Tough Times........................ - Last Page

Posted 08/02/2008 03:42 am

It is absolutely ridiculous to lay the blame for the current mortgage crisis entirely on the heads of borrowers. Mortgage banks and hedge funds were having a field day creating all kinds of junk derivatives based on the value they (and others) convinced people was in their house and land. What appears to some to be a subprime-borrower-caused mortgage crisis can just as easily be looked at as a derivative crisis entirely caused by lenders. Describing it this way, though, is just as unfair as blaming borrowers.

I myself have a house on the market, it's been there for months. I worked my tail off on that house. I put in a new flagstone walkway, new patio, stone-walled perennial gardens, finished the basement, replaced the HVAC, refinished the floors, put granite in all the bathrooms, completely redid the kitchen/dining room breakfast nook...it's a beautiful home. I purchased it for $180K (7 years ago, I am not a flipper) and probably put another plus-or-minus $70K (not counting labor) into it. I worked 12 hour days doing everything right, getting approvals, making sure it was beautiful and safe. My last appraisal before listing was $300,000. It's now on the market for $229,000. Yes, it's my fault that I didn't take my home equity loan and blow it on vacations and new cars. I will take responsibility when my house sells for less than I owe, or I am forced to give it back to the bank because no one is extending credit and few can buy a house right now. It is all my fault. If I do end up in default, it will be on my credit report for years and I will bear the responsibility. But still I can't imagine one borrower who purchased a home and said, "Oh, well, if we get foreclosed on, the government will bail us out like always."

Now, I'm a prime borrower, not a subprime borrower. But I know subprime borrowers were told, "Don't worry about your interest rate reset. You will always be able to redo your loan so the payments don't get out of hand." Those promises turned out to be completely untrue.

Don't try to rewrite history with this, "Borrowers should have seen this coming." Shouldn't banks have seen this coming? Shouldn't regulators have seen this coming? Shouldn't government leaders have seen this coming? Now, I'm not going to lose my home. I may lose my ability to borrow on good terms for a while, but that's what happens when you decide to move to find a better life for your family. But to dismiss the cause and effects of the mortgage crisis as entirely the actions of irresposible borrowers is completely inane. I feel for the majority of people who are losing their ownership stake in their primary residences, no matter who is ultimately to blame for this situation.

The whole 'personal responsibility' line of thinking is understandable. It's deeply rooted in our nation's Puritan heritage. It is self-reinforcing and completely unempathetic, as those who've never 'needed help' will always cast themselves and their exemplary behavior as the exact opposite of those 'sinners' who've succumbed to temptation and fallen. The 'personal responsibilty' mythologizers have been able to cast quite a few villians over the years, with great vitriol directed at "welfare queens," "affirmative action," and generally at (gasp!) "liberals," to name but a few.

What seems to be missing from the personal responsibilty argument is that there is no personal responsibility without generally understood guidelines for collective behavior. In the world of absolute individual responsibilty, the free-est market is the one with the most benefits, fewer regulations and less government intrusion will lead to better and higher standards of living for everyone. The less government does, the better we all will be because we will only have ourselves to rely on. Corporations make better decisions than government because the profit motive increases efficiency and the rising tide of business lifts all boats.

Really?

If you've bought into the whole personal-responsibilty/less-government-is-the-best-government-Fox-News
argument, I understand. But try making your case to someone who has a family member who got sick or died because of e.coli after an innocuous meal in a restaurant that could have been prevented by attention to an inspection, or who was driving home over a bridge in Minnesota, or to three in four of our nation's ill Cold War nuclear workers who remain uncompensated for their sickness and sacrifice to this day, etc.

I am sure there is a small number of borrowers who went into the home loan process knowing full well they would never be able to make a payment on their home, and these people make me sick. However, the vast majority of borrowers entered into rotten agreements with a rotten system. Should they have known better? Well, they can't entirely be considered victims, they did sign their names, but the role of others in creating and glorifying the system should not be ignored or minimized for the sake of the old Myth of Responsibility.

EDIT: For some reason, I have not been permitted to post in the general area. Just to note that I owned the home I am trying to sell for 7 years. It was a primary residence, not an investment. We moved for work. If you grow all of your own food, and generate your own energy in a house that you built yourself from trees that you harvested on land that is fully paid for, then I apologize for implying that we live together in a society and need to have a greater understanding of individual circumstances rather than just blaming people for 'living beyond their means.' Every time a mortgage lender approved a loan for a home based on an applicant's credit score and income, that applicant was assured every step of the way that the house they were purchasing was within their means. I simply can't totally blame the borrower for believing the facts as presented. The 'myth of responsibility' I am pointing out IS one of the current memes of one particular political party (and has been for some time), however neither of the major parties is blameless in the mortgage crisis. It's great that people credit themselves for picking themselves up by their bootstraps, but I doubt you made the boots all by yourself.

Also, it has affected my coin buying as I am being much more selective with my purchases.

Edited by halfabustisbetter
08/02/2008 3:09 pm

Report this Post to the Staff