Saturday, February 21, 2009

Caveat Emptor

Hey! Um, so I haven't blogged in quite a while, huh? I thought it had been longer, actually, but I did have to look to find that out. I've been feeling like getting back to it again lately, I'm not sure why. I've considered posting about shaving cream, Twitter, and video game boss fights, but of course, I'm back with a rant.

I was listening to Planet Money (which is amazing and you should all listen to it especially if you don't think you care about politics and the economy and don't know what's going on) and an otherwise very smart-sounding economist said something about people losing their homes "through no fault of their own" and I nearly threw my iPod out the window.

I've come close to blogging about this many times, but I thought, "Hey, I'm not that smart, I must be missing something." But I don't think I am.

Look, I know that lenders and brokers were "predatory," and I know that anyone who bought a home two years ago or so couldn't reasonably expect the bottom to drop out so dramatically. But what ever happened to "buyer beware?" Whatever happened to reading the fine print? To understand what you're signing when you're borrowing thousands of dollars? Especially the part about how the interest rate can change?

We need money education in this country almost as much as we need sex education. Maybe we can combine them. "Condoms cost less than babies!" College kids need to know that a credit card is not free money. Grown-ups need to learn that no one's going to just give you a house. There's nothing wrong with debt. Debt is useful. Debt can be a gift. But it is, by definition, something you have to pay back.

When Boy and I bought our apartment, we opted for a fixed-rate mortgage because, well, it's fixed. Our interest rate was higher than it would have been if we'd done an adjustable, but an adjustable, well, adjusts. And it does so unpredictably. We understood this in 2004, because we'd done our research. A higher rate now was worth less risk later. We knew going in what our payments would be, and we knew that if we did nothing, they would never change. We knew we could afford them. And that they won't go up, so as our salaries (hopefully) do, and the overall cost of living increases, their value will lower. We also, for various reasons, had to take a no-income-verification loan. The bank took a chance based on my good credit rating (unlike later, when they started taking chances based on nothing at all). But again, we knew we could afford it, or we wouldn't have done it. Because otherwise we'd be homeless.

Now, I should say that we had a fabulous, smart, ethical mortgage broker, which I know was the opposite of the case in all these sub-prime schemes. And those people should be punished. But I still don't see how that lets the borrowers off the hook. When I spend or borrow lots of money, it's as much my responsibility to do my homework as it is the salesman or lender's not to con me.

The situation has escalated, and is dire, and has so many effects elsewhere – I'm not saying I'm against bailouts or assistance (though I'm not saying I'm for them, either), I'm just saying "through no fault of their own" is bullshit.

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