Econ: An irresponsible borrower.
This came via the Carnival of Liberals.
From Greta Christina’s article:
When we bought our apartment three and a half years ago, of course we applied for a mortgage (what with the whole "not having the cash up front to buy a San Francisco apartment" thing). We found a mortgage broker, filled out the applications, provided all the pertinent information.
And we trusted the bank to tell us if we qualified.
We trusted the bank to tell us if they thought we had enough income, and a stable enough income, and a solid enough history of paying off our loans and bills and such, to pay off the mortgage on this apartment. We thought we could, obviously; but we also didn’t know any more than the average person about the complexities and finer points of the financial world. Which is to say, we didn’t know much. We trusted that the bank - being a bank and all - knew more about the financial world than we did. We trusted that they were doing a careful evaluation of our financial prospects, based not only on the information we gave them, but on their own extensive experience of loaning people money. And we trusted that, if they thought we couldn’t pay off our mortgage, they’d tell us.
A trust that, as it turns out, was grossly misplaced.
This is where many people get it completely wrong. You are not supposed t trust the banks any more than you should trust the Federal government, which is to say Not at all. The legal reality is that you are responsible for putting your signature on the contract, no one else. California, at least, has disclosure requirements for all loans 1 and the law requires that you be aware and understand all of it 2 . However, that doesn’t relieve you of the requirement of doing some of your own homework. You know your budget better than anyone can. It is up to YOU to look at the terms and decide whether or not you can afford it.
Now, did you fill out the forms truthfully or only State your income without providing the previous year’s form 1040? What about your recurring monthlies, did you declare ALL of them? What about the tons of food that your Saint Bernard eats?
Footnotes:
- Why do you think that is? Could it be that banks have proven themselves untrustworthy in the past? [ ↩]
- This is so that you can’t reneg later. You are not allowed to later claim that you didn’t know. [ ↩]
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