Let’s not Blame the People Who Wanted to Buy Homes

If this was 24 years ago, I would have been blamed for causing the meltdown on Wall Street.

I was about to turn 29, and couldn’t walk in our tiny two-bedroom condo. Every inch was covered with stuff devoted to the care, feeding and entertaining of our hyper-active two-year-old.

My wife and I decided to go house hunting and found the perfect place: A three-bedroom, two and half bath home on a third of acre of land in a terrific school district.

That was the good news. The bad news was it cost $138,340, and I was making all of $40,000 a year (my wife didn’t work) and we didn’t qualify for the traditional $110,000 mortgage (at 13%) we needed.

I begged my boss for a $5,000 raise and that got us closer. But the only thing the bank was prepared to offer us was something called a “Growing Equity Mortgage.”

Basically it is a loan, where your monthly payment does NOT cover principal interest. After a year of writing mortgage checks our outstanding balance would actually be GREATER than it was when we started. (Somewhere around $112,500 as I recall.)

We took the loan. And I did the equivalent of taking a taking a second job. I started writing books on nights and weekends. The advance from the first book allowed us to convert to a traditional mortgage. The advance from the second finally allowed us to buy some dining room furniture. (The room was empty for nearly three years.)

Why do I tell you all this?

As the dust settles on the Wall Street bailout, revisionist historians have started to take a new tact: The financial disaster was caused by all those people who wanted to buy a home. If only those people realized they couldn’t afford a place of their own, this entire mess wouldn’t have happened.

The obvious, and correct, reaction to that line of reasoning is: “How silly can you get?”

It was up to the folks who made the loans to make sure the people they were giving it to could pay it back.

And for many, an unconventional loan was the only chance they had to live the American dream. I know that was true for me. In my case, the bank determined correctly, I was a good credit risk.

It was the lenders and not the borrowers who caused the problem. The lenders always could have said “no.”