Saturday, September 6

Forget respect, I'd take a little responsibility!

I decided to try out this BlogHer that everyone's so keen on. So here's a lil post I did especially for those folks. (But I would never deprive you all of my rants. That would be cruel.)



I feel as though I am beating a dead horse -- apologies to PETA -- but I just can't over how many people in this country act like truculent teens.



When you confront a teen about a mistake, chances are that they'll apologize in a half-hearted way (if they bother at all). Then they want you to clean it up for them. Because, after all, they're still just kids, right? If you try to make them understand the gravity of the mistake, they roll their eyes. Exasperation.



Maybe we didn’t push enough, and so they assumed someone would always clean up after them. Or maybe it’s just from living in a society that dips youth in gold and places it on an altar. Maybe it’s that adults now act more like children than ever: Always buying new, flashy toys; playing video games; eating unhealthily.



Whatever the reason, this society is disinterested in owning up to mistakes – particularly if it means making things right. It's so much easier to blame others. Obese? Fast food chains are at fault. Upside down on your mortgage? The lenders gave you too much mortgage.



This sort of thinking is awfully convenient. It allows you to walk away with no guilt. Because it wasn’t your fault to begin with. Unfortunately, it also means you don’t learn from your mistakes.



I know that some folks were duped into adjustable-rate mortgages but, by and large, people just wanted things that were previously out of their grasp. And once it was within reach, they didn’t ask questions, didn’t look critically. They just bought into the advertisers’ hype that they “deserved” these things.



Here’s my final bit of exasperation: “Upside-down on your mortgage.” What does that mean exactly? Well, I know what it means. But why does that situation somehow absolve you of any wrongdoing?



Even with the housing price inflation of the past few years, how “upside-down” can you really be? I would be shocked to find anyone who can answer more than $50,000. My guess is, most people are maybe $10,000-$20,000 short.



So why do they get to walk away from that responsibility? Why do they get to think that if they don’t break even, they have no options other than giving up?



They decided to get a house. There’s always risk with that: disability, prolonged illness, unemployment. With most kinds of investment there is risk. And they accepted that when they signed the papers.



Yes, $10,000 is a lot of money. So is $50,000. But you can pay it back. It will take time. And they will be forced to cut back and do without.



But it’s money they owe. Why do they think they're allowed to opt out because things didn't go according to plan?



If you lose money in the stock market, you can’t walk away. When you lose at a casino, you can’t go ask for a do-over. You accepted the chance of losing at the same moment you accepted the chance of winning.



But in this country people think that they are owed a happy outcome. When the unhappy news comes calling, they have plenty of excuses why they can't be bothered.




  • They point to children and say, “We have to live somewhere.” Fine, rent. Go for a small apartment.




  • They say they have too much “stuff” to fit into an apartment. Uh, isn’t that part of what got us into this problem? Sell whatever you can and put the money toward the debt.




  • They say their kids need to go to college. The kids will have to save on their own: holiday money, babysitting and a part-time job during the school year (full-time in the summers). They may still need to take out loans. It happens.



We need to start convincing people to take responsibility. We owe it to ourselves and to our children to stop this cycle. Teach your kids that debts should be honored and that mistakes do have consequences.


Otherwise our future is not only full of annoying whining, but also pretty bleak.

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14 Comments:

Blogger DogAteMyFinances said...

Love it. I couldn't agree more.

September 7, 2008 at 4:48 PM

 
Blogger Claire said...

Not that I don't agree with most of what you said, but let me tell you our situation. We bought a 950 sq ft, 2 bedroom condominium in November of 2005 for $272,000 with a 6.125 fixed interest rate. We knew it was a bit of a stretch for us but still within traditional guidelines, and we just desperately wanted to get into the market before we were totally priced out. (At that point, the area where we live had experienced 10-20% ANNUAL increases in real estate for the previous 5 years.) We had to shoehorn in ourselves and our two kids, but it was doable, and I've gotten better at de-cluttering, so we fit all right. We thought we'd move out in about 5-7 years, once our oldest was around 8 or 9 years old, because we figured we would need some more space by then. And then...the market fell. Plummeted would be the more correct adjective. We've lost almost 40% of the value of our home. That's right, we're currently $107K underwater.

