Thursday, March 15, 2007

Stupidity gone hog wild

I have been skeptical of the housing market for some time now, particularly in the United States where I read of people getting mortgages that are worth more than the value of their home. Something in the business and economic model just didn’t make sense to me. I am told again and again that Canada is immune to a housing collapse, but I also find that hard to believe. The recent headlines about the sub-prime lenders starting to foreclose homes just reinforce my gloomy outlook on the economy and markets at large.

An article on CNN Money has me thinking about the housing market and the “victims” of sub-prime loan sharks. The article featured a nice young couple with a $5,000 down payment on a $300,000 home facing the possibility of foreclosure. The company that lent the money was made out to be evil snakes from hell and the young couple an unsuspecting victim of money hungry people out to get them. My question is, what are they doing taking out a mortgage they can’t afford in the first place? Why am I supposed to feel sympathetic for a couple stupid enough to pay 10.7% on one loan and a variable interest rate on a second loan which has a fluctuating interest rate that they are worried about?

Don’t make the lenders out to be evil people. They were just out to make some money. Most of the people working are also at the mercy of commissions and high sales targets. If you know you can’t afford the interest payments going up, don’t enter into the agreement in the first place. Why do we vilify people for making a few bucks? Sure, they did it irresponsibly and I am against big business at large, but this time the customers are just as much to blame. If you know you are going to get screwed, don’t sign on the dotted line!

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