Thursday, January 31, 2013

Escaping Blame

Andy Kroll wrote a preface for an article on the homeowner debt crisis, and bemoaned the fact that his own parents had fallen “victim” to this plague which swept our nation.

Last December, as we hopscotched around town buying last-minute Christmas presents, my mother told me how, for years, they'd been underwater on the house they'd owned for nearly as long as I've been alive. Five thousand dollars underwater, then $10,000, then $20,000... The local housing market sagged along with the nation's, and there was nothing they could do about it. This angered me more than anything I can remember: first, you're a “homeowner”; then, it turns out that you're over your head in debt by no fault of your own…

Andy Kroll was born in 1978, so his parents must have bought the house on or before 1985 to qualify for his “nearly as long as I've been alive” bit.

We bought our house in 1995 with a 30-year fixed and 20% down. We have refinanced a couple of times for lower rates on a new 30-year fixed, and neither time did we add to the principal, that is “take out equity.” We currently owe about 32% of what the house would sell for today.

So how do Kroll’s parents, who bought their house ten years earlier than we did, find themselves underwater “through no fault of their own?” Housing prices are not the same in California as on the East Coast, but patterns are very similar, and I’m not willing to believe that East Coast housing prices have fallen dramatically below 1985 prices.

There is no doubt that Kroll’s parents bought into the hype of the housing bubble. They were persuaded that their home was worth vastly more than they currently owed on it and that they could live the good life by refinancing and “taking out equity” to maintain a lifestyle not otherwise possible.

They may very well have been persuaded by shysters, but that does not make it “no fault of their own.” Each of us is responsible for our own decisions. We cannot, as adults, allow someone else to make a decision for us and then say that it, being a bad decision, was not our fault. It was our fault for not being sufficiently adult to inform ourselves in order to properly make our own decision.

The con man preys on the greed of the victim. No greed, no victim.

1 comment:

bruce said...

Yeah I wondered that, why thier debt kept growing over the years... variable interest rate loan? balloon payment? Nothing was said about re-financing or cash-outs, so...

But Jayhawks point is well taken.

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