The administration says that its scheme does not reward people who recklessly borrowed too much. This is untrue: the plan will certainly help some people who borrowed more than they should have. No doubt, it would be fairer to help only borrowers whose standard repayments (after teaser rates expired) were no more than say 30 percent of gross income to begin with, and/or who borrowed less than 80% of their property's initial value--in other words, to help only borrowers who behaved prudently, and who are now in trouble because their income has fallen. But of course this would have meant many more defaults. Because foreclosures also hurt innocent bystanders, there is a public interest in limiting them.A couple things worth mentioning.
The part I bolded, "borrowers who behaved prudently," may be a little too narrowly defined here, especially considering my situation. I borrowed, oh, about 99% of my home's value. Perhaps that initial decision may not be judged "prudent" on paper, and I have at times regretted it, but it would be unfair to call it reckless.
I bought a house I could afford: small, old, a low-income home in a low-income neighborhood. (As a guy with a decent income, I could have insisted on a more modern, decent-income type home...but if I had, I probably couldn't write this
I was also able to secure a fixed (low) rate loan, so I don't have to worry about resets or any of that stuff.
Not only that, but I have been routinely, persistently, insistently making extra payments towards my principle. My debt-to-income ratio is where it should be. I'm within a hair's breadth of being close to that 80% initial value number.
Mortgage wise, I'm alright.
But that brings me to this:
"...of course this would have meant many more defaults. Because foreclosures also hurt innocent bystanders, there is a public interest in limiting them."And that, my friends, is the sad truth of the matter. I may be alright, but I am not an island adrift in my own private utopia of self-reliance and discipline.
We're all affected by the actions of those around me, as I found out when my next door neighbor off-loaded her house on the cheap and erased twenty grand of my property value. (It was all on paper, though, part of the bubble, and since I'm not looking to sell the house for a while, it just means I pay fewer taxes.)
It's like dominoes...wait, have you heard this one before? Okay, then. I guess I don't have to go into that interconnectedness of the world thing then.