Wave Chasing

Today the President and Treasury Secretary held press conferences talking about what steps are going to be taken to keep people in their homes. Rate freezes, refinancing, etc. As someone who has always paid her bills on time and never had a mortgage that was bigger than she could afford, this annoys me.

Don’t misunderstand me – the last thing I want is for a family to end up out on the street. I am not that much of a heartless bitch. And having recently gone through the fun and games of selling a home in a crap market, I do understand that there are problems out there. But this whole mess does leave me with a lot of questions.

Whatever happened to the 28/36% rule? The last time I refinanced (2003), that seemed to have gone out the window. The guideline was that your prinicpal and interest payments should be no more than 28% of your gross income, and principal, interest, taxes and insurance should be no more than 36% of your gross income. If you were looking at ARM’s, you should be basing the calculations on the max/capped rate you might encounter over the course of the loan. The only time you should only consider the teaser rate was if you were CERTAIN you would be selling the home before the rates reset. And that was how I evaluated my options with ARM’s and fixed rate loans when I refinanced. (FTR, went with a 30 year fixed.)

When did that all change? They were good rules and reasonable rules, and I know I never felt stifled by them. (And I was hardly making a ton of money when I bought my townhouse or when I refinanced it.)

If I still had a mortgage, I would be in no way, shape or form eligible for any type of relief. If I had an ARM, I would have only gotten a mortgage of a size that I could still afford when it reset.

The time has come to get those rules back as the norm. Homeownership CAN be something that everyone can strive for. But maybe we need to dump this idea that everyone is entitled to a $500K starter home. Start freaking small like your parents did. There is no reason that you NEED to be in a gated community for your first house. Tough it out in an apartment for a while and save up a downpayment. Pay your bills on time. Don’t get in over your head with the credit cards. Don’t buy more of a house than you can afford.

Simple stuff, really. Why do we always seem to abandon the simple stuff?

I hear people complaining that the help being offered to homeowners is just a bailout for the rich who are in the stock market. (Yes, I have actually heard that.) Personally, I am taking the positive pin action as my reward for not getting myself in over my head in the first place.