Should the Government Bail Out People in Foreclosure?
by Bill Bronchick
As I wrote in my article, Can the Government Solve the Foreclosure Problem, the
state and federal governments are considering using taxpayer money to bail out
people in foreclosure. Is this a good or bad idea?
At first blush, it appears awfully unfair, in that the government would take
your money and give it to someone who made an irresponsible financial decision
and would thus profit from it. On the other hand, one could argue that the
government’s lack of regulation on loans, in part, led to the problem.
From a purely capitalist, free-market position, I’d say, “Absolutely not - let
the market correct itself and allow economic darwinism take its course”. From a
sympathetic standpoint, what’s $300 million in the scheme of things, since most
of it would go to HUD counseling agencies to help poor people refi and keep
their homes?
Despite the animosity from people who object to paying for this “robin hood”
program, it would help everyone, since less foreclosures helps keep your
neighborhood home values up. However, the harsh reality is that $300 million
wouldn’t change anything, and like most government programs, it would be nothing
more than lip service and bureaucracy.
Nobody wants to see low income families on the street, but it is a bad precedent
for the government to have too many programs to bail consumers out of bad
financial decisions. True, some of the lenders are to blame, but they are
already being punished in their pocketbooks. Many lenders who originated and
sold these loans are now having to buy them back from the investors they sold
them to.
As a final note, most states do not have extensive regulation of the mortgage
broker profession. I am not much for excessive government anything, but having a
sufficient fund to reimburse the victims of the worst predatory lending would be
a good idea. Real estate brokers, attorneys, and other professionals pay into a
fund managed by the state for the protection of clients that are scammed, and so
should mortgage brokers. In my own state of Colorado, mortgage brokers have to
carry a small bond, which is almost a joke. California, on the other hand,
requires a mortgage broker to first be licensed as a real estate broker, which I
think is a good idea.
Bio:
William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney,
author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real
estate since 1990, having been involved in over 600 transactions. He has
appeared as a guest on numerous radio and television talk shows including CNBC
Power Lunch. He has been featured in Who's Who in American Business, Money
Magazine, the Los Angeles Times and the Denver Business Journal. William
Bronchick has served as President of the Colorado Association of Real Estate
Investors since 1996.