The much-discussed housing plan from the Obama Administration seems to be leaning heavily on this “responsibility” rhetoric, the idea that it won’t reward “bad” homeowners. I’ve heard this used in multiple speeches from the President, and in an assortment of articles which outline the specifics of the plan and how it should theoretically work.
But what I’m wondering is: how do we decide who is “responsible” and who is not? Is there some kind of magic formula I don’t know about, into which the specifics of someone’s situation can be plugged in to determine how responsible he or she is?
In my opinion, a lot of Americans have been extremely irresponsible. Speculators and flippers, for example, are both irresponsible and irritating, because they helped contribute to the housing bubble. People who repeatedly refinanced, using their homes like credit cards, are also irresponsible, in my opinion.
But beyond that point, things get a little bit more tricky. What about someone with cancer and no health insurance who had to refinance a home twice to pay for medical treatments? One could look at the loan history and think that this person had made bad choices, but in fact the truth of the matter was much more complex. And how do you tell the difference between someone who didn’t fully realize the ramifications of buying a $500,000 house, and someone who knew that he or she could only afford $300,000, but took the $500,000 anyway? When do you decide that people are being reckless and stupid, and when do you think that their situations were caused by factors outside their control?
If someone owes more on a home than the home is worth, but he or she is able to make payments, should the loan be renegotiated? When my car depreciates in a year, I don’t go to the credit union and say “gee, I think that the terms of my loan should be changed, because my car is worth less.”
I think that the “responsible” vs “irresponsible” language is going to wind us in a whole heap of trouble. I don’t even know what we should do with mortgages. On the one hand, I think that aid props up the housing bubble, which is bad, but on the other, I don’t like the thought of millions of vacant homes across America. And I really hate the thought that keeping people in their primary residences will probably help out people who maybe don’t entirely deserve it, in addition to pouring more profits into the coffers of the financial industry.
It’s a tough bind, but I can’t help but see parallels between this and other social issues, like legislation which forces women to do (or not do) certain things while pregnant “for their own good,” and general social attitudes about responsibility and lack thereof. As evidenced by the flurry of commentary on Monday’s post, rhetoric about responsibility often runs into a slippery slope. And I didn’t see people distinguishing between “good” and “bad” banks when handouts were going to the financial industry.