The national foreclosure rate was 3.3 percent in February - this is a 51% year-over-year increase and the number of new mortgage problem loans remains at a five-year high. The total number of failing first-lien mortgages and REOs exceed 7.9 million. Is the problem the economic slowdown? Well, maybe in part but I would argue that the main problem is that a large number of people in these situations are idiots. This isn't a result of predatory lending.
HAMP is only a band-aid. These people are living beyond their means and are being supported in this by those in office who provide these "recovery" programs. Instead of addressing the real problem - pay your obligations first before wildly spending on discretionary items - the government is encouraging class envy and promoting wealth distribution.
Paul Jackson over at HousingWire.com points out the following case from a real HAMP applicant:
They had an $1,880 monthly payment on their mortgage they’d defaulted on, yet their bank statements for the past 30 days included the following expenses:
- visits to the tanning salon
- visits to the nail spa
- some kind of gourmet produce market
- various liquor stores
- A DirecTV bill that involved some serious premium programming or pay-per-view events
- Over $1,700 in retail purchases, including: Best Buy, Baby Gap, Brookstone, Old Navy, Bed, Bath & Beyond, Home Depot, Macy’s, Pac Sun, Urban Behavior, Sears, Staples, and Footlocker
Mr. Jackson summarizes it well: people are spending their mortgages. So then the public gets the pity-party reports through the media about all of these unfortunate souls which helps drive the passage of ObamaCare (I'm sure we have some people who can't afford health insurance because they are spending like this), HAMP and other government programs. Personal responsibility is being tossed out the window in favor of government coddling. One of the most powerful teaching tools is trial and error. If there are no consequences, people will not learn and continue to repeat stupid behavior because it's the easy path. Instead of bailing out these banks and other financial institutions with taxpayer money (many of us who pay out mortgage and bills FIRST, and then allocate spending with what's left...if anything after today's tax filing), they should be empowering these institutions to collect from these extravagant spenders. Yes, I know that there are others in bad situations and I feel sorry for them - but I strongly suspect that a significant portion of the defaulters are engaged in poor budgetary practices. Then again, maybe they're taking a lesson from the U.S. Congress.
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