What if Jeff and Brian are right? What if it is preordained in the cards that a federal bail out of Countrywide is an absolute necessity and a foregone conclusion should the behemoth lender fail? While Jeff certainly provides a well reasoned and thrilling John Grisham version of a Countrywide rescue; why wouldn’t we look at some other (less plausible no doubt) bail out options?
Let me say this first and foremost: I don’t support a bail out of Countrywide. Period. I think its a horrible idea for all the same reasons bail outs in the past have been bad ideas – they reward the wrong-doers. Why do we reward the Mozilos and their billions of dollars while punishing the American public? If I am forced to accept a bail out, I would rather it be a bail out of the American public rather than a few rich puppeteers overlooking the pacific ocean from their posh Malibu homes.
Here are a few outrageous ideas that probably won’t work for a million reasons, and have a shot longer than you do of being hit by an asteroid tomorrow morning; but just for fun lets float a few out there. My bail out options to keep from rewarding the greedmongers:
A couple of general guidelines:
- Bail out options apply only to loans secured by primary residences; and maybe even just to owners of one property.
- Bail out options apply only to those loans underwritten with full income documentation (maybe stated income for self-employed borrowers)
Bail out options for the American public (hey, if my tax money’s going to anyone, I’d rather give it to my neighbor):
- Pre-payment waivers: Anyone with a prepayment penalty on their existing mortgage receives a voucher to refinance with out being penalized. This could be financed by individual lenders, Wall Street banks, or investors.
- Voiding of pre-payment penalties: Alternatively, the government could pass legislation nullifying all pre-payment penalties allowing borrowers to refinance immediately with out paying the fees associated with the penalty.
- For those that paid a pre-payment penalty between June 2006 and today – a tax credit for the full amount of any pre-payment penalty paid Read more