Aug 07
22
Standing for Justice
Posted by Stephen22
Tags: forgiveness, learning
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I was reading an article about financial worries around the world due to the current unstable housing market in the US. Today’s problem started several years ago when real estate was booming and house prices were going through the roof. Buy! Sell! The economy was in a frenzy. We noticed because we were looking to buy a house. It was madness. Houses would go up for sale in the morning and be sold that afternoon. If you saw a house you liked you had to make a decision on the spot and sign the papers then and there. Not for the faint of heart.
With so many people eager to buy a house (“Buy now, it’ll be more expensive tomorrow!”) there were many people eager to lend money at very attractive rates. Traditionally the bank would own the mortgage (and thus your house) and you’d pay it off over the next twenty to thirty years. But in that superheated economy there were a lot of people wanting to borrow a lot of money quickly. So mortgage brokers got creative.
They’d give someone a mortgage to buy a house, often without doing due diligence to see if that person could afford to pay it off. The broker would then group together a bunch of mortgages and sell the package as an investment. Investors used this new source of income to issue bonds, which other investors bought. Those bonds were then split up and blended into other instruments such as mutual funds, which were bought by yet more investors. Complicated, but the effect was to spread the wealth. There was a lot of money in real estate, and by doing all this mixing and matching on the stock market that money made it into every aspect of the economy in North America and around the world.
The problem was that if you followed the money all the way back to the source, you’d realize the whole structure was being supported by private individuals who had mortgages they couldn’t afford. Today there is an epidemic of foreclosures, where people are kicked out of their houses because they can’t pay. As collateral for bonds, the mortgages are suddenly worth a lot less. So the bonds are suddenly devalued. And so are the mutual funds they’re a part of. And now the portfolio of the average guy on the street plummets in value. This means people are less confident they’re able to afford a house, so house prices go down. Prices go down to the point where some people owe more on their mortgage than their house is worth, leading to more foreclosures. The cycle reinforces itself and spirals down.
I guess you could say the problem was rooted in basic pride and greed. People wanted bigger and better houses than they could afford, and used those houses as collateral to borrow yet more money to support a lifestyle suited to their new fancy abode. Investors were quite happy to lend the money because they saw themselves making an excellent return on their investment. Get rich quick.
An interesting side effect is that 2008 would probably be an ideal time to renew our mortgage. A whole segment of the financial market will have to pay out for bonds backed by so many worthless mortgages, and they’re going to be looking for money to make those payments. There will be some very attractive interest rates on offer.
Our mortgage doesn’t come up for renewal until 2009, and I found myself wishing that the current housing crisis continue for just a little longer so that the low interest rates extend for another year. It took me a minute to realize some of the implications of that wish. I was hoping for the prolonging of a situation that kicks families out of their homes onto the street, leaves people destitute and homeless, merely for my own personal financial gain.
Sad.
A few days ago I was writing about how Jesus blasted the Pharisees for neglecting justice, mercy and faithfulness, and how on earth did that verse apply to me. I ended up extrapolating some general principles. But it turns out that all along it applied to me very specifically and directly. In focusing on my own economic wellbeing I am throwing justice and mercy out the window. The Bible makes a big deal about standing up for the homeless, about showing justice and mercy to those left with nothing.
I have approximately zero influence on global financial markets. I have no say on how lenders deal with people that default on their mortgages. But although I am not acting in injustice, it is the intent of my heart. I am a transgressor. I’ll quote that verse once again, seeing as it now speaks to me directly. May the Lord change my heart.
Woe to you, experts in the law and you Pharisees, hypocrites! You give a tenth of mint, dill, and cumin, yet you neglect what is more important in the law