So you're right, $5K or $10K is a lot of money, but it can be paid back. But $107K? That would take a lifetime for us to pay back. We're currently trying for a short sale to see if we can get out of here while our lender is amenable to the idea. If we wait another 3 or 4 years, there's no chance the value will have rebounded enough to make a difference, and who knows if the lender will be willing to work with us? I don't like it, but I feel like there were a lot of bigger forces at work that caused us to get into this situation. The Washington Post had an interesting series on it if you're interested:
http://www.washingtonpost.com/wp-srv/business/creditcrisis/
You'll have to have a Post login ID to see it.

September 8, 2008 at 9:43 AM

 
Blogger Rachel said...

I'm not saying that I disagree with any of the sentiment here, but in some housing markets the numbers won't stick. We bought our house before the boom dropped and the value of our house dropped approximately $160,000. Thankfully because of the equity we already had in it, it's now worth just a smidge more or dead even with what we owe. The house next door to us, which was foreclosed on, sold for $170,000 less than it had been purchased for (and thus around $160,000 less than the outstanding loan amount). If I had been in my neighbors' situation, being upside-down $160,000 and having gone through two layoffs and six months with no work, not being able to make the payment even though they had refinanced into a fixed-rate mortgage, and not being able to sell the house because of not having that $160,000 extra to pay off the note, I'd be overwhelmed too.

I'm sure as heck not saying that people with sub-prime mortgages (which interestingly include many more mortgages than just ARMs and Option loans) are all innocent (goodness, far from it), but there are many different situations out there. I do agree that those who used ARMs to pull out money for toys they couldn't afford, and knowingly got themselves into too much house... yeah, that bothers me. And it bothers me that there are people who are plunging us into even more economic mess by walking away (again, those who had or have other options in the situation).

It's a discouraging situation overall -- hopefully now both individuals and banks have learned some lessons and will minimize the risks later on. Unfortunately it seems like no one (including the government) has a good plan for dealing with the aftermath now.

September 8, 2008 at 9:51 AM

 
Blogger Abby said...

Claire,

I am sorry to hear about that situation. Certainly that is quite the housing snafu.

I am curious, though, you never said why you need to leave. I get that it's a tight squeeze but I know a lot of kids who had to share a room for most of childhood. Hardly ideal, but doable.

And given that, 3 years ago you couldn't have predicted that the housing market would drop so precipitously, how can you be so sure that real estate won't reboot?

If you wait a few years and keep making what payments you can and even $50 extra a month, at least you'll pay down a bit on the principal. You may get to the point in the rental market (which is going completely insane in many places) that you can rent the place out for the bulk of your payments and rent a bigger place for your family. Or, in the next five years, the economy may slowly drag itself back up and you may be able to refinance.

Also, you didn't mention whether you're both working/either or both of you has taken a second job. That would help pay down principal.

At least right now, you have a place to live. But to give up the place you own -- because you're "upside down" -- and then still owe the money?

If you have a fixed rate then the payments aren't climbing so ostensibly you can still make payments. Why not stay?

I understand this situation seems unfair and hopeless. But a) $107,000 won't take a whole lifetime to pay off -- just seems that way and b)you're still sort of acting as though you need to own a home.

I would love to own a home someday. But it may or may not be in the cards for Tim and I. We've discussed this. Given our health issues, we're going to simply wait and see. If we end up renting for the rest of our lives, then there are a lot of headaches we'll avoid. I'd certainly rather have a place of our own.

But people in the past five or so years have gotten to where they feel like a house is a staple. Plenty of folks rent their whole lives.

You said you "desperately wanted to get into the market before we were totally priced out" but if you were going to be priced out, maybe that tells you something. I love living in Seattle (though some day we may need to move to AZ or NV or that region for Tim's health) but choosing to live here, where my support network is, means potentially giving up the option of owning. It's a crazy housing market here. A two bedroom condo here still goes for $225,000+.

