Jason Lindquist (jlindquist) wrote,
Jason Lindquist

Whose fault is it?

According to The Californian, one out of every nine homes in Murrieta, up I-15 in southwestern Riverside County, went into foreclosure. This is the quote that cracks me up, from a woman who's losing her home:
"Who's actually losing their houses is not those people. It's people who bought houses they could afford and had the housing industry take everything."

Ummm... no. You bought a house at the top of the range you could afford, at the top of the market, and financed it with an ARM that had a teaser rate. You climbed out on a limb, and it snapped. "The housing industry took everything"? Please. Yes, her husband was laid off from his job... in the housing industry.

A lot of people are blaming the mortgage industry for people losing their houses. Some of that blame is fair, as there is no justification for a prepayment penalty, which kept some people from refinancing their homes, and made it financially unattractive for some others to sell when they had the chance. But the rest of it is squarely on the buyers. Lenders offered these ludicrous teaser-rate ARMs because the market was demanding them. They wouldn't offer 'em if people weren't willing to sign up for them.

When I bought my house, it wasn't a stretch. I had good credit, a good salary, and could finance it at the going rate for a 30-year fixed, with a comfortable margin left over. If my association assessment went up 3 months after close, it wouldn't kill me. If I got laid off, unemployment would cover the mortgage payment. (It would be tough for me, but I wouldn't go into delinquency.) There were no indications at all that my employer was in trouble, or that the job market here was tight. If the unexpected happened, I had room to ride it out.

I could have bought something pricier, but it would have left me with no margin. I could have bought higher still, taken a zero-down ARM on the assumption my salary would rise dramatically or that rates would fall even farther (which they did, but that would have been foolish to depend on.) No, that route would have been pure stupidity. If just one thing went wrong for me, I would be in the same place as that woman. No thanks. If those had been my only options, they would not have been options at all. Continuing to rent and save would have been my only wise choice.

I know, "waahhh, we have four kids, we HAD to buy a bigger house!" No, you didn't. My grandmother is one of ten children. They lived in houses much smaller than the one I grew up in. Yeah, it's cozy. No, they didn't get to have a pool in the backyard. But it was safe, warm, and dry... in the middle of the Depression. If you had to, you could get a couple of used bunk beds and live with your four kids in a townhouse just like mine, and as an added bonus shave a hundred miles off your daily commute.

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