Underwater Mortgages – Why the Good Need to Help the Bad

Unfathomable amounts of taxpayer money is being used to help prop up the flailing industries that are reducing America’s work force, property values and 401k plans. If no drastic measures to save the economy are taken, the entire U.S. population will feel the pain. However, taxpayers who followed all the rules and managed their personal expenses properly are being held responsible for bailing out their neighbors who were less than stellar in their choices. The good guys are well justified in their anger, but need to maintain a sense of calm for the greater good of the nation. Upside down mortgages have affected every financial institution, and in turn the greater economy – all means must be used to help prevent people from drowning in underwater mortgages.

Part of the newest addition for the American Recovery and Reinvestment Act of 2009 involves a grass-roots approaching to tackle the housing industry melt-down. Part of the strategy includes a new mortgage plan providing $75 billion in subsidies to help reduce mortgage payments for 3 to 4 million borrowers. The overall  plan aims to stave off further foreclosures to help stabilize the housing market. Once again, the good guys who are not behind on their mortgages are paying to assist those who are unable to afford their underwater mortgages. Discouraging as it may be, it appears to be a necessary step from prevent any further value depletion on a community level.

The good guys have also come to the rescue when it comes to assisting  institutions posing authentic systemic risk. There are approximately 20 U.S. banks with total assets in excess of $100 billion that qualify for assistance. No intervention by the government to some of the biggest financial companies would have caused further devastation to the American economy, thus harming the ones who play by the rules even further.

Ultimately, the good are in the position of helping the bad in order to reduce their personal losses. Despite who is right and who is wrong, we are all suffering from the current recession, and it takes a team effort to get back on track. A small uptick in February real estate activity is a positive indicator to some, but mortgage rates are holding steady and do not seem to be dropping and will not likely contribute to more sales as they cannot not drop much lower. There are certainly some very strong opinions regarding the current state of affairs – feel free to share yours with us.