More on the Foreclosure Problem
We congratulate and thank Military.com for illuminating this critical issue in their recent lead article. For two years we have worked hard to address this issue and proposed solutions. We believe that the recent media attention will be key to getting the government's attention. Oddly enough, many of the military friendly non-profit organizations are very slow to come on board with the issue. Here are some of the recent reasons I have heard from well-known organizations with a great history of support for military families:
- "We can only go forward with so many issues and must prioritize them. This one just isn't important enough -- yet!"
- "We don't want to take the lead. We'll wait until there is more of a ground swell of activity or Congress gets involved."
- And here's my personal favorite (not!). "We can't just bail out everyone who makes a bad investment decision. They chose to take a bad loan!"
We won't embarrass these organizations by mentioning them by name, but it's very important to recount just how we got here and clarify a few facts.
Let's start by a refresher on Maslow's Hierarchy of need. Shelter and security are on the first tier. It's the DoD's responsibility to provide housing for our military families. Of course, there isn't nearly enough (check the wait lists) and much of it is acknowledged to be inadequate.
Two generations ago, homes weren't really considered an "investment." They were shelters for our families. It wasn't until the '70s that home prices began the appreciation that has led them to become most families' "largest investment." So, homes are still first and foremost an absolute necessity, and even if they are our biggest investments, haven't our military families earned the opportunity to share in that American Dream?
Secondly, most military families that face foreclosure did not make bad choices. There seems to be an assumption that anyone who chose an adjustable rate mortgage (ARM) made a huge mistake and should suffer the consequences. ARMs were "invented" by the mortgage industry in the late '70s and early '80s when 30-year fixed rates were above 15 percent and, today they work very well for thousands of families.
In comparison to ARMs, VA loans had higher interest rates, thus higher monthly payments. They had significantly higher settlement costs due to the VA funding fees (2 percent - 3 percent of the loan amount), and in high-cost areas, they simply weren't an option as the maximum loan amounts were considerably lower than the cost of the average home. So the 3/1 or 5/1 ARM made tons of sense for someone with three-year orders who would be waiting one year or more for base housing.
So how did we get here? Well, it wasn't through thousands of "bad decisions." Military families need homes. Base housing and rentals are not always available or may not meet families' needs in terms of schools and other considerations. Military families believe they have earned the right to share in the American Dream. We desperately need highly educated, high-quality personnel serving in our high-tech, all volunteer force.