Because the lender has a vested interest is misleading you? Really, it's not that difficult to see that in any financial transaction of significance, if you don't know what you're doing, you should always invest in an unbiased expert to help you out. It's important.

Clearly our schools aren't teaching Personal Finance 101 anymore. These are fundamental principles to surviving in modern society, folks. If you didn't get a good education, at least buy a good book.

Yes, we agree on most things here.

I got my "how much mortgage can we afford?" question answered by my financial adviser (who manages my investments), not a Realtor. She had a different (and more accurate, it turns out) perspective.

And yes, we had the home inspected by both a professional inspector and (because it's a rather old house) a professional engineer before signing on the dotted line. And I've had the same mechanic for over 20 years, and he always inspects used cars before I buy. Very good point.

Even with a lawyer to review the paperwork, a really clever scam artist can still sucker you in. At that point, you'll have to rely on the courts to do the right thing, and terminate the contract as unreasonable. But I like the idea of restricting the resale of mortgages - "you make the loan, you service the customer" would have pretty much prevented the current disaster.

Yours is an interesting assertion - restated (and tell me if you think I'm not accurately restating your position) that personal responsibility is a weak defense against irresponsible predators in the marketplace. I spent some time thinking about your proposition in light of recent events, but I believe you are underestimating your power to keep yourself out of trouble through prudent research.

While not an absolute defense, I disagree that personal responsibility isn't a strong defense against predators. Part of personal responsibility is evaluating the reliability of information. A used car salesman's estimate of his product's worth is much less trustworthy than Kelly Blue Book, for instance, because KBB isn't trying to get my money (other than the modest price of their information).

Similarly, when we bought our house, our mortgage broker offered to lend us twice what we were requesting so that we could buy a much nicer house. She assured us our income could support that size of a mortgage. Tempting.

Independent recommendations, however, showed we were seeking the right size mortgage. I trusted their advice more than the broker's because they did not stand to benefit if I took their advice. This was a prudent assessment, and as a result, we aren't in trouble in the current financial mess.

So when you say "good people can be taken in by someone who they think they can trust", I would counter that "good people were taken in by someone they should have known better than to trust, but accepted their statements because they really, really wanted them to be true". It's certainly human nature, and I support Truth in Lending laws and such - but ultimately, you're much better off to "trust but verify" in your financial dealings rather than hoping laws will protect you from your own over-enthusiasm.

While I agree that personal responsibility isn't a panacea for avoiding financial errors, it's the best defense I know. If you don't expect the government, or your parents, or FDIC, or anybody else to bail you out of your mistakes, you'll be more conservative in financial affairs - and that's a recipe for success in most cases, AFAICT.

Regardless, I appreciate the thoughtful response.

You're right, of course. Nor can anyone guarantee you prosperity, even if you act wisely. On occasion, a dread disease or unexpected event can still wreck your life - and nothing (especially the government) can protect you from that. It's reality; deal with it.

The best you can do is play the odds. Avoid debt. Spend less than you make. Invest wisely. Diversify. Give generously. Buy insurance prudently from reputable, established companies. Vote the candidate, not the party (sorry, couldn't help but throw that one in :-). In most cases, you'll prosper.

For the world at large, you may be right. For those who are drowning in debt, though, waking up and switching to a debt-free, pay-as-you-go life will result in much more happiness. At least, it worked for me. :-)

They do. Do you really think the government can be trusted with such a critical decision? The government that is $10 trillion in debt? Riiight, real financial geniuses there in Washington. No thanks, I'll take care of me; at least I have no debt and a positive cash flow.

Again, if you're unable or unwilling to "read the fine print" when spending a quarter of a million dollars, hire a lawyer. For a few hundred, you'll get advice from someone who's competent to evaluate such things without the obvious bias the mortgage company holds.

The rest of your post is sad but unrelated. I'm sorry you and your dad lost your jobs, and had not saved enough while employed to keep their house when the inevitable bad times hit - but they ended up with the equity anyway, so it's as happy an ending as you could expect from remarkably poor planning. Countrywide (and most big lenders) are greedy and abuse their customers (yes, I smile too); so don't borrow money from them.