Please don't mistake me: This is a terrible situation and certainly you're faced with some VERY awful choices right now. And you're definitely taking responsibility by not walking away.

But you're still acting as though you have fewer options than you do. Stay where you are for as long as you can and pay down principal. Find a second job, which will suck but you're doing it to dig yourselves out of debt and meanwhile you'll still have a place to live. My cousin did this for three years, including throughout a pregnancy. Meanwhile, pat yourselves on the back for having the sense to get a fixed interest rate within "traditional guidelines" so that you are able to make payments.

I will go ahead and check out the series, though.

And for commenting on this piece, I'll go ahead and enter you in the second weekly giveaway, which I'll post later today.

September 8, 2008 at 10:19 AM

 
Blogger Abby said...

Rachel,

You have a point. I suppose it may have sounded as though I were crucifying everyone. I understand that some of these situations are not caused by stupidity or myopia. Even with careful planning, like Claire mentioned, things can still drop out from under you. And with situations like you mentioned, with layoffs etc, there are some folks who are genuinely overwhelmed. Same with folks who were duped by mortgage companies into ARMs etc.

I always loved the 7-year balloon mortgage. I never understood people who actually bought those. I guess everyone counted on the fact that these mortgage options would be around for years to refinance again and again.

Thanks for writing in and checking out my website. For commenting on this post, you're entered into the second weekly giveaway. As soon as I'm actually home, I'll post the details of that.

September 8, 2008 at 10:26 AM

 
Blogger sallyavena said...

Amen! We chose not to buy for this exact reason. Whatever happened to save, save, save like crazy to get a down payment? I think that process teaches some valuable lessons that can be applied later (need furniture? save for it-your used to the idea and not falling into instant gratification mode. We still rent a small apartment so we can save and we have 4 kids. Is it ideal? No, but it's do-able.

September 8, 2008 at 7:30 PM

 
Blogger Abby said...

Thanks for commenting, Sally!

I agree with you (obviously) and good job on delaying gratification on your house. I hope I have your patience once our debt is gone.

September 8, 2008 at 7:39 PM

 
Blogger Alicia said...

Thanks for the great post. When my husband and I decided to become home owners, we had a nearly prophetic conversation about the effect of housing market fluctuation on home values, and this greatly influenced the location and the size of home we bought - we bought a home we felt was smaller than we needed and which was in need of major cosmetic updates, one in an area we felt was safe and growing, but less than ideal for our purposes - we bought what we felt was a tolerable starter home that we could stay in for some time or get out of quickly depending on our needs. This turned out to be a great plan - our home has lost only about 10% of its value (other homes in the vicinity have lost much more), but because we bought less house than we could have, got a good deal because the house needed work, and have been making extra payments on the principle, we are not upside down. We also have realized that, although it is smaller than what we initially wanted, the house fits us just fine, so we are content to stay where we are until after the market rebounds or longer.

My husband and I are not good with money, neither of us are financial whizzes, this was our first home, and we are not wealthy (together we gross about $75000 a year and have two kids in daycare). We just made sure we knew what we were getting into every step of the way, and we made sure to think about as many crap scenarios as possible before signing a 30 year commitment with a bank. I suspect that many bad situations could have been avoided had people had a little good advise and/or common sense.

And college? Our kids are going to have to manage that on their own. I love them to pieces, but I do not feel obligated to pay for their educations - my husband and I paid for our own (two bachelors degrees and one out-of-state masters degree for a grand total of 90,000), and while it was painful, we learned a great deal about wise decision making and debt payment.

September 9, 2008 at 4:08 AM

 
Blogger Abby said...

Alicia,

Way to go! Despite you saying you're not good with money, it sounds like you made some pretty smart financial decisions.

