Monday, December 22, 2008
There's been a push recently to re-write home loans which had adjustable rate mortgages with the idea that the buyers would be able to keep the house and it would not go into foreclosure further glutting the market and further depressing home prices. What the process seems to have overlooked is that the buyers most likely could not afford the house in the first place. Frequently there was no money down and the buyers could just barely afford the payments with both husband and wife working. Once the rate adjusted up and/or there was a job loss, illness, or divorce, the mortgage payment was just too high to keep up with. Now the stats are showing that after the re-write to a lower, fixed rate, 37% of the re-written mortgages are 30 days or more past due. This evidently is news, a surprise to some. I don't see why--they couldn't afford the house to begin with. While I am on the subject of surprises, it seems to come as a surprise to many that life isn't always rosy, doesn't go the way we want it to, and just plains sucks sometimes. This may explain why so few have an emergency fund, have a fall back plan for when something goes wrong, or even supplies for a few days when there is a hurricane coming. I guess there is some benefit in being a pessimist--our surprises are generally pleasant ones--when things go right.