Saturday, July 11, 2009

Did I say "structural change?"

Evidence of a "structural change" in the economy arrived at our doorstep last night.

As the readers of this page will surely know, we have been struggling right along with most of Americans to make our mortgage payment, and I have been discussing our situation routinely with the mortgage lender since February before it became delinquent. Time after time in those conversations I was told there was nothing they could do for us, and that foreclosure was imminent if we didn't make our payments timely.

As recently as two days ago I was told the same thing after repeating my story again for at least the twelfth time to various loan collectors who had called, and in response to demand letters received in the mail.

Last night I picked up a thick FedEx envelope offering a modification to our mortgage and reaffirming the bank's position that they did not intend to foreclose -- a total reversal and capitulation on their part.

There is an amended payment in the plan that cuts our current mortgage payment IN HALF subject to signing a hardship affadavit, review of last year's tax returns, and compliance with the three-month trial period's adjusted payment. The temporarily adjusted payment then becomes permanent and all late fees are waived, the interest rate is adjusted downward and the escrow for taxes and insurance is included in the revised payment amount. In essence I will be given a modified mortgage without having to refinance through traditional means. This is GREAT NEWS, right? This is a "miracle" -- right?

While grateful for the relief this program offers, it is obvious to me that the shortfall is being made up from somewhere, and that can only mean that my home mortgage is part of the massive government subsidies to the banking industry from the record-breaking deficit spending that is going on currently at the federal level. The documents indicate they originate from "The Troubled Asset Relief Program" ("TARP") under a subheading called "Making Home Affordable." My mortgage is ten years old, was originated by our son Jeff in a small shop in Sandy, sold to Countrywide, and then acquired by Bank of America. No doubt somewhere along the line it was part of a mortgage securitization package. I was violently opposed in principle to this whole TARP rescue approach a year ago.

There is a political whisper tickling my ears this morning: "We will save you from failure, and you will thereby (the thinking goes) be beholden to us forever. It's not your fault that you are in trouble. We'll save you from those wicked and greedy Wall Street bankers who got us into this mess in the first place." Subtle, but effective.

How ironic!! The systemic failure of the financial markets is certainly an unintended consequence of overaggressive lending practices originally mandated by federal mid-1990s amendments to the Community Reinvestment Act, though the debate still rages as to whether this was the only cause of the bursting financial bubble. Whatever you associate with the causes of the present crisis (well-documented in Wikipedia -- search "subprime mortgage crisis"), the simple fact remains that the federal government has stepped into my life in a massive way to help relieve my financial suffering rather than letting me fail. The message is clear to me -- "Others caused this mess (admitting no responsibility ourselves as the government), and we're taking steps to rescue the innocent victims from the rising flood waters of disaster." Good politics.

Is it a tacit admission that the government is actually taking responsibility for the crisis, though admitting nothing? Would the Bush administration have taken such bold steps to save me? Is this prima facie evidence of the "structural change" in the economy I predicted in my post only yesterday? Whatever it is, it is certainly unprecedented in my lifetime, and I fear signals the government's ongoing intrusion into every aspect of our existence.

If this is my story, think how many times it can be replicated across America in every hamlet and town. Only you can decide if this represents progress out of the crisis, or it is a headlong plunge into unparalleled socialism. Whatever your conclusion, it is unsustainable.

So what will I do? I'll accept the offer. I'm dumb, but I'm not stupid.

1 comment:

  1. How crazy is that? A blessing, yes, but how crazy?! It's like how I think the government should be involved in our lives as little as possible, I'm all for minimizing government programs, and yet I'm more than willing to let our dysfunctional and sinking state pay Phil paternity leave so he can be home with us for a month after our children are born. Hypocritical? Maybe a little...but like you, I'm not stupid. What an interesting and wild time we live in.