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1.
Mortgage Bailouts - An Overview
Mortgage
Bailouts are typically plans that are designed to allow a homeowner
to bail out (or be relieved of some or all of the responsibility)
of their mortgage loan. In most cases, it doesn't mean that
all debts are forgiven. Generally, the plan just aids the homeowner
so that the home is not lost to foreclosure. This can involve
either freezing or reducing the mortgage interest rate for the
loan.
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
practices. Yet, others feel that a limited bailout option should
be available - whereas assistance is provided, but not a complete
walk-away option.
A national
Mortgage Bailout plan is especially needed when the mortgage
crisis is so bad that it actually threatens a country's economy
and stock market. This usually happens when foreclosure records
have been set with millions of households affected. This can
occur when the government does not properly regulate how banks
are distributing loans to borrowers.
For instance,
if banks are giving balloon loans (also known as Adustable Rate
Loans) to applicants that really don't qualify - this can backfire
on everyone. Generally, within 3-7 years the monthly payments
for the borrower will increase to a level that is no longer
affordable. When millions of borrowers are in this predictament,
corporate America is unable to step in to remedy the mistake.
That is when the government has to issue what many refer to
as a Mortgage Bailout plan. |
