Monday, September 08, 2008

Foreclosures - Why is it the government's responsibility to bail us out?

There's something I don't understand. I've been watching a lot of CNN lately what with the election coming up and news about hurricanes blasting the east coast (btw, we made it through Hanna with just a lot of wind and rain, but no damage...thanks to everyone who emailed me or commented on my last post!). Well, today they're talking about the government helping to bail out Fannie Mae and Freddie mortgage lenders, but something they said really struck a chord with me.

They said that today there are 1.4 million foreclosures in the U.S. and the people want the government to help people bail them out.

This is what I don't understand. Granted, there are a lot of people unemployed, but didn't they take that into account before they took on such a high mortgage? Didn't they think of backups? What to do if their job wasn't there say in the next year or two?

That's the problem with America. Sure, you can have your white picket fence, but why do you have to get into something that has such high risks if you know darn well that sometime down the road, there might be a problem with your job or a problem with your health?

I know it sounds like a dumb question, but let's get real here. Why do we overspend and hope someone can bail us out? Where are the smart thinkers here?

Sure, we have no idea what the future holds, but if you're sitting there contemplating a high mortgage and you have just fallen in love with this house and just have to have it and you know darn well that $2,000 a month is a lot of money and you're just not so sure just in case something else comes up down the road that will prevent you from getting that kind of money, and you're thinking and thinking, and you know what happens? The realtor tells you that if you want this dream home, you must act fast because there are other bidders and you know what happens? Sensibility flies right out the window and you make a bid.

Let's just say this bid is what the seller wants and you get the house. You give your mate a high five knowing you've "won," settle in, buy new furniture, make upgrades if necessary and then along comes high grocery bills, high utility bills, kids needing braces, car needs fixing or replacing and you don't want to admit to your friends and neighbors (or yourself) that you just don't have more money to spend since you already have a big chunk of that paycheck going to mortgage. But, you know if you don't pay the utility bill, it will get turned off, so you pay that. If you don't get your car fixed or replaced, you'll have no way to work to pay that high mortgage. If you don't get you kid braces or cheerleading costumes or classroom dues or a million other things that kids need in this gotta-have-everything world we live in, you're job as a parent is kaput. No, no, you can't have any of that happening, so you pay.

Along comes that high mortgage and you're thinking where in the hell am I going to come up with more money since you've already paid for the cost of high living the good life? You freak. You call the bank. You call the mortgage lender. You call your mom to bail you out again, and Mom's the only one who has it because she thought SMART and perhaps looked ahead.

I know times have changed, but it's time people did look ahead and be responsible for stupid moves like taking on more than they can chew.

But this won't stop anyone. They'll get help from the government and still go out and live like kings. I just don't understand.

Think, people. Think ahead, that's all I can say.

9 comments:

  1. I agree with you. I don't expect anyone to help me out if I overspend, but I think this is part of the government's way of trying to control more than it needs to. Coincidentally, your candidate Obama would be supportive of measures like this.

    Part of what happened is that the housing economy stunk, so lenders began to offer no money down mortgages. And, interest rates were so low that people allowed themselves to believe that they could actually own homes that were beyond their budgets. I was reading in Forbes Magazine some of the ridiculous mortgage terms people agreed to and most of these were flexible rate mortgages, so as interest rates rose again, people found themselves unable to pay.

    We took advantage of lower interest rates too, but when we refinanced we took a slightly higher fixed interest rate mortgage, so that our bottom line isn't impacted by fluctuations in the market. Now, if I could just find a way to keep the town from raising property taxes I would be all set. LOL!

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  2. Now see, there's your problem right there. If it isn't a fixed rate mortgage, I wouldn't even touch it. The way the economy is? You'd be stupid to buy a house with a flexible mortgage just to live in a house that is beyond your means and you know it. People have no sense.

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  3. Oh, thanks for your comment, Cheryl. This just has me so fired up. Reminds me of this girl at work who refuses to make herself better and instead relies on handouts. Just frosts my cookies.

