Many of you may have heard about micro-lending but because it is generally a tool used by persons in countries like Pakistan, India and Bolivia really never gave it much thought. Neither had I until I recently read an article on Source of Title http://www.sourceoftitle.com
This short article reveals the potential pitfalls of micro-lending in a way that while was not meant to be humorous, for some reason just really made me laugh. I do not feel good about my reaction, but that was my honest reaction. But, then, I started to really think about this issue and read a bit more on the subject.
The article mentioned above relates to a story about a micro-lender in the U.S. who lent a sum of money to a farmer and used the farmer's goat(s) as collateral against the loan. The repayment terms were $2.20/month. When the borrower fell behind to the tune of $6.10 the micro-lender found it necessary to foreclosure it's rights in their collateral, i.e the goat
From the article:
SAN FRANCISCO-Representatives from One World Finance, a U.S.-based microcredit provider, confirmed Monday that they had initiated foreclosure proceedings on a goat in southern India following a borrower's repeated failure to make her $2.20 monthly loan payments. "I tried to work with Ms. [Subha] Thangam on this, but once she fell a full $6.10 behind, I had to repossess the goat," said loan officer Michael Conrad, who stated that he was just doing his job and that it was "not [his] fault" if certain subsistence farmers were living beyond their means. "I'd love to recoup the entire $22 loan at auction, but given the glut of foreclosed and abandoned goats in the area, I'd be lucky to get even half that." Conrad also acknowledged that the owner had left the goat in "pretty bad shape" and had even stripped it of its hair for potential resale on the paintbrush market.
Now, again, this is truly not funny, and when you really sit down to think about it, is the reaction of this borrower really any different from that of many borrowers we have all come across, who, for whatever reason, have fallen into foreclosure or are in a short sale situation?
How many times have you, as Realtors, gone into a home that has been foreclosed upon only to realize that the prior owners have stripped it of it's copper piping, appliances, cabinets, stair rails, etc. Their reaction to their circumstances is no different than that of this poor borrower in India who has found themselves unable to repay a debt, that maybe should never have been granted to them in the first place.
As a title agent who specializes in transferring REO property I can tell you that there have been many times in the past when I have been at the closing table with a borrower who clearly has no idea about the responsibility that comes with the privilege of home ownership. I can also tell you that many, many of those same files have shown up on my desk of late in foreclosure, in REO STATUS ready to be marketed at very reduced prices. Many of those same folk who really, really WANTED to buy more than they should have and who were told they could absolutely afford it are now left with all consuming debt, foreclosures in the credit history and a need to start over again. So, did anyone do them any favors by telling them that they should absolutely take on debt that clearly they could not afford? I think NO.
I do feel badly for all who are in financial straits whether because they overextended themselves or they lost their jobs as a result of the financial meltdown we have experienced in this nation, and in fact world wide.
I do hope though that this current economic climate has taught us all a lesson. Let's see if we can't get back to reality and realize that we NEED only the basics. Those things we WANT should be saved for and then, when we finally get those WANTS, perhaps we will appreciate them more.