Those people endure huge amounts of stress and live on the financial edge constantly, and it's actually better for them in the long run to get rid of the house they can't afford and get to a more stable financial position. And if you think they aren't still living on the stressful edge after getting "help", consider this: the results are coming in from government programs in states and from banks that are rewriting mortgages, and 54% of people who have their mortgage terms changed STILL default on their loans.
My concern is what happens to all these defaulted loans. You see from my understanding these loans are owned by banks, and insured by companies like AIG (which can't afford to pay for all the defaults). So basically it goes back to the financial institutions bought the loans and can't recoup the value, because the insurer can't pay.
So eventually this leads to companies and countries who bought the loans as bonds. So do we stiff China, Russia and Europe for the bonds they purchased. Does anybody have any idea what kind of havock that would create, if the US bond was relabeled double A or single A.
People need to realize that what finally started the house of cards to fall was that China and Russia started looking at our debt and refused to buy anymore or greatly reduced the amount they were buying.
All the US government is trying to do is stave off the next potential quantum spiral in this fiasco. US bonds getting rating lower and the US dollar no longer being used as a reserve currency in global markets. When that happens you can kiss your savings good-bye.
Basically the world is in a freeze waiting for the US to show it can make good on it's outstanding debt. Because if you trace the loans all the way, you'll find a good chunk of it is in China, Russia, Saudi Arabia, Japan, Venezuela (yeah Venezuela)...
So if these loans don't get repaid in some way, then the dollars I currently have are going to become worthless (well I'm pretty sure we won't be exchanging one to one with the peso).
So basically what the big three went and did was say that we control 300,000 jobs and untold amounts of loans and said give us the money or we are going to make all these people and businesses default on their loans (how patriotic of them, I'm with you on investing in the buggy industry, Wal-Mart will probably be next).
So now the question is, how long will the rest of the world wait. So will they move the reserve currency to another country, or will they accidentally sink a Carnival Cruise line vessel and start a war.
Basically they are waiting and we are trying to stave off any action that will cause an uncontrolled deflation of the dollar on the world market.
So right now I'm for finding a way to make as many of these loans good for as long as we can.
Nobody knows where the magic number is. Do we have to save 40% 60% or 80% of these loans, because nobody is really sure how much is involved and where it all goes.
So it appears to be a grand scale mess and that's why we need to find a way that these people can pay these loans, credit cards and what not. Because if they default we are going to have to pay one way or another. They aren't going to have to pay because they don't have any money to devalue.
So we either pay with inflation or pay with taxes or both. The main thing we have to worry about is uncontrolled inflation, which could lead to deflation/depression. Which everyone keeps talking about on the news, but nobody explains what that means in common day language. That means nobody has enough money to buy anything but the bare essentials if that.