Foreclosures

We should remember one thing about the foreclosure crisis. Most of the people who are buying homes in Michigan are paying their mortgages and paying on time.

That doesn't minimize the crisis, or trivialize the suffering of those who are now losing their homes. Most of us, as has often been said, are only a few paychecks from disaster.

And many of us who have been homeowners for a few years may have been saved in our time from disaster by not only different market conditions, but a different regulatory atmosphere. Today, there is a feeling among those who call themselves free-market conservatives that government regulation is a terrible idea.

They prefer to trust in the invisible hand of the marketplace, and the good sense of buyers and lenders to sort things out. That’s all very nice in theory. But when I went to buy my first house, I knew all about what I had been studying in graduate school. But I didn’t know escrow from Ella Fitzgerald. I don’t know if I would have been smart enough to have avoided bad adjustable rate or “balloon” mortgages. They just weren‘t generally available then.

Earlier this year I discovered that one of my brightest former students, a woman in her early thirties, was about to lose her house. She and her husband had signed up for an outrageous, interest-only loan which went off like a time bomb a year or so after they got it.

They knew they hadn’t been prudent, and had worried a bit at the time. But they had been pressured hard by a real estate salesman, and the lending institution. And, like young Americans since the time of George Washington, they blithely assumed they would continue to make more and more money every year.

Unfortunately the economy changed on them, and as also happened, they ended up making a baby instead, which made them happy but gave their two-income dreams a bit of a setback.

You can say that was their own fault. You can snort, caveat emptor; let the buyer beware, and say these people who... [continues]

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