Foreclosure mess about greed and ignorance

The latest coverage of this foreclosure mess reminds us that both Kentucky and Ohio are in the Top 10 nationally as states with the highest foreclosure rates. KY has more than 2% of loans in foreclosure, and Ohio leads the nation with nearly 4%.

I'm no expert on foreclosure, but I know about home ownership debt, having owned four homes in three different states since the inflation days of the late 1970s when bankers acted like they were doing you a favor by giving you a 15% loan with a prepayment penalty.

Most of what I read causes me to conclude that two words describe about 98% of the problem: "greed" and "ignorance."

For example, on our discussion board on the subject, meet Jane from Lincoln Heights, who offers this: "I purchased a home in Lincoln Heights three years ago and the home will be foreclosed on soon. I took out a 2nd mortgage and used the money for gambling, vacations, and the like. I can't refinance because I am upside down in my mortgages. This is my fault but I am so disgusted with myself."

Jane has learned the hard way that borrowing money to buy a home is the largest debt most of us will ever have, and that creates an obligation to ourselves and our families to ask some questions. And, really, they're not tough questions. What will my payments be? What will my payments be in the worst-case scenario under the terms of this loan? What can I really afford based on what I have and how I want to spend it?

If you don't like the answers, or if the terms seem too complicated to comprehend, get up and walk away. Or run away. At least find someone who can make sure you have clear answers.

Greed plays into the equation, too. Many mortgage sellers and borrowers thought they could play games, betting on appreciation and low interest rates -- a carnival ride that wouldn't end. Some lenders crafted products that were purposefully complex and clearly would put a lot of people in the position of losing their homes.

What I haven't seen are many stories about investigations or prosecutions against those mortgage sellers that defrauded buyers. You just know some of that was happening -- it always does when people think there's easy money to be made by preying on others. Let's go after that crowd. Sue them into oblivion, too.

But the public policy question is whether the government (as in "the taxpayers") should bail out corporate greed or consumer ignorance.

I think not. It's no different than buying a stock that loses value or investing in a business that doesn't make money. Why would I expect government help as long as I wasn't misled or defrauded? Despite her plight, Jane from Lincoln Heights seems willing to take personal responsibility for her unfortunate situation. That's an important lesson that bailouts only dilute.