- October 22, 2010
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Who is responsible for the foreclosures we are constantly reading about in the news these days? Lately the culprits are the "robo-signers", previously it was the Wall Street derivatives market's demand for new products and before the blame was carved into parts it was simply called predatory lending. Is it really the fault of lenders or should Courts and lawmakers also be looking at predatory borrowing? Of course there were self-proclaimed "investors" brainwashed by the likes of Robert Kiyosaki into believing they could become the next real estate moguls by levaraging their funds, or in many cases their homes, only to find that leverage is a 2 way street and if money, from rent or re-sale, is not coming in faster than it goes out levarage spells trouble. When the market bubble burst and people stopped buying real estate at ever inflating prices or could not pay rent then all the Kiyosaki taught "investors" were hard hit. We can call that the cost of doing business for them and they can decide whether to blame Kiyosaki, the banks or themselves.
For individuals there are different stories and reasons for crisis but in most cases it comes down to greed. Sure the banks allowed people to turn their homes into personal ATM machines by writing second and even third mortgages against personal residences of borrowers so they could leverage the ever increasing "value" in their homes. The banks did not actually force anyone to take those mortgages. The banks, whether they failed review all applications, failed to accurately appraise properties or whatever other manner in which they failed to "protect" the borrower from the borrowers own greed did not actually force the borrower to accept the funds but rather enabled the borrower to do as he or she wished. The second class of individual borrowers now suffering are those who purchased as much as a lender would possibly allow based on "house of cards" funding where if a wind blew the structured "deal" would fall apart.
The wind that blew turned out to be a tornado as the market bubble burst but this was as much the borrower's fault as the lender's. The practice of saving was forgotten and people were living for the next indulgence they could impress their friends with. Even immigrants coming to this country and taking jobs as laborers were buying the so called "McMansions" based on wages that could hardly pay for a reasonable home.
Of course there are the unfortunate individuals who practiced sound spending and saving but suffered tragic accidents or illnesses and sadly are now experiencing the same difficulty as the greedy.
Now what of the savers who practiced sound spending who are paying ever increasing taxes and whose children and grandchildren are faced with the largest deficit this country has ever known. Should it be their responsibilty to save the banks who are now forced by the Courts and government to accept responsibility for the greed of consumers and write down these loans at huge losses only to be later "rescued" by the government at the ultimate expense of the frugal who are now the only ones still paying their bills? Or should those who enjoyed the spoils of their greed be made to actually pay for it this time by remaining in their homes and paying modified amounts for longer terms without the benefit of handouts or rescues which are shortly therafter followed by the extension of new credit lines likely be utilized by these individuals who have been taught they can have all the luxuries in life for free?
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