We will have a class war the likes of which we've never seen. Those that acted responsibly won't merely be jealous and envious, but rather they will be outraged. This will pit neighbor against neighbor, friend against friend, and colleague against colleague. Those with good credit will demand action. They will demand justice and they will demand accountability. I have always believed that there is a silent majority in this mortgage mess. That majority are the folks that have paid their bills on time. For the most part, they want no one bailed out. They were responsible. Others weren't and they won't stand for those that were irresponsibly being rewarded.Now, in the two days since President Obama announced his mortgage bailout plan this mortgage class war has exploded. The first significant salvo was fired by Rick Santelli in this clip.
The White House responded today.
In Gibbs' response, the White House tried to frame this as a class war between Main Street and Wall Street. (With Gibbs proclaiming the idea that derivatives traders know what they are talking about went out months ago) Of course, the White House will be in for a rude awakening if the folks there really believe that government subsidized loan modifications will be viewed as Wall Street Vs. Main Street. It won't. This plan will be viewed as responsible versus irresponsible borrowers.
Fox News has a story with just a tiny sampling of the kind of resentment and anger we will soon see.
Michelle Fry is a suburban Atlanta homeowner who has seen the value of her modest one-family home drop by more than half in the past year. She now sees a national mortgage bailout plan that appears to reward people who bought more house than they could afford and can't pay their bills. And she has a simple question for President Obama:I have seen loan modifications from the inside. The average interest rate is 5%. That's a rather sweet deal considering that you only get it because you can't afford your current rate. One modified loan I saw received an interest rate of 4% for five years, 6% for two more years, and 6.75% for the remaining 23 years. One borrower I am familiar with received a loan modification with an interest rate of 1%.
"Why am I paying for them?"
"We are very frustrated and scared," said Fry, 32, a newly expectant mother who works as a creative director for a public relations firm. Her husband Sam, 38, is a truck driver for a local printing company. Their combined household income is less than $100,000.
There are a few very important things to keep in mind. First, all of this has really happened in just a few days. Second, the President laid out a broad plan on Wednesday. The details of this plan won't be laid out until March 3rd. Until then, the White House can continue to claim that only those that "acted responsibly and played by the rules" will be helped, and it will be difficult to counter because we don't know the details yet. Finally, and most importantly, most people still don't know just how good a deal some of these folks that get a loan modification will get.
There is just the simmering of anger now. That anger will explode and spin out of control once responsible borrowers are able to wrap themselves around just how good a deal these loan modifications are. Keep in mind that loan modifications are predicated entirely on ability to pay. Often times, someone is so underwater that they only have the ability to pay if their loan balance as well as their interest rates are reduced. Furthermore, any loan that is underwater, one in which the balance is more than the value, will be brought down so that the two are at least even. What's more, imagine how one might feel when they realize that they don't qualify because their credit profile is too strong. That's the crux of the class war this process of loan modifications will bring. If you have been on time, and your finances are in order, you will be denied a loan modification. In other words, the person that overbought will be the one eligible for rates as low as 1% and reduced mortgage balance, meanwhile, all you get is the going rate on a thirty year fixed.
Make no mistake, the mortgage class war is about to begin and this one will be ugly, very ugly. This ludicrous notion that we reward the most those that were most irresponsible. We give them deals better than for those that are responsible is not without consequences. One of many of these consequences is the mortgage class war that has officially begun.