While I'm sorry for your family's financial trouble, you need to avoid debt and save for a rainy day (as your grandmother probably told you). Do it NOW. I'm not being unkind or heartless, I'm being honest - something neither Courtrywide nor your government will do. Sorry, in the end, it still comes down to personal responsibility...

• Deed in Lieu of Foreclosure - The homeowners can return the deed to the bank and vacate the house voluntarily. This is slightly less damaging to their credit, and less expensive for the mortgage company.
• Refinance by Third Party - This was usually the (bad) plan of homeowners who knew they were getting in over their heads, but hoped the eternal (not) housing bubble would give them equity to use for a refinance. It's still an option if a mortgage company (not necessarily the current lender) is willing to give a lower rate, extend the terms, or otherwise reduce the payment to something the homeowners can afford.
• Sell the House - The homeowners can simply sell the house and pay off the mortgage. If the house is upside down (equity to mortgage value), either the mortgage company must agree to accept the actual value of the house as payment in full, or the (former) homeowners must take out a loan for the difference - or they compromise somewhere in between. One or both parties still take a hit, but at least foreclosure is avoided.
• Increase the income - The homeowners can find a way to sweat through the disaster until the market recovers, by (for example) working extra jobs, or leasing part of the house to help cover the mortgage. This isn't forever - the market will recover. The homeowners may be able to tread water long enough for the flood to recede.

I may have missed a few; I'm not a Realtor. I only point these out to clarify that a homeowner in trouble still has options beyond foreclosure. It's better to take responsibility and find a solution than to sit around passively or in denial and wait for foreclosure. In the end, though, when stupid decisions are made, one or both parties will get hurt, as you correctly state. In the current crisis, so many stupid decisions were made so many times by so many people and corporations that the entire world is now feeling the pain. But there's no time like the present to start thinking clearly and maturely, and to do the right thing.

You're misreading what I wrote, which does not support a "true Liaise Faire" approach - hence, "regulators" (hint: no regulators in a "true Liaise Faire" economy). I fully support a reasonable level of government regulation over the economy, including solid consumer protection and anti-trust laws.

My point, however, is that if you expect the government to fix your problems, protect your life and property, bail out your ARM, and make your life fulfilling and worthwhile, you are a fool who will be sorely disappointed. "I am responsible for me" simply means that I am not a helpless victim - ultimately, I have to fix my life, protect mine and me, make prudent choices, and make my life worth living. Anything that helps from others, be it friends, government or religion, is gravy.

If your house payment is 50% of your take home pay, it's ultimately your responsibility because you signed the mortgage. Don't do that. Actually, live on less than you make and put the rest into diversified modest risk investments, and you will prosper almost every single time.

Why do you say that? The bank's job is to make profit for their shareholders; otherwise they go broke (well, except for the government pouring money down that drain). The bank has a moral obligation to fairly evaluate a proposed loan, and protect the debtor from his own greed, but a lot of bankers aren't moral. I think that much is clear.

Until we own up to responsibility for our own lives, we're just suckers waiting for the next con artist.

And so you're helpless? Hire a lawyer. For $200, you'll get knowledgeable, unbiased advice on what is likely the largest investment you'll make in your life.

The banker doesn't wring his hands over his inability to decipher javascript - he hires you. Now go and do likewise.

Of course it's the fault of the consumer if they buy a house 10x too big for their income. Hello? Personal responsibility?

That's not to argue that banks, real estate brokers, AIG, regulators, congress and the president don't have plenty of blame to share and share alike. Stupid is as stupid does.

But ultimately, I am responsible for me - not you, not "the village", not nanny government. When I almost bankrupted myself in 1985, it was my fault - not the great new car salesman, or the student loan broker, or the woman who filed for divorce. I admitted that, fixed the problem (the face in the mirror), worked my butt off, and paid back every penny. Now I'm not broke anymore.

Until people recognize and fix the problem in the mirror, and accept responsibility for their own lives, they will just hop from one con artist to the next - whether in banker's clothes or from an email from a former Nigerian official.

[/rant]