Home Foreclosures and Social Justice

The story of Hannah Swearengin and her mortgage woes tugs at the heartstrings.  Poor health, no job, unable to pay the mortgage ($1,700 per month).  According to Laurie Roberts, Hannah's advocate at the Arizona Republic, "Swearengin isn't even looking for a reduction of her principal -- just an extension of her loan and perhaps a lower interest rate to bring her payments to a level she can afford."  Where is the evidence of that?  Apparently, Hannah's New Year's resolution was to pay exactly nothing for her housing: she has missed eleven payments since January.  Every one.  No partial payments, no payment every other month.  Just went cold turkey on writing checks for her residence.  And now the bank wants its house back.  The nerve.

I could have been in Hannah's shoes.  With the bursting of the dot-com bubble, I lost my job and made do with a variety of positions that paid half of what I was accustomed to.  It took nearly six years before I was earning what I had been, minus the yearly increases I would have had.

However, we never missed a mortgage payment.  How so?  My wife and I are still living in our first house.  Our only house.  Our payment is $500 per month, a sum we could meet in bad times.  Yes, we were the chumps in the good times, the stodgy ones who were not slurping up delicious gains during the housing bubbles (Arizona has seen two in those 24 years).  And now we're the chumps again, being asked to bail out the Hannahs of the world.  Oh, the request is never put so starkly.  What we hear is demands that the bank cut her payments in half, that they write down the value of her house, that they show compassion...  And when the banks get in trouble again, Uncle Sam can come forward with more money -- our money -- to bail them out.  Again.  And so the round merrily continues.

In the 24 years we have been in our residence, we have watched most people in our situation buy two or three houses, always moving up, leveraging their payments, living the American dream.  After all, that's what the smart money said to do.  Remember the wealth-building seminars of the 1970s?  "Become financially independent using other people's money!  Your house is your greatest asset!  It will always be worth more tomorrow than it is today!"  Never a cloud on the horizon.

Those voices fell silent in the real estate crash of the early '90s, grew to fever pitch in the dot-com bubble of the late '90s, fell silent again in the ensuing collapse, and came back with the bubble of '05-'07, only to go to ground once more with the collapse of '08.  How long 'til they begin baying yet again?  Up until recently, bubbles came about once a generation; now we're seeing them every seven or eight years.  Our collective memory seems to be growing shorter and shorter, but there is one constant: during a bubble, the bulls never tire of bellowing, "The good times are here to staaaay!"  Remember the hyperventilating articles in Time and Newsweek in the late '90s declaring that the new e-economy, the virtual economy, had repealed the law of business cycles?  The only question left for economists was whether stock prices on the morrow would be higher or a lot higher.

I say all this not to gloat over Hannah's predicament, but the cause of her financial woes is simple: she bought more house than she could afford.  She is 68 years old and has a mortgage of $1,700 per month.  Oh, and she was a real estate agent.  What on earth was she thinking?  Your house will always be worth more tomorrow than it is today, right, Hannah?  "What goes up must come down" is just for squares, for the stodgy folk, right, Hannah?  So now it's the bank's fault.  Earlier generations knew that health is fragile, that jobs do not last forever, that leveraging your assets to buy something you cannot afford is imprudent.  And now?  Now it's someone else's fault.  Always somebody else.  Hannah's troubles come from the bankers, the insurance men, and all the other bogeymen of a capitalist society.

When our oh-so-wise professors wax philosophical about the reasons for the economic rise of the West (see Niall Ferguson, professor at Harvard, in the Wall Street Journal here), their list usually includes respect for the rule of law (respect for property rights is so, like, I mean, totally yesterday).  Well, respect for the rule of law would require that we refer to Hannah's house not as her house, but as "her" house.  Until she makes the last payment, it's the bank's house.  Sure, she may have celebrated birthdays there, held parties by the pool, even buried the family cat in the backyard.  But it's not her house any more than an apartment would be hers.  If she sold me a boat on time, I would not own it until I finished making payments.  And if I stopped paying, she could take it back.  Or what was left of it.  As for me telling her, the owner, that she could not repossess her property after I had defaulted, that would be wrong.  Or it would be if we respected the rule of law.  But now -- no, it's somebody else's fault.  The one person who cannot be at fault is Hannah.

