The Homeowner Stability Initiative: Positive or Negative.
The prevailing wisdom of economists is that the collapse of the housing bubble is the main contributor to the current downturn in the economy. It is no surprise that the Homeowner Stability Initiative is a big ($75 billion big) portion of the $787 billion Recovery and Reinvestment economic stimulus plan (a.k.a. The Bailout). However, the fear is that money, tax dollars borrowed from our children and grandchildren, will be used not to aid those who through no fault of their own have been victimized by predatory lenders, terrible misfortunes and the out-of-control speculation of others, but to reward those buyers who did not ‘beware,’ purchased homes they could not afford, and acted without thought about what may happen to their home investment in the short term much less in the long.
That is why statements like this make my skin crawl:
“The plan also offers financial incentives for lenders to reduce the mortgage payments of as many as 4 million homeowners who are at risk of losing their homes. Under the $75 billion Homeowner Stability Initiative, lenders would cut mortgage payments to no more than 31 percent of the borrower’s income.”
I’m not saying that people in real need shouldn’t be helped, but the thought of even one person who through greed or stupidity gets to call a ‘do-over’ when the rest of us who acted with forethought and invested wisely (actually our children and grandchildren) get to pay the price for it makes my blood boil.
That said, President Obama did at the end of his speech explaining the Initiative Wednesday sound the note that everyone needs to hear:
“Our housing crisis was born of eroding home values, but it was also an erosion of our common values, and in some case, common sense. It was brought about by big banks that traded in risky mortgages in return for profits that were literally too good to be true; by lenders who knowingly took advantage of homebuyers; by homebuyers who knowingly borrowed too much from lenders; by speculators who gambled on ever-rising prices; and by leaders in our nation’s capital who failed to act amidst a deepening crisis. (Applause.)
So solving this crisis will require more than resources; it will require all of us to step back and take responsibility. Government has to take responsibility for setting rules of the road that are fair and fairly enforced. Banks and lenders must be held accountable for ending the practices that got us into this crisis in the first place. And each of us, as individuals, have to take responsibility for their own actions. That means all of us have to learn to live within our means again and not assume that — (applause) — and not assume that housing prices are going to go up 20, 30, 40 percent every year.
Those core values of common sense and responsibility, those are the values that have defined this nation. Those are the values that have given substance to our faith in the American Dream. Those are the values we have to restore now at this defining moment.”
Though not the message that was picked up by the media, acting with common sense and responsibility is the key point that needs to be drilled into every single one of us. For too long many Americans have lived well beyond their means. They think too much in the ‘now,’ and ignore the ‘future’ and the consequences their actions may bring not only to themselves but to those around them. They buy their homes and their cars not based on what they can afford, but by how much they can borrow, then make up the difference with credit cards and other forms of easy credit. They save too little and when they stumble financially or are economically jostled by a market downturn, the dangerous debt they juggle can slip from their grasp. Everyone makes mistakes. Mistakes are good as long as we pay for them and we learn from them. All too often, when you don’t have to pay you end up making the same mistake again. It sounds harsh to say that these people need to fail, but their failure is their responsibility and not that of future taxpayers.
(hat tip: TDAXP)