On vacation, I won’t mention the place, I slipped in the over-tub shower this morning. I hadn’t soaped my feet, there being no non-slip mat in this small, enameled tub. The shower curtain may have slowed my fall, as its plastic hooks broke and flew out one-by-one, scattered across soaked floor and slippery tub like so many broken teeth from the fight-of-the-century. 

Unexpected. Potential disaster. The manager said the calcium in local water makes it very slippery. When maintenance replaced the shower curtain, they also brought a rubber slip-proof mat. 

Too bad people taking out sub-prime loans didn’t have a slip-proof mat—the “slip” being adjustable rate mortgages! The rate that just keeps on moving, some to an uncomfortable fall, some to devastating results. 

In the case of a slip-and-fall accident, the proprietor of the establishment where the injury occurs would be liable for a degree of restitution: medical bills, possibly even loss of wages, and punitive damages (to name only a few). Unfortunately, purveyors of adjustable rate mortgages are not being held accountable for inadequate communication about the potential of adjustable rates to reset at a much higher rate – often an increase of several hundred dollars per month in only one month’s time. 

The attention is being given to the higher-than-average entry rate, the “sub-prime” part of a multipart agreement. The 8% starting rate has not been indicted in the problem; though, that is the language of headlines. If buyers enter a broker’s office wondering whether they can qualify to buy a house at all, and the lenders’ representative finds an entry point for them, how much “warning” of adjustable rates (ARMs) is likely emphasized? Common sense says the buyers are still celebrating and the lender’s rep is unlikely to emphasize potential negatives – that’s just sales. 

Home-buyers need to step up to a whole new level of financial literacy. They cannot be expected to manage paying off their mortgages in a third the time, using a HELOC or any other creative process, if they cannot even choose a loan they can afford. We want to blame the lenders, the brokers, the investors – even Fannie Mae or Freddie Mac – but ultimately, we cannot trust outsiders. We must take responsibility for ourselves, just as we’ve begun to do with education and health. 

This also may mean we cannot rely on government either to regulate or punish fraudulent or even unscrupulous practices.

If you'd like to learn more about paying your mortgage in one-third the time….lemme know: