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Get-it-now culture runs up a large tab
Friday, October 03, 2008
Like the vast majority of my fellow Americans, what I really know about finance and economics is exactly the same as what I really know about brain surgery and nuclear physics. Because it was a requirement, I took one economics course in college, became hopelessly confused by the second class, slept through the rest of the semester and barely escaped with a passing grade.
As nearly as I can understand it, though, this week's shock on Wall Street was started by predatory lenders who gave mortgages to people who weren't qualified to get them. Then the lenders sold the mortgages to investors who somehow didn't notice that the mortgages had been given to people who weren't qualified to get them. Meanwhile, the politicians were too busy worrying about getting re-elected to do anything about mortgages being sold to people who weren't qualified to get them.
So who do we blame for this mess? I'm not really sure, although I'm positive there's plenty of blame to go around.
But while we're flogging the predatory lenders (who deserve it), the greedy investors (who deserve it), and the inattentive politicians (who deserve it), shouldn't there be at least a rap on the knuckles of a culture that encourages people to apply for mortgages they aren't qualified to get?
This is, of course, the same culture that has encouraged the last few generations to buy now, pay later. To take out payday loans with a vig that would embarrass the most stone-hearted bookie. The same culture that mails weekly credit-card applications to college students whose incomes aren't visible to the naked eye.
When it comes to the stuff we want, whether we need it or not, we have become the impatient generation. It's not just a question of keeping up with the Joneses. It's a quest to track down and buy every last thing we see advertised and charge it to whichever credit that is not maxxed at that moment. And to bring it all home to a house we can't afford.
A decade ago, the qualifying standard for home loan applicants was the ability to budget 28 percent of their monthly income for principal, interest, taxes and insurance. But somewhere along the line 28 escalated to 33 ... or 40 ... or 50.
To be fair, applying for a mortgage is not something the average American does every day and the process can be confusing. But how smart do you have to be to understand that if you have an income of, say, $50,000 a year, you probably shouldn't be buying a house that costs, say, $300,000? With nothing down.
The predators didn't just prey on the poor and uneducated. There are plenty of foreclosure signs in the expansive front yards of high-end homes, bought by those with Bud Light incomes and Dom Perignon fantasies. Or by "flippers" who figured they could outsmart the inevitably bursting bubble.
There are, certainly, a lot of home owners forced into foreclosure through no fault of their own. People who have lost their jobs. Victims of unexpected medical bills. But there are, too, a whole lot who knew, or should have known, that they were reaching far beyond their means. People who were victims of their own impatience.
People who have no one to blame but themselves.
