Money doesn't actually talk. We do.

How the Mortgage Bailout Hurts Me

Here’s my problem with the rescue plan.

The Bush administration intends to reward some borrowers who are in over their heads by cajoling mortgage companies into leaving those borrowers’ artificially low interest rates where they are. Those rates won’t jump, as they were scheduled to do soon. Read the White House’s explanation here.

But what about the folks who have saved diligently, have impeccable credit, earn a decent income and yet still are priced out of many homes because of the stratospheric real-estate prices that were propelled by easy credit? Folks like, oh, say, me for instance?

I, too, could have taken out some ridiculous loan to add $100,000 to what my husband and I could have afforded a year or two ago. But I didn’t. Since then, prices in my neighborhood have gone even higher (unlike most of the rest of the country). And we still haven’t been able to find the type of place that we want, even though we have a bit more savings now.

Perhaps only a handful of the coveted two-bedroom brownstone apartments in our area were snapped up by people with nutty adjustable-rate mortgages. And perhaps only some of those owners are getting the Bushie bailout. Mark Zandi, chief economist at Moody’s Economy.com, figures the plan will only end up helping about 250,000 borrowers nationwide.

Ok, fine.

But principles matter here. If a few of those apartments went into foreclosure, prices might fall a bit. Because they’re not going to go into foreclosure, I suffer. Sure, some of the buyers were duped into adjustable-rate mortgages by mortgage brokers who made three times the commission off subprime loans than they would have off of other loan types. Borrowers who were duped deserve a break. But the bailout doesn’t (and, in fairness, probably can’t) make the distinction between those who were swindled and those who simply got in over their heads.

It gets worse. Our cousins at The Wall Street Journal suggest this morning that the mortgage industry is teeing up new fees to account for this whole mess and dumping them on, you guessed it, borrowers with good credit. This could cost me as much as $1,000.

Bush, Hank Paulson and their advisors clearly believe that some voters (including those getting low rates for several more years) will be thrilled by any sort of bailout with an election year approaching. And they’re counting on the fact that a bunch of us aren’t smart enough to figure out that we’re likely to take a hit as a result of their actions.

Well, they’re wrong. And we vote too.

–Tara Siegel Bernard

Illustration credit