Jul 14th, 2008
Sympathetic, But Not Enough to Favor a Bailout
CNNMoney has a story on a family who lost their home in the mortgage crisis. A grandmother who bought her first house and was getting rent money from her two daughters who “unexpectedly” saw her mortgage payments shoot up hundreds of dollars a month.
No more house.
Yes, I feel horrible that someone who had bought a home–their first home–might lose it to foreclosure. Especially someone who at least had saved a sizable amount–$20,000–as a down payment
But read the story more closely: the house she bought cost $489,000. Her yearly income is $25,000.
Time out!
There’s lots of responsibility to go around on this one. Borrowing $489,000 on a salary of $25,000 a year is totally out of line with reality. And loaning someone with a $25,000 a year salary $489,000 is incredibly irresponsible. There’s no way someone with that kind of salary to reasonably have a mortgage of that size, meaning that not only did the borrower need to know beforehand she couldn’t afford it, the lender needed to let the borrower know that–and there’s no way a lender couldn’t have known that it wasn’t a workable loan. This was doomed from the start, a marriage of a borrower who didn’t know what they were getting into and a lender who wanted to make a loan–and some dollars–in a bad way.
All of that said, while I feel horrible for this lady and her family, I just can’t support a taxpayer bailout of folks who have gotten themselves in deep with mortgages they can’t pay. These are the biggest investments almost all of us will ever make in our lives and we owe it to ourselves–and each other–to do our homework and not get ourselves into situations where we’re in over our heads. We’re not talking about a situation where someone lost their job or had a catastrophic illness or accident; we’re talking about a situation that was 100% preventable beforehand. Yes, I feel horrible, but no, I can’t say bailing them out is the best use of taxpayer dollars.
“Her nest egg and good credit score qualified her for an adjustable-rate loan that didn’t require documentation of her income.”
How could anyone ON EITHER SIDE think this was in the best interest of the customer or the mortgage company? With these requirements, I could qualify to buy my own island!
This post will be in the 69th Carnival of Money Stories, going live on July 22, 2008 at Almost Frugal. Don’t forget to link back to the carnival!
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