What I am about to say may strike you as puffery, drumbeating, or dogma.
I will take the criticism and disdain that may follow because, like it or not, we’re all in this together.
If you are paying your mortgage on time but your neighbor throws in the towel, you know what happens to values in your neighborhood.
The Center for Responsible Lending would have us believe the total loss of equity in California will be $627 billion in the next three years. I challenge that estimate — but it’s not beyond the realm of possibility.
Granted, some folks are in situations not of their making. Loan terms were not accurately disclosed and their house payment has spiked upward.
There may have been a job loss or significant reduction of income. Job relocation may have forced a sale of the current residence. Whatever the case, they are in a bind through no fault of their own.
Still, others are suffering from actions precipitated by excessive optimism. And there are some who acted out of fraud or naked greed. It is a fact — you know it, and lenders know it.
Should the latter group be entitled to mortgage relief? Are mortgage companies able to tell who is really a victim and who is looking to get a leg up at the expense of the bank?
Perhaps you can understand the resistance, even cynicism, of some lenders.
When home values were rising, nobody offered their lender a share of the gain. But when values go the other direction, who gets handed the loss?
As a consumer, one can justify this conflicting relationship as follows — the bank has accepted a level of risk in exchange for the reward of charging interest on the money. That is a valid premise, except when reward is far below true risk.
The amount of risk on some mortgages was not accurately portrayed, then the investment-house artists compounded the problem with derivatives. And in the wake of it, the credibility of our national economy is on trial.
There is not a continent, or a major economic engine that has not felt the damage from these circumstances.
Alan Greenspan chose a prophetic title for his book, “The Age of Turbulence”, and he wrote that commerce cannot take place without trust between the parties. Without trust, there can be no exchange of goods, services and capital.
In this season our trustworthiness is in question, but I am not discouraged.
When the United States finally entered the European conflict in World War II, Winston Churchill remarked, “You can count on the Americans to do the right thing . . . after they have tried everything else.”
We are pretty short on “everything else” and bearing down fast on “the right thing.” Another quote — “The full faith and credit of the United States” — is often used when America has appeared at the money windows of the world.
John Adams used it when asking the Dutch to lend millions for George Washington’s army and we have leaned upon it in every succeeding national crisis.
That credit is in question today and it must be restored. We have the capacity to repay and recover. It will take time and it will take sacrifice.
For those of us who have the capacity to meet our obligations, there is no justification for behaving otherwise.
I won’t polish over one glaring fact. There have been some very unscrupulous dealing by people in high places. They may or may not live to endure the consequences of a broken moral compass — though the CEO of Lehman Brothers got his lights punched out at the gym.
So today, we lowly taxpayers are carrying on our shoulders the burden of their immorality.
If we drop the load, it will be you and I that have to clean up the mess. By meeting our personal financial obligations to the best of our ability, we reduce overall losses on the macro-scale.
Our personal debts figure into the potential losses seeking rescue from our tax dollars. So, in the end, our individual behavior will increase or decrease the price of righting our economic ship.
During the last presidential race I was fond of saying “yes we can, but will we?” It is time we found out. Let’s look in the mirror because, as another adage goes “the world is watching.”
We are being called to account as a partner in commerce, as a political system and as a people.
David Ryland is the acknowledged dean of loan originators at Big Valley Mortgage in Roseville. He has 30 years of experience as a loan officer, manager, trainer and mentor. He can be reached at dryland@apmortgage.com.
