Countrywide, the country’s largest mortgage lender, is stepping in to “rework” 82,000 loans totaling about $16 billion. I believe that the lenders and the borrowers are both partly to blame for the mess. Lenders offer risky loans, and customers, happy to hear they can afford more than they anticipated, sign up without realizing they can’t really afford it.
When a company like Countrywide gives into consumer pressure, you can be sure other lenders will follow. While this is good for the economy in the short-term and good for the borrowers overall, it may send a bad message. It perpetuates the idea that there are no real consequences to being in debt. Bailouts extend the ability for people to survive while simply signing their paycheck over to other people and companies like mortgage lenders, electric and cable companies, and credit card issuers.
This is a dangerous thought: As long as you are following the spending trends of millions of other people, you are safe. There will always be changes in regulations or laws to keep the economy somewhat afloat, and if you’re representative of the greater economy, chances are you’ll be kept afloat as well.
While history shows that in general that has been the case it is a highly dangerous way of thinking, because it doesn’t play out that way for everyone, and you have no idea of knowing if it will for you. It’s a much better idea to live below your means and never have to worry.