Thursday, December 6, 2007

The Straw That Broke My Camel’s Back: Rate Locks For Stupid Mortgage Borrowers

Author: Nick
Category: Money
Topics: , ,

idiot-saving man to the rescue!

It takes a lot to make me really angry. Sure, I’ll get a little scary when I’m wronged by a retailer, and I’ll occasionally issue the one-finger salute to idiot drivers, but I haven’t been this infuriated in a long time.

And why am I pissed as a porcupine in a pig pen? It’s because of President Bush’s new plan to freeze the interest rates of dumbasses with adjustable-rate mortgages. Great, now I’m swearing. See what you made me do, Mr. Prez?

In case you haven’t heard the news yet, here’s the gist of this ridiculous bailout.

  • It rewards the stupid. If you were idiotic enough to come into a mortgage loan in the last few years that will soon (but not before the new year starts) adjust to a rate 30% or more above your current rate, you may be eligible to have that rate locked. Bye-bye rate jump.
  • It’s not for everyone. You have to be current on your mortgage payments to qualify for the rate freeze. In theory, those behind in their payments now could use this plan the most. Nope, they’re still screwed.
  • Some investors will get screwed too. Investors who bought these adjustable-rate mortgages from banks expecting to cash in on higher interest returns may get shafted. While the program is designed to benefit only those who would have trouble making payments if their rate adjusted (a good thing for investors who would otherwise lose money on defaulted loans), it will undoubtedly help out some people who can make their payments just fine in real life. That means investors will get lower returns on their mortgage loans, and that could discourage them from putting their money into lenders’ hands in the future. That means higher mortgage rates for everyone down the road. Yay!
  • It’s temporary. The rate freezes will only last for five years, which means we’ll have a repeat of the current mortgage crisis again around 2013. And with higher rates because fewer investors will want to fund these mortgages, these adjustable rates could then jump far higher than they would if they simply started adjusting now. In short, this plan postpones the bad but makes things worse later.
  • As for smart homeowners? If you’re like me and had the three brain cells necessary to see that a fixed-rate loan was a good idea… well, you get nothing. Actually, you get to continue paying a higher fixed rate, while people who took out riskier loans are rewarded for their foolishness with longer terms on their lower rates.

I would have been even more pissed if FDIC Chair-dumbass Sheila Bair had her way. She wanted to freeze rates on all subprime loans. Forgive me for purchasing a home I can actually afford, Ms. Bair, but I didn’t know you were planning to protect financial morons from the reality of their bad decisions.

I’ve heard all the arguments for why this is a good idea. People often blame predatory banks for forcing these horrible mortgages on poor unsuspecting homebuyers. (This is bull hockey. People who can’t do interest rate math shouldn’t be given six-figure loans in the first place.) Others won’t blame either side, but they point to economic doom should all these adjustable-rate mortgages end up in default. But regardless of who is to blame and what could happen, I hope you’ll agree with me that, in the end, this is a terrible idea. It’s demonstrating to people that the government will always bail them out of their financial messes, and that just encourages even more reckless behavior.

As I mentioned above, I was awesome enough to see that the 4.9% interest rate I was offered on an ARM mortgage could adjust as high as 9.5%, whereas the 6 percent interest rate on a 30-year fixed mortgage would remain at—surprise!—6 percent. What does that get me now under this government handout plan? Zero. Zip. Zork. Not. A. Thing.

Really, President Bush, how could you agree to this plan? You were so against government assistance in the subprime mortgage meltdown. I… I could stand by you when you started crazy wars and conducted slightly unconstitutional domestic surveillance. But I just can’t forgive this! You are so not getting my vote for re-election when you alter the constitution to allow dictator rule, I promise you that.

I’d like to take this time to address my mortgage lender.

Dear Bank of America,

Thank you again for agreeing to give me a whole lot of money to buy a really overpriced home a couple of years ago. Also, thank you for giving me an ethical mortgage officer who easily convinced me to go the fixed-rate path since it meant that I would not lose my home in a few years when faced with payments I cannot afford.

I hear you may soon be planning to lock in the rates of some of your less intelligent mortgage customers who thought an initial rate of under 5% that could adjust into the double digits was a smart idea. I’d like to remind you that I’ve been a loyal customer of yours for some time now; I’ve made every payment on time, and I even put a smiley face on the memo line of my mortgage payment checks. That said, I must ask you to give me the same handout as your less intelligent mortgage holders. If you decide to lock in any of their lower rates, I request that you reduce my rate to those same levels. In addition, I would ask that you refund me the difference in interest I would have paid had I instead opted for that lower-rate ARM.

If you are not prepared to offer me the same treatment as your lower-IQ’d borrowers, I will gladly sue you to get my rate lowered. Of course, we know that won’t accomplish anything because you will likely get a free pass from the federal government’s Offices of Thrift Supervision and the Comptroller of the Currency. So in the end, you get more of my money, you help stupid people not go bankrupt, and you get to continue being a giant ATM to math retards. I guess everyone’s happy! Oh wait, I’m not.

Respectfully asking you to suck it,

Phew! It sure feels good to vent, but I’m sorry I had to expose you guys to that. Don’t worry, I’ll return next time with tips for saving money on lollipops and rainbows.

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