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Posted by on Mar 26, 2010 in Economy, Politics | 29 comments

The Prudent Man’s Burden

Not being a professional literary critic I don’t do too many referrals to the work of the other fine authors here at TMV, but this morning I will make an exception. In case you missed it yesterday, I would strongly suggest that you read the column by Robin Koerner, Obama; If This Is True, then Shame on You. Rarely do I run across such an exceptional piece which takes a subject which has been uncomfortably nibbling at the corners of my mind and crystallizes it into an understandable framework. I have already forwarded the piece to many, many friends.

It tells a story which is, unfortunately, all too common today. But more to the point, it asks an important question which all of us should be considering as we debate the future course of the country. To abbreviate a good bit, it tells the tale of someone of modest means who purchased a home, only to see the market value of the property plummet. They also found themselves hitting hard economic times, but made sacrifices and found a way to struggle through and hang on to their home. And now the federal government seems poised to move on a plan to bail out many other homeowners who did not exercise such prudence.

We have faced many such questions in our country which are frequently complicated by other factors such as race, gender, sexual orientation or economic status. Think of it as the “white man’s burden” quandary. Challenges have been raised regarding government programs which provide “set aside” contracts for minority owned companies, special college scholarships for women, jobs and housing programs and more. If someone – generally a white, non-disabled, heterosexual male – dares to raise a hand and say, “wait… what about me?” they are quickly shouted down. We are trained to look down on anyone who asks such a question because. no matter how hard that person may have worked or how deserving they might be on a truly even playing field, they simply “can’t understand” what it’s like to be a woman, or black, or gay, or what have you.

But what of the scenario Robin describes? Now all questions of race, gender and sexuality have been wiped from the board. The issue has special relevance for me as well, because I’ve been dealing with a very similar situation. We also purchased a home during the boom days of the 90s and have since seen its market value drop basically in half – less than what we still owe on the mortgage. I also took a major hit on the employment – income front and we’ve found it very hard to get by. A heck of a lot of belt tightening and lifestyle changes were involved. But somehow we managed to keep making our mortgage payments and are still in our home.

Unlike Robin we landed a relatively low, fixed rate mortgage, but it took some financial gymnastics to manage it. We had to save up for a while and then go into a “rent with the option to buy” arrangement with the seller. For those not familiar, this is a contract where you rent the home you wish to purchase for a few years, paying an inflated rental rate. A portion of this monthly payment goes into an escrow account which is used to add to your down payment at the time of purchase. If you fail to buy the home, the seller keeps the extra money. This arrangement allowed us to put down a larger payment up front to lower our mortgage payments and secure the low, fixed interest rate. It took time, but it was worth it, and we have remained safe from those skyrocketing, adjustable rate traps many people have fallen into with huge balloon payments coming due.

True, my house now has a much lower “market value” than it did when we bought it, but I didn’t buy this as some sort of investment opportunity with some plan to “flip it” and get rich quick. This is my home. It’s where I plan to spend my retirement years. No matter what the real estate market says it is worth, it still has the same value to me as when we purchased it. The roof still keeps the rain off my head and the walls and windows hold in the heat during the winter. It is, in short, worth what I paid for it – at least to me.

And now the government is going to take my tax dollars – and your tax dollars – and bail out the people who didn’t manage the same thing, some of whom, frankly, bought homes they really couldn’t afford and took risky mortgages with built in time bombs? Tagging on the previous column and continuing the 2010 version of the White Man’s Burden analogy, I’ll ask the question. What about me? What about Robin? What about the people who “did the right thing” and will now watch others reap the rewards? Is this the direction we need to be going?

I already see comments in Robin’s column about the one article of defense which liberals seem ready to pursue on this. “So you think we should just let the housing market continue to collapse and have people keep getting foreclosed?

No problem. I’ll field that question. The answer is yes. Like it or not, the real estate market is part of the larger free market and property only has the value people are willing to pay for it. If the prices were too high, inflated in an artificial bubble, then they need to collapse to wherever the floor is that the market can support. It’s a painful process, but it’s a needed correction. And for your information, home ownership is not a “right” in our country. It’s a desirable goal which most of us want, but it requires work, planning and quite frequently, sacrifice. And sometimes bad fortune hits people and those goals can be derailed. This is the nature of reality. We don’t live in Nirvana where everyone is assured the best of everything and there is no insurance against ugly twists of fate. And it is not within the power, ability or duty of the federal government to try to create that Nirvana.

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