Wednesday, January 25, 2012

Here's a Novel Idea - Making Banks Pay

Everyone who listened to President Obama's SUTU speech on Tuesday evening has something to say, as new programs were outlined and the expected backlash articulated. And, from the tenor of the early news shows, some did not appear to listen. Not all the programs involve increasing the deficit.

One novel idea may have merit: making some of the largest financial institutions pay a small fee to help homeowners take advantage of record low interest rates and lower their payments. Heretofore, refi qualifications are so stringent that many applicants cannot qualify.

The President stated, and rightly so, that "A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.”

It strikes me as equitable - we all know that banks made a bundle from packaging mortgages with dubious credit ratings that then were sold to institutions and individuals. A housing crisis ensued, with disastrous ramifications. People who then lost their jobs in the downturn could not sell their houses in this real estate market. Not all of these people bit off more than they could chew in terms of houses beyond their means. Many put down the requisite 20% or more, made payments regularly, have FICO scores of 800 or better, but cannot refinance. Those without a job are especially hard hit, and reducing their payments, just until they land, would be a welcome respite. Asking banks, who did much to create the current problem, to help homeowners get back on their feet seems appropriate.

However, the bill has to pass Congress, so don't hold your breath. But, you may want to contact your Congressman.

Bloomberg Business Week has an article that explains the proposal in greater detail. Here's the link:

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