I read that in the new bill that there will be an $8000 “free” loan to new homebuyers, so I can’t complain too much about the new stimulus package.  However, I’ve heard about some people who have foreclosed on their homes because they owe more than the home is worth, despite being able to afford the mortgage.  These same people will then purchase a new home at these new reduced rates and get to take advantage of the new stimulus efforts, while the middle class people who have been responsible and continue paying their mortgages get nothing.  At least this is the impression I’ve gotten from the bits and pieces that I’ve read or heard in the news.

Fastforward to yesterday, when I added the “NBC Today Show” podcast to the iPod Touch (yep, I gave in and opened it), and I heard an interview with Meredith Vieira, Dylan Ratigan (host of CNBCs fast money), and Barbara Corcoran (a contributing real estate expert).  I thought I was about to get some answers when I heard this question:

Meredith (after hearing about rates being lowered for current mortgage-paying homeowners):

“But what about people who have been paying their mortgages? What about me?  I’d like my rates lowered as well.”

Dylan:

“As well you should.  We found ourselves in a situation that was created by our politicians, and our bankers, we’re creating this easy flow of money.  This easy flow of money creates mispricing of assets and what we mispriced was our houses.  So now home prices have to come back to an actual rational price for the average american buyer…and what you’re seeing is a moral hazard, people are getting rewarded for bad behavior but at the same time a shock absorber, which is what this is, to try to affect the transition from overpriced houses to properly priced houses without completely destroying so many households in this country.  That’s the political decision that you’re seeing made.”

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Does anybody see anything in here that answers Meredith’s question?  Yeah, me neither…  moving on…
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Meredith:

“But aren’t there some people where they should face foreclosure?”

Barbara:

“Well, it’s almost like a punishment, like you did badly and now we’re going to get you. No, I don’t believe that at all.  I think people made the most prudent decision they were able to make at the time, and if they need the help, it’s smart to help them, because everybody else is paying that price through the economy. Now, it makes no sense at all to punish the people who have made a mistake in the past.”

Dylan:

“The problem is we’re fighting two battles simultaneously: the banks and the congressional cooperation created this toxic mess.  At the same time, because of the toxic mess, we run the risk that it’s like a blob that’ll continue to spread through the entire economy. And it’s spreading. and that blob is further home foreclosures, further job losses, and what you see obama and the administration in DC are trying to do right now is stop the spreading of the blob as Tim Geitner at the treasury tries to deal with the blob.”

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OK, I get the part about people’s “mistakes” affecting the entire economy.  But seriously, “now, it makes no sense at all to punish the people who have made a mistake in the past”????  I can understand the poor folks who’ve lost their jobs and need help to get back on their feet, but SO many people took on insanely high loans that they should’ve known they couldn’t handle.

What happens when several people forego common sense?  $1.5M condo on $20K income: Prospective buyers lose $175K in Bellevue.

I just don’t know how rewarding people for making terrible decisions is the right idea.

OK, rant over.

Click here for the highlights from the new stimulus bill.