I’m not a hardhearted person, and I hate to think of anyone losing their home to a cruel twist of fate. Unfortunately, however, it seems that most of the people caught in the subprime morgate mess either aren’t very good at handling money or think they can borrow their way through life without ever having to pay up on their debts. For example, the woman discussed in this post at AdviceGoddess.
Over the past five years, she has refinanced her home five times, each time taking out cash and paying prepayment penalties. Last year, all she had to do to refinance was state that she and her husband earned a combined $100,000. She says she used the proceeds to pay off $30,000 owed on her white Lexus.
You don’t have to be a financial genius to see the subtle flaws in that financial plan.
What is she thinking? I suspect she’s thinking that she can run a perpetual bar tab and then lobby for legislation to force her lenders to change the agreement after the fact. Not surprisingly that’s exactly what she, and many other people, are trying to do right now. Keep it up long enough and they’ll never have to pay! Yay!
Unfortunately, more responsible people who do pay their bills and don’t refinance five times don’t get in on the deal. We’ll just get higher taxes or fees, depressed stocks, and twice-shy mortgage companies with less favorable loan arrangements. Boo!
Lots of discussion in the comments over there too.