Monday, April 14, 2008

Call me Old-Fashioned,

but I am not getting this mortgage crisis thing. Please let me first post a disclaimer. Although I earned a B in my college Economics class, it is one of those subjects that makes my eyes glaze over. Start talking about cows, or organic produce, and I'm right there. Mention supply and demand, and I'm off to Jamaica or somewhere else. That's probably why I haven't started an organic business yet, but that's another post!
My understanding of this crisis is that people took out adjustable rate mortgages on their homes. Now rates are going up, and they can't make payments. They're losing the American Dream, and they want someone to help them keep it.
OK. Here's where I turn into Mr Hammond from Jurassic Park. You know, this guy in white;




Over the years, John and I have purchased three homes. Each time, we were offered an adjustable rate mortgage. We turned it down, because--and here's the important part--we could never tell if we could afford the payments when the rates would go up. Notice I say WHEN, not IF; nothing gets cheaper, does it? Anyway, because we did not have a crystal ball to predict our future house payment or our future income, we passed on the ARM. We were told, "But you could buy this bigger, nicer house if you did take the mortgage," but we passed anyway and took the smaller, but still nice, home.
Now, here's where the Mr. Hammond analogy comes in. In between the oohs and the ahhs of the beginning of Jurassic Park, and the running and screaming near the end, Mr Hammond says to computer-geek-saboteur Dennis Nedry, "I don't judge people by their mistakes, but I do expect them to pay for them." More to the point, I don't judge people either, but I don't want them asking ME to pay for their mistake of taking the ARM. And you know I will have to, as the government is going to come looking for me and mine to pay the monies necessary to save the American Dream for these people.
But, wait. The American Dream is about working and saving and THEN buying a house. We probably shouldn't even have the mortgage we have, except that we can afford to pay it. No one is keeping the American Dream from those affected by the mortgage crisis; we're just expecting that they work through what was told would happen to them if they couldn't pay. Nowhere does the American Dream say anything about handing it to someone if it doesn't work out in the end that they can't afford it. And, hey, is a Dream ever guaranteed, anyway?
Can someone clear this up for me? Tell me what I'm not getting, and where I'm unAmerican. Please.

3 comments:

Karen said...

I really enjoyed your rant, because I feel the same way! We also bought smaller homes with fixed rate mortgages so we knew that we could afford the house. Too many people have the "need it now-no matter what" mentality. Then, they expect sympathy and someone else to foot the bill when their wants are too expensive.

Susan said...

>>where I'm unAmerican

Depends on your definition of what's American. Being able to work for something and take responsibility for your mistakes.... that's old-school "American." Newthink "American" is that I have a right to whatever I want, at someone else's expense.

So it's a culture-war over what our basic principles and beliefs are.

But you didn't need me to tell you that, did you?

Kim said...

We have an adjustable second and the recent events have been great for us. Our payments have gone down not up, down by almost $100. That said we knew we could afford the payments even if the rates went up a bunch so we chose to buy a house.

A lot of people didn't just take out adjustable rate mortgages but mortgages with payments that double or triple after a few years because they were paying interest only payments with a low fixed rate. After the initial 5 years the mortgage becomes adjustable and they have to start paying the prinicple payments as well. They were gambling that they would be able to refinance when the value of their home increased, the problem is that the value didn't go up enough to get out of the original loan. These types of mortgages are really popular in places with high housing costs.

I agree with you that we shouldn't be bailing these people out. But as Susan said, lots of people think that they have a right to whatever they desire.