Beyond the sub-prime mortgages, therein lies another problem. The media would have us believe that the majority of home mortgages now in default was caused by people who held fast to the dream of buying their own home. I don't know much about what happened outside of California, but I am aware of numerous homes going into foreclosure in our state that was caused by people believing they would become rich by becoming a real estate "investor." Many of those people were already living what the media refers to as "the American dream." They owned their homes. However, they saw the rising cost of real estate and decided to captialize on it. They were confident that real estate would keep increasing in value while interest rates would continue to fall. They were comfortable and probably even cozy in their homes, but they wanted more. There is more required to being a successful investor in real estate than just a desire to do so. It's just not that simple. I believe the decision was motivated by a desire to make more money by most of the people in foreclosure in California. Many of them never expected to remain in their "home," and instead bought it with the intention of "flipping" it. That term was used loosely in this state during 2006 and 2007. "Oh, you can buy it, and remodel it and flip it," was heard at almost every real estate showing. I know that, because my husband and I were shopping for a home, so we could downsize. Our youngest left home in 2004 and married in 2006, which just leaves us and the two bulldogs. We heard all of the hype about buying before we sold, because it would be easy to sell our house. We met up with other people looking at average size homes and heard the chatter about flipping houses. When "flipping" interests met up with realtors earning 6% of inflated real estate prices and unethical mortgage brokers qualifying all, (greed meets greed meets greed), it was a match made in heaven. Well, that is until interest doubled, the house didn't "flip" and people couldn't make their payments.
Another falsehood is related to people who really can make their payments, but they don't choose to do that. When some people couldn't make their new increased payments, the foreclosure numbers increased. Home values began to drop. When people decided their home value was less than their loan, it seemed to be an easy decision to just not pay for it. There are people walking away from loans, who have the income and capability of paying the loans but they are taking advantage of the economic situation. Suddenly, instead of looking at the property as their home, they are ready to walk away because they owe more than what the home is worth today. Some would tell me only a fool would pay for a house that isn't worth what is owed on it. I would say that I never bought a "home" with a thought of its future value. There have been times that my home has not been worth as much as the loan on it especially since my husband likes to remodel. For years, we were "over built" for the area. However, since it truly was our home, we didn't treat it as an investment. We were motivated to make our payments, because we loved our home. I personally know people who are just walking away from loans not because they can't pay them, but because they have lost confidence in their "real estate investment." An experienced investor knows to wait for their investment to show a gain again. A homeowner does everything possible to stay in their home if they can make the loan payments, regardless of its value.
We have a financial disaster in our country. Am I insensitive to people who truly are at risk of being homeless? I am concerned for anyone who can't make a living. Do I think there were some innocent people who truly thought they could buy and keep a home in foreclosure now? Yes, I do.
If we are to learn as a nation from what has happened, all people involved need to admit their mistake. It seems as if the decisions that are most apt to get us into trouble are those we make without considering the integrity of what we are doing. Greed and integrity doesn't blend. Packaging mortgage loans filled with deceit do not blend with integrity either. Selling real estate with promises that are not likely to be fulfilled doesn't meet integrity standards. Walking away from debt that you are capable of paying but don't choose to pay is not a demonstration of integrity. This certainly doesn't let our elected officials off the hook either. Integrity is a foreigner, I'm afraid, in our legislative bodies. If we examine this whole situation closely, honesty would have gone a long way to keeping America prosperous. Honesty and integrity do work together and go a very long way in preventing future problems.
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