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Paul Kiesel
Paul Kiesel
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It Could Happen to Anybody…

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Here’s an excellent piece written by Mike Cassidy of the San Jose Mercury News on the realities of the foreclosure crisis, which has yet to be abated by the government or lenders.

Mr. Cassidy’s thesis is: It’s futile to blame ALL homeowners who are facing foreclosure because it could have happened to anybody, and it very well could still happen for people who are in Pay Option ARM loans that have not had interest rate resets.

On top of all this, many different borrowers, from multifarious economic backgrounds, took out loans that appeared to be "good loans," when in fact the loans had several TILA violations. Some of these violations were surreptitiously placed; sometimes information, like the loan being a negative amortizing loan (which, according to the Truth in Lending Act, needs to be stated in the loan, if it’s that type of loan), was left out all together. Therefore, lenders and certain mortgage brokers willingly advertised and sold these loans to customers, when they had no business of being sold from the onset.

Here’s a link to a blog I wrote a couple weeks ago that briefly explains part of the nascent stages of the economic crisis that allowed for this mortgage mess to precipitate as it did, and how government regulators, according to Senate Banking Chairman Chris Dodd (D-CT), including the Fed, failed to adequately police the mortgage lending markets, resulting in the "creative mortgage" boom and its fallout.

From MercuryNews.com:

SAN JOSE—We are a nation of blamers.

When something goes terribly wrong — like the current economic collapse — we desperately want to blame someone and if at all possible punish them, too.

For months now, as the economy and our notions of it have unraveled, we’ve been doing a good job pointing fingers. Democrats blame the Republicans. Republicans blame the Democrats. Greedy Wall Street operators are high on the list of suspects. Bumbling, or worse, Washington regulators have taken their punches, too.

The truth is, they all share in contributing to the stunning chain of events that has taken down world financial markets and national economies.

But the finger-pointing that has surprised me the most is the chorus of complaint directed at those who have recently lost their homes or who are in imminent danger of doing so.

You hear it on talk radio and see it in newspaper commenting sections now that the Treasury Department is exploring ways to use some of the $700 billion Wall Street bailout to help struggling homeowners hang onto their homes.

Readers and radio listeners describe those who are losing their homes as shiftless and lazy. Those foreclosed upon are chiselers who tried to get away with something, or they’re irresponsible buyers who wanted a nice house whether they could afford it or not. In short, this thinking goes, they got what they deserved.

Along with the condemnation comes a smug superiority: I worked hard and found a home within my means. I pay my bills. Why can’t those who are losing their homes do what I did? Using my tax money to help those in trouble is simply not fair.

But you know what? Life isn’t fair. Ask those about to lose their homes.

No doubt there have been some bad operators taking loans as well as making them. But what the rants lack is any acknowledgment that sometimes events are beyond our control. I wonder whether those of you who are scolding struggling homeowners believe you are immune from the unforeseen and unfortunate events that can derail a comfortable life.

Maybe you bought your home years ago and have enough equity to cover the balance if you have to sell. Maybe you have a fixed-rate loan that has insulated you from climbing monthly payments. Maybe you dealt with an upstanding broker instead of a mortgage shark who sold you a loan that not only balloons, but blows up in your face.

Could be you didn’t get sick or divorced, or lose your job. Maybe your spouse didn’t lose his or hers.

Maybe you’re not like the school teacher and mother from Union City who wrote to me recently. She’d just lost the house she owned for eight years. She said she refinanced after a divorce, so she could buy out her husband and lower her monthly payment. Then she lost the second job she worked to hold it all together.

Or maybe you’re not like the retired couple in San Jose whose kids wrote to me. The couple’s biggest crime apparently was trusting the wrong people — first an accountant who swindled them, and then a series of predatory loan brokers who relatives say falsified the couple’s income and stuck them with a $6,000-a-month mortgage that they have no way to pay.

The angriest ranters out there will point out that the school teacher and the retired couple made their choices. Now they must live with the consequences.

When bad things happen, it’s so simple to invoke the canon of personal responsibility. It’s cut and dried. Tough people take responsibility. Wimps ask for help. The problem is that by relying solely on the rule of personal responsibility we risk absolving ourselves of our social responsibility.

It’s something to think about as we head into economic hard times likely to be unlike any most of us have seen. Because the truth is, if we hope to survive what’s coming we’re going to have to do a lot better by each other.