There’s always something to howl about.

So if there has to be a bail out…

What if Jeff and Brian are right?  What if it is preordained in the cards that a federal bail out of Countrywide is an absolute necessity and a foregone conclusion should the behemoth lender fail?  While Jeff certainly provides a well reasoned and thrilling John Grisham version of a Countrywide rescue; why wouldn’t we look at some other (less plausible no doubt) bail out options?

Let me say this first and foremost: I don’t support a bail out of Countrywide.  Period. I think its a horrible idea for all the same reasons bail outs in the past have been bad ideas – they reward the wrong-doers.  Why do we reward the Mozilos and their billions of dollars while punishing the American public?    If I am forced to accept a bail out, I would rather it be a bail out of the American public rather than a few rich puppeteers overlooking the pacific ocean from their posh Malibu homes.

Here are a few outrageous ideas that probably won’t work for a million reasons, and have a shot longer than you do of being hit by an asteroid tomorrow morning; but just for fun lets float a few out there.  My bail out options to keep from rewarding the greedmongers:

A couple of general guidelines:

  • Bail out options apply only to loans secured by primary residences; and maybe even just to owners of one property.
  • Bail out options apply only to those loans underwritten with full income documentation (maybe stated income for self-employed borrowers)

Bail out options for the American public (hey, if my tax money’s going to anyone, I’d rather give it to my neighbor):

  • Pre-payment waivers: Anyone with a prepayment penalty on their existing mortgage receives a voucher to refinance with out being penalized. This could be financed by individual lenders, Wall Street banks, or investors.
  • Voiding of pre-payment penalties: Alternatively, the government could pass legislation nullifying all pre-payment penalties allowing borrowers to refinance immediately with out paying the fees associated with the penalty.
  • For those that paid a pre-payment penalty between June 2006 and today – a tax credit for the full amount of any pre-payment penalty paid for the purposes of selling their home.  No limit on the one-time deduction, applicable to this year’s tax return.
  • Mortgage rescissions – Borrowers found to have been duped by unscrupulous lenders would be entitled to 100% rescission of their existing mortgage and be awarded the ability to find new financing.  This would be decided by a specially appointed division of the Federal Reserve and/or HUD.
  • Piggyback rescissions – Rescissions of all piggyback mortgages totaling 95-100% at the lenders’ expense to reduce high-cost debt burden.
  • Forgiveness of accumulated deferred interest – Borrowers in Option ARMs would be forgiven any deferred interest (at the lenders’ expense) and would be eligible to refinance in to a fixed rate loan with out penalty.
  • Borrowers who sold their home between 2006 and today would receive a 100% tax credit for the amount of deferred interest that was added to their loan balance and that depleted their equity during the course of holding the loan.

Let me restate two very important things:

  1. I am not in favor of any type of bail out.
  2. I know there are a million reasons why these ideas won’t work.

So what do you think?  Should Countrywide be bailed out, or should we give our money to our embattled neighbors instead?  If there has to be a bail out who are you pulling for?  Frankly, I’m done pitching in my hard-earned money to save the big guy – screw Countrywide, if my tax dollars MUST go somewhere I want my fellow American to keep their home.

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