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The Alchemist (12/12/2007)
By Al Thomas

I'm from the government and I'm here to help you.

Gosh, that makes me feel good. I know they will solve all the problems. That housing thing is a doozy. Let's see. The Secretary of the Treasury said so and you have to believe him. He is going to help everyone, well, almost everyone, keep their home. He said they will be helping 250,000 homeowners stay in their houses. Of course there are currently 1,100,000 who need help.

The plan is to freeze the mortgage payment at its current rate and level for 5 years. He didn't say what will happen at the end of the fifth year. He also didn't mention anything about home prices declining during the next 5 years or that the mortgage might be more than the value of the house at that time. It will help people stay in their homes and help banks continue to receive payments instead of having to foreclose on a house the bank doesn't want.

Mr. Paulson also did not mention that folks might not want to

pay property taxes if that happens or keep the property up so when the bank finally does take it in 5 years the neighborhood could be run down affecting the value of other folks who live nearby.

Many of these homeowners had a no-money-down deal and a discounted interest rate mortgage. Of course, they wouldn't walk away and leave the house vacant and the bank would not evict them.

There is another group that may or may not be eligible for the "freeze". How many (and there are millions) have been using the home as a "piggy bank". Instead of building home equity they have been refinancing and spending that extra cash.

Now that they will not be able to refinance because the home value has dropped they will have less money to spend which could slow the economy and even cause many companies to lay off employees. Seventy percent of the spending in the U.S. comes from the individual consumer and not from the business sector.

Slow buying of the U.S. consumer by as little as 1% can affect the world economy. It means China, India and Europe will ship us less merchandise and they will be laying off their employees. It's a domino effect.

No one has asked the banks or the mortgage makers if they want to do this "voluntary" plan. It means the Uncle Sam is going to change a contract. Does that sound like a violation of a person's constitutional right. This will go to the Supreme Court and that could take years to clarify. In the meantime make the payments or move. If there aren't enough "volunteers" what will happen?

The Secretary didn't say who was going to make new mortgages or who would refinance those that are coming due.

Lenders aren't lending any more. It sounds like the taxpayers will be funding the excess debt as they always have before.

It is a plan. It is up to you to decide. Hairbrained or Harebrained?

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter and receive his market letter at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Copyright 2007 All rights reserved.



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