It’s Not Up to The Feds to Bail Us Out.

It was Chicken Little who cried, “the sky is falling in”, but now it is the media. Day in and day out we are peppered with stories – in print and on air – about how the real estate market is bad, how people are losing their homes, and how things are going to get worse with our economy.

It seems to be an epidemic, this spreading of fear to the populace. Read about it and hear about it twenty-four-seven and you get a tick in your right eye and a pain in your belly.

But there is another way of looking at the situation, one which isn’t getting much coverage but is true nonetheless.

But, before we go there, let’s look at the current situation.

One part of the problem is people who are losing their homes are people who overreached what they could afford to buy. Others looked at the low interest rates, or interest-only rates, and decided they could go for a more expensive home. Still others used the low rates to take out a second mortgage and a home equity loan. The people who are being squeezed currently are people who overreached what they could afford. They either thought they could sell their home before the balloon hit and their interest rates went up, or they never considered that the interest rates would go up; although that’s a bit like turning a blind eye to reality when they signed on for a mortgage with “arms” or a “balloon mortgage” that didn’t establish a firm interest rate.

Now those people who are defaulting on their mortgages are pushing for the lending institutions to bail them out by freezing their adjustable rate mortgages – resetting them – to rates they can afford.

While I feel sorry for the people in danger of losing their homes, those people signed on for the adjustable mortgages. They were able to buy homes at low rates, knowing those rates could rise, and now they want to continue to own the homes and have the lenders and perhaps taxpayers foot the bill. This not only prolongs the agony, and could have a disastrous effect on the nation’s economy, it amounts to a Marxist theory of spreading the wealth, taking from those who have and giving it to those who don’t; and, in the case of today’s foreclosures, it includes people who cashed out with home equity loans, spent the money, now owe more than the home is worth, and want a bailout from their errant ways.

It is up to individual home borrowers to go to their lending institutions, and negotiate a way to save their homes; it is not up to the treasury department to bail them out. One possibility is for the lender to own the home and the resident to pay rent and have a portion of the rent go into escrow to eventually buy the home. But there are other possible solutions as well. The bottom line is that it is up to the defaulter to find a solution, not the government and certainly not the taxpayers.

As for the other way of looking at the situation – one which isn’t being covered in the headlines – here it is. Instead of seeing the real estate market as being in crisis, look at it as the real estate market being on sale. If you are someone who wants to buy a home, now is the time to start looking to buy. Many people are trying to sell their homes before their higher interest rates kick in. Those people are willing to negotiate on price. It’s best to buy when prices are low and now is the time to do it.

Real estate is on sale.

_______________________

Mary Laney is a former TV anchor, award-winning journalist, regular columnist for, and member of the editorial board of, The Chicago Daily Observer.