The great 2008 Mortgage bailout – Why am I paying for other people’s homes?

Washington is abuzz with talk of rescuing the sub-prime mortgage lending industry, and all the home buyers who who signed up with them, gambling that rates would remain low.

Personally, I have a bunch of problems with this. First, when I bought my first and only home so far, I opted for the best fixed-rate mortgage I could find. I knew I’d be bankrupt if I went with an adjustable-rate mortgage and the market went bad. So, I’ve been paying higher interest rates than those who need their debts forgiven by the crazy lenders who loaned money to those who couldn’t really afford it.

Next, due to a messy divorce, I was forced to raise the money to pay off the last 60% of my mortgage, because (ironically) I couldn’t afford to refinance it in only my name. Even with the cash on hand, and the appreciation of my house’s value, my mortgage company wouldn’t grant me a loan. So, lots of liquidity went down the drain, and I now own my home, whose value is plummeting.

And yet, though I acted responsibly throughout, and didn’t commit to a mortgage that might bankrupt me, I now find myself on the receiving end of the government’s wish to forgive really bad choices on the part of both lenders and borrowers. Our government is considering subsidizing both these parties and their mistakes, and who has to pay for it? Everyone, including careful borrowers like me.

See, now I wonder if maybe I should have been irresponsible, and borrowed beyond my means. I would have saved money in the short term, and I could have avoided my financial responsibilities thanks to the US Government and the US taxpayers. Put another way, what’s the point of being careful with one’s finances if one pays more up front, and pays for others’ mistakes on the back end?

Yes, we need a healthy banking system, especially now when we may or not already been in a recession. It is so bad some people are “accidentally” burning their houses down because they can’t afford them. And it would be worse if those with the ethics not to destroy their homes became homeless as a result. I honestly don’t see a good way out of this mess.

I must be an idiot, or a hopeless believer in the good nature of humanity, because I really believe that with freedom comes responsibility. With risk comes… risk. If someone, myself included, doesn’t have a backup plan when choosing an ARM that might become unaffordable, I assume that most people won’t put their selves and their families at risk of becoming destitute.

Don’t misunderstand… I lost my job in January 2002 and haven’t worked full-time since. Unemployment ran out four and a half years ago, and I’m not even a statistic any more—I’m under the radar, and I don’t count when you hear the nation’s unemployment numbers. I want a job and want to work, but I’m just old enough and senior enough that most employers will opt for younger, cheaper workers, possibly even offshore workers. I’m not rolling in money. Far from it, all the money I worked so hard to save for 30 years is almost gone. If it weren’t for a lucky investment or two, and for my lovely wife, I’d already be homeless or living with my parents at an unpardonably advanced age.

So, while I believe in social liberalism, and giving a hand up to those who can’t help themselves, how can I possibly pay for my own home at a fixed rate, and the homes of other people, who chose to gamble on beating the odds? Not to mention to foolish financial industry who tried to squeeze every cent of profit out of the mortgage market, and failed beyond all expectations? Something seems very wrong here.

At a time when our government has irresponsibly swung back to the Reagan-era “borrow-and-spend,” feel-good, here’s-your-$300 tactics of retaining political power, and the inevitable bill will soon be due with a new administration, how can people who borrowed within their limits understand an industry and borrowers who willingly over-extended themselves? Should we all give up, and become the children of the state? Personally, I abhor the paternal (or maternal, if you prefer) style of government we have created. It may sound cliché, but “freedom is not free,” and “with rights come responsibilities” are vital, central concepts for me. I suppose it isn’t surprising that our President feels free to spy on any American and curtail any inconvenient liberties like habeus corpus, considering we collectively expect to be treated like children without responsibilities.

I guess it all comes down to that—responsibility. Hey, I bought my house just before the market went bad in 1988, do I get a check for having a house that is worth a fraction of what I owed? I converted my IRA to a Roth IRA when it first came out, and I paid more taxes on the conversion than the account is worth almost 20 years later. Do I get a bailout for my bad luck? I haven’t asked for it, and even if I did, I know it’s not going to happen.

I don’t want people to lose their homes. I appreciate that a strong banking system is part of a strong economy. Maybe my question is, why were these borrowers and lenders allowed such dangerous choices in the first place? As much as I dislike government regulations, shouldn’t some agency have forseen the possible downside, and acted to protect our economy? And what has happened to the grown-up concept of accountability?

Update- Boing Boing reports a leaked Chase Mortgage internal memo that details how to fool their computer system into granting mortgages to applicants who don’t qualify.

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