Pure Confusion...

I'm hoping that someone can explain to me why it is becoming so trendy to bail out corporate American lately. It seems so common now for our country to reward people for under performing. The American auto makers are constantly putting out inferior products and heavily overspending. How does a company "suddenly" find itself $19 billion in debt? Not only that, they are putting over 682,000 retirees at risk. http://money.cnn.com/2008/11/07/news/companies/sloan_detroit.fortune/index.htm?postversion=2008110715

Just another reason why I wish to stay self-employed and stash my retirement fund under my mattress! What really upsets me about this economic downturn is that, I believe, many of us saw it coming and quite frankly our greed facilitated it's arrival. What do I mean by that? Well, at the end of the Clinton administration, Uncle Bill signed into our existence a wonderful product called variable rate mortgages or adjustable rate mortgages (ARM's). After working in the mortgage industry for a year, I am fully aware that anyone who has every sold a ARM loan knew full well they could be putting their client in a sticky situation in the future. This is where the greed of the lenders, whether to pad their bank accounts or to get ahead in the corporate world by selling more loans comes into play.

When mortgage rates hit an all-time low, it doesn't take a genius to conclude the rates are going to rise again. Quite frankly, they are guaranteed to rise. Knowing this, I personally saw loan officers sell customers ARM loans because they wouldn't qualify for fixed rates and went ahead and wrapped in ancillaries such as their credit card bills into the loans. Sure, their monthly payments may drop a couple hundreds bucks, if at all. But how can someone justify selling this product knowing they just extended their finance charges on those balances from a few years to 30 years!! Have to get that loan closed though, right? I can't begin to imagine the stress these loans put on their clients.

I specifically remember a client in 2003 who refinanced her mortgage ($600k) and included all her credit cards ($50k) and her car payment ($13k) into this wonderful ARM note. Her rate was around 4.5% and was fixed for the first three years with a variance of +or-3% at the end of those three years. Not only that, it could adjust +or-.5% every six months thereafter. This client was self employed and could barely afford the monthly payment even after all these expenses were combined. Knowing this, take two factors into account. First, her rate more than likely increased at least 1%/point after the three years. http://mortgage-x.com/general/historical_rates.asp and secondly, her property value very likely decreased causing this client to not only have an unaffordable monthly payment, but unable to convert their loan to a fixed rate due to the fact they are quite possibly upside down in their property. Meaning their debt/mortgage might be higher than the value of the property.

The one year I worked for this particular lender, the company CEO reportedly took home nearly $50 million on the backbone of the variable rate mortgage. After sucking all the money out of the economy and destroying property values in America, these individuals are asking for the tax dollars of the very people they screwed in the first place to bail them out. Forgive me if I don't feel so inclined to dip into my back pocket to help them out.

Just my thoughts on the matter...