Henry Percy is the nom de guerre for a technical writer living in Arizona.  He may be reached at saler.50d[at]gmail.com.
The story of Hannah Swearengin and her mortgage woes tugs at the heartstrings.  Poor health, no job, unable to pay the mortgage ($1,700 per month).  According to Laurie Roberts, Hannah's advocate at the Arizona Republic, "Swearengin isn't even looking for a reduction of her principal -- just an extension of her loan and perhaps a lower interest rate to bring her payments to a level she can afford."  Where is the evidence of that?  Apparently, Hannah's New Year's resolution was to pay exactly nothing for her housing: she has missed eleven payments since January.  Every one.  No partial payments, no payment every other month.  Just went cold turkey on writing checks for her residence.  And now the bank wants its house back.  The nerve.

I could have been in Hannah's shoes.  With the bursting of the dot-com bubble, I lost my job and made do with a variety of positions that paid half of what I was accustomed to.  It took nearly six years before I was earning what I had been, minus the yearly increases I would have had.

However, we never missed a mortgage payment.  How so?  My wife and I are still living in our first house.  Our only house.  Our payment is $500 per month, a sum we could meet in bad times.  Yes, we were the chumps in the good times, the stodgy ones who were not slurping up delicious gains during the housing bubbles (Arizona has seen two in those 24 years).  And now we're the chumps again, being asked to bail out the Hannahs of the world.  Oh, the request is never put so starkly.  What we hear is demands that the bank cut her payments in half, that they write down the value of her house, that they show compassion...  And when the banks get in trouble again, Uncle Sam can come forward with more money -- our money -- to bail them out.  Again.  And so the round merrily continues.

In the 24 years we have been in our residence, we have watched most people in our situation buy two or three houses, always moving up, leveraging their payments, living the American dream.  After all, that's what the smart money said to do.  Remember the wealth-building seminars of the 1970s?  "Become financially independent using other people's money!  Your house is your greatest asset!  It will always be worth more tomorrow than it is today!"  Never a cloud on the horizon.

Those voices fell silent in the real estate crash of the early '90s, grew to fever pitch in the dot-com bubble of the late '90s, fell silent again in the ensuing collapse, and came back with the bubble of '05-'07, only to go to ground once more with the collapse of '08.  How long 'til they begin baying yet again?  Up until recently, bubbles came about once a generation; now we're seeing them every seven or eight years.  Our collective memory seems to be growing shorter and shorter, but there is one constant: during a bubble, the bulls never tire of bellowing, "The good times are here to staaaay!"  Remember the hyperventilating articles in Time and Newsweek in the late '90s declaring that the new e-economy, the virtual economy, had repealed the law of business cycles?  The only question left for economists was whether stock prices on the morrow would be higher or a lot higher.

I say all this not to gloat over Hannah's predicament, but the cause of her financial woes is simple: she bought more house than she could afford.  She is 68 years old and has a mortgage of $1,700 per month.  Oh, and she was a real estate agent.  What on earth was she thinking?  Your house will always be worth more tomorrow than it is today, right, Hannah?  "What goes up must come down" is just for squares, for the stodgy folk, right, Hannah?  So now it's the bank's fault.  Earlier generations knew that health is fragile, that jobs do not last forever, that leveraging your assets to buy something you cannot afford is imprudent.  And now?  Now it's someone else's fault.  Always somebody else.  Hannah's troubles come from the bankers, the insurance men, and all the other bogeymen of a capitalist society.

When our oh-so-wise professors wax philosophical about the reasons for the economic rise of the West (see Niall Ferguson, professor at Harvard, in the Wall Street Journal here), their list usually includes respect for the rule of law (respect for property rights is so, like, I mean, totally yesterday).  Well, respect for the rule of law would require that we refer to Hannah's house not as her house, but as "her" house.  Until she makes the last payment, it's the bank's house.  Sure, she may have celebrated birthdays there, held parties by the pool, even buried the family cat in the backyard.  But it's not her house any more than an apartment would be hers.  If she sold me a boat on time, I would not own it until I finished making payments.  And if I stopped paying, she could take it back.  Or what was left of it.  As for me telling her, the owner, that she could not repossess her property after I had defaulted, that would be wrong.  Or it would be if we respected the rule of law.  But now -- no, it's somebody else's fault.  The one person who cannot be at fault is Hannah.

Henry Percy is the nom de guerre for a technical writer living in Arizona.  He may be reached at saler.50d[at]gmail.com.

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