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The Disadvantages of A Mortgage Bailout Plan
Although
a mortgage bailout plan is designed to help a mortgage crisis,
there can be disadvantages. For instance, the plan will add
some stability to the housing market, but it won't stop all
the problems in the mortgage industry. In addition, the plan
that Bush proposed doesn't help a lot of people who are in trouble.
In November
2007, BusinessWeek.com reported that "the bailout plan
almost certainly won't stop the decline in housing prices."
They also stated that "investors are betting that there
will be double-digit declines in home prices in nine of 10 major
markets by 2008."
Another
disadvantage is that the mortgage interest freeze does not last
forever. Many critics, including Senator Hillary Clinton, have
called for at least a seven-year freeze.
The problem
is that investors are involved, and they will lose money if
homeowners' mortgage balances are reduced. Those who have invested
include private investors and firms who have turned the investments
into pension funds and mutual funds. So realistically, a mortgage
bailout plan could help the homeowner at someone else's expense.
In fact, it may even be at their own expense - hitting them
hard in another way.
There is
another disadvantage that is not openly discussed. A mortgage
bailout plan may cause future homeowners to become irresponsible,
feeling that their situation will be easily remedied if they
can't fulfill their payments. In other words, if some homeowners
are given a break on their mortgage balances - future homeowners
will feel that they are entitled to a break too, if they need
it.
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