As a weekend diversion I thought I would share the following letter to Webster Bank by Bill Dunn (originally found in the Waterbury Republican American (Waterbury, CT) -- registration required). It is pretty funny and encapsulates what responsible mortgage payers are feeling right about now.
Here is an excerpt:
Here is an excerpt:
Dear Webster Bank: This letter is to inform you that my wife and I have decided to take advantage of the $700 billion Bailout Bill recently passed by Congress. As your records will indicate, we have been making mortgage payments each month for the past 22 years, which means we have eight years remaining on our 30-year mortgage.
However, my wife and I believe we have paid enough. We are very impressed with a provision in the Bailout Bill that allows the government to arbitrarily change the principal balances of existing mortgage contracts. For example, if the outstanding balance on a particular mortgage is $300,000, the government now has the authority to step in and declare, "No, the new balance is actually $100,000." Even though a binding, legal contract was signed, even though the lending institution gave the borrower $300,000 to purchase a home, only $100,000 needs to be repaid. Is this a great country, or what? Taking our cue from the politicians in Washington, we have arbitrarily decided that as of this moment our mortgage balance with you is exactly zero. From this point forward we will not be sending you any more monthly payments.
We suspect you will not be very pleased with our decision. You might be inclined to protest, insisting that a deal is a deal and a contract is a contract. Trust me, a few weeks ago we would have agreed with you wholeheartedly. But that was before the Bailout Bill was passed. That was before Congress made it clear that our new national policy is: behave irresponsibly and we'll fix it; ignore your promises and we'll cover you.
You have to admit, up until now my wife and I have been model customers. We have sent you our mortgage payment on time every single month for 22 straight years. (Well, except for that one time a few years ago when my wife asked me to put our payment in the mail, but somehow I shoved it in my briefcase with a bunch of other paperwork from my office and a copy of "Sports Illustrated." I must say, your late-payment notices are rather nastily worded.)
However, my wife and I believe we have paid enough. We are very impressed with a provision in the Bailout Bill that allows the government to arbitrarily change the principal balances of existing mortgage contracts. For example, if the outstanding balance on a particular mortgage is $300,000, the government now has the authority to step in and declare, "No, the new balance is actually $100,000." Even though a binding, legal contract was signed, even though the lending institution gave the borrower $300,000 to purchase a home, only $100,000 needs to be repaid. Is this a great country, or what? Taking our cue from the politicians in Washington, we have arbitrarily decided that as of this moment our mortgage balance with you is exactly zero. From this point forward we will not be sending you any more monthly payments.
We suspect you will not be very pleased with our decision. You might be inclined to protest, insisting that a deal is a deal and a contract is a contract. Trust me, a few weeks ago we would have agreed with you wholeheartedly. But that was before the Bailout Bill was passed. That was before Congress made it clear that our new national policy is: behave irresponsibly and we'll fix it; ignore your promises and we'll cover you.
You have to admit, up until now my wife and I have been model customers. We have sent you our mortgage payment on time every single month for 22 straight years. (Well, except for that one time a few years ago when my wife asked me to put our payment in the mail, but somehow I shoved it in my briefcase with a bunch of other paperwork from my office and a copy of "Sports Illustrated." I must say, your late-payment notices are rather nastily worded.)
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Thank you for your insights. Mortgages are stressful and confusing sometimes. INformation is key to making a good decision.
The concept of a Mortgage Bailout plan is often criticized because many feel that people who were irresponsible to get themselves into bad loans should not be bailed out. Others feel that they should be bailed out because lenders are often very deceptive in their practives. Yet, others feel that a limited bailout option should be available - whereas assistance is provided, but not a complete walk-away option.
Apparently, it wasn’t enough to cover the mortgage crisis up with a TARP. No, Treasury Secretary Paulson’s Troubled Asset Relief Program wasn’t the kind of credit repair scores the endangered homeowners needed. Now that Federal Deposit Insurance Corp Chairman Sheila Bair has pushed a new mortgage modification program forward, 1.5 million homeowners will have someone new on their side when they’re facing foreclosure. This $24.4 billion program will be drawn from the $700 billion pool that TARP set up, and it’s a very straightforward system. Lenders will be given a stipend of $1,000 per loan they renegotiate with financially stuck homeowners, and in the event of default on a loan, the FDIC has promised to take on up to 50 percent of the loss. Paulson has condemned this as mere spending that will only bankrupt the FDIC, others view this action on Bair’s part as a needed investment to maintain liquidity in the mortgage industry. While this won’t solve all of the problems at once, it’s certainly a valiant effort to help repair credit, isn’t it?
Click to read more on Credit Repair
The evidence confirms the popular belief that the lack of screening incentives created by separating the originator of a loan from the ultimate bearer of the default risk—coupled with risk-taking behavior—significantly contributed to the current subprime mortgage crisis," he says. "From the market's perspective, the probability of default on a mortgage loan partly depends on the originator of the loan itself. From the regulator's perspective, the bank's liability structure has a predictable effect on loan decisions
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