Teen columnist: For adults, foreclosure is payback time
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Spend your money wisely. That's the important lesson people have been pounding into their kids for years.
But maybe it's time for adults to rethink wise spending as well.
With foreclosure becoming such a big issue, you would think people would do a reality check before buying houses.
In early 2007, one in every 172 homes bought ended up in foreclosure. Most were bought with subprime mortgages.
These mortgages are for people who already have low credit ratings. The loans have much higher interest rates and usually a sudden increase in interest after a few years.
Subprime mortgages usually set people up for disaster.
But unexpected circumstances, such as divorce, death or job loss, also may result in foreclosure for a person who used to be financially stable.
But such circumstances are not aberrations; they always have been occurring.
They certainly are not the reason foreclosure rates have gone up so quickly in the past couple of years.
From 2006 to 2007, the number of foreclosed homes shot up 51 percent.
But between December 2006 and a few months ago, in December 2007, they have grown an alarming 97 percent and still are climbing.
Foreclosure rates have risen because people aren't checking their pockets for money, and lenders are rashly doling out loans with no down payments, not bothering to confirm that the consumer can actually pay back the loan based on their income, and all but ignoring credit history.
Organizations such as the Center for Responsible Lending are hoping that the Foreclosure Prevention Act will help up to 600,000 families facing foreclosure.
But will reducing mortgage debt actually create more responsible lending? Is it really responsible when lenders do not bother to check potential borrowers' income so that some end up using half of their income to pay their mortgage?
Is it really responsible for people to take out a loan, saying now is now and later is later?
People may blame the slow housing market as the reason many people cannot just sell their homes to pay the debt.
But when you buy a house, selling it is probably not on your top 10 list of things to do.
It comes down to this: Once upon a time, when people were forced to really consider what they could afford and credit actually counted for something, people bought houses they could live in for a few years.
So maybe this foreclosure crisis is for the better, forcing a readjustment, and people can take it as an opportunity to learn from other's mistakes.
"It just shows we need a comprehensive approach to solve the problem," said John Taylor, CEO of the National Community Reinvestment Coalition.
But in this case, preventing the problem will be a whole lot easier, and more effective, than trying to alleviate it. Because in the end, it's not going to be new laws promising government aid or judicial intervention in businesses or lower interest rates that slows down foreclosure; it will be the action of the people.
So instead of having the government run around playing superhero, trying to bail out people before they become foreclosure victims, let's try reteaching our adults about taking responsibility for their own actions. Namely, taking out loans they can actually pay back. Which, incidentally, was the original purpose of loans.
Teen columnist Emily Hu is a freshman at Catalina Foothills High School. E-mail: emily2_468@hotmail.com
You will go far in this world if you can remain as responsible and intelligent as this article shows.