Cognitive Dissonance And The Mortgage Crisis
Or, to put it more simply, “why I have no sympathy for people who have had their homes foreclosed as a result of the sub-prime mess.” Now, a lot of digital ink has been spent writing about the current financial state of the United States.
Everyone is blaming everyone else for their problems and not taking a hard enough look at themselves for their own problems. At, the end of the day we are in the current situation because millions of Americans ignored their own better judgment and took on loans they knew they could not afford.
The current situation is a perfect example of cognitive dissonance at work. People just ignored the idea that you can’t get something for nothing (or almost nothing) and instead took on loans to buy real estate they could not ultimately afford.
Like all financial bubbles this one has now burst and the finger pointing and name calling is well under way. What we see now, is a perfect example of projection, or blaming other people for our problems.
Many pundits and consumer advocates have blamed the mortgage companies and banks for predatory lending practices. However, the fact remains no one had a gun to any ones head and forced them to take out larger loans. Everyone was just too greedy for their own good.
Borrowers thought they could get their dream home when they knew deep down they could not afford it. Mortgage brokers got huge commissions and banks were able to sell the debt on to other investors. It seemed like a win-win-win situation except it was all built on a flawed concept.
People with little or no income are extremely unlikely to all of a sudden start earning enough to pay off those $500,000 mortgages. But hey, as long as everyone is making money let’s not worry about the future. Again, cognitive dissonance at work, just ignore what is uncomfortable to think about.
Also, just to show I don’t have a heart of stone I have no sympathy for the mortgage brokers or banks either. In fact, all these companies should go bankrupt instead of getting bailouts from the government. They knew better and they scarified long term financial security for a few quarters of higher profits.
They should be allowed to go out of business and the CEOs and top executives should not be given any sort of golden parachute. Instead, they should be treated just like everyone else; when you screw up you get fired and you don’t get compensated for it.
Sadly, I am sure the name calling will continue for a long time to come. Borrower’s are guilty of ignoring common sense. Mortgage brokers and banks are guilty or shear stupidity. And now everyone is projecting their problems on to someone else.
Hopefully, people will learn to think more rationally about their financial choices in the future, but if history is any judge they won’t.
Update: I have just come across a service that claims to be able to help prevent foreclosure. If this sounds like you, you may want to check out EZShortSale. I have no idea how or even if the service works, so be cautious. If it sounds too good to be true it probably is.