Important Lessons Learned From This Sub-Prime Mortgage Mess

Most Americans feel compassionate about anyone facing foreclosure. Witnessing more than a million people staring down foreclosure due to home mortgages leaves all us wanting to save people from this sad situation. But before we spend billions in taxpayer dollars for a bailout, we need to consider how this happened in the first place. When we do that, we'll see that most of the people losing their houses never should have qualified for a home loan in the first place, and that predatory lenders are to blame for most of this mess.

The Bush administration reached a deal with mortgage bankers to freeze interest rates on some sub-prime mortgages for five years. Other limitations apply, and only about 225,000 people will benefit from it. In fact, it's fair to say that if these homeowners are already in trouble, freezing interest rates won't help much - if at all.

The problem is that too many people jumped into the housing market and signed on to loans they could never repay. These were the loans that required almost nothing down, and low payments for a period before high interest rates kicked in. Who's to blame for getting such a loan? The buyer is, obviously, but so are ethically challenged lenders who make sure it's difficult to understand these sub-prime mortgages.

We don't fault mortgage lenders for giving people a second chance, and charging them more for that opportunity to own a home. Many of us have been in the same situation, and were thankful someone trusted us enough for another chance. But some seedy lenders did their best to hide the extra fees, the interest rate increases and everything else to get people who had no other choice to sign on the dotted line.

Our federal government should not be stepping into this sub-prime mortgage mess, other than to bust the criminals who lied, cheated and mislead someone getting a loan. In those cases, fines, jail time and any other punishment should be levied. But they aren't the only ones to blame.

People must take responsibility when they enter into contracts to understand what they are signing, and be responsible enough to live up to the agreement. Taxpayers should not be bailing out people who were not responsible with their own finances. It sounds cold to say that, but it's true.

If government needs to regulate anything it's that all lending be done transparently, that all terms, costs and expenses are out in the open, clear to all parties in the loan, and there should be no surprises. As for the predators who feed on people who are down on their luck, shame on them. To the people who signed on to loans they never should have taken, consider it an expensive lesson learned.