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  4. Hi Dorothy,

    Sorry your cookies are frosted. This whole housing situation is rather complex however, and I don't think we can lay all the blame on the homeowners.

    Sure, it's been the "American Way" to mortgage ourselves to the hilt, but we Americans are also positive thinkers, who always believe times are going to get better -- and there's something in there too about wanting to provide the best for our families.

    But I'd lay some blame on our educational system, too. Sorry, but I don't think there are very many high school graduates who actually have a good grasp of economics -- or who even know how to make a budget, or plan for the inevitable contingencies.

    And I agree: once a family finds themselves mired in debt due to overspending and unexpected circumstances beyond their control...there IS the human tendency to look for the easy way out. Which is how the government gets involved.

    Maybe we need to teach more entrepreneurial skills -- show people how to get themselves out of their financial mess, instead of looking to Mom or the government.

    Possibly with book authoring, hmmm? Maye you can work on a way to help people through proper promotion of their books?

    Just a thought...

    Anne

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  5. There are many reasons why a person or family could find themselves over their head in a mortgage situation. I know from person experience, as I'm one of them. I didn't overspend, get an adjustable rate mortgage, refinance, or buy with no money down--yet I'm in dire trouble. It can happen to a hard working, responsible, reasonable person.

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  6. I think one big part of the problem is too many people bought more house than they could afford because of "special" financing that allowed it to work. For awhile. They expected the value of that house to increase so that in 2 or 3 years they could refinance and have enough equity to get a good mortgage. But, instead of appreciating, houses have been going down in value over the last year or so. Then when that "special" mortgage plan ends and realty is looking them in the face, they can't afford it. It is kind of a form of gambling.

    I kind of "gamble" in the stock market. Over the last 11 months I've had a lot more days where I've lost 2 or 3 thousand dollars and none where I've made that much. Should I expect the government to bail me out? I've only put money at risk that I can afford to loose so I am far from desperate but I've taken some big losses over that time.

    I am just ahead of the Baby Boomers and have already retired, but I am very concerned about many of my peers and those a bit younger than me. I think too many of them are approaching retirement and will have nothing other than Social Security to live on. SS has always been intended as a supplement to your other retirement funds but many don't have any other funds. And you can't build enough to retire comfortably in just a few years of saving, even if you save 100% of your income.

    As I've gotten older and into the empty nest position I have wanted smaller, one floor homes. I had plenty of equity in my last family home to pay off the new smaller house. My previous house payments were about $1200/month. Not having to make a house payment sure makes whatever retirement income you have go farther.

    I think Anne Holmes had a good idea in that our schools need to do a better job of teaching kids the realities of living on a budget. But that won't help the present situation.

    I have some new flower photos posted and, yes, I know the one I called a mum is really a dahlia!

    (Sorry this is so long but it is important now days.)

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  7. Another retired chap like Dick. You are right on, and Anne Holmes too. The government should let the free market direct this sort of mortgage abuse; not become a bigger part of the problem.

    Can I change the subject. The possible mortal effects of global warming are in the future. Radical Islam threatens civil societies now - but if you put either of these horrors in perspective, they are both minor threats compared to the immediate LACK OF FRESH WATER all over the planet.

    But WATER doesn't seem to get any attention. Millions of human beings are dying right now. In India 75% of the fresh water is polluted and toxic. In northern China the percentage is about the same. In vast African territories there is no fresh water at all.

    Granted: Global warming might kill people someday and Muslim fanatics may take over the world country by country, eventually.

    But people are dying right now because of the lack of fresh, clean water.

    Why is this fact not better known?

    Sorry. It's just something on my mind and I'm curious.

    Dixon

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  8. There have been a lot of foreclosures in Las Vegas. Too many people bought houses they couldn't afford. And too many lenders convincing them it was possible.

    I'd watch "Househunters" and hear how much they were spending and wonder how could they possibly afford that. They couldn't. And then speculators jumped in and drove the prices up expecting the prices to keep going up and so they could make a big profit. The skyrocketing prices were artificial. I agree - too many people are not thinking.

    And I fear they are not thinking in this election either. :)

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