Saturday, December 01, 2007

Delaying the Inevitable

The Treasury Secretary this week was meeting with the mortgage industry in an attempt to fashion a plan to bail out all those home owners who took out Adjustable Rate Mortgages that are due to reset next year. Why exactly is the Treasury Secretary interfering in private contracts between lender and borrower? When someone takes out an Adjustable Rate Mortgage shouldn't they have to bear the consequences when rates go up? Why should they get a free ride?

Any plan which allows homeowners to stay in houses they can't afford will only delay the day of reckoning. Eventually the rates on these mortgages will rise; will these homeowners be in any better financial shape when that finally happens? That seems doubtful; if these were prudent borrowers they wouldn't be in this position.

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