 I've
got a public service announcement for all Americans: Just
because someone is willing to sell you a million dollar home
by using some exotic, negative amortization, 3/1 ARM loan,
doesn't mean you should do it. No matter what some greasy
banker says; if you can't afford something; don't buy it.
Unfortunately, millions of people have ignored that advice,
evidenced by the fact that sub prime loans -- translation:
no job?, no credit?, no problem! -- make up almost a quarter
of all new mortgages. Some experts now believe that 20
percent of these types of loans made in the last two years
will end in foreclosure...I'm no Alan Greenspan but that
can't be good for the economy.
The Real Story tonight is that some people are just too
stupid to own a home. There I said it. Some people should
never have kids, some people should never own a gun, and
some people should never buy a home; that's just the way it
is.
Remember back in the late 90's right before the Internet
stock bubble was about to burst? Everyone was suddenly a
stock expert...people who couldn't balance their own
checkbook were out there buying shares of "revolutionary
companies" like Pets.com because they thought it was easy
money. Well, we all know how that turned out...But now those
same people have migrated to real estate and exotic
mortgages have become the new Pets.com.
On my radio show this morning I said it was just a matter of
time before we started hearing politicians talk about
bailing these poor people out, but it turns out I was too
late, it's already happening. Hillary Clinton gave a speech
last week in which she partially blamed the problem on the
lenders who used complicated formulas to determine
payments:
"Well, we have to put ourselves in the shoes of a parent
signing a mortgage product unaware of a complicated,
escalating payment formula that has been worked out on some
computer that has balloon payments and pre-payment
penalties, which includes the cost of taxes and insurance,
and other added on costs that the owner doesn't really
understand and nobody takes the time to explain them."
"That the owner doesn't really understand." -- Isn't that
the key phrase? You can milk this all you want for political
gain by railing against the big, bad, greedy mortgage
companies, but the bottom line is that it takes two to
tango. If you don't understand something, you shouldn't sign
it!
Hillary, all I'm looking for is a little consistency. If you
want to bailout all the people who bought mortgages they
didn't understand, then you better be willing to bailout all
the people who bought into the Pets.com IPO without
understanding what that company really did.
But maybe there is a brightside; maybe this culture we've
created where no one wants to hear the words: "you can't
have that" will finally be broken as children see their
parents struggle to pay for a home they could never afford
in the first place. Maybe people will finally understand
that owning a home is a privilege that takes decades of hard
work and tough sacrifice; not something that's done by
calling a broker to figure out the highest mortgage you
qualify for. Maybe this is nothing more than "financial
Darwinism" where the strongest survive and the weakest sit
in their brand new BMW, in their brand new garage...start
the engine, roll down the windows and take a long, deep
breath.
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