When I went looking to buy my first house, there was a number that wagged a finger in my brain. Twenty percent. That was the down payment. If I couldn't come up with that, I couldn't afford the house.
Many good homes slipped away. I walked out the front door sighing, wishing I had more money. But it seemed like such a hard and fast rule, every real estate agent and banker repeated it — "You need 20 percent down to get a mortgage" — that there was no alternative.
So I waited. I waited until I found one I could afford. And I gave the bank 20 percent. And I bought it.
This, of course, was almost 20 years ago. Things have changed. The other day I read a New York Times story that said the median down payment on a house last year was 9 percent. And that almost one-third of home buyers put down no money at all.
So perhaps it's no surprise to see so many "for sale" signs on my block, and the next block, and in neighborhood after neighborhood. Or, even worse, houses that simply have been abandoned.
After all, it's easier to walk away from something when you didn't give too much to own it.
GREED MAKES THE WORLD GO AROUND
As the subprime mortgage mess infects the U.S. economy, ruins households, sinks businesses, creates havoc on global markets, the sympathetic cry is, "Oh, those greedy banks!"
And they were. Greedy. Greed drove this crisis as sure as tide brings waves to a shore. Mortgage brokers weren't satisfied with an industry that had people buying and selling in a frenzy. They wanted new markets. New players. New victims from whom to skim their percentage. The banks and hedge funds that supported them wanted bigger profits, continued growth.
And they found it. By making it easy. They told people things that I was never told 20 years ago. They told people 10 percent down, 5 percent down, no money down. They told them this house could be yours, and all you have to do is pay the rent — and it really was like rent — and in a few years, it'll be worth so much more, you'll be able to borrow against it, find new money, maybe sell it and move up the ladder and do this magic all over again.
And here came the fatal blow.
People believed it.
So you tell me, who's at fault: the conned, or the con man?
RUNNING AWAY FROM THE PROBLEM
Because now, homeowners are simply throwing up their hands. They are waking away. They are sticking it to the banks with a "not my problem" attitude that mirrors what the banks showed them when they complained that rates had adjusted too high.
The New York Times piece detailed a company in San Diego called You Walk Away. It helps people drop their homes into foreclosure and avoid liability. For this, you pay $995. And people are doing it — happily, thankfully. Think about that company, that name. You Walk Away. Only in this economy, at this point in American history, are we grateful to pay somebody to lose our homes.
Yes, of course, it's tragic when people are uprooted. Tears are shed. Hearts are broken. But many of these "homeowners" should not have owned those homes in the first place. They should have waked away until they could make the reasonable down payment. They should have stayed where they were, in a smaller house, in an apartment, the way their parents and grandparents did, until they could save enough to afford it — not afford the pyramid scheme, but the home itself.
Sadly, nobody wants to wait. We have a sense of entitlement. Gimme mine now. Why shouldn't I have a house? Why shouldn't I have a bigger one? Why shouldn't I buy and flip like my friend the next town over? Look at the TV. Everyone's getting rich but me!
So now there's a new industry: selling parachutes. You Walk Away. A subject in that Times piece said, "I know I'm working the system, but you got to do what you got to do."
Twenty years ago, that meant wait. Today, it means something else entirely. It's hard to feel sorry for banks and mortgage companies, but them being rich doesn't make our greed right. Just redundant.
