The Housing Crisis in America

Okay, okay I have finally had it. My background is in food, but when I went to college I studied Family Financial Planning and Counseling. I have a bit of background in to which I speak. I have seen clients with millions of dollars living off tax free interest to the tune of $110,000 a month and I have counseled those who couldn't save two nickels to save their life. Both are extremes.

But what we've seen in the past few months and year in American is a story of greed and corruption to the very top. I have heard the pundits tell homeowners that the crisis they are in is their fault for signing the loan docs. That they are responsible for allowing financial professionals lead them down the garden path, and then they bought the story and signed up. I am so sick of hearing that this is the homeowners fault. Yes, there is some culpability on the part of the homeowner, but come on. When a notary is in your home at 8:30 at night, witnessing and notarizing loan documents, how are you going to read through the 200+ pages of fine print that you are signing. You've asked all the right questions, youbeen told exaggerations, and outright lies, to get you to this point.

Your home has been subjected to an appraisal, it cost you anywhere from $350 to $600 to have it appraised. You were surprised at the phone call that told you your home was worth three times its value and then were asked are you sure you only want to borrow "x" amount? You could borrow a lot more! Go ahead, it will only cost you an additional "x" per month for the opportunity to cash out.

Gas prices are stable, you are both employed, you work everyday, and you have never called in sick. You know how fortunate you are to have th ejob you have. It's good. So you sign up to gain a bit of relief from the interest rates of your old loan to pay off the credit cards and never go back to them. Aahhh, relief. You put your future in the hands of trusted professionals. They told you the value of your home, real estate is the best investment you can make, and yes, this is the value your home. What you don't notice is the small paragraph in the 200 pages that tell you at any time your homes value falls more than 10% below what the value is currently, the bank can call your note. Everything is due and payable immediately. Or you can refinance. Only you can't because there's a pre-payment clause, that you specifically asked if there was one and you were told no, not at all, and now it's there buried in the fine print. 10% of the loan value penalty, to refinance for three to five years, not a descending penalty but a 10% penalty right off the top.

Refinance!??!! WHAT were you thinking? Gas prices are at record highs. Groceries are moving up faster than you can keep track. And your wife's job? Well her company just had to close because it couldn't compete with the large corporations that have moved into your area. She's no longer working. Now the real estate crisis is in full swing and you've got to refinance. Your home's value has fallen by 20% because your neighbors are in the same situation. Everywhere you drive in town there are signs telling you that you are not the only one feeling the pinch. BUt hey, you tell yourself, I'm still current with my bill. I'm okay but not for long. If I don't get this house refinanced I'm going to be in trouble too. However, I can't refinance. The value has fallen below what I owe, I have this penalty of 10%, and I have no savings, my wife is out of work and times are hard.

Then you hear the news. The government is going to help those in need:
1. They're going to give cities and states grants to buy homes that have been foreclosed.
2. They're going to give consumers in trouble financial counseling.
3. They're recommending tax relief for lenders who are willing to negotiate with mortgage holders.

Band-aid fixes. Give the foolish consumer counseling and help all the corporations. When is the turnip going to be squeezed dry? The lowly taxpayer is being asked to hold all the responsibility, the cost and continually be asked to pay more fees and taxes, for what? Less and less everyday.

Bernanke asked for one proposal that might actually help someone out. I doubt it will get much play. Banks only write down losses for themselves, not others. But we'll bailout firms like Bear Stearns. hmph. The next time you want judge your neighbors for losing their home, think about a bit of what I've written here. Not everyone is a schlub with no regard for finances. They're probably a lot like you.