…and should the federal government even ‘lend a hand’ in this manner?

President Bush outlined a series of policy changes he’d like to see implemented:

1) Suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure.

2) An administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates.

3) An initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.

Can they legislate away ignorance or stupidity? I know a woman who, though she had no need to, refinanced her home [that was almost paid for!] at the height of the housing boom in her area. She cashed out, still holding a now huge *adjustable* mortgage and spent every penny of the funds… and she hadn’t even made provisions for a new escrow, so at the end of every year she must come up with insurance and taxes. They saw her coming…

So… will we bail her out?