Tuesday, April 8, 2008

Unconventional Wisdom About Home Mortgage Contracts

We think we know a lot more about mortgages today than we used to. The subprime mortgage collapse has been covered in the media exhaustively, and we’re all watching the ripples fan out across the global economy. But we don’t know the full extent of the damage yet. We wonder if our government will bail out individual homeowners and stop cascading foreclosures. Or will the situation get worse and lead to record numbers of bankruptcies and new additions to the ranks of the homeless? Unfortunately, we don’t know.

Meanwhile, here are some things I do know and you should know, too: You don’t sign a contract that you don’t understand. You don’t sign a contract that isn’t the deal you agreed to. And you absolutely do not sign a contract based on lies about your financial situation.

You don’t sign a contract that you don’t understand. I’m sorry, truly, for the elderly people who have been defrauded by confidence men whose intention all along was to steal their homes. But please. By the time you are 70 years old, you have a pretty good idea of what your smarts are. Your house is usually your main asset. Take care of it by exercising some reasonable shrewdness. Take care of yourself by putting your affairs into the hands of genuinely trustworthy relatives or a conservator if you sense that your grasp of your finances isn’t what it used to be. As you get old, you know things are going to become more difficult for you. So prepare. Then the confidence men can’t get at you.

That goes for all you people who don’t speak English, too. This country was built on immigrants and my father was one and I have nothing against people leaving a lousy situation in their original country and coming here to better themselves. But would you please learn the language? For your own sake? You should never sign a contract that you do not understand. Never. Get a neutral party—not the friend of the guy who’s selling you the mortgage deal—to translate for you at least. Don’t just sign documents blindly.

And by the way, this includes native-born Americans who can’t be bothered to learn their own language. Being ignorant is not a permanent condition or a constitutional right. You can educate yourself to understand every word in a contract, and you should. You can also bring trusted friends with you to advocate for you when there is a document to sign. It’s not you against the world. It’s you against you if you choose to remain ignorant.

You don’t sign a contract that isn’t the deal you agreed to. We’ve all heard about surprises at the table when you’re closing on a house, and we’ve all had moments when we’ve had to accede to a deal that isn’t what we expected, negotiate for something different, or walk away. Guess what? The most desperate person always gets the worst of the bargain. Don’t be the most desperate person. If the contract doesn’t spell out the exact deal you thought you were getting, don’t sign it. Fight for your original deal or a better one, or walk away. So you don’t get the house. So what? At least you won’t have sold yourself into financial slavery on credit terms you have no hope of meeting.

You absolutely do not sign a contract based on lies about your financial situation. Yes, I know you are desperate to get this house or this money. Yes, I know you come from a crooked country where everything is done by bribes and corruption. Yes, I know your life experience has made you believe that much about our financial system is dishonest. And yes, I know you really intend to make good on this loan you haven’t the income or assets to pay off. But you are being dishonest if you sign a contract based on lies about your finances. You are committing fraud. Forget about the other guys at the table and think about you. When you knowingly engage in a financial transaction based on lies, you are the con man. You are the criminal. We’re hearing a lot of sob stories right now from people who knew better but turned a blind eye to honor. Don’t be one of those people. And if you were once, don’t be again.

You may wonder if this advice is closing the barn door after the horse has escaped, or whatever the metaphor is. But the truth is that we usually get many opportunities to be foolish, to be ignorant, and to be crooked in our lives. Sometimes, as in this recent crazy real estate bubble, we get what amount to engraved invitations. But we always have choices. We can refuse to act foolishly, we can refuse to get rooked, and we can refuse to be cheaters ourselves.

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