Nearly 12 years ago my wife and I lived next to a couple that had built a custom home that was twice as nice and twice as large as ours. Additionally, they had bought two new cars as well as had a pool installed a couple of years later. The man was an audio-visual teacher and the wife was a public health nurse for the city. Neither occupation rakes in the cash, at least not the kind it appeared they had.
Although it certainly wasn’t any of our business we just couldn’t help but wonder. We just chalked it up to an inheritance or a windfall from their last house. Over time, however, as my wife and I began to get to know them better, the wife had confided to my wife a little more about their finances. She confessed to my wife they were over $38,000 in debt on their credit cards alone! Gag and choke!
Along about that time is when the last housing boom was in full swing and new homes were popping up everywhere here in North Texas, and I guess all over the U.S. Additionally, as circumstance would have it, my wife had two other friends who told her they were also $30,000 in credit card debt….credit card debt, not total debt.
It was then, 12 years ago, that I realized just what fueling our economy. It was nothing more than consumer spending. Electronic stores, home improvement stores, shopping centers, and high price restaurants were appearing seemingly overnight. The reason there was a housing boom, and what appeared to be an economy that was on fire, was because people were spending more and saving less than any time in America’s history.
We could get into homes with no money down. We could buy cars with no money down. We had several credit cards with $10,000 dollar limits……..and we were taking advantage of every one of them.
Over and over again I saw young couples getting into homes they couldn’t afford. Mortgage lenders were pre-qualifying people for homes that the payment alone was 50% of their montlhy income as well as various schemes like low payments for the first three years while tacking the difference on to the end of the loan. These young couples never thought about higher electric bills versus that of an apartment. Nor did they think about the expense of landscaping, watering, and fertilizing a lawn much less the expense of a lawnmower to begin with. Additionally, because the new home was much larger than the apartment, new furniture was needed. Out comes the Visa with the $10,000 limit. Sadly, two years later, these homes were on the market and as time went on more and more people defaulted on their loans.
I remember telling my wife nearly 12 years ago that what we needed in this country to get this kind of recklessness in check was a good recession. People were never going to learn to discipline themselves unless they were forced to……and then the “Mortgage Bubble” burst and drove this country along with the rest of the world into a recession.
Much has been made in the news lately about the “big bad mortgage companies” taking away the poor little people’s homes. Laws have been passed and programs established in order to keep people in their homes. It has done little more than prolong the inevitable, the loss of the house anyway. The housing market continues to fall and people are still defaulting at astonishing rates.
Much of the blame has been passed on to the mortgage lenders, which some is deserving. Additionally, some of the blame has been laid at the feet of our current president, although the bubble popped under the leadership of our last president. The one thing I have yet to see much of in the news is that the blame might possibly lie with the American people and our reckless financial habits.
As I read this article here on MSNBC.com about the latest effort to help keep people in their homes, I couldn’t help but get a little aggrevated. The title and the opening paragraph are as follows:
Mortgage settlement leaves most homeowners to fend for themselves
The landmark $25 billion settlement reached by the federal government, 49 states and the nation’s five biggest banks will provide long-overdue relief for hundreds of thousands of homeowners who have been struggling to navigate the mortgage mess created by lenders.
The title along with the opening statement clearly imply that the mortgage mess we’re in is solely the fault of the lenders and the responsibility of correcting it rests on the federal government. Might I suggest that had the American people not been in such a rush to jump into houses they couldn’t afford, and not been so quick to fill them with furniture on credit, and maybe not been so quick to agree to “zero-down no proof of employment” mortgages, maybe they wouldn’t be in a position of financial ruin to begin with? After all, if I go out and purchase a car on credit and can’t make the payments, whose fault is it really? The big bad salesman for convincing me I needed the car?
Now I fully realize that there are many people caught in the middle of this mortgage mess because of a job loss due to this current recession. People who weren’t originally in over their heads. I myself lost my job in December 2010 and didn’t get full time employment until October 2011. But I’ve purchased a house that is far less than what I can “afford” and I’ve been diligant not to spend every dime I’ve made on vacations and furniture. It was tough, but we made it. I couldn’t even begin to imagine what it would have been like had we purchased a house that was equal to the amount the morgtage company said we quailfied for, which was nearly twice the cost of the house we purchased.
What we all need to come to understand is that mortgage companies sell mortgages. Car salesmen sell cars. Furniture salesmen sell furniture. It’s in all of their best interests if they convince you to buy their stuff. It’s our responsibility to be sure we aren’t buying more than we can afford. Of course these guys are going to sell you something you don’t need….It’s their job.
We need to stop blaming others for the mess we created ourselves because of our wasteful and lavish spending. We need to understand that having a new home full of new furniture , although it may be the American dream, isn’t a guaranteed right. And lastly, we all need to be good stewards of the resources God gave us and spend them wisely.