I will state up front that I’m not a financial whiz, nor an expert in the area of economics. However, it just seems that a lot of the problems with the current mortgage crisis is self-inflicted.
Much has been made of people not being able to make their house payments. The causes that I hear about the most is 1) loss of job; 2) mortgage payments rising due to an adjustable rate; and 3) unscrupulous lending practices.
The first cause there isn’t a whole lot that the borrower can do except keep trying to find a job. Unemployment benefits only last so long, and unless the borrower has a decent savings account, foreclosure can come fairly quickly.
Losing a job that feeds the family and puts a roof over one’s head is devastating, especially if losing the job is not the borrower’s fault. Trying their best in finding another job under these economic conditions is stressful, especially in Michigan. Jobs are not easy to find, especially ones that will pay that mortgage.
The second cause is the borrower knew that their rate could adjust upward. To sit and scream that their once low rate skyrocketed is simply stupid – didn’t they know that this could happen? And on top of this is that some of these borrowers bought too much house, and with the current economy, cannot pay for nor sell.
The last cause is one that I believe broke the camel’s back. Lenders that were looking for a fast buck made loans that the borrower could not afford in the long run, were a high risk, or omitted facts about the loan itself. From what I understand, most of these loans were made with an adjustable rate that started out very low – lower than a fixed rate mortgage – and then increased dramatically after the lock-in rate expired (usually after two or three years).
There is a story that I saw on CNN about an elderly lady who refinanced her house because she needed money to take care of her 32-year old retarded daughter. The lender’s representative did not report her income correctly on the forms, overstating the amount on at least one form. The mortgage rate was adjustable. It sounded as though the loan was a second mortgage. The amount that this lady paid per month (and was told to pay per month) did not include property taxes, and worse yet, she is on a fixed income. Bottom line is that her real payment (with taxes) is more than what she was paying before taking out the loan. She is suing for relief from the mortgage company stating fraud and improper procedures in an effort to keep the house that she has lived in for over 22 years. Of course, she is using a publicly funded attorney to plead her case…
While this lady has a case, it makes me wonder if she knew what she was signing. If you are signing your name to a bunch of documents, shouldn’t you look them over to make sure that the information that they contain (including your personal information) is correct? And if you don’t, do you have a legal recourse to negate your own legally binding signature that states or implies that you know what you are signing?
In today’s legal and social world, the short answer is yes. The concept of personal responsibility for one’s own actions is fading fast. More and more we are told that if we screw up, someone (usually the government) will make everything better. Congressional hearings and passages of resolutions targeted toward “mortgage relief” is another step down that path of the nanny-state care system. But who really pays for this relief? That answer is you, the hard-working taxpayer. And this is where I have my heartburn.
Now before someone calls me a cold-hearted bastard, I do believe that some help is needed for those hard-working people that are caught between a rock and a hard place. But I do not believe that the tax-payer (other hard-working people) should pay for that relief.
Companies that make these bad loans due to questionable practices should provide the relief. Company officers that rubber stamped the loans and received millions of dollars in bonuses while their companies tanked should be held accountable, give up those bonuses, and help clean up the mess they helped create. They had the authority and responsibility not only to the company they ran, but to the borrower they sold the mortgage to.
But I cannot neglect the nagging thought that the real responsibility of the mortgage crisis is the consumer, the person that took out the loan to begin with. Yes, everyone should shop around for the best loan at the lowest cost. A loan with an adjustable rate will have that rate increase – that is to be expected. It will not stay at that low, low rate. But to expect a bailout when everything hits the fan because of one’s own stupidity is, well, stupid.
And now because of a perfect economic storm, people are losing their jobs, losing their houses, losing their savings, and things are not going to get any better anytime soon. And more and more people are looking to government for the solution. And that’s crazy.
In some respects, government is partly to blame for this situation. No, this is not a Republican or Democrat problem, it is a government problem. Policies enacted from both parties concerning trade, business, and tax structures have accumulated over the years to cause the current economic situation that now faces both the American business and the American people. Furthermore, it has encouraged the notion that “Uncle Sam” will be there in case something bad happens. All one has to do is look at the stranded victims of Hurricane Katrina to know that government is not going to help everyone in times of crisis (at least in a timely fashion).
It is time for the average American to wise up and realize that their success is not dependant on government, but it is dependant on themselves. That means taking responsibility for themselves and their actions which includes making wise decisions. That is a foreign concept to some people, and that is a shame.