Consequences of bad choices trickle up

I don’t own my own home and am nowhere near saving up for a down payment for one. But at least my husband and I have a plan (save up at least $20,000 to $50,000 for a down payment, although I have no idea how we’re going to do it, and buy a house that isn’t in that crazy $500,000 range for a measly 3 bedrooms – give me a break!). Which is more than I can say for a lot of people who are caught up in this housing mess.

This entire mess, which has reverberated all the way up to the federal government, who are now going to meddle in what is supposed to be a free market, just supports the theory that people should do what’s right. Think of this as the butterfly effect, except that each action is a choice made by a person.

=> John, seeing that everyone else is buying a house, wants to buy a house too. Except he doesn’t have any money saved up, plus his credit is not that great. Consulting his friends for direction and referred to a mortgage loan specialist, John qualifies for a no-down payment loan with a low introductory rate. Excited, John opts to buy a four-bedroom house — for just him and his wife — and immediately takes out another loan to fix it up.

=> David, a real estate agent, meets John and his wife and shows them a variety of homes. Unbeknowst to John, David is subtly pushing newer construction, four-bedroom homes at him because of their bigger price tags, which would mean a bigger commission. The strategy works — the shiny new hardwood floors and new bathroom with a jet tub is a hit with John and his wife.

=> Mary, a mortgage loan specialist, meets John on the referral of previous clients. She sees that John’s credit is kind of shaky, but still good enough to qualify for a prime rate loan. Instead, because the “subprime loan” will get her a bigger commission, she sells it to John and even encourages John to take out another loan to fix up his house to increase the value of his investment.

=> Home Loans Inc (not a real company) sees gold in the number of people with shaky credit who want to buy homes. Home Loans Inc decides to encourage its loan specialists, like Mary, to sell subprime loans over prime loans.

Forgive me if my information or impressions are incorrect. But these seem to be the actions that have led to this housing slump — people who couldn’t afford homes buying homes, real estate agents pushing homes that people didn’t need, mortgage loan specialists selling loans that were either too much for a person to handle in the long run or not even necessary in the first place and financial companies encouraging the practice in the first place. All these actions seemed to be fueled by your typical human thinking — “I gotta get mine” or “just this once” or “this won’t hurt anybody.” Well, now that “just this once” or “this won’t hurt anybody” action may very well bring our economy into recession. Good job, everyone.

Honestly, I’m tired of people not being accountable for their personal actions. We (as people) think that the little bad things we do won’t have an effect on anybody else, but they do.

People, did you read your contracts and see that the interest rate would double after a couple of years???? You are in trouble for so many reasons — thinking that the insane prices for homes would go on forever, believing that you could “flip” your house for a profit, positing in the first place that a house is an “investment” rather than — gasp! — a home.

Sales people, your greed has caught up with you — you’re now in trouble for trying to cash in on these crazy home prices and not thinking long term — “maybe if I continue to sell people what they need rather than what they want (since people often have eyes bigger than their stomachs, so to speak), I’ll have a steady supply of people who need to buy a home.” Now all those people are stuck with homes they can’t afford, and there’s no one else to buy a house from you.

Loan people, your greed has caught up with you too. You somehow sold yourself the idea that subprime loans were a great deal for people with shaky credit. Right. Where in your right mind did you think that people with shaky credit in the first place might be able to maintain a long-term mortgage — especially one that would balloon in the next couple of years?? It seems to the rest of the world now that all you thought about was lining your own greedy little pockets.

And now, the federal government is coming in to bail folks out. Never mind that their plan is voluntary and not across the board AND unfair. Never mind that its simply a band-aid so that there won’t be as many foreclosures over the next five years and that this plan is only going to delay the inevitable. Never mind that the government is intervening in contracts that really have nothing to do with them (other than politics). The federal government is going to help you out because people shouldn’t lose their homes.

In my opinion, they should because they didn’t consider the consequences. God knows I’ve lived through losing a home to foreclosure — those kinds of events help you learn lessons, like a teenager who learns that talking on a cell phone a lot means you have to pay a lot of money. Instead, the federal government is now intervening, like a well-meaning but clueless family friend who gives the kid money and urges the kid not to tell mommy.


Read more about the angst in the Washington Post and in HousingPANIC.

One thought on “Consequences of bad choices trickle up

  1. Karl

    The federal government isnt really bailing homeowners out…this plan affect the borrowers dealings with their mortgage holders, or a private business transaction.

    However, the real reason government is involved is that they dont want a rapid fall in property values, hence, property taxes which is their life blood. In California, for example, government spending is up over 40% since Gray Davis was turned out of office. How could that happen? Werent things out of control then? It was all made possible by the rapid increase in housing values, which of course led to a government largesse not seen in the history of the State. Well, they couldnt well pay down the debt, or put it in a lock box for a rainy day…nah….they had to give everyone raises and blow money on pet projects.

    I havent seen one word about any of these sad people getting their property tax relieved. (Payments due Dec 10 folks) CA is already 10 billion behind in income this year, and might be 20 billion very soon!

    As for the mortgage brokers steering people toward liar loans that doubled their income…are they any different than the finance guy at the auto dealership steering you toward those higher priced options or the “extended warranty” for only thirty dollars more a month? They will get their commuppance, as any hiring manager I know throws away any resume with “realtor”, “mortgage specialist” or “appraiser” listed….same as the notcommer employees after the dotcom burst. A couple have even been taken out by angry homeowners whose lives were ruined.

    This CA or Federal plan is nearly a band-aid on a very large real estate bubble…and will slow, not stop, the inevitable. People still cannot afford new houses to move into using the 20% down formula…take your family. You both are responsible adults with full time jobs, educations, and still are years away from buying a house in Southern California at the “price levels” they are looking to stabilize things.

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