Thursday, June 02, 2011

Your home loan is under water - so why do we have to pay?

Nearly every time I’ve driven a car off the dealer’s lot, the market value of the car instantly dropped to the point where it was worth less than the amount of my loan balance. When the collateral underlying a loan becomes worth less than the loan balance, it’s called being under water. So, I guess my car loans have been under water four or five times. I once had a home equity loan where the interest rate was higher than the market interest rate, after rates had fallen considerably. This loan also would be termed under water. Yet it never occurred to me to cry foul and demand that someone else either pay my loan for me or give me money as compensation for my situation or for the questionable deal to which I’d agreed and contracted. But for some reason, people think a home loan is extra special and if it’s under water then the borrower needs to be legally entitled to take your money and mine.
Is something so different about a home loan? Please someone explain what is so different about a home mortgage loan that stealing from others needs to be made legal and acceptable. People demand payments if their home values decline yet I haven’t heard of anyone lining up to pay more in property taxes when their home values increase.
Once we accept and allow this type of stealing via taxation to compensate “victims” of under water home loans, we’ll soon be paying “victims” of under water car loans, home equity loans and student loans – yes!... “because the job I was promised doesn’t pay what I thought it would pay - my anticipated earnings are less than my student loan balance and I demand compensation.”
Silly? Just wait. It doesn’t end there. Once we’ve legalized and accepted this kind of theft, then nearly any kind of theft becomes acceptable, subject to the whims of the people who hold political office. And that’s not a very trustworthy lot to depend on, is it?

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