Friday, March 26, 2010

Rewarding Bad Behavior

As a person who has held a thirty-year-fixed-rate mortgage on my home since we bought it when we were first married, refinancing just once for a lower rate with no cash out, I have a rather jaundiced view of the complaints of homeowners who are “underwater” due to the various forms of tricky mortgage schemes. I cannot count how many times over the years we have been importuned to get into these types of schemes to “save money,” to “reduce our payments” or to “enhance our lifestyle.” Some days there would be a dozen flyers in our mailbox telling us how idiotic we were to be paying so much money for our home when we could be “financing more creatively.”

Well, home prices are going to have to really plummet to drop below what we currently owe on our home, and I’m talking pup tent territory here, and I can’t say that I’m feeling particularly stupid.

Until, that is, I read of the government’s latest homeowner rescue plan.

Not content with rewarding corporate bad behavior, the government is expanding its plans to reward individual bad behavior. If you have been refinancing your home repeatedly, and have been taking out the “increasing equity” each time so that you now owe more on your home than your home is worth, the government has a plan to reduce the amount of that loan so that you can make the payments and keep the home.

Not content with rewarding people who did that, they now have another plan to reward people who took out “home equity lines of credit.” Virtually all of these are for car loans, vacation loans and the like, secured by the home to make the loan easier to get and to make the interest on the loan tax deductible. Essentially, none of them have to with the initial purchase of the home itself, but they do tend to foul up the first plan where the government can redo the basic mortgage. So, from the San Diego Union-Tribune today (emphasis mine, Jayhawk),

And there will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans - a problem that has blocked many loan modifications.

So now I do feel rather stupid. Being fiscally responsible means that I don’t get to have the government hand me a whole bunch of money to reward me for being fiscally irresponsible. My father taught me some really bad habits. Maybe I should start hitting women, too.

Well, maybe not. I think he might be watching me.

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