“Liar Loans” benefit from Bailout!
Those Alt-A mortgage products, that required no proof of income or ability to pay, are targeted for $100 billion of the government bailout money. In this scheme taxpayers foot the bill for reduced interest or principal amounts on these “Liar Loans.”
Of course, with taxpayers footing the bill, the banks don’t seem to be able to find the manpower to go through the documentation loan by loan and are “streamlining” the process. So, if you fit a certain formula of negative equity and a variable interest rate loan, you can probably “streamline” your way to a better loan, whether you need it or not. Those who lied in the first place to get a loan they couldn’t afford are offered a second chance to do the same, but this time at taxpayers expense.
In the blogosphere, there is discussion of even those who aren’t having any trouble paying for their loans to miss some payments in order to qualify for the better terms of the bailout loans. What do you think the likelihood of these loans having better default rates than the pre-bailout loans are? This is what bailout critics were worried about when they said the bailout would just prolong the market correction, at a very high cost.
To add further fuel to my frustration, I read here at the Bloodhound blog that Michael Alix, who worked at Bear Stearns for 12 years and was its senior risk manager since 2006, was named a senior vice president in the bank supervision group of the Federal Reserve Bank of New York, the Fed announced. Of course, Bear Stearns failed miserably at properly asessing risk. Now he will oversee the financial safety and soundness of banks.
You can read more about the “Liar Loans” at CNBC and The Real Estate Bloggers.
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