The Thinking 

The Temptation of Government Loans

August 3, 2012


KAREN I. writes:

The post about liberalism leading people to error, and then exploiting their error reminds me of something I saw a family do recently.

I live in a large apartment complex. It features townhouse-style apartments in a country setting, and it is very affordable, with heat included. Several families with stay-at-home parents have chosen to live here because the good value allows families to live on one average income fairly comfortably. I will be the first to admit, it is not a lavish lifestyle, but an average family determined to have a mother at home can do so without tremendous difficulty. 

One such family has just decided to purchase a house. They used a USDA mortgage and financed it at 102 percent, no money down. They are going into their new home already underwater and the mother, who has limited education and had been home with young children full time will have to find full time work outside the home quickly. She will most likely wind up working in one of the many local retail establishments for little more than minimum wage. In years past, she told me how happy she was to be home with her children, and until she started looking at homes, she seemed quite content. But, as the house hunt went on for months, she complained more and more about minor defects with her apartment, stopped cooking and cleaning and generally radiated unhappiness most of the time. Conversations with her became dull as she would talk of nothing besides the great USDA mortgage program and houses she was going to look at. She no longer seemed to care about being a stay at home mother and could be heard yelling at her children quite often.

Government programs like huge student loans or mortgages with no money down force those that take advantage of them to live liberal lifestyles. Parents who sign up for these programs often find themselves so far in debt they have no choice but to have both parents work full time. I don’t know about other areas, but here that means the children go to a large daycare after school (and often before) that receives federal funding. The federal funding pays for things like snacks, so the daycare says it “has to” ask parents about things like their income during their intake process. It is all quite intrusive but parents have few alternatives when they are backed into a corner by high mortgage payments and/or student loan payments.

If families who want a mother to stay home with the children are not vigilant, our liberal government can provide them with some sort of tempting program that will lead them to err financially. Then, it exploits their error, often for the rest of their lives. Women who might ever want to stay home with children should be very, very careful when accepting government loans of any sort. They are often impossible to get out of. In the case of the USDA loan, my former neighbor was so eager to get, the USDA will even collect the balance left after a foreclosure.

Karen adds:

This Wall Street Journal article says that delinquency and foreclosure rates for USDA direct loans are 17 percent. It also details the collection practices used to collect on delinquent loans, including garnishing social security checks. Some of the comments left by readers make excellent points, including the ones that ask why these people were allowed to take out the mortgages in the first place, when they were clearly a poor risk.

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