I’m told there is a credit crunch out there. This past August saw the highest number of foreclosures in more than 20 years, 240-thousand plus. I don’t claim to be an economics major but if there is a credit crunch why are the banks beating down the door to get me to borrow more money? Have you looked in your e-mails lately?

Two weeks ago, I filled out one of those Lending Tree forms just to see where rates are. What a mistake! I got no less than 16 banks and lending institutions trying to lend me up to $300,000 without knowing anything about me. Once I filled out their forms I was told I could borrow up to $450,000 with no problems. Now folks, I make a pretty decent salary but there is no way in heck I could afford that kind of monthly payment. And one of the lenders trying to get my business was Countrywide. Hello? Countrywide, the so-called sub prime poster child, that lost millions of dollars and would have gone down the toilet, according to Fortune magazine had not Bank of America dumped a bunch of cash into their kitty. In fact, while I was on the phone I told the sales person that Countrywide was laying off 900 employees. He about dropped the phone to the floor! It was in another division, not his.

Now I should tell you that my wife and I are great credit risks. Our credit scores are near the top in every category. We pay our bills on time, thanks to automatic bill paying, and we’ve lived in the same house and same neighborhood for more than 20 years. We live at or slightly below our means for a family with four kids. That’s the way our parents lived and the way we hope our kids will live, too.

It’s not that mortgage companies weren’t pushing and shoving us all along the way. Our mortgage was sold no less than 5 times in it’s short 15-year-span. Each time the new company came a calling offering us cash if we would just refinance. We never bit. And when we started hearing about those interest-only loans all we could think about is how fast you could end upside down in your payments.

And who is to blame? Let me quote a new acquaintance of mine who works for a new bank in our area, “We got cash crazy and broke every rule in our own books to make money. And we got burned!” You bet mortgage lenders got burned. They got burned because they created stupid guidelines that no one could follow. They got burned because they kept pushing the ratio between income to housing expense up from 23 to 34 to 56 to…gulp….. 61 percent of your monthly income. That is just plain nuts! They didn’t account for an economic slowdown and a glut of houses. TheY rode the bubbles till the bubble burst, as all bubbles do.

Some folks say we need a big government bail out to help these poor lenders who got themselves over extended. Baloney. We need to help the individual homeowners by giving them more time to make the payments the mortgage companies knew they couldn’t afford. Let them refinance at more realistic terms they can actually meet. Let the mortgage companies fade away and the CEO’s and directors who encouraged the crazy lending go broke. Let the flippers who got in just to jack up home prices choke on their loans for a couple of months.

Here’s the good news in this dark cloud. The housing market will eventually self-correct. Experts say we are close to the bottom. a bottom that is still significantly higher than where real estate values were just five years ago. Many lenders have changed their qualifying rules. New home prices are dropping back to levels that should help the existing homes sales start to rebound.

Now comes the bad news. You are still going to get crazy loan offers in e-mails and junk mail. You will still be able to borrow yourself into deep trouble if that’s your cup of tea… or strychnine. You still have to exercise good judgment and common sense borrowing practices. Moral of this story? Don’t take out loans you know dang well you can’t pay… no matter how much your lender tries twisting your arm with a deal that is too good to be true.

Al Ruechel, Copyright 2007, All Rights Reserved

Like today's commentary? Hate it? Send your comments here..