Recently we saw the Federal Reserve and European Central Bank take steps to keep money available to all. On a smaller scale, some states are looking to help homeowners avoid defaulting on their debts. Faced with record foreclosures (and, of course, the subprime debacle), states want to direct funds towards people who are about to lose their homes.
Is this a good idea? Chris Mayer from the Columbia Business School talked about it on Marketplace Money. According to Mr Mayer:
I think the time to have done something was two years ago, it's not now.
He suggests that states can only make an impact for a small number of borrowers. Instead, he suggests containing any contagion -- if homes go into foreclosure they need to be kept up and sold to a new homeowner as soon as possible. If neighborhoods start to go downhill because all the lights are off, the subprime problem will spread even wider.
Further reading:
- What is 'Subprime'?
- Listen to the Marketplace Money Podcast
No! People that buy homes should read and understand the fine print before they rush to buy! When a person buys a car no one bails them out if they get in trouble, why should it be any different with a house? If this gets started, there will be people who will take advantage of the bail-out! No! They should know what they are signing and getting into!