They're Called Sub-Prime for a Reason

It seems like every week I'm reading another story about how, because of the failure of so-called "sub-prime" mortgages, foreclosures are at a new high. Each story has some new tale of misfortune of a family that is losing its house after catastrophic medical or other bills, rising interest rates, and malicious mortgage companies.

It's true that foreclosures are up, and its true that this increase matches an increase in sub-prime mortgages. But whose fault it it really?

Clearly, if a mortgage company is lending money to a consumer, and that money has a good chance of not being repaid, the company is not managing its resources well. Its owners and managers certainly have questions they need to answer about why they are doing business this way. These companies are not charities, so that can't be the answer. Are they charging enough interest on all their other loans to make up the difference, and if so what does that do to everyone else's ability to make their payments?

But I think the biggest question is, how much sympathy should we have for people who clearly bought more house than they could afford, and then neglected to read and understand the loan agreement? Now I know that some foreclosures result from truly unexpected crises, such as major medical expenses. But when the people who bought a house just can't make the payment when the interest rate on the ARM goes up as scheduled, I have trouble getting up much sympathy.

And when we're asked to help save these poor folks from their own gullibility, I hope that our elected officials don't forget that many of those poor folks hold some of the responsibility for their current situation.