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Greed is now hurting those who resisted

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POSTED October 29, 2009 1:44 a.m.
Send your congressman a congratulatory note.

They have succeeded in penalizing people who have integrity and didn’t overextend themselves through unadulterated greed.

The foreclosures that are starting to pop up now are people driven to the edge by months of reduced hours and loss of jobs. Washington may talk about the recovery starting but thanks to their inept, short-sighted fiscal policies that triggered the foreclosure meltdown and then managed to dilute integrity in their bid to clean-up after themselves the road back for many is going to be long and painful.

It was Congress hell-bent on making home buying easy for those who wouldn’t otherwise qualify that planted the seeds for this disaster. True, it was the wizards of Wall Street who took it to the next level and inspired unscrupulous loans but it was all done out of Congress’ perception that the mortgage industry had it all wrong because everyone didn’t own a home. The comparison to Congress’ attitude at times on health care should scare you but that’s a different issue.

Culprits involved in the undermining of the mortgage system which for decades was as a conservative function of investment as they come were from politicians on both sides of the aisle. It is doubtful it was intentional but that is what you get when you mix political rhetoric with politically correct goals and then reduce the entire process down to a 500 page bill of which a congressman depends on a 23-year-old aide fresh out of college to analyze in the three days it is available before a vote and tempers it against pressure he’s getting from lobbyists.

Was anyone really surprised that a laborer making $30,000 a year was buying a $560,000 house in Manteca or that people who owed $200,000 on a home they bought for $110,000 were taking out second loans of $120,000 to buy toys because their house was all of a sudden worth $400,000 on paper? Why ask how one would pay it back as we were all acting like a congressman – it’s free money.

It overheated the economy and blew a lot of money on “extras” instead of necessities. Unfortunately – or fortunately – there were a lot of people out there who resisted such temptations. They did the right thing and acted fiscally responsible.

Now many of those people are paying the price even though they never got seconds on their homes and are often 10 years or so into their mortgages.

The culprits just aren’t those who got caught up in the greed of buying more home than they could afford as the housing bubble ballooned.

There are a large number of people who could afford their mortgage payments but took advantage of Congress’ offer of forgiving tax liability on what banks had to eat on short sales and foreclosures and simply walked away.

Talking to congressional aides at the time they reacted indignantly saying that wouldn’t happen and if it did it wouldn’t be a big deal.

Guess again. There are at least two dozen cases that I’m aware personally where the homeowner simply stopped making payments and walked away from their home because their house was no longer worth what it was two years ago. They could afford the payment in each case.

The most outrageous example involves a couple that bought a home a few years back in a new neighborhood. They decided in about March that it was “unfair” that the people buying homes at the time were getting the same home for $100,000 less. So they simply stopped making payments. The couple claims a combined income of $140,000. They just didn’t like the idea that their house was worth less than they were paying for it. Oh, by the way, they vacationed in Hawaii in August.

Another example early on was a single man making $150,000 a year. His mortgage payment was $3,100 a month. Within days of the exemption from tax liability was put in place, he rented the same exact home across the neighborhood for $1,200 a month and then let his house go into foreclosure.

What is happening now is the direct result of people not thinking through the consequences of their actions whether they were homebuyers ill equipped financially to buy, mortgage processors who should have had some integrity to question what they were handling, Wall Street types that loaded portfolios with undisclosed risk and said they were “A” rated, as well as your congressman.

Making it all the more ironic is that the people being hurt now will probably get little or no help because government bent over backwards to make those whole that were driven by greed.
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