No Bailout!

Dear Senator Shelby -
 
I am writing on behalf of the vast majority of Americans, who are appalled at
the idea of bailing out irresponsible borrowers OR lenders! 
 
It is quite apparent that the legislation is driven by poor political calculus.
Rather than gaining votes by such a measure, those who vote for it are sure to
LOSE support.  There are millions of Democrats who would, because of this one
issue, vote for a Republican who stood firm against this travesty of justice. 
 
There are those who say this legislation punishes the responsible parties
equally.  However, innocent, hard-working Americans who played by the rules are
the ones who are really punished by this or any bailout.  How can we justify
'giving' equity to those who acted so irresponsibly, when the prudent,
hard-working folks sacrificed and lived within their means? 
 
What is TOTALLY left out of this discussion is the reality that in MANY areas
of the country, home prices are STILL well above historic relationships to
income.  Aside from the moral hazard of encouraging risky and irresponsible
behavior in the future, by artificially maintaining unrealistically high home
prices, we are setting the stage for another bubble - or, in the very least,
prolonging this one well beyond what would otherwise be the case. 
 
While it might be reasonable to assist those who can prove that they were
clearly taken advantage of, with no responsibility of their own, these
borrowers were only a tiny fraction of those who are now in trouble.  The
lesson needs to be sent, loud and clear, that home prices can indeed fluctuate,
and that committing to a mortgage is not something to be entered into lightly.
A bailout sends the opposite message.    
 
A recent FBI study just reported today, showed that the amount of mortgage
fraud by borrowers who lied about their incomes, as well as their
OWNER-OCCUPANCY status, is huge and growing - and is only the tip of the
iceberg.  It is still going on NOW!  How is the bailout going to be targeted
just to those deserving of help, when the fraud was SO rampant, and lenders are
now so woefully understaffed in attempting to deal with the current situation?? 
 
While the argument that communities are devastated by "dropping home prices"
applies to a few select areas, it is ludicrous to speak of 'plummeting prices'
in an area (like much of California) where prices - despite the recent drop -
are still 200-300% ABOVE where they were before the bubble began, and still
WELL above what incomes would support. 
 
The VAST majority are HURT - not helped - by high home prices.  First-time home
buyers, would-be home buyers, move-up buyers, etc., are all better off when
prices are lower.  By permanently raising the FHA limits to 125% of the median
(a median made artificially high during the bubble), we would directly be
maintaining those painfully high prices.  The income required to support the
new limit is close to $200,000!  Hardly the low to moderate income borrower
that the FHA was originally created to serve. 
 
Furthermore, the FHA loans are in many ways overly aggressive, and may well
lead to the necessity of honest folks in Georgia bailing out over-extended,
risk-taking borrowers in artificially over-priced homes in California.  WHY are
we encouraging 97% Loan to Value loans for borrowers with marginal credit and
up to 55% Debt-to-Income ratios in bubble markets, where prices may yet fall
dramatically?  Oh, yes, and are you aware that FHA does NOT even require that a
termite report be done on a property they finance - much less clearance
(repair) of termite/dry rot problems!  (which had historically been required by
banks) 
 
In closing, Senator Shelby, I speak for millions when I beseech you NOT to
yield to the powerful Real Estate and Banking industries.  The voters are not
ignorant, and we CAN see through the falseness of the various bailout
proposals.  It is bad policy, economically unsound, and morally repugnant.  It
WILL come back to haunt those who try to force it through!  Please show the
courage to be the voice of wisdom here. 
 
Thank you very much for your leadership on this issue!
 
J. Smith

Postscript from patrick.net:

The battle is now in the U.S. Senate Finance Committee.  There is a chance we
can kill or dramatically improve the Frank-Dodd bill.  The most effective thing
at this point is phone calls. Please call these Senators and tell them your
opposition to the Frank-Dodd bailout bill:

Sen. Dole      (NC): 202-224-6342
Sen. Bennett   (UT): 202-224-5444
Sen. McConnell (KY): 202-224-2541
Sen. Bayh      (IN): 202-224-5623
Sen. Carper    (DE): 202-224-2441

These guys are from states that aren't really impacted by overbuilding
and are conservative enough that a $300 billion new program should give
them pause.