More and more over the past few weeks, the topic of the economic bailout has been at the forefront of the news.  The more the government promises, the more companies hold out their hands saying “gimme”.  And during this whole game, homeowners who can’t pay their mortgages are crying out that it’s not their fault and they need help and it’s the lenders who caused their problems – and what’s worse is that the government is saying “okay” and granting the ability to refinance at lower interest rates and bailing out mortgage companies.  When will people and businesses accept responsibility for their own actions and bad choices, and take the blame for the consequences onto themselves where it belongs?

I am by no means stating that I believe all the fault lies with the consumer, but I will also not pretend to place blame entirely on the lending companies.  I can’t say whether the fault is 50/50, but I do know that it is split between the two.  I’ve had many discussions with friends and family about this issue, and feel very strongly about it for a number of reasons.

One of the many lessons I remember from my childhood (having had most of them repeated over and over again throughout the years since as a young boy I refused to listen) is that you have to accept blame for your actions.  You can’t stand up and accept the praise for something you did right if you refuse to stand up and own the consequences of something you did wrong.  Unfortunately, that’s exactly what the majority of these homeowners are trying to do right now.  They shouted from the rooftops when they were granted the exhorbitant mortgage loans that they asked for, and now they’re crying from the gutter when they couldn’t pay those mortgages and their homes were foreclosed.

I’m not some horrible tyrant who is happy these people are losing their homes.  By no means do I want to see them homeless and without a safe place to stay.  However, they put themselves in this position of their own free will.  Nobody came up to them and told them to forget about their $30,000 annual income and apply for a $250,000 home loan.  And even if they did, anyone who said “okay” and went straight to the bank to take out that loan is an absolute fool.  It’s simple math.  It’s not a complex calculation that requires a genius or accountant or real estate agent – it requires a pen and paper and a 4th grade education.  My 10 year old brother could easily explain the dynamics of the equation to these people.  Granted, that’s not quite fair since he is a little genius, but the point remains the same.  The below math is generic and estimated, but you’ll get the idea:

$250,000 home loan + Accrued interest = (Average monthly mortgage payment) * (Number of years to be paid out) * (12 months per year)
$250,000 + ? = $900 * (30 Years * 12 Months)
$250,000 + ? = $324,000
$250,000 + $74,000 = $324,000

This is crude math.  The last thing I need to hear is how it’s not exactly right.  I was very generous with the interest to make a point.  If you’ll look at the second line you’ll notice that even with only a $900 monthly payment (barely more than I pay for a one bedroom apartment just outside of Dallas), you’re committing yourself to over $10,000 a year in mortgage payments.  When you only make $30,000 before taxes, that means you’ve decided that over 1/3 of the money you bring home every year goes straight to a mortgage.  How does that make sense?  Or how does it even add up?  It doesn’t.  And this is why people are losing their homes.  They felt so fancy that they were approved for the huge loan they asked for, that they never stopped to think if they could really pay for it all.

What’s even more frustrating is that the individuals being foreclosed who are having these problems are being granted the ability to refinance at a lower interest rate and extend the timeframe of their mortgage, but the individuals who are not in this negative state are not being granted the same opportunity.  So you have the irresponsible people who never should’ve taken out the loan in the first place being granted special priviliges, and those who have been cutting back and managing to pay their mortgage entirely and on time are not getting any such benefits or priviliges; instead, their taxes are going to help out their irresponsible neighbors instead.  I find this sickening.  Reward the ones who don’t deserve it, and punish those who do?  Our government exhibits such wonderful logic.

Yes, there is some blame to be laid at the feet of the lenders.  While the consumer should never have asked for such an astronomical loan when their income was so low, the lender should’ve evaluated their available monetary income to see right away it would never work in the long run.  But they didn’t.  Why?  Because it’s a business and the business isn’t concerned with how you’re going to make your payments, just that you make them.  And if you don’t make them, they take back your house.  They still come out at a loss, but they’re hoping that’s incentive enough for you to find a way to make good on the contract you signed with them when they agreed to give you the money.  Silly them, because they’re quickly finding that it’s not.

Now everyone is asking for a handout.  The mortgage companies want a bailout because they lost so much money from people who couldn’t afford to pay back the loans they took out.  The consumer because they’re losing their home because “the big bad lending company” took advantage of them.  Everyone’s pointing fingers and nobody’s willing to take the blame.  Both are at fault and neither will admit it.  Our economy did not randomly start spiraling downwards.  There are always factors that elicit a reaction.  This just happens to be one of the big ones.

I would like nothing more than to own a home right now.  I pay almost as much in apartment rent as I would to own a home and pay a mortgage, but I know better than that.  I know that I’m not ready, financially and otherwise, to own my own house just yet.  I’d like to, but I’m not quite there.  Could I get approved for a loan and jump in headfirst anyways?  Yes, I’m sure I could.  I have good credit and while my salary isn’t by any means huge, it’s enough to get a moderate home loan.  But I won’t do it because I know better.  I’m not a genius, I just have common sense.  All I dare to ask for and hope for is that the rest of America (and the world) exhibit signs of the same.  Sadly, I just don’t think it’s going to happen anytime soon.