CINCINNATI A plan to freeze mortgage rates for troubled homeowners may help ease the U.S. housing crisis, but for wiser borrowers and those who have already lost their homes to foreclosure, such a plan seems unfair.
"It's people's own fault that they didn't pay attention to what was going on," said Cincinnati high school teacher Peter Parker, 32, who cautiously borrowed more than $400,000 in the last two years to buy two investment properties.
"It's not the government's job to bail them out."
The Treasury Department is finalizing a plan with mortgage industry leaders that will hold interest payments steady for many subprime borrowers facing higher interest rates and possible foreclosure.
While the details are not yet known, the prospect of a plan to rescue hundreds of thousands of homeowners from a deepening mortgage crisis has quickly won both fans and critics, including those who say a bailout sets a bad example for irresponsible banks and borrowers.
"The government is punishing people who were more responsible in the way they took out mortgages," said Peter Schiff, president of Euro Pacific Capital in Connecticut. "Of course they're going to be pissed."
Schiff also wonders how the government will pay for the bailout -- and said the looming November 2008 presidential election was likely behind its timing.
"They're trying to keep the you-know-what from hitting the fan until after the election," he said. "The rhetoric is 'We've got to help homeowners,' but the reality is it's designed to help the fat cats, Wall Street. It's bailing out the lenders."
PITCH IN TOGETHER?
School teacher Parker said lenders were practically giving loans away to borrowers like himself a few years ago -- with no down payments required -- but he was cautious, and only took fixed-rate loans he could afford to repay in the long run.
"It's callous to say, but they shouldn't be helping these people," Parker said, adding that as a history teacher, he worried about the example it was setting for Americans.
"It feeds into the mentality that the next time you screw up, someone will rescue you."
Interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years.
Supporters of the plan, including some on Wall Street, say that without help for troubled homeowners there will be a knock-on effect hitting every part of the economy, from jobs to spending power to retirement savings.
And credit counselors said many people were taken advantage of by predatory lenders during the five-year U.S. housing boom, which ended in 2005. Others ran into unexpected financial problems and simply couldn't cope with higher payments when interest rates started rising.
"A lot of people were misled -- they really didn't expect it would go as high as it has gone. I've had clients whose payment was $500 and a year later it's $1000 or $1200," said Joyce Keethler, a credit counselor at the nonprofit Consumer Credit Counseling Service in Cincinnati.
The aid plan also comes too late for many.
Doris Lusk, 58, effectively lost her home in Lancaster, Texas, after she battled rising interest rates and the costs of refinancing to get a fixed-rate mortgage. She moved out to avoid foreclosure, but wishes the government had stepped in to help in time to save her home.
"If they had of done it earlier it would have helped a lot and I would probably be able to stay there," Lusk said.
Some Americans are sympathetic to such borrowers.
"It can't be all about me, me, me, especially at a time like this. These are difficult times and we've all got to pitch in together," said Peter Sisung, 44, a Cincinnati designer.
A renter, Sisung said he could have been one of the homeowners in trouble -- he considered buying a house a few years back but was worried he'd get in over his head.
"Everyone was jumping in, there was such a craze," he said. "But I'm very cautious with money, so I didn't. Since then, I've said 'Thank God.'"
(Additional reporting by Ed Stoddard in Dallas; Editing by Eddie Evans)