Why Should I Care?

Today TaxMama hears from Julie who says “Why should I care about people who got messed up with subprime or ARM mortgages? Did they not know enough to read their contracts? I had a financial advisor back in 2004 who presented an adjustable rate based on the LIBOR Index. I told him to forget it and we refinanced to a 15-year 4.56% fixed rate mortgage. I don’t like the government bailing out people for their ignorance.”

Dear Julie,

Your anger makes perfect sense. Why should you have to pay the price for folks who knowingly gamble with their finances, or those too ignorant to do their homework? Excellent point.
I also did my homework and locked in a 10-year note at under 4.5%. Why couldn’t others?

What irks me especially is that I warned everyone that this would happen when the whole frenzy of ARM mortgages were being written. And I urged people not to subscribe to those short-term adjustable rate notes. Some folks listened.

At the beginning of the collapse, back in March, I also proposed a solution that the mortgage industry could have used to resolve the problem with a win-win scenario.
http://taxmama.blogspot.com/2007_03_18_archive.html

I even sent the solution to Senator Hilary Clinton when she proposed her outrageous fix, to have the government provide funds to bail out the mortgage companies. No response.

Well, my friend, you’re going to pay the price, whether the government bails them out or not.

If the government does nothing, you will find more and more people losing their homes and being evicted. Your neighborhood will suffer from all the vacant homes – in a variety of ways:

  • Increased vandalism of the empty homes – or squatters.
  • No one to shovel off the sidewalks – so the city has to pay http://kstp.com/article/stories/S274209.shtml?cat=89
  • More people facing bankruptcy, as they expend their funds to try to save their homes
  • More people losing their jobs and becoming homeless – http://www.bankrate.com/brm/news/real-estate/20071109_foreclosure_eviction_renters_a1.asp – and having to go on welfare.
  • Foreclosure vultures swooping in to buy up those homes cheaply and filling them with tenants who often make living in your neighborhood a misery instead of a joy.
  • Lower price on your home when you want to sell, because your neighborhood has turned into a slum.
  • And your savings decline, because the stock market has been on a frantic roller coaster, ever since the lenders started folding last Spring.
  • Oh yes, and an increase in violence, as people get more desperate and have nothing to lose. It can get scary out there.
  • Increase in gang activity, with new recruits, from children of middle-class families who’ve moved downward and are angry with the system.

Yup. It’s not your problem.

But if nothing is done, be careful walking out your door.

And remember, you can find answers to all kinds of questions about bad loans, and other tax issues, free. Where? Where else? At TaxMama.com

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