Posted by
Andrews on Saturday, July 12, 2008 2:59:20 AM
I was talking to my father today about the people now crying that they got adjustable rate mortgages and now are stuck with payments they can't make. The one thing we both agreed upon was this, that they gambled and lost.
Now many will think this is unfair and talk about the hardship and the human cost and unscrupulous lenders and falling prices, but the truth is, anyone who takes an ARM is gambling, just like going to Vegas. There was no unfairness. They bet that rates would keep falling, or, if they didn't, that rising prices would allow them to refinance into a fixed rate loan before prices rose much. They got unlucky, and prices fell when rates rose, so now they are stuck in a loan more costly than they wanted.
It's sad for them, but it is sad for anyone who gambles and loses. It doesn't mean we have to bail out everyone who comes up snake eyes in Vegas.
Allow me to make my point another way.
They think, now that rates are rising, and they can't get out of their ARM, that someone should come in and bail them out. Why? When rates fell, did they write to the lender and say "don't bother lowering my rate, I know it would be a hardship for you"? No. So long as the lender was losing, it was completely fair. But as soon as rates favor the lender, it is a rip-off and unfair.
That is not how the system works. If you gamble, you assume risk, and when you lose, you pay the price. All those smart people who stayed in fixed rate loans lost out on the savings when rates dropped, but they also don't have to suffer the rising rates hitting ARM borrowers now. That is the upside and downside of playing it safe.
But the people in ARMs want the upside of ARMs without the downside. They want to gamble, but never pay off a loss.That is not how the system works.
But oddly enough, thanks to media whining and the pandering inevitable in an election year, they are now getting sympathy. I know it is popular to hate lenders today, especially if they lend to people with bad credit. But before you shed too many tears for these people, ask yourself, would you cry for a guy who staked his life savings at roulette and lost?
If not, then how are these people any different?