Responsibility

Here's a hypothetical situation for you:

Fred is renting a house. Over the last few years, a couple of landlords have bought and sold the place. The property has been neglected. Fred finds out that the house is for sale, again, so he decides to try to buy it. He goes to a mortgage broker to find out if he's able to purchase the property. He's never done this before, so he asks the broker for advice. No one in Fred's family has ever owned a house before, either, so he's not very familiar with the process of purchasing a home.

The mortgage broker tells Fred that he can buy the house without any trouble! At this point, Fred is excited... his mind starts to wander a bit. He is dreaming of being free from the chains of the slumlord. In the background of his daydream on cloud nine, the mortgage broker talks about the low introductory rate on the adjustible rate mortgage and the no money down option and the interest-only loan that is best for Fred's current financial state of well-being. Fred isn't sure what those things are, but the mortgage broker is assuring him that everything is going to be fine and congratulating him on his decision to buy a home.

Year 3 of homeownership arrives, and the lender notifies Fred that his $500 introductory monthly payment has increased to $850. Fred is confused, as he doesn't have a $350 cushion in his monthly budget. He tries to scrape the cash together, but he just can't keep up.

6 months later, he gets a letter in the mail informing him of the fees he has incurred due to not paying the bills in full. Plus, the interest rate went up again, so his monthly payment is now $1000. Fred's hypothetical ship is sinking fast, and still taking on water. Fred can no longer pay the bills.

The letters keep coming, informing Fred of his new monthly payment and, ultimately, his pending foreclosure. Fred has been blindsided with the reality of his mortgage payment increasing from $500 to $1400 in just a few years. Fred never meant to get into such a mess... he just didn't realize he signed his name onto a bad deal.

Who is to blame for Fred's predicament? The easy answer is "it's Fred's fault", and that would be a correct answer. Claiming ignorance is never a great defense, and poor decision making is not an argument that will get anyone off the hook.

But picture yourself in Fred's shoes. Wasn't Fred mislead by a mortgage broker who wasn't concerned with Fred's best interest? Didn't that broker conveniently not divulge the entire reality of what Fred was sold?

I feel bad for the person who currently owns the EPH house my wife and I are considering the purchase of.

There are "loan sharks" out there. They are concerned only with their own commission from the potential sale of the loan. They don't care whether the buyer will be able to pay the tab. They want to get the buyer's signature on that form so that they get paid.

Especially over the last couple weeks, I feel like I'm seeing an even dirtier side of real estate that what I already knew existed. And I don't like what I see.

Nobody put a gun to Fred's hypothetical head and forced him to sign the loan documents. But that doesn't completely exonerate the person who "tricked" or "mislead" the uneducated buyer into a loan that was never a good idea to begin with.

(Sorry, Dad, if I sound too much like a Democrat in this post.)