Who's to Blame for Increased Forclosures?

I saw an interesting article today on a forum I frequent. See the post here: http://tinyurl.com/2t3c3b It discussed the author's view about why some homeowners are drowning in their mortgages and who is really to blame.

Well, this got me thinking about the dynamics of this current trend, as it is a complex issue. Here are my thoughts on the subject:

Some of the "creative mortgages" are used improperly.

For example, I personally know someone who was laid off after being with a company for 20 years. He was out of work for 2 years & lived on severance, unemployment, savings & finally, credit cards. He opted for an interest-only mortgage before the credit card bills got out of hand. He ended up being hired for his dream job with a company that ironically he started working for after college -- back in the day (many moons ago). He makes a comfortable living now & was able to refi into a conventional loan.

For HIM, the interest-only loan was a great program. I feel that's what it was designed for -- or for those at the end of their loan, where they're not getting much of a tax break on interest anymore who are planning to sell in a few years. THEN, that type of loan makes sense.
The trouble is, just because a loan program is out there, doesn't mean it's the best fit for all situations, nor should it be used as a band-aid on a hemmorage.

I don't know that the blame lies squarely on the homeowner, because often they are being sold on an idea of "saving $XX per month" -- but, they are already (in their head) spending that savings elsewhere (i.e., vacation, new car, computer, whatever) and continuing the spending cycle that put them in the particular situation they're trying to get out of in the first place.

I believe the solution is that the programs currently available are designed for a particular purpose or circumstance and should only be used for borrowers that fit that purpose or circumstance. I also think that borrowers who have marginal credit or are over-extended should be required to attend credit councelling as part of the approval process.

Melissa S Haley, http://ctnotary.home.att.net A Connecticut Mobile Notary Public