February 2, 2009
A Headline, A Rant
This morning I saw this headline: Good News for Foreclosure Victims. Foreclosure victims I tell you! Argh! The only people affected by foreclosure that I think of as victims are the renters whose landlords failed to pay the bills, causing the renters to be unfairly evicted. The article did address those people, too. Freddie Mac has decided that to avoid unsightly vacancies and properties falling into disrepair, the bank will graciously allow the house to be rented to the foreclosed-upon owner. In the even that the house was already occupied by renters, Freddie will rent the house to them instead of evicting them. For the renters, who likely can't afford to start a new lease elsewhere, this is great news! For the owners-turned-renters, this is also good news. Sort of. Sure, I think it's great that they aren't going to be kicked to the curb and their pets abandoned to the local shelter or worse. I do have a couple of questions. First, if they weren't paying the mortgage, what makes Freddie think they'll pay the rent? Is he going to drop the monthly rate? If he IS going to drop the monthly rate, then what motivates a struggling homeowner to keep struggling. Why not give up the loan and the house and pay the decreased rent? Same house, same standard of living, price break. Yes! The decision to borrow too much is first rewarded with the loan itself, and then with a possible drop in rent. Second, what makes these people victims? They chose to take the loan. They chose to buy a house that was beyond their means. I know there are exceptions. There are people who could afford the monthly payments but disaster struck and times got hard. In my opinion, they aren't victims either. They could have waited to buy a house until they could pay cash or at least had enough savings to cover them in the event of an emergency. Why is Freddie continuing to reward people for their irresponsible choices?!