Obama’s homeowner’s rescue plan is great for homeowners who “through no fault of their own” owe more on their home than it is currently worth. It’s also great for those who, because of greed and to finance a lifestyle they could not afford, used cash-out refinancing to increase the mortgage on their home to a level beyond reasonable market price levels. It’s also great for people who, because they had poor financial judgement, purchased homes at prices that were larger than made any kind of rational sense in the market place.
For people like my wife and me, who prudently kept our thirty-year-fixed and didn't increase our mortgage balance, it does nothing. We get to stand by and watch the government help those people refinance their mortgages with interest rates a half point or so lower than the rate we have been paying for eleven years and, in some cases, reduce what they owe.
Other than that, it’s a fine plan.
Like much of the government’s rescue planning lately, it assures that people who have used prudent financial thinking over the past ten years will be punished for having done so, while people who have been greedy, reckless and stupid will be rewarded.
Does government ever consider the ramifications of what it does?
The COBRA provision in the Stimulus bill is a real treasure; the employer has to pick up 65% of that tab. So the small business that is struggling to keep its head above water is faced with another roadblock to survival. It cannot afford to keep workers on, but it cannot lay them off either because of that COBRA tab. It no longer has any choice but to padlock the doors, close the bank accounts and file for bankruptcy. So now not only do those who would have been laid off hit unemployment, the entire company does.
The COBRA provision is supposedly retroactive to September of 2008, but let’s get real. Anyone who lost coverage since then and has any health issues is not going to be taken back without lawsuits. Not to mention that those retroactive fees for small business are unpayable, and for large corporations that have had to make major layoffs they could be ruinous.
What about the people who have made COBRA payments for the last five months? Do they get that money back? If they do, who pays it?
Finally, every dollar that goes to those COBRA payments is a dollar not available for employer provided termination services such as retraining, job placement and the like. Give with one hand and take away with the other.
I can tell you from my own personal knowledge that many companies have been providing excellent post-termination services and I can tell you that, not only are they cutting back, these provisions will certainly cause them to cut back even further.
These are not Republican provisions, they are Obama/Pelosi/Reid Democratic provisions, and they do the same things that the Republicans did, just doing it in a different manner. They reward a different set of bad behaviors and they punish prudence.