DISCUSSION: Did We Learn Our Lesson In This Mortgage Crisis?
The American Dream shouldn't just include apple pie, home ownership and baseball, it should also include the ability to pay for such things.
You've heard the phrase, "It takes two to tango" right?
Well, the Bank of America, J.P. Morgan Chase, Citigroup, Residential Capital (Ally Bank/GMAC), and Wells Fargo & Co. now have to pay the piper through a massive nationwide settlement for using deceptive and abusive lending practices, which includes paying up $140 million to the state for mortgage claims.
These banks represent only one dance partner in this mortgage mess and I can't help but wonder…are we as borrowers being more accountable?
According to a story in the Milwaukee Journal Sentinel, people who were harmed by bad lending practices may qualify to have those terms modified, or (if they've already lost their home) receive a cash payout.
“This agreement provides real relief to homeowners and real reform of servicing standards – now,” said Attorney General, J.B. Van Hollen. “The people of this state, and our economy, have suffered enough from the unfair and deceptive practices of the mortgage industry. Today, with this settlement, the banks and mortgage servicers are being held accountable and, more importantly, homeowners and communities are receiving much-needed assistance.”
But when I listen to how we talk about the mortgage-banking crisis, I find it interesting how we've got our either/or thinking screwed on pretty straight on this topic. You'll often hear people talk about how those greedy people should never have taken out those home loans or you'll hear the other side talk about how those greedy banks should never have given those loans. But we don’t often discuss both perspectives at the same time. And, I think that's a problem.
Quite frankly, I think both views form an accurate picture of the problem and it would serve us well if we stuck to understanding how both dynamics caused this mess – those who bought into the notion that we were owed these homes without being required to pay the loans were just as wrong as the corporate banking officials who thought they could get away with employing deceptive loan practices.
I understand there are some who were deceived and some who had the ability to pay, but lost their jobs. I'm not talking about those situations. I'm talking about people who got in way over their head and had no ability to pay for those loans in the first place, and the banks that took advantage of people like that.
We all fell in love with those home flipping and remodeling shows on television. We wanted a bigger American Dream, or at least one bigger than our neighbors'. Some of us wanted the warm and fuzzy feeling of home ownership, but we failed to accept the responsibility of paying for home ownership. And there were some banks that were more than willing to take advantage of us through deceptive loan practices. I mean, what in us thought we could get a $325,000 loan when we only made $23,000. Conversely, what bank thought that was seriously a good loan?
My point is that while this settlement seems like a first step in the right direction toward developing responsible lending practices we also need to be responsible borrowers. Gone should be the days of “buy now, but never pay.” Gone should be the thinking that we have to own it all to become someone of importance. Gone should be the thinking that our self-worth is the sum total of what we own. We were foolish to think such things and this thinking absolutely needs correcting.
Still, the public scrutiny currently taking place within these broken financial institutions should root out those responsible perpetuating faulty lending practices, and we need those institutions to be replaced with ones that believe in sound and consistent lending practices. Why? Because no one wins when a loan fails – not the lender, not the borrower, not the community, and not our country.
We need our lending institutions and our citizenry to be financially sound in order to move in a positive direction again. And, I don’t believe for one second that this is a Republican or a Democratic idea, it’s a fundamental principal that adults should always cultivate in them selves and should never be an extension of politics. If someone lends you money in good faith, you borrow in good faith. I don't really understand why we needed to make it so complicated.
To find out more about the settlement, click here.