Tuesday, August 19, 2008

American Dream About to Become American Entitlement

Senator Carl Levin is working overtime giving out goodies on the backs of the taxpayers. Today, we look at the "mortgage crisis" in America and how Mr. Levin proposes to solve it. With your money. 

Home Ownership: American Dream or American Entitlement?
Certainly, you have heard the headlines and read the stories. The news media has done an effective job of telling America that the home-ownership sky is falling. If you were to believe the news reports, the dream of home ownership is about to come crashing to the ground.

Perhaps we should look at the facts about home ownership in America. The numbers of individuals and families who own their own home has been on the rise since the 1960's. In 1960, 62% of homes were owned by the occupant. That number grew to almost 66% by 1980 and stands at just under 68% today.

Foreclosures, which have "skyrocketed" in the last two years, increased to a rate of just over 1% of all mortgages.  It should be noted that many, if not most of these foreclosures were caused by borrowers who falsified information on their mortgage application. They did so either out of the desire to "own" their own home or for the purposes of speculation on the future value of the home.

And what is the government's answer to this "crisis?" A $300 billion bailout for the same frauds who borrowed the money in the first place.
Senator Levin to the Rescue!
To hear Mr. Levin tell it, we really are in a serious crisis and those who have defaulted are all victims. A story that appeared in the Saginaw News on August 14 under the headline, "Senator: Nation's Mortgage Crisis Puts Every Neighborhood in Limbo," Levin is quoted as saying, "Neighborhoods and cities are at stake." The fact is, in Michigan many neighborhoods and cities are at stake, but it isn't because of a mortgage crisis. That is just a very convenient excuse for the Senator to use.

Mr. Levin goes on in the newspaper story to talk about the HOPE for Homeowners plan. This government program is explained fully by the Heritage Foundation in an essay written on May 6, 2008. Here is an excerpt: 

"Under the legislation, lenders that chose to take part in the voluntary program would agree to receive 85 percent of the current assessed value of the house, while the borrower would receive a refinanced loan equal to 90 percent of that new assessed value. Refinanced loans would be 100 percent guaranteed by the FHA, and the new lender would have no further credit exposure if the borrower subsequently defaulted. If the homeowner subsequently walked away from the new loan, and if the FHA lacked the resources to back the loan, then the taxpayers would cover any losses."

The three most important things you need to know:

  • The foreclosure rate in the United States is about 1% of all mortgages

  • The government bailout will cost $300 Billion

  • Taxpayers would cover any losses

But understand, demagogues like Carl Levin love programs like these because it allows them to travel back to the district as heroes who are bringing HOPE for Homeowners. Read the story in the Saginaw News. Then read the essay at the Heritage website. Tell me I am wrong. But remember, "taxpayers would cover any losses."  

Illegal Speculation Rewarded by the Taxpayer
There is a real irony here. Lately, Carl Levin has been blaming "speculators" for driving up the price of oil. Those speculators are legally trading their own money on oil price futures. They risk making a tidy profit or losing it all. But now, that same Senator is bailing out those who speculated on the future value of their home by lying on their mortgage application. So, while Levin persecutes those who speculate honestly, he is willing to bail out those who speculated illegally. And worst of all, he wants to use YOUR MONEY.

The bottom line is this: It is wrong to use taxpayer dollars to bail out individuals who take speculative risks or who knowingly defraud the lender for personal gain. In fact, the government (taxpayer) should not be in the business of bailing ANYONE out for any reason. This is not what government was intended to do. I will not support such behavior with your money.

There is one additional hard-hitting, candid essay, Will Your Tax Dollars Go to Mortgage Cheats?  Read it and understand.  
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