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Housing History Repeats By Robin Rouse  Listen to story (Real Audio)
In this commentary, she revisits her own past for some perspective on the present. TEXT OF COMMENTARY: Our story sounds like so many others on the surface: A young family, desperate to buy their first home, short on a down payment, but full of hope for the future. All the realtors, builders, and mortgage brokers assured us home-ownership could be a reality. It would just take a little "creative financing." We struggled to come up with the paltry 3 percent for the down payment and took a mortgage that in retrospect sounds crazy but at the time was our only hope: an adjustable rate, reverse amortization mortgage. And yes, we were, as na? as you are probably thinking we were. Everyone assured us this type of mortgage wouldn't be a problem. After all, they said, the equity in our house soon would exceed the ever-increasing balance and we'd be able to refinance our way into a conventional mortgage in no time. We didn't count on the housing bubble bursting. But it did. Housing prices started dropping like lead balloons, yet our payments and principle continued to increase. Eventually we lost our house, our credit score, and our hope for the future. So, you might be thinking, "What makes their story so different?" Well, what makes it different is that it didn't happen in 2008. Our story took place in 1988 -- 20 years ago. And the crisis du jour was not the sub-prime debacle but the Savings and Loan scandal. While the initial blow that set the dominoes in motion may have been different, the outcome was the same: too many people stuck in houses that they couldn't afford in the first place, victims of "creative financing" that backfired when the banks and the housing market started to fall. We learned a lot of lessons from that experience. It took us 10 long years before we became homeowners again. When we finally did, we made sure we didn't make the same mistakes twice. We saved until we could make a substantial down payment, shopped for a good, fixed rate mortgage with a reputable lender, and waited for a house that we could truly afford on our current income. Interestingly, we were offered the same kinds of crazy mortgages to try to entice us into buying bigger, more expensive houses. It's a shame the banking community didn't learn the same lessons we did 20 years ago. I certainly hope they do this time; the country is banking on it.
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