Interesting Times
Sadly, I think that this may be a sign of things to come. A large bank in Southern California has failed.
The bank is blaming it on a run caused by a senator’s open letter expressing concern. Interestingly this bank specialized in Alt-A loans, which are basically one step up in quality from the sub-prime loans. Didn’t we just get done with a sub-prime melt-down…
So we are seeing the beginning of a second wave of the mortgage crisis, as the next most vulnerable sector falls. But what, there’s more. Fannie Mae and Freddie Mac are in trouble. What you say? Yes, the federal government is considering taking over these venerated institutions to prevent collapse. Prevent collapse. At what cost are we going to “prevent collapse?”
This is not all the government is doing for you. In May, the House Financial Services Committee approved the FHA Housing and Homeowner Retention Act, which allows the Federal Housing Administration to refinance mortgages for families that can show their payments are consuming 35 percent or more of their income. What is bailing out the bottom going to get us when the collapse is already raising up the mortgage quality ladder?
The media has been reporting since February about how walking away seems to make sense. There are websites dedicated to it.