Thoughts on Paulson

Joe:

Just felt the need to comment on one of your reports this morning where you mentioned that Secretary Paulson is contemplating offering relief to high credit borrowers who are falling behind on their mortgage payments. While I understand the philosophy behind his plan, it bothers me on two levels:

1) As a homeowner w/ strong credit and an adjustable rate mortgage on my 2nd home in CT, I recently paid a lender $2,000 to obtain a new 10yr interest only ARM ay 5.5%. My old loan was a 5yr balloon at 3.75%. If Paulson’s plan in enacted, I feel as though I am being penalized for paying my debts on time and not defaulting on my obligations.

2) As the owner of a mortgage brokerage, a large part of my business plan for 2008 focused on capturing the refi opportunity being offered by the billions in dollars of ARMs that are due to adjust. The mortgage arena is tough enough as it is…never mind that the Federal government is now contemplating bailing out mortgagors who had no complaints when they were able to purchase their dream home or take cash out to consolidate their debts. Why not loosen Fannie and Freddie guidelines to allow these high credit folks to refi? This would at least assure that the investors who purchased the original paper receive the duration that they have built into their portfolio models as well create revenue for the mortgage related firms that still manage to exist outside of the NYC real estate marketplace. Maybe not a PC solution, but more in line of what I had hoped for from an ex-Wall Streeter.

I feel badly for those that are currently struggling, but the government needs to steer clear of solutions that create moral hazard for borrowers. Owning a home is, believe it or not, a privilege, not a right.

Best,
Rich Bouchner