The housing crisis
March 5, 2008
I read a lot of news every day. One of the biggest stories of the past few months has been the housing crisis and the sub-prime mortgage mess.
In an attempt to put a human face on the housing problem, many newspapers and magazines have profiled people who have lost, or are in danger of losing, their homes to foreclosure. The thing I have found surprising is the public reaction towards the people who have been brave enough to share their stories and are willing to be a cautionary tale to others.
Most news outlets have an on-line comment section at the end of stories where the public can vent their thoughts and feelings. I say vent because that is what people seem to be doing. Anonymous posters unleash harsh rants about how these people who took out sub-prime mortgages are stupid and deserve what they are getting.
Who deserves to lose their home? Who hasn’t made a financial mistake in their lives? Who hasn’t been given bad advice?
So many people are unjustly harsh towards complete strangers who are in a terrible situation. Yes, it’s hard to feel sorry for some people. But, it’s also not necessary to have such hostility towards them either.
It seems to me that many of these people who are losing their homes weren’t trying to scam the system (as some have suggested). Conversely, they are people who didn’t understand mortgages or debt-to-income ratios and relied on lenders to give them the appropriate advice.
I liken this last point to me taking my car to the shop. I admittedly know very little about the inner workings of my car. I rely on my mechanic to tell me if something is wrong, how to fix it and how much it will cost. When I took my car to get an oil change last week, my mechanic said they changed brands of oil and launched into an explanation of how the new oil was just as good as the old brand, blah, blah, blah.
I quickly explained that I wouldn’t know whether he was using Texaco, Castrol, or Wesson in my car.
Naïve on my part, yes. But, many people looking for home loans are in the same boat, just on a much larger and much more financially dangerous scale. They assume their bank wouldn’t put them into a loan they couldn’t afford.
Many people will argue the old adage that ignorance is no excuse for the law, so keep reading over the next few days as I detail some important things potential buyers should know before they start looking for a home or talking to lenders.
The next topic is types of mortgages.
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