THE REALAPIST IS IN: You Can’t Always Get What you Want - The Rolling Stones
1910 Police Mugshot of Charles Ponzi
2009 Mugshot of Bernard Madoff
Most of you have probably already read the recent report that Denver performed the best out of the 20 major metropolitan housing markets tracked in the S&P/Case-Shiller Home Price Indices report. When the housing market hit the fan a couple of years ago Colorado initially took the lead as the #1 city in the nation in foreclosures. From #1 in foreclosures to #1 in economic recovery is an impressive journey.
About the foreclosures: The tragedy of home loss for thousands of people was devastating, especially for those who went into their purchases with clean motives and a smart plan. Scores of people were grossly taken advantage of, lied to and many financially ruined all in the name of greed. Greed, coming from Wall Street, banks, CEO’s/CFO’s, loan officers and even real estate brokers who cared more about their own personal profit than the soundness of the real estate transaction. Rising unemployment led to even more foreclosures. Yes, there were victims.
Where does personal responsibility come in? Instant gratification is all too common in our society. We want what we want when we want it and we think about the repercussions later. Personal responsibility is one area that I always emphasized with my psychotherapy clients. I listened to many sad stories with true compassion. But, unfortunately, the world is not going to give you a hall pass because of your sad story. In the end we are responsible for the decisions we make as adults. How many people who bought homes during the days of easy and under-regulated loans thought about the future AFTER the 5 year teaser rate? How many home owners used their equity as a checking account for a new swimming pool or trip to Europe and now are under water on their home? Remember way back when we used to buy home, pay it off and in the end have a roof over your head paid free and clear as you entered the golden years of retirement?
What about the days when you had to have a savings account WITH money in it in order to get a home loan? Not to mention good credit. Until recently you could have credit worthy of a toilet bowl and the solution to obtaining a loan was a higher interest rate and more fees. Makes sense, huh…… give the most difficult loan possible to the people who are the most financially unstable. And, what about job stability? “No Doc” loans took care of that silly rule. Why ensure that the buyer has the future ability to pay the loan when you can just sidestep that issue and get to closing. 100% financing programs bypassed the need to actually save your money to qualify for a loan. Mr/Mrs. buyer, don’t you also know that a stable job is the key to paying your mortgage on time and that a savings account will help protect you in case of an unforeseen predicament? Many buyers took advantage of these “wonderful” opportunities. We cannot blame everything on everyone all of the time.
About the Recovery: Things have changed dramatically and they continue to change. Thomas Fuller said “All things are difficult before they are easy”. The old adage that people learn the hard way is all too true. Who wants to repeat the Great Recession? No one.
Some noteworthy changes: Lenders are now regulated. Currently, with the new and improved rules, you cannot have a criminal record and originate a loan. Impressive! The fees and points that lenders assess are now regulated; they cannot deviate from the numbers that they gave you in the original good faith estimate. Genius! No doc loans are gone. Wonderful! Banks and underwriters actually review the file before approving the loan. Super! And, Appraisals…… this is huge, lenders can no longer hire their appraiser buddy to appraise the loan for the contract price so that they can go out together and celebrate the closing at Mortens. Amazing advances!
Sarcasm aside, I think that the best thing that has come out of the the Great Recession is that greed and excess has been exposed in all of it ’s raw disgustingness. People are starting to behave differently and this will last, for at least a generation. They say that it takes about a generation for people to forget about their hard learned lessons and resort back to the old ways. Humans are predictable. But for now let’s be happy for some of the changes. Corporate executives have been dethroned. Ponzi schemes are exposed as moronic, evil and hopefully are now archaic. “Green” is in and McMansions are out. People have learned to be conscious of their motives; hardships often force us to look inward at what really matters in life. In these areas and many others, we are healing and growing as a society and, according to Case-Shiller, Denver is currently leading the way.
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