As for college, I'm sure your kids will be fine on their own. My parents helped me by paying room & board. $400-500 a month for four years definitely adds up, so that really did help. But the deal also made me careful: I had to pay for tuition and while I got early acceptance to my dream school (Cornell) I also got nothing but loans. I was pretty sure I would end up going to grad school and didn't want to have over $100,000 in debt before I even got going on the second degree! So I turned down the Ivy-League schools and went with University of Washington. I love Seattle and have never regretted my choice, especially after I realized work was always going to be iffy.

September 9, 2008 at 10:42 AM

 
Blogger Marina said...

I totally agree with the article and I will just correct you in one thing - that doesn't happen just in your country. it's the same everywhere ;-))

September 10, 2008 at 2:57 AM

 
Blogger a.b. said...

I highly agree with the lack of accountability. Whether or not someone loses their house, I rarely hear anyone say, "I made a mistake," "I should have read the paperwork more carefully," "I bought more house than I could afford" or anything in the like. But here in Las Vegas we many haven't lost 10,000 or even a 100,000. I wrote a post about a foreclosure house here that's for sale; it's posted at a loss of 1.2 million.

The issue people here and in California and Florida are facing isn't how upside down they are; it's that the adjustable rates are resetting, sometimes into the high double digits and they can't make the payments. Since they're upside down they can't refinance to stay in their homes.

I know a woman in CA who was trying to make arrangements with the bank so as not to go into foreclosure, but one department would make an agreement, and another would veto. After over eight months they are letting the foreclosure happen and moving into a trailer on an elderly friend's property to help care for her, so they are truly making the best of it...but there was certainly no desire to walk away on their part.

But to support your argument for accountability, when my husband and I first moved here we were still looking for work, but were told by friends, family and real estate agents, that we should immediately buy a million dollar condo on an interest only loan, and sell or refinance before it reset. When I said, "I can't afford the payment on a million dollar mortgage, and what happens if I can't sell or refinance? I have to be able to make that payment" I was met with a bunch of "Oh, that will never happen"s and "You're going to be priced out of the market if you don't act now"s. I felt that attitude was idealist at best and irresponsible at worst, so I followed my own path.

September 10, 2008 at 11:08 PM

 
Blogger Abby said...

wow, a.b. That's quite a lot of debt. Glad you were careful enough to avoid the debt.

Thanks for commenting. I'll go ahead and enter you in this week's giveaway.

September 10, 2008 at 11:16 PM

 
OpenID savingcent said...

Hi Abby! Thanks for your comments on my blog! I'm glad you enjoy it!

As for subscribing....I'm not sure...(and I thought I had that whole blogger thing down...) I usually just link to other blogs I enjoy readying. I'll have to add you as you are a fellow Seattlite!

Thanks for the date tips! First Thursdays is a great one to remember! I don't drink soda, so I'd imagine it would take me quite some time to save up all those points...its a good idea though!

Let me know if you know of a widget I can add so you are able to subscribe...

-Seattle Girl

September 16, 2008 at 1:40 PM

 
Blogger Donna said...

SeattleGirl: I don't drink that much soda, either, but I've gotten a ton of movie tickets from MyCokeRewards. How? By not being too embarrassed to pick up bottle caps, or bottles with caps on them, from the ground and/or sticking out of recycle bins. I go to a big university and there are tons of trashcans with a separate "bottles and cans" section on top. I don't have to reach into the trash, just peek in the top compartment.
Also, one of my jobs as an apartment manager is to keep an eye on the recycling Dumpsters, so I sometimes get 10- or 20-point codes from Coke product boxes before I stomp those suckers flat.
I'd also suggest putting it out there that you're collecting these things. Coworkers, relatives and neighbors may just throw them out. You could do something nice for them in return, such as picking up mail while they're away or bringing a batch of homemade cookies to work as a thank-you.
Some workplaces have recycling bins in the break room; wait until the room is empty and take a quick look for bottle caps.
Good luck! And remember, the movie tickets might "cost" 485 points, but they come with a coupon for a free soda. So let's see, $9.25 admission plus $3.75 soft drink... You might decide it's worth a little grubbiness.

September 29, 2008 at 2:20 PM

 

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