A story: once there was a couple who got engaged and decided to buy a house. This was in the fall of 2004 when the housing market was peaking and fabulous homes could be bought with no income verification and magical choose your own payment plans. This couple qualified for one of these fabulous homes at 3 times their annual income. However, this couple was level-headed and thrifty (not to mention, they loved to travel and they knew it wouldn’t be cheap to fly to Europe forever) so they managed to restrain the urge to buy a house they could barely afford and chose one well below the amount they “qualified” for.
They built their house in 2005 and over the next three years, they dutifully made their payments. In fact, they paid $400 more per month on their house payment to essentially turn a 30 year mortgage into a 15 year one because the husband has an irrational hatred of paying interest to anyone if he can avoid it. They still went on vacations, still lived within their means and generally had a happy life.
Fast forward to 2008: the housing market has begun its inevitable crash and politicians everywhere are crying about people getting foreclosed on. Countrywide, the same company that held our hero and heroine’s mortgage had gone under and been bought by Bank of America. Several states had sued Bank of America saying that Countrywide had engaged in predatory lending. These states won their case and Bank of America agreed to help
greedy bastards who couldn’t live within their means idiots people in danger of foreclosure stay in their homes, regardless of whether they could afford said homes or not.
In fact, some of the ways BoA agreed to help these
greedy bastards who couldn’t live within their means idiots people in danger of foreclosure was to lower their interest rates to 2.5% for 5 years, reduce their principal and suspend foreclosure proceedings on people who were in default but wanted to stay in their homes. Isn’t that awesome how BoA is going to help all those greedy bastards who couldn’t live within their means idiots people in danger of foreclosure? Of course, you only qualify for help if you fall into one of these categories, e.g. you’re a deadbeat on some level.
Moral of the story: If you are
a greedy bastard who couldn’t live within his means an idiot a person in danger of foreclosure, you’ll always be taken care of by the government/lawyers but if you are a sane person who makes smart decisions, well you can bend over and lube up because you’re gonna get all you can take and more.
Extended discussion: I understand why states’ attorney generals are doing this but the results are, in effect, punishing the majority of people who went about their business, making sacrifices as necessary to pay their home payments. I’m sure that the group of subprime mortgage holders are a mixture of greedy bastards and stupid people in varying levels but to artificially lower the principal on thousands of homes and suspend foreclosure on people who can’t make their payments is insane and will only serve to lengthen the disaster we currently find ourselves in. These measures are aimed at alleviating the symptoms while completely ignoring the cause of the problem which is that our money is broken.
We didn’t buy a house with an interest only, pick your payment ARM that resets in 5 years because we knew that is a stupid thing to do. Lots of people out there probably didn’t understand what it was they were getting into, sold by slick salespeople assuring them that house prices would always go up. I feel sorry for those people and have some sympathy for them because I know how easy it is to want something you cannot afford. I would be OK with a plan that got the subset of this group of people into a mortgage that was fixed, 30 year at an interest rate that was something below market. I’m not OK with a blanket plan that helps the rest of the idiots who got themselves into a house they can’t afford. They should be foreclosed on as quickly as possible so that the market can start to make a semblance of a recovery. Helping them while punishing the rest of us is sickening.