Who can forget football legend Dan Marino pitching an “easy” home equity loan on television? Remember DiTech Funding, a General Motors subsidiary? Everyone thought that company was solid, due to its all-American automaker backing.
Unfortunately, we were wrong and we are now paying the price for believing Dan and others who convinced us to take these loans.
CoreLogic Inc., a real estate data organization, issued a report recently regarding individuals who took home equity loans. It revealed that homeowners who took this cash ten years ago are underwater in the mortgages at two times the rate of homeowners who did not.
This pertains to both home equity loans and second mortgages, which were scooped up like candy during the period of loose lending.
Walking away from a mortgage is never a good idea. Some homeowners are bitter because they feel that banks walked away from mortgage loan packages that they guaranteed, with no repercussions. Taxpayers ended up rescuing the banks by bailing out Fannie Mae and Freddie Mac.
Why then, can an individual homeowner not be helped?
The two quasi-government entities guaranteeing the mortgages were reinforced by voters. They elected national representatives who used low interest rates to subsidize housing, keeping voters happy. Representative Barney Frank, Senator Chris Dodd, and even former Fed Chairman Alan Greenspan encouraged homeowners to take out adjustable, low-rate loans.
Though it may be easy to forgive these folks, the debt remains. It is not something that can be repaid through payday loans over the short-term. The funny part is, the government does not keep this debt on its books.
Taxpayers are responsible for this debt, which TruthinAccounting estimates to be a total of $77 trillion.
The government hides its debt and calls it Treasury refinancing. If consumers did the same, it would be considered bank fraud.
