Where has PERSONAL RESPONSIBILITY disappeared to?

I get up this lovely sunday morning and come across this article on the Money Central section of the MSN website:

http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/housing-crash-spawns-big-lawsuits.aspx

Now this is a rather long article detailing the wave of lawsuits against various mortgage companies and banks.  Now unless you are Lazlo Hollyfeld and lived in a secret room accessbile only via the closet, you understand that we are in the midst of some pretty tough times right now.  Depending on who you read, watch, or listen to the problems are the result of the bottom falling out of the housing market.  No real need to further beat that dead horse, everybody knows or has some general understanding what happened there. 

Now, where I do want to go is the ridiculous notion of people suing their mortgage lenders for their own failure in making good sound judgements.  I will start by talking about a couple profiled in the article presented at the begining of this post.  A couple from Boston ran into some tough times, the wife lost her job in early 2007.  The article is a little vague on details but they at some point realized they needed to get their loan reworked from a refinance done in 2004 (according to the article that loan was a fixed rate loan).

I am going on a limb here, but I am going to make a few assumptions here:

  1. Why if you refinanced in 2004 to a fixed rate loan, do you need to modify the terms of your mortgage now?  This means that you weren’t misled into signing some exotic mortgage and are suddenly under the gun looking at a huge jump in your mortgage.  The fact you lost your job, doesn’t mean the terms of your loan should be modified. 
  2. I am assumming that despite a job loss by one member of the household the mortgage was still being paid.  It’s only after determining that in order to qualify for “assistance” the payments stopped.  People lose their jobs all the time, other than medical or divorce it’s a big reason financial problems emerge. 

This is just  a stupid and a ridiculous lawsuit.  Sure the lawyer in the article can state they are suing because WAMU didn’t keep their end of the bargain to help struggling homeowners.  Sure the couple recognized they were going to be in trouble, but you don’t stop paying your mortgage because you want to make yourself better suited to receive help.  In addition you do not request monetary damages because of the damage to your credit rating, claiming it was the fault of the mortgage company not responding to your requests.  YOU STOPPED PAYING YOUR MORTGAGE ON PURPOSE…PERIOD!  The damage to your credit was done the moment you decided you would show the bank who’s boss and stop making payments in order to get their attention.  That would be like taking a laxative because you are constipated, going down to the basement with no bathroom to watch TV.  Then in your rush upstairs to the toilet the basement door gets stuck, you crap your pants and sue the maker of the door or even the laxative maker for not detailing all the possible scenarios that could cause an “accident” .

Mr. and Mrs. Boston resident, I feel sorry for you.  You lost your job that is tragic, but that still does not absolve you from paying your mortgage regardless of what you are trying to work out with the bank.  In case you have been living under a rock, the mortgage assistance has been targeted at those who were “taken advantage” of anyway, not those who ran into trouble due to normal life things like: losing a job.

Which leads me to the next “victim” outlined in this article.  The gentleman from Las Vegas who feels duped because he DIDN’T read the loan docs before sigining them.   This is another great example of personal responsibility.  If you read the article from above, you will know then that this man has had a tough life regarding his health and lives on Social Security.  The man ran into money troubles in 2005 and refinanced his loan to get a little money.   A lender he supposedly worked with for years worked to get his refinance complete and encouraged him to not worry and just sign the 200 page loan document….trusting this person, he did just that. 

Low and behold, he signed docs committing him to am adjustable ARM loan, with a ballooning payment.  He claims this “subprime loan” should not have been given to him, he was better than that (according to him he had a 740 credit score and shouldn’t have been in that type of loan period).  My first question: how did you know you were better than that loan?  Secondly, I would argue that if you are refinancing due to debt problems and needed money, you might have been a better candidate for a sub-prime loan.  Finally, if  you were in trouble with debt and needed money, did you really have a 740 credit score?

I am sorry Mr. Vegas resident that your health over the years has led you to monetary problems.  It still does not remove the fact you signed something that you shouldn’t have.  This leads me to my final part of this article, personal responsibility points.

  1. A home is the single largest financial investment most people will make in their entire lives.  You look through all the information in the documentation provided from your mortgage company before signing.  No matter how much you want the house, if the terms are not right….DON’T SIGN IT.  In the end regardless of what somebody tells you, you have to pay the bills.
  2. Home Ownership is not for everybody.  If you don’t have the personal responsibility to be diligent in saving money, then maybe you shouldn’t own a home.  The upkeep and other miscellaneous expenses cost money.  Money that should not come from a credit card, money that should come from a rainy day fund.
  3. A mortgage is a contract with a company that YOU WILL REPAY what the lender took a risk in giving you.  Sure there may be lenders with fewer morals than others (see #1 above to weed those out).  There is nothing in that contract however that states you will get your loan terms re-worked should you run into any sort of trouble.
  4. If you run into troubles during your lifetime, you do what you can to make the payments.  If you have to get a 2nd job to pay the bills, you do so.  Sure it puts a slight burden on the family, but so does bankruptcy and foreclosure (which actually puts burdens on your neighbors and other homeowners).  Aside from medical expenses that arise from an unexpected diagnosis with an illness that requires expensive treatments that insurance doesn’t cover, there are few reasons you can’t work hard to keep to your obligations.
  5. If you are laid off from a job and burn through your emergency funds, you should not be turning down job offers because they may not be what you want.  I have seen and heard stories where people lost their jobs and claimed they couldn’t find another one.   Only to find out they were turning down job offers because it wasn’t paying enough or wasn’t their ideal job.  Let’s see…you are not earning an income, likely living off government assistance and a job that pays less isn’t better.  Well let me be the first to tell you: it is enough!  Less money coming in is better than NO money coming in.  See point #4 if necessary.

I will not deny that some mortgage lenders, real estate agents, appraisers and others in the home industry were less than honest during the housing boom.  However, this is no different than in any other time or industry.  It’s you the consummer who needs to take responsiblity to know where your money is going.   I equate this responsibility to getting a 2nd or 3rd opinion from a doctor when diagnosed with an ailment.  If you think possibly that the 1st doctor is wrong, visit a 2nd one.   Take responsibility for your actions and if you screwed up, admit it, work to fix it and move on.  However, putting the blame on those who you claimed took advantage of you is not taking personal responsibility.

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