I will be one of the first to admit that the subprime mortgage meltdown in the U.S. is harrowing and completely devastating for whole swaths of the U.S. economy. Foreclosures are occurring left and right, and the areas hardest hit are seeing entire sections of neighborhoods now sitting empty, due to foreclosures. The societal impacts are heavy as well – entire families being displaced, businesses being shuttered if they have any relation or proximity to the housing or mortgage banking markets.
That being said, what appalls me even more are the calls for a Federal “bailout”, by Congress and even the Presidential Candidates.
Whose fault is it that millions of these homeowners entered VOLUNTARILY into highly risky “boutique” interest-only mortgages?
Whose fault is it that people who had no business buying homes were buying homes, due to inadequate income, or insufficient up-front liquidity (a down payment)?
Whose fault is it that the people buying homes didn’t read the fine print, and only became outraged when their “teaser rates” began expiring and started reflecting the real world?
Do the banks and unethical mortgage loan brokers share some of the blame? Absolutely.
But at least equal amounts of blame (if not more) are shared by the homeowners themselves.
If you signed a loan for what is for most people their single largest purchase in their lifetime, without reading the fine print, shame on you.
If you bought a home and couldn’t really afford the payments when your mortage started, shame on you.
It’s not the Federal Government’s role to bail you out for embarking on what is largely a foolish financial venture. Note: It’s foolish if you can’t really afford it.
And its not fair to the millions of people who responsibly purchased their homes with conventional mortages and sufficient incomes, and sufficient financial liquidity and reserves. These are the people who are being unfairly burdened and whose taxes will go toward any kind of bailout program, that is sure to be in the hundreds of billions of dollars if enacted.