Housing aid bill faces veto by President Bush

[Terri]

By AP STAFF
Associated Press
May 9, 2008

WASHINGTON (AP) -- Democrats' plans to help hundreds of thousands of homeowners struggling with rising subprime mortgage rates and plummeting house values could be sidetracked by President Bush's threatened veto and the backing of many congressional Republicans.

Opponents of the plan say more prudent homebuyers and renters shouldn't be called upon to bail out borrowers who gambled on ever-rising housing prices and lost.

''The American people don't want to make their neighbor's payment when they're having trouble making their own,'' said Rep. Randy Neugebauer, R-Texas.

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[FlaJim]

Bush should certianly veto this wrong-headed bill. It would reward the very people who created the problem in the first place: those who bought too much house, lenders who offered generous mortgages while exercising little oversight, and speculators.

The second part of the bill, buying up foreclosed properties, is plain stupidity. Real estate is undergoing a market correction, bringing prices down to realistic levels. To throw money into the system to buy up foreclosed properties would only bolster currently inflated prices.

With the more stringent lending practices now in place, there'll be no one to buy them. Will government then decide to award these properties to 'deserving' families for a song? Probably.

[Stephen D Griffis]

One of the problems I have with the Democrats plan is that it would violate contract law. A mortgage is a binding contract entered into by the mortgagor and the mortgagee(s). Forcing the mortgagor to take a loss of up to 30% would effectively require the mortgagor to change the terms of the contract.

The only lawful option is for the mortgagee(s) to refinance the mortgage, something that is done quite often. An honest mortgage holder would be more willing to refinance a loan than take a total loss on it. The mortgagee(s) would, of course, still have to meet credit-worthiness. If the mortgagee(s) can't refinance, then their house should be foreclosed.

It would be a bad precedent for Congress to force a one-sided violation of the terms of a contract.