The Careful Cultivation of a Loan Culture at the Root of Foreclosure Troubles Today

November 10th, 2008 | Tags: Foreclosure

Foreclosures did not happen in one day. The problem had been building up for sometime with the careful cultivation of a loan culture. This has been the root problem of the foreclosure crisis of today. The nation forgot all about the high principles of being neither a lender nor borrower. It began to fuel its hunger by taking loans from foreign countries. The individuals too who make up the nation also resorted to frenetic borrowing. Today the nation and the individual are now in the throes of foreclosure woes.

Foreclosures were preceded by the proliferation of credit cards. Today thousands are filing for bankruptcy being unable to clear credit card dues. But the laws of the land make it hard to file personal bankruptcy. About a million Americans file for bankruptcy each year. The current years are going to be worse. The borrowing culture has got so much imbedded in the psyche of the American mind that starting from Joe the plumber to the Lehman Brothers, borrowing is no shame – rather it has become a fashion. At the most it is a small embarrassment. It is taken to be as a means of restructuring oneself.

Americans routinely made use of the card to pay for medical expenses, fuel, grocery bills and college fees. It was used even to dial-a-porn! The consumers were given thumps up for charging on their cards The card companies vied with each other to offer various benefits like cash back, flyer milers or some such ridiculous temptation which users never bothered to analyze but glibly took it all in. The credit card was at times used to pay off mortgage dues to get out of the foreclosure mess for the time being. Multiple cards were juggled to jump from one loan account to another. But it stands to reason that without savings how can a family sail through hard times? The Federal Reserve states that the total amount of credit card loans weighing down American families amounted to $900 billion as on November 2007.

As long as the money flowed the banks did not feel the pinch. Business and fraud made up for the losses due to bankruptcy. Each year thousands of cardholders found themselves prey to credit card fraud schemes. But this could not continue. When credit card losses combined with the weight of innumerable foreclosed houses, the financial bodies began to crumble and sink.