Buying a home you can’t afford

For the proud homeowners of America, the one statistic that keeps getting pumped down our throats is frightening: An estimated 2 million adjustable-rate mortgages are scheduled to reset by the end of 2008, going from low introductory interest rates to much higher rates.

The result, analysts say, is that millions of monthly mortgage payments are on the verge of skyrocketing ‘ some even doubling with the higher interest rates. Unable to make the higher payments, hundreds of thousands of these homeowners are expected to lose their most cherished possession ‘ their house ‘ and find themselves on the curb.

It’s a sobering story and one that appears likely to create another government welfare program. Yes, just what we need, a welfare program for folks who can no longer afford payments on their $279,000 home.

To his credit, President Bush said last week he has no intention of starting a massive federal bailout program to make mortgage payments for people so they can stay in their homes. That’s the good news.

But the president can’t appear to be too cold and callous to the untold masses who aren’t smart enough to manage their money. So, in the words of a previous president, Bush has to ‘feel their pain.’ That’s why Bush has pledged do something about it while speaking in the vaguest terms possible about what that something might be.

Congress, the Federal Reserve, and banking regulators are right behind the president, urging loan companies to work with borrowers in any way possible to avoid foreclosures. This would certainly be a desirable result.

While I don’t want anyone to lose their home, I’m not about to sit here and encourage too much government interference. I’ve always maintained less government is the best government ‘ especially when it comes to handouts.

The thing that aggravates me most about this mortgage crisis is that people brought it upon themselves. It wasn’t too long ago, about three or four years, when it seemed like everyone was buying a $200,000 home. Regular folks with regular jobs were suddenly upsizing from their regular houses to mini mansions with 3,100 square feet.

I, for one, was envious and somewhat embarrassed. I mean here I am in my regular house in the $80,000 price range. Could I still go out in public? Could I face the community?

I contemplated support group counseling. ‘Hi, I’m James and I live in a modest house. It’s nothing special but at least I can afford it.’

Call me old-fashioned, but I believe people should have a basic sense of responsibility (although I appear to be in the minority on this one). At the core of that philosophy is not buying a house that’s far more expensive than I can afford. It’s called living within your means.

Unfortunately, this is a dying creed in our buy-now, pay-maybe society. And now we have an estimated 2 million homeowners who have bought into this thinking. What they haven’t bought is a house they can afford.

It’s to the point where our government is almost obligated to provide some form of assistance due to the sheer volume of pending foreclosures. Perhaps federal persuasiveness will be enough to convince lenders to refinance loans and it’s likely Congress will cough up $75 to $100 million in tax dollars to help in any way possible.

But exactly how much should our government give to bail out grown adults who don’t know how to manage a household budget? What happens next when 2 million Americans can’t make their car payments?

More and more, the United States is becoming a country where the responsible few keep up the irresponsible masses. Eventually, this will spell disaster.

James Clark is editor of the Standard. He can be reached at 473-2191.