Yep, increased risk of foreclosure is the deadly trap in the refinance game. I've talked to a lot of borrowers, and not all of them were oblivious to the risks. For many people experiencing hard times these days, they were faced with choosing the lesser evil, and hoped to correct the situation later, when things get better. However, if interest rates have hit bottom and have nowhere to go but up, I'm not sure how they can fix it later. There's a distinct dark lining to the silver cloud of refinancing.

"Predatory lending" is becoming a hot button issue around the country, in state legislatures and even down to the municipal level. Like all such crusades, a lot of it is hype, but there is a real problem at the core. Mortgages are highly technical, and there are a myriad ways for an unscrupulous broker to steer borrowers into deals that may cost more than they should and might not be in the borrower's best interests. Of particular concern are deals so bad that they lead almost inevitably to foreclosure, as if the lenders are consciously trying to acquire property by setting up the borrowers. Many of the new anti-predatory lending laws include a provision that defines one of the broker's basic fiduciary duties as ensuring that the deal is really in the best interests of the borrower--specifically, resulting in a lower total debt and/or lower monthly payment--which sounds like a statement of the obvious, but clearly it needs to be stated explicitly.

Spending more than you earn is a very common problem in America, ranging from individuals all the way through the federal government. It's also a recipe for disaster. In an emergency, you can justify doing it for a short period. For example, a nation can justify deficit spending in time of war or natural disaster....However, the definition of "emergency" has been defined down by too many people to mean "I want it."

My first impulse, naturally, was to take the bait and reply along the lines of "yeah, you mean like Bush and his war?" But I'll forego that little pleasure for now. We've had that debate before and I'm sure we'll have it again.

Yours in fiscal responsibility,

--Robert