Should the Feds Bail Out Homeowners Who Can't Pay Their Mortgages?
Monday, August 20, 2007 | Ethan Roberts Is this Spam?A few weeks ago, and with a certain amount of predictability, Hillary Clinton came out with a proposal for 1 Billion dollars worth of aid for "at-risk" homeowners. You know who she meant - the poor homeowners who were tricked and hoodwinked by those no good predatory lenders into taking loans they really couldn't afford after the first two years.
And of course the current situation of rising foreclosures is the fault of ... you guessed it, President Bush. Said Clinton about the Bush administration:
"They believe in letting everyone fend for him or herself. They believe in what the president calls an ownership society, which is really you're on-your-own. It's the yo-yo economy; some go up and some go down and the strings are pulled by other people. I don't think that's how America works best."
As a society, Americans will have to decide whether we want to foster dependency or to promote self solvency in our culture, even if it means that some will suffer as a result.
While it may be true that some lenders did not take the time to explain the fine print to their borrowers, as a Realtor, I can attest to the fact that the terms of the loan are always explained to the borrower at the time of closing. Therefore, if the loan were the "2/28" variety, in which the borrower has two years of a low introductory interest rate, followed by a likely re-adjustment thereafter to a much higher rate, this is something that would have been explained before loan documents were signed at the closing.
Buying a home has always been a symbol of maturity in our culture. It's as much about taking on personal responsibility as anything else you can do. Part of the pride of homeownership is about sending a message that you are no longer living in your parent's basement, nor paying off your landlord's rental property.
Our parents and grandparents worried about making their mortgage payments, just as we do. I laugh when I hear how my in-laws thought $17,000 for a house was a tremendous sum of money in the 1960's, and yet they made their payments each and every month, even if they had to "eat beans and rice, rice and beans" (thanks, Dave Ramsey) to do it.
So now the question du jour is, do we want to send a message to present and future home buying generations that from now on you can forgo the rice and beans, and still have your mortgage served with Lobster Newburg? If you can't pay the mortgage, should Joe Taxpayer pay it for you?
In my opinion, the Federal Government needs to stop infantilizing Americans by wiping their financial bib every time they spit up. What's next ... bailouts for all investors who lose money in the stock market? Where do we draw the line? Clinton's proposal is classic enabling in its most pronounced form, and does not bode well for the financial future of America.
