Have you read about this news where a 53-year-old lady shot herself dead soon after faxing a letter to her mortgage company? The suicide note said that by the time of foreclosure on her house, she would be dead.
It is very sad for the family to experience such a tragedy but what is the underlying message to the US government?
A lot of experts are predicting an astronomical 1 trillion dollar loss from the financial sector but with a 12 trillion dollar mortgage industry we are talking about, I think the situation could be far worse.
A loss approaching 2 trillion dollars when all the dust has settled is not surprising if prices of residential real estate continue to fall. More updates on this matter after the announcement of new home sales.
As investors, of course, a bailout is necessary to prevent the damage in the housing sector from widening to the general economy. But a lot of people are actually disgruntled with the House passing a bill to rescue Fannie Mae and Freddie Mac.
Firstly, why should taxpayers help people who bought a house they couldn’t afford? Their fiscal prudence now counts for nothing when they have to fork out money just to keep greedy people in their homes.
I believe there were some individuals who were honestly taken advantage of due to ignorance – they were encouraged to buy more houses with ARMs or when their credit records are in tatters. However, the majority of these homeowners brought it upon themselves due to financial irresponsibility and greed.
Another point of discontent is the big boys are not feeling the pain. Fannie Mae’s chief executive, Daniel Mudd, received compensation last year valued at $12.2 million, including a $2.2 million bonus.
Freddie Mac CEO Richard Syron received $10.5 million last year in salary, stock, options and bonuses. They are highly rewarded for bringing the company to the brink of collapse, leaving taxpayers to prop up the company.
While I do not have the actual statistics, the bail out seems to serve the purposes of big corporations more than homebuyers. A lot of them don’t lose much in the first place since they bought these houses with little cash or nothing down.
So they just go back to their former life by walking out on their mortgage obligations, with some undesirable black mark on their credit. Such mass defaults will certainly wrought further turmoil on financial companies.
Do you now regret buying the 250K house instead of the 1 million dollar mansion since you know the government and taxpayers are going to bail you out eventually?
Tell me what you think.