Bail Out My Mortgage

I’ve kept quiet about this for quite some time.  Mostly because it’s probably a pretty sensitive topic for some people.  But, well, I can’t control my fingers any longer, so here’s my rant…  The notion that every American should be able to own a house is ludicrous.  It is not a right to be able to own a house, it is a nicety, a privilege, something many people save for many years to be able to afford.  I, as ataxpayer, expect the taxes I work hard to earn and pay, to be used for things like building roads, paying for the military, ensuring the water we drink is fit for consumption.  It absolutely drives me up the wall every time I hear politicians drawing up plans to help people remain in their houses by reducing their mortgage payments using taxpayer money.  And this morning Citi Mortgage, which is part of Citigroup (article to the right, click on it for the full version) announced a plan to pre-emptively reduce the mortgage payments for half a million borrowers to prevent foreclosure.  Last time I checked, Citi borrowed money from the many discount lending windows instituted by the Fed over the past months, so effectively is using taxpayer money to bail out would-be foreclosees.  I don’t know the details of Citi’s involvement with the TARP plan but I assume if they take money from it they’ll be able to channel it wherever they want, except for executive pay packets.

Now, I understand it’s a sad thing for someone to lose their home.  I’m not a cold-hearted capitalist that thinks people in trouble should be put out on the street.  But why should the majority of US homeowners who can afford their mortgage payments, have sensibly managed the interest rate risk associated with their mortgage payments, and budgeted to be able to handle their payments, continue to pay their mortgages when irresponsible borrowers get bailed out using taxpayer money?!  I’m sorry, if you didn’t understand the contract you signed when borrowing hundreds of thousands of dollars and are now in dire straits, you deserve to learn the hard way.  If you purchased a house you couldn’t afford using a negative amortization loan and are going to be out on your arse unless you get bailed out, you should lose your home and take that as a lesson.  If you took out a home equity loan to buy a boat and a new car with a variable rate first mortgage and now can’t afford any of it, you should get ready to say bye bye to the whole lot.

Of course, there’s another side to the story.  Crooked mortgage brokers that took advantage of uneducated borrowers, or falsified mortgage applications to get loans approved and receive their commission, those people should be in prison.  I can understand taxpayer funds being used to protect borrowers from predatory lending.  When you consider the scope of the financial fallout from five or six million homeowners losing their houses, I can also understand instituting some kind of protection against foreclosures.  The question then becomes where do you draw the line?  Who gets aid and who gets left to burn like Lehman?  Who makes the decision?  And can I get my mortgage payment reduced too, maybe a little reward for being conservative and managing my interest rate risk, understanding the contract when I signed on to borrow hundreds of thousands of dollars, not taking a home equity loan to buy a new Porsche?  That seems fair, doesn’t it?