Monday, October 11, 2010

Home Foreclosures: Cutting Through the Crap

A lot has been made over the past few days about the revelation that "flaws in paperwork" have caused Bank of America and other banks to halt home foreclosures. Let's cut the crap here and answer the question who does this help?

The mortgage lender (usually a bank)? How does it help the bank to continue to have to hold a depreciating asset they don't even want longer than they would ordinarily have to? This action is going to keep more properties vacant and tied up in foreclosure proceedings even longer.

The "homeowner"? What homeowner? I can call myself a homeowner -- answer that question "do you own your own home or rent?" by saying I own my own home, I can pay outrageous taxes to the county every six months, anyone anywhere in the world can find my little slice of the American dream in my name on my county assessor's web page and know exactly how much it is worth. But the simple fact of the matter is that I'm not an actual homeowner until I hold a free and clear deed in my hand. Until then, I'm just a debtor to a bank that holds majority interest in the home I live in -- majority interest because if I miss any of those payments (including the last one) for a period of time, they can come in and reclaim their property and resell it to someone who is presumably more capable than I am of paying the monthly mortgage. That's the way it has always worked until the last couple of years or so when we've decided that it was necessary to turn this relationship on it's head and deprive the mortgage lender of their ability to recover their money from the deadbeat without be portrayed as a heel. 

Did I say deadbeat? Yes, I did. We all acknowledge that there are a certain percentage of home buyers in foreclosure right now who are truly hard up. Thanks to the Obama Administration and its minions in both houses of congress, this percentage is a lot higher than it normally is. But the majority of Americans (and others -- legal aliens, illegal aliens etc.) who find themselves in mortgage trouble knew they couldn't afford the house they were buying in the first place and simply just weren't honest with themselves about their financial situation. Sure, there were banks out there offering "interest only" mortgages where you pay $250 a month on a $300,000 home then refinance after five years. But at some point the bill comes due and it's the responsibility of the borrower to realize that. It's not the evil lender who covered up the fact that you can't really buy a $300,000  house for $250 a month, it's the idiot who convinced himself (or herself) that they could afford it when the $250 a month payment went up by 800% in five years. Liberals like to portray this person and folks who can't afford their house payment on top of the two car payments, the boat payment the RV payment and $50,000 worth of credit card debt as "victims". If these folks are victims of anything they are victims of their own stupidity and their utter inability to be honest with themselves about their financial situation. 

But there are "flaws in the paperwork". So what. In this mortgage lender/deadbeat relationship there is only one thing that matters: Is the deadbeat several month's behind in payments and is there any possibility that they are going to be able to get their mortgage current in the foreseeable future. If the answers to these questions respectively are yes and no, then the best option for everyone is to foreclose on the house. This gets the "home owner" out from under a house they can't afford and allows the mortgage lender to attempt to recover their debt by reselling the house to someone who can actually afford it.  

But the rest of us benefit from this benevolence, don't we? After all even though we are current on our house payments and have a reasonable expectation that we will be for the foreseeable future, there but for the grace of God go I. If we're ever in situation where we can't pay our mortgage, we'd want the lender work with us as well right? Truthfully and as painful as it might be, if I ever find myself unable to make my mortgage payment month after month I -- as is the case with anyone else who finds themselves in this situation -- would be a whole lot better off to try to unload the house and either downsize into something I can afford or go back to being a renter than to struggle on month after month trying to make a payment I have no realistic expectation of ever being able to make. Contrary to what everyone has apparently come to expect over the last 30 years or so, falling on hard times doesn't make you a "victim". However painful it may be, it's a part of the American experience. Living in the greatest country God gave man doesn't doesn't give you an automatic entitlement to onward and upward prosperity and it doesn't guarantee that nothing bad will ever happen to you. All you are guaranteed in this country is your freedom and liberty -- "victim" status and a death grip on a house you can't afford shouldn't be a part of the bargain. Unfortunately, entitlement seems to be becoming more and more a part of the American experience these days. And that's a bad thing.

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