The chart on the state website detailing supervised loans in Colorado tells a graphically ugly tale. Too many state residents live on money borrowed at 12 percent or higher interest rates. That high-interest, high-risk borrowing means people are living on borrowed time.
The dollar amount of high-interest, high-risk loans made in Colorado increased for the fourth year in a row in 2006, Attorney General John Suthers announced Tuesday.
It totaled $2.23 billion. Of that, $1.2 billion went to so-called sub-prime “closed-end real estate-secured” loans whose defaults have pushed the world economy into the toilet.
In 2005, supervised lenders made only $1.9 billion in high-interest, high-risk loans, and only $436 million went to closed-end, real estate-secured mortgages.
This means we can look forward to more people losing homes to foreclosure and more glut in the real estate market that drives down the value of everybody’s house.
This means an already horrible situation stands to get much worse.
Here, from the AG’s news release, is most of what you need to know about sub-prime lending: “The percentage of foreclosures on supervised loans increased by almost 80 percent” from 2005 to 2006.
Suthers called the growing dependence on all types of high-interest, high-risk borrowing “very disconcerting.”
The description “ticking time bomb” also comes to mind.
Nowadays, too many Americans exist on someone else’s money. In the past several years, the country’s federal budget has run as deeply in the red as it ever has. Our children, grandchildren and perhaps even our great-grandchildren will pay for the Iraq War. Baby Boomers’ Social Security payments threaten to empty the fund before Generation X reaches 65 or 72 or wherever they move the retirement age to try to stave off insolvency.
Meanwhile, most Americans follow Uncle Sam’s example and finance just about everything from houses to cars to tuition to groceries with loans and credit cards.
Credit, it seems, is a lot easier to come by than deferred gratification.
My personal website, SpencerSpeaks.com, makes not a single cent. If anyone out there wants to sponsor it, please call or write. Meanwhile, even my penniless product has attracted a half-dozen credit card offers.
Suthers, said spokesman Nate Strauch, “thinks Americans are addicted to debt. They’re addicted to having everything now and not waiting until they can afford it.”
That sums it up pretty well for the borrowers. But usurious lenders play a big role here. And so does the lack of government regulation over an economic system built on the tenet that greed is good.
Suthers has some good ideas for non-profit debt counseling to educate consumers. The state legislature has passed a couple of laws aimed at helping borrowers understand what they’re getting into with things like no-money-down, adjustable-rate mortgages.
Now, it’s time to make sure lenders act responsibly. At this point, it seems like people take their cut, then pass on the financial risk in the sub-prime mortgage business. The buck passes until there are no bucks left to pass. Then overextended borrowers and under-informed investors take the hit.
You’d think by now everyone would get that. Then, you look at the numbers in Suthers’ report and wonder if anyone is paying attention.
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