Borrowing for Bales: Who’s Home is It Anyway?

I don’t much like to borrow things. The whole “giving back” piece of borrowing usually causes me to pause. If I need to give something back with substantial interest, I find that I am increasingly likely to forgo the transaction altogether. Of course, in our culture today, we see borrowing to be as much of a right as, well, health care. It is with this in mind that I read in the WSJ about some people who are bemoaning their inability to get loans for unusual homes:

To pay for [their home made of bales of tires], the Hagars in 2007 took out a $240,000 line of credit from Red Rocks Credit Union in suburban Denver. In the old days of easier credit, appraiser Lori Slota couldn’t find another tire-bale home that had recently sold but said the house would be valued at $500,000 when complete, citing the listing of a straw-bale home as well as other houses in the area.

Last year, with the home finally finished and interest rates at record lows, the Hagars started trying to refinance into a long-term, fixed-rate mortgage. But in February 2009, they got the bad news from loan officer Bill Schimel, who wrote in an email, “I think we have really hit a brick wall here.”

So far as anyone can tell, no home made from tire bales has sold recently in the state of Colorado. Lenders have been telling the Hagars they can’t value the property and won’t give them a regular mortgage.

Elsewhere in the article another person expresses the frustration of being “at the mercy of the mortgage companies.”

Did you know there was a time when a home mortgage in this country was not the rule? In fact, if one goes back roughly 100 years, one finds that a mortgage often required as much as 50% up front for as little as a 5-year term. Imagine doing a loan like that today for a $175,000 mortgage.

Then, after a lot of mortgages were called in during the early days of the Great Depression, FDR started up the Federal Housing Administration to back the loans–so the banks themselves didn’t really carry the risk. Oh, and the FHA (if I remember correctly) established the 30-year loan to make the payments affordable. Generational indebtedness is now the norm. As a complete aside, I wonder how the stress and pressure of such large levels of debt which many carry affects overall health?

Now, we¬† have people like those mentioned in the article who believe they have the right to a mortgage–even though the market is unable to easily determine just what the risks would be on those loans. I am personally familiar with some of these issues, having laid out plans for a silo home with a beautiful winding staircase going up four floors. Alas, my wife exercised her veto on the plans.

That aside, do people really believe that it is possible to be protected from engaging in all types of risky behavior? And not only possible, but that it is the responsibility of a banking institution to protect them upon request? It is all well and good to create homes from non-standard materials, but the principle of personal responsibility says that if you wish to build a home from tires, or beer cans, or silo staves–or anything else which comes to mind–then it is up to you to pay for it. After all, it’s your home, isn’t it?

2 thoughts on “Borrowing for Bales: Who’s Home is It Anyway?

  1. Somewhat reasonable… although if we want great numbers of people to start building their homes out of their own pocket, we face another painful economic shift as we slow down the economy more.

    Still, I have noticed an unhealthy pressure from mortgagers to make bigger houses with greater sale value than the owner may want. When we built our 1232-sq-ft house, we had trouble keeping the bid under $100K, the amount we had decided we could afford. The bank strongly encouraged us to add a garage because it would increase the sale value. They also wanted a garage to make it easier to evaluate — there aren’t many house without garages, so they’d have trouble coming up with an average for our house. We were trying to be frugal and minimize our debt: the mortager wanted us to make their job easier by incurring more debt. We said nuts to that.

    We may not be entitled to build our house out of tires with someone else’s money… but I’d like to think we’re still entitled to borrow only as much as we want for just the amount of house we want, rather than the greater amount of house most of our neighbors have.

    1. CAH,

      Slowing the economy down to ensure its viability does not seem wrong.

      Glad you restrained yourselves and your banker.

      However, none of us are entitled to borrow anything. We may desire to borrow, but no one is under any obligation to fulfill that desire. For it to be otherwise is nothing more than declaring another right out of the ether.

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