The iconic Alan Greenspan once said to the American people, “tap your home equity.” What he was really saying was to borrow against your home because your home is your personal bank. So use your ‘bank’ to get more money. Refinance! Consolidate your bills! The problem, of course, was all of the hidden clauses that allowed the real banks to raise your interest rate later and basically steal your home from you.

It might not come as a shock to know that Alan Greenspan changed his stance on the housing market after the bubble burst. If you guessed that the largest category of real estate loan loss for U.S. banks is mortgage loans, you’d be wrong. Lenders wrote off $31 billion in home equity loans and home equity lines of credit last year. That’s more than the losses on primary mortgage loans!

As if that wasn’t bad enough, the delinquency rate on home equity loans is higher than all other consumer loans combined. According to a recent article in The New York Times, “one of the paradoxes of the recession [is] the more money you borrowed, the less likely you will have to pay up.” Unlike a mortgage loan, which gets repaid first when the home is foreclosed on, the home equity lender rarely receives more than ten percent on the dollar.

All this really pisses me off because I’m paying for someone else’s lavish, overspending lifestyle. You might be thinking, “Easy for him to say: he has plenty of money of his own – he doesn’t have to borrow anything.” But like almost everyone else, I’ve had my share of financial difficulties, both personally and professionally. And even though it was hard to see the light at the end of the tunnel during those tough times, I always made good on my debts. I learned from my mistakes, and I vowed never, ever to repeat them.

Like me, people used to learn from their mistakes. But not anymore. American’s now seem to have absolutely no problem simply walking away from their debt. After all, they’re getting away with it, so why not?! Worse yet, borrowers are often quick to blame others: “The bank was predatory,” or…”My mortgage broker said I could afford it.”

Now here’s the most self-indulgent excuse yet: Why worry about borrowing responsibly when everyone else just walks away when the going gets tough? So now, not only are the responsible American consumers paying for the luxury lifestyles of irresponsible borrowers, but we’re also breeding an entire generation of overspending consumers with little or no borrowing conscience. On a side note, it seems many of these individuals just so happen to be turning to a career in politics!

I’m not saying there’s an easy solution, but it seems like lenders have given up too soon and many of us have forgotten about financial responsibility. These outstanding debts should not be forgiven recklessly, especially for those consumers who are still driving the cars and boats they bought with outstanding defaulted equity loans.

We need to take responsibility for our actions and stop spending beyond our means, both as individuals and as a government. Remember what Benjamin Franklin said: “A penny saved is a penny earned.”

LINK:
NY Times – Debts Rise, and Go Unpaid, as Bust Erodes Home Equity