Our Latest Loan Crisis

The recent controversy over the low cost home loans has two points that need to be discussed.

First: Here we go again!
I know it has been said a million times but this proves the point. History that is ignored will be repeated. It was not that many years ago that we had a crisis in the housing industry caused by the fact that loan interest rates had been raised to such an extent that people were not able to pay off their mortgages and many homes went into foreclosure. It was a matter of the loan industry pushing low cost flexible rate mortgages that were very affordable to a large number of first time home buyers. Those loans and the “first time” loans that had rates that went up to market rates in a year, were a trap for many people. They knew in their hearts that they would not be making that much more money when the cost of their home mortgage was increased. Some people were able to find a way to refinance their loans, in time to save that extra money. Many people did not have the skill to do this or were in such a financial position that they could not make that type of change. The number of foreclosures went way up and both the lending and real estate business was bad for a couple of years. Now we see this all happening again.

Second: Should government bail these people out?
Is it the job of our government, at any level, to save people from their own actions? People went into these loans with the knowledge that the cost of the loan could go up at any time. Were they so convinced that the government would never raise interest rates that they believed that they would never have a higher rate to pay? Rates were at an all time low and were more inclined to go up then down. The industry really wanted the interest rate to go up, after a short period of time, so that it could entice more people to save money so that the lending industry and the banking industry could make more money. What happens to your loan payment after you have made it? The money is reinvested in loans and in the short term it goes in the bank so that it can make money for the loan company. They want more money in the available loan pool so that they can look better on the stock market.
Who are we bailing out? Is it the big loan companies just as much as it is the little lender? These companies were the ones that made it so easy to qualify for these loans. They should have known what the history of the past had shown. We may feel sorry for those who took out the loans. The fact that it was big companies who are making all of the profit should be part of the equation. Maybe they should be the ones who are looking into helping the people that they are forcing into foreclosure before they give up on the loans. Maybe part of their profit could help these people. Just maybe they could help all of the people who did a good job for them in the good times, to stay afloat while the times are not as good.
Is it government’s job to bail out all of these people? Maybe not. Selective help is harder to control, but it does work best.

So what can be none?
Who is at fault? It partially must be blamed on the lenders who were making it look so easy to own that large home or at least own a home in an area were the prices have gone up to a point were the homes are just not as affordable as the people who want to live in that area can afford.
All of the dollars that we as individuals invest or that goes in pension plans is money that earns income for some person. When the interest rate is down so is the availability to those who are living on money they invested or put in the bank as a source of income after retirement. We all want to be good people it is just that none of us can provide a living for the rest of the people.
People must live with their own decisions and they can not depend on other people to cover up their mistakes. Some people will lose houses, but other will find a way to get through this crisis as people have always done in the past.