How 'Occupy Our Homes' threatens your mortgage
December 14, 2011
Last week protesters in two dozen cities across the U.S. disrupted foreclosure proceedings as part of a movement called Occupy Our Homes, an offshoot of the Occupy Wall Street movement. Their actions included interrupting evictions, occupying previously vacant homes in foreclosure, and disrupting bankruptcy auctions.
While this protest is well meaning, some unintended consequences could result. These protests could negatively impact your ability to get a mortgage in the future, or even to refinance your current mortgage.
Emotionally, the Occupy Our Homes movement is very satisfying. After all, no one wants to see a family evicted from its home, especially for the sake of some faceless bank's profits.
However, once you get past the emotion of any specific situation and think of the bigger picture, some rational questions arise:
- Where do you draw the line between lending that was predatory, and that which was prompted by a popular movement to make home loans available as widely as possible?
- Is the Occupy Our Homes movement making a distinction between homes that were foreclosed on due to questionable practices such as balloon mortgages, and those which had conventional mortgages on which the homeowner simply failed to make the payments?
- What responsibility do individuals who borrow money have for meeting their obligations?
It doesn't help that one of the examples the Occupy Our Homes movement highlights is a Vietnam Veteran who is now facing eviction after being in his home since 1968. It's a sad story, but you have to wonder why a person still owes a mortgage balance after 43 years. Clearly, there's more to the story than just banks victimizing homeowners.
To really understand the unintended consequences of the Occupy Our Homes movement, you have to think of the people on the other side of the issue. After all, it's not just banks that are hurt when people fail to meet mortgage obligations. Other victims could include:
- Future mortgage borrowers. Especially at current mortgage rates, banks have little enough incentive to make new loans these days. If they are blocked from collecting on their loans, future borrowers can expect mortgages to be more expensive and/or harder to obtain.
- Current homeowners. For the same reason as the above, the actions of Occupy Our Homes may make it tougher for current homeowners to refinance their homes. Ironically, the more homeowners can take advantage of current mortgage rates, the fewer would have to face foreclosure.
- Depositors. Low interest rates on savings accounts and other deposits are partly the result of weak profits in the lending business. Erode those profits even more, and you can forget about seeing those interest rates rise anytime soon.
- Bank shareholders. No, don't think about rich one-percenters. More likely, bank shareholders are pensions and 401k plans, whose participants are ordinary people. When borrowers don't meet loan obligations, those ordinary shareholders can take the hit.
In short, the Occupy Our Homes movement seems to demonstrate that good intentions don't always make for a good cause.