Wednesday, April 23, 2008


I don't usually talk about politics or the economy on this blog, but I can't help it after catching the tail end of a story on NPR today. Some lady in Florida bought a house a few years ago with a nice down payment. Sadly, when she bought the house, she didn't have all of her finances in order and, moving from New York, she didn't find a job in Florida as quickly as she thought. Thus, she was late paying her mortgage a few times and the bank threatened to foreclose.

So she found a new lender that would help her out. The problem was, she soon found out after she agreed to the new mortgage, that her monthly payments were going to balloon - going from about $1500/month to $2800/month. She, obviously, couldn't afford this.

She soon found out that the new lender didn't do any qualifying checks to figure out her income or whether she would be able to pay. In essence, the woman feels that the lender is just lending money to people that they know cannot pay, so they can foreclose the house.

She's bitter, saying that "It's raping me of everything, stripping me of everything. Providing me with a loan that I cannot afford? That means it was your intent in the first place to take my home away from me."

Umm . . . hello? Did I miss something? Where does personal responsibility come into play? It's the lender's job to figure out if their borrowers will be able to pay or not? Of course, any responsible lender will do this, but no matter what the lender says, it is ultimately the borrowers job to figure out for themselves if they will be able to pay the loan off. Why pass the blame onto someone else when you were the one who didn't take personal responsibility for what you could afford? Do you think that a bank is looking out for your best interests, or theirs?

Though I have never bought a house and I don't have a mortgage, from what I understand a bank will lend you as much money as they think they can risk. This doesn't mean that you should borrow that much money. The bank doesn't know every little spending habit you may have, or just how much you can really afford. It is your responsibility to figure out for yourself if you can afford the maximum amount that the bank is offering. Why would you expect someone else to take responsibility of that for you?

Of course, I am sympathetic to the woman's plight. But that is also life. No one is going to cut you a break when it comes to finances. And, like John McCain said a few weeks ago, it is not the government's job to bail out a few million people in the United States who weren't smart enough to read the fine print or hastily secured a loan they couldn't afford.

I guess this is a good lesson for me. When, and if, we try to buy a home, I need to make sure I know what I'm getting myself into!

You can read and listen to the story here, by the way.


Bill Cork said...

This lender engaged in fraud--a very common fraud. It's been the basis for successful litigation in many foreclosure lawsuits I'm aware of. Some states have protections to guard against this--others don't.

Shawn Brace said...

Well, you know more about these things than I do, I'm sure, but I don't see how the lender engaged in fraud - at least from what the story says. Is the borrower not responsible to know whether she can afford a specific loan or not?

Bulworth said...

Clearly some individual borrowers gambled--as did their eager creditors--that the housing bubble would continue ballooning.

Other borrowers were simply misled.

I bought my first home five years ago, and I was, quite frankly, overwhelmed with all the details and information. Fortunately, I didn't require one of the now infamous "subprime" mortages and I received excellent professional input by my realtor and financier. I was lucky. Others not so much.

"There but for the grace of God go I".