by Jerome Pinder
In the Bahamas Edition of the USA Today there is a front page article entitled "BofA will cut loan balances." The goal of this program is to reduce home foreclosures.
BofA will consider reducing the principal balance on loans up to 30% for 45,000 customers. The borrowers must be at least two months delinquent and the principal balance of their mortgages must be 20% more than their home values. It is proposed that the principal balance will be reduced in stages for those borrowers that keep up with their payments over a five year period.
There is plenty of blame to go around for the causes of the financial crisis. Blame can be given to politicians, regulators, banks, and bankers. However, not much has been said about the lack of commonsense on the part of the consumer.
One of the major problems is that thousands of consumers wanted instant gratification. They wanted to have the material possessions to match the possessions of those that have worked and saved for 20 to 30 years to acquire. They financed a home at 100%, they financed cars at 100%, flat screen TVs at 100%, and they lived off credit card debt. All without saving a dime!
And the reward for this is a write down on their loan balance. So what does the consumer get that practiced common sense? That lived within their means? That saved to have a down payment towards their home and car? Those that new what size home and mortgage they could afford? Those that did not need instant gratification?
The responsible consumer won't get their mortgage balance reduced and they will not get a reduced interest rate. What break do they get?
