Americans Split on Subprime Bailout

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom - Borrowers are to blame for their subprime woes and lenders and Wall Street investors, not borrowers, would most likely benefit from any federal mortgage relief, say most taxpayers who stand to foot the bill for new laws designed to address the subprime mortgage morass.

Two recent surveys reveal consumers are split over legislation, including the "rate-freeze" bill that U.S. Treasury Secretary Henry Paulson supports as not a bailout for people who made bad decisions.

"Foreclosures are very costly to lenders and investors as well as harmful to homeowners," Paulson said in an interview on Fox News television Dec. 18. "There's no bailout with government money, none whatsoever."

However, virtually all new laws come with some administrative costs and some subprime proposals making the rounds on Capital Hill directly pick the pockets of taxpayers.



An Opinion Research Corp. poll conducted for CNN found that 51 percent said subprime borrowers whose homes are at risk willingly accepted risky home loans and are themselves to blame. Another 46 percent said borrowers are the victims of bad lending policies.

Even though most believe borrowers are at fault, 51 percent said people who could lose their homes because of the risky loans deserve special treatment. Another 46 percent said there should be no special treatment for those in trouble.

In another poll conducted by Harris Interactive for the National Taxpayers Union almost half of adults polled, 48 percent, said a federal bailout would help either lenders or Wall Street operations that profited from the mortgages. Only 26 percent believe subprime homeowners would benefit most.

"Americans are skeptical not only of who will benefit, but who will be left holding the bag," said NTU Vice President for Policy & Communications Pete Sepp.

That's not surprising. For years, homeowners were sold subprime mortgages as the answer for many who otherwise couldn't afford a home. Now many feel like they were sold a bill of goods.

In the CNN poll only 26 percent said banks and other financial institutions that currently hold bad home loans should receive special treatment that would prevent them from losing money on those mortgages, while 72 percent said they would oppose any such special treatment.

When the NTU poll asked its group which statement most closely reflects their views on plans allowing federal agencies to "increase the size of the loans they can
insure and purchase, and to reduce down-payment requirements," 66 percent agreed with the statement "these proposals are nothing more than a taxpayer-funded bailout of banks and lenders that provided and profited from these risky loans."

Thirty-four percent agreed with the statement "a taxpayer-backed refinance program is necessary to avoid an increase in foreclosures that could reduce home values across the country."

Also in the NTU poll, taxpayers would be most negatively affected if the government were to "bail out the subprime mortgage market," according to 60 percent of those polled. Only 5 percent said in each case that "homeowners who hold subprime mortgages," "lenders who issue subprime mortgages," or "Wall Street banks who profit from subprime mortgages" would be most negatively affected.

Forty-five percent of those polled said they strongly opposed or somewhat opposed proposals for taxpayer funding "to subsidize mortgage payments, or subsidize the cost of refinancing subprime loans." Only 29 percent said they strongly or somewhat supported it, and 12 percent indicated they didn't know or were not sure.

"The low levels of trust in government reported in other polls, along with the results of our poll, seem to suggest that policymakers may want to minimize the government's role in any rescue packages being crafted with the lending industry," Sepp concluded.

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© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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