Homeowners: Victims or Culprits in the Foreclosure Crisis?Source:
http://boiserealestateinfo.net 25 percent of all home sales so far this year have involved foreclosures and one out of every 200 households received a foreclosure notice. The foreclosure crisis is the greatest in American history, thanks to a perfect storm of rising consumer inflation, hemorrhaging mortgage industry debt related to subprimes, and crashing real estate prices and depleted equity. But while bailout and rescue plans are designed to help the millions of Americans faced with foreclosure, it is important to recognize that this current epidemic of foreclosures is different from others in our history. Foreclosures have typically involved cheaper properties, homeowners who were unsophisticated regarding financial matters, and events such as job loss, death of a spouse, hospitalization, bankruptcy, or divorce. This time around, however, many of these “distressed” properties are worth millions of dollars and are owned by savvy homeowners with six figure incomes and luxurious lifestyles. They saw housing prices rise and jumped in with their eyes wide open to take full advantage of a moneymaking strategy that promised much better returns than the stock market. They could buy highly leveraged properties with no money down, hold them for two years as a primary residence to qualify for a capital gains tax exemption, and then sell them for double what they paid for them. While waiting for the tax break to kick in they could tap their expanding home equity and use the money to buy second or third homes. They bought high, expecting to sell higher, and it was not unusual for properties priced about half a million dollars to receive multiple competing offers only hours after being listed with Realtors. These are not the vulnerable and helpless victims we want to rescue, and they aren’t the downtrodden and displaced hardworking families that taxpayer funded bailout plans should be focused upon. They were just real estate players trying to get rich – or even richer – quick. When the scheme backfired and the market reversed direction, they got caught in the whiplash. Financially overextended – but attached to a comfortable upscale way of life – they refused to cut their losses, sell, and downsize to a more appropriate status. They borrowed more and used the money to service growing debt. Many feel a sense of entitlement and expect to have their debt forgiven and bailed out by their fellow taxpayers. But they are not victims. They are just opportunists. And there is nothing wrong with trying to make a fast buck, as long as you take responsibility for your actions and their consequences. Unfortunately, scores of Americans who are genuinely innocent victims will lose their homes this year because they were misled, misinformed, or otherwise caught up in the crossfire of real estate and mortgage frenzy. They have rising monthly payments while the dollar buys less, and they can barely afford to drive to work because of rising gas prices. Many have been laid off and have no source of income. Those folks deserve a neighborly helping hand. How policymakers and officials will differentiate between homeowners who are victims and those who are culprits is difficult to say. Chances are they won’t be able to make those tricky distinctions, and that is unfortunate for the nation and rather unfair to the real foreclosure victims. ### |