Calls for Accountability Lost in Emotion
Editor’s Note: The email alert for the story I cite from Huffington Post carried the headline “Terrified Homeowner Faces $200,000 Bill At Age 100.” The story itself, however, now carries a very different headline: “Few Homeowners See Benefit From National Mortgage Settlement, Three Months Later.” A headline should get you into a story, but the facts presented within the story shouldn’t be ignored in a cloud of melodrama.
The scenario is enough to make anyone upset and ready to take action: a poor, 100-year-old woman facing a bill for nearly $200,000 to stay in her home. Until you know a few more details.
The woman isn’t 100. At the moment, she’s nowhere near 100. She’s almost a quarter-century away from centenarian status. But as Huffington Post reports, if she lives to celebrate that magical birthday, she can count on a bill for $199,052 from JPMorgan Chase.
Ah, yes. Another critical ingredient: a big bank to cast as the villain. Now we’re set for a perfect conspiracy theory.
The victim, a 76-year-old Florida woman, was behind on her mortgage payments, as the story goes, and accepted a “modification plan” that allowed her to stay put with more affordable payments. Of course, when a creditor agrees to accept less for a longer term, the difference is going to have to be made up somewhere and at some time.
That, friends, is common sense.
In her case, the difference will be alleviated by a balloon payment of nearly $200,000 due in 24 years. And if she can’t stay current on a mortgage at 76, there’s likely no chance at all that she’ll be able to handle a balloon payment at 100.
While many homeowners are waiting for their chance at loan forgiveness, a provision of the national mortgage settlement that required that five major banks — Chase is one of them — to shell out at least $10 billion in relief, few have actually received it, yet.
The other option, reports Huffington is the principal forbearance plan, which moves the payment of the majority of the debt to the end of the loan. In the form of a balloon payment that in some cases would be virtually insurmountable.
Two Key Questions
But before you get too deep into a sea of predictable outrage, let’s consider one important point: did she read what she signed, and did what she signed spell out this balloon payment?
Those are two critical questions that should determine how outraged you get. Indeed, the answers should determine whether you get outraged at all, or at whom.
If the bank pulled something shady, changing the terms after her signature was committed to paper, which is unlikely, then the bank is at fault and doesn’t deserve another red cent from her because of the stress they’re causing her about her future. If the bank never disclosed, anywhere along the way, how much of a payment would be due, which also seems unlikely, they likewise ought to do the honorable thing and make the loan more workable.
But then there’s the other side: if she knew the terms and still signed, then there’s something very different that’s wrong with this picture.
Don’t get me wrong: I feel sorry for this lady and think it’s a horrendous predicament for anyone to be in at a time when they should be enjoying a carefree life of golden years. But if she knew what she was in for and signed, anyway, you have to wonder if foreclosure might not have been better. Or, whether she might have done better holding out for a different plan.
But if she agreed to this arrangement, as the old saying goes, she made her bed…and we all know what comes next.
The article at Huffington Post goes into more detail about the agreement those five banks made to forgive all those billions and seeks to begin holding them accountable to living up to that agreement. Why does that accountability seem to only loom on one side of the equation? Why are the “evil” banks supposed to be sure to stick to what they agreed to do while the “good” citizen shouldn’t have to?
Student Loan “Victims” Complain, Too
I see the same kind of “good vs. evil” scenario played out among college graduates who complain about student loans. But they accepted them. It’s not the financial institution’s fault that they now don’t want to pay the debt they agreed to pay.
In the interest of full disclosure, I was very fortunate: I had no student loans. My parents were smart enough to start buying savings bonds on a monthly basis from the time I was about six months old. (Granted, I didn’t select a major that kept me in college for a longer time nor did I have any interest in going to a college so expensive that it would have required student loans.)
But I look at my friends who were stuck with them. And they’ve busted their butts in getting them paid off, even when they couldn’t afford it, even when they had struggles finding the “perfect” job they hoped their college investment would land them.
The point is, they paid off their loans. They did what they said they’d do, what they committed themselves to doing, when they signed on the dotted line.
At some point, we have to hold ourselves accountable before we start pointing the finger at corporations who are only trying to do the same thing.