Jeff's Stuff

How does this sound to you? I'll buy something that I can afford to pay for. When I can't make the payments... I'll get you to pay for it. Doesn't that sound like an excellent idea? Well, some people in government think so. Also, many Americans think so too.

We've all heard about the "credit crisis" and "sub prime mortgages". Well, lenders and the government want to ease the burden on people trapped in adjustable-rate mortgages. Confused? Let me explain.

You see, when real estate was booming, everyone wanted to buy a new home. The trouble is, many of them couldn't afford to. Many of them had poor credit. These people were forced to purchase "sub prime mortgages". To make the payments more affordable (a lower monthly payment) they were offered adjustable rate mortgages (ARMs).

As the name suggests, ARMs are mortgages whose rates adjust or, vary over time. Usually, very attractive "teaser rates" are used to entice buyers. These rates, which are usually below the market rate, are low enough that prospective home buyers believe they can afford the monthly mortgage payments. The trouble is, these home buyers usually forget to take into consideration the fact that these rates can, and will, increase.

Now, as interest rates began to rise and property values began to fall, these home buyers are in a tough position. They're adjustable rate mortgages... adjusted! Imagine that! The trouble is, this caught many people off guard. They were not prepared for substantial increases in their monthly mortgage payments.

Ordinarily, in a situation like this, the homeowner would be able to sell their home and use the proceeds to pay off the mortgage. Today however they find themselves in a market where their houses are worth substantially less than they paid for them. They find they have debt and little to no equity. Unable to pay their monthly mortgage payments, they end up in arrears or worse in foreclosure.

This of course hurts not only the consumer but also the banks that loaned them the money. But not to fear. The government is here... and wants to help! Banks as well as politicians looking for votes, want the government to ease the burden on these homeowners.

Here is a simple lesson in economics. When the government "eases the burden" on someone or some group, it means that you and I pay for it. We've already spent billions and billions of dollars to fund a war that we have no business fighting. Now our government wants to spend money to help idiots.

You see, when I bought my home, I shopped for a house that I could afford. I shopped for a mortgage that I could afford. I read the terms of the mortgage very carefully before I signed anything. You see, that's called fiscal responsibility. That is of course a subject that our government is woefully ignorant on.

I could have borrowed substantially more money from the bank and bought a much larger, nicer house in a fancier neighborhood. I did not, of course, do this. Why? The simple answer is that I did not want to borrow more than I could afford to pay back. I did not get tricked into buying a mortgage whose interest rate would suddenly increased dramatically. This is not because I'm so clever. It is because I took the time to shop and to read.

Now the government wants to bail out people who didn't read the fine print. Wait! That isn't correct. It would be more correct to say that the government wants you and I to bail out people who didn't read the fine print. They want to use our tax dollars to help people who didn't bother to be responsible with their money. These people should not be rewarded with handouts from the government. They should be forced to eat their losses and move on.

Lenders are at fault as well. Lenders gave money to people who did not have a prayer of paying off their mortgage. Yet these mortgages were written. And now, the lenders want help from the government. Oh, wait. I'm sorry, I did it again. These lenders want help from you and me.

It is the holiday season. Millions of Americans are filling the stores and malls. They are spending boatloads of money on gifts. They are "fueling the economy". They are also maxing-out their credit cards at an alarming rate. Am I supposed to bail them out too when they can't pay their credit card bill? I buy reasonably priced gifts. I pay what I can afford to and no more. Because I am responsible, does that mean I have to pay for everyone else's gluttony?

It's time we stop funding stupidity. We shouldn't sue McDonald's because we're fat. We should exercise and eat better. We shouldn't blame the maker of firearms when somebody buys a gun and shoots up a room full of people. We should blame the person who fired the gun. Likewise, the people responsible for the problem should fix the problem. Why should we all have to pay for it?