Bank Foreclosures

There has been a lot of discussion of Government interfering with the foreclosure process. As always, in any developed country when government tries to help one group, it necessitates hurting another group. Government interference is a zero sum gain almost all the time. It is my opinion that since government will do harm to some party regardless of what action it takes or does not take… government should interfere as little as possible. At least in that case people can blame each other or themselves. When government interferes, it is entirely governments fault. In the case of government interference, the harm that government will inevitably do to one group or another is funded by taxpayer money which adds to the damage.

I see little benefit coming out of government interference with a private loan contracts between willing parties. There are two major problems politicians face if they interfere with the foreclosure process of banks.

-First, if lenders don’t believe they can collect their collateral on default, they won’t lend any more in the future… That is obvious, no one would.

-Second, if borrowers believe that they don’t risk foreclosure… they will stop making any effort to pay back loans. Families are always forced to prioritize their budget. If they don’t risk foreclosure… paying the bank back goes down on the priority list.

It has long been my opinion that individuals should never, ever borrow from banks for personal items like houses or cars. They would do better to discipline themselves for a period of five to ten years and buy a house they can afford… not a mansion they can not afford. I have witnessed too many people fall into the trap of buying a house far more expensive then they should, just because they were able to secure a loan for such a house. This does nothing but enslave them to a life time of labor. Over a period of 30 years they pay back three times the value of the house… and at the end of that 30 year period the house will be in ruins.

The easily credit has also pushed real estate far beyond its natural value over the last 30 years. A house should not be worth more then the value of the land, material and labor less erosion. The value of a house should go down with its age, not up. The only thing that should appreciate is the land that it sits on. This natural process of house devaluation has been reversed due to easy credit, which allows people to bid up the price of real estate with money they DO NOT HAVE. However, this is a private matter that is being corrected by the recession. The recession is not the the problem, it is the fix.