Monday, November 24, 2008

The Mortgage Mess

We all know about the turbulent economy affecting the entire world, brought on in part by the home mortgage crisis. How did we get into this mess? While hardly an expert on finance, I have some personal perspective on the situation.

Blame can be assigned to greedy lending institutions, eager to exact huge interest sums from home buyers, as well as builders that constructed expensive homes they needed someone to buy. We can also indict those who unwisely sought to obtain homes beyond their means.

When my wife and I bought our first house more than 30 years ago, we had to meet three requirements: A minimum of 20% down, a monthly payment of not more than 25% of our gross monthly income; and a mortgage not in excess of 2.5 times our gross annual income. I understand many banks are now returning to similar stipulations.

Who can buy a house with those limitations? Actually, those guidelines were not intended to be prohibitive, but to ensure we could afford the house we were moving into. Contrast that to what was happening as the current crisis neared: People often buying homes with no money down, receiving loans that sometimes exceeded appraised value (presuming on future appreciation), and agreeing to escalating loan payment schedules (presuming on future income).

I believe everyone should have the opportunity to own their own home, but they should still live within their means. If their "dream home" is more than they can afford, that gives them something to strive for, a goal providing inspiration for achieving their own "American dream."

The Bible says the borrower becomes slave to the lender. Across the nation - and around the world - we are seeing the consequences of ignoring that warning.