Foreclosures symptom of larger problem

Oct. 17 is circled in red in far too many calendars and appointment books. It is the deadline for many to declare bankruptcy before new federal changes in bankruptcy law take effect.

Already, a steady stream of bankruptcies and foreclosures have been making their way through the courts. Iowa is on track to set a record number of bankruptcy filings this year, nearly 16,000. Filings have been on the rise since 1994 when there were just over 5,000.

Another alarming trend: Iowans are losing their homes to foreclosure at a faster rate than the rest of the nation. According to the Mortgage Bankers Association, from mid-2003 through 2004, Iowa's foreclosure rate climbed as the national rate declined.

Several factors are at play for the increase in foreclosures, according to the Mortgage Bankers Association. Our economy is growing at a slower rate than the rest of the nation, but smaller growth in new jobs and median home prices make selling a home - and escaping debt - more difficult in Iowa than in more robust markets. More liberal lending policies, including no down payments, loans that exceed the value of the home and adjustable rate mortgages, help people get homes, but also encourage buyers to get more home than they can afford.

Couple this with too much spending, too little savings, a refinancing to pay off credit card debt, and you are a couple of bad breaks away from losing everything. If a primary wage earner gets sick or injured, it's a quick and slippery slope to bankruptcy.

Still, Iowans are proud people, and many, to their credit, do all they can to avoid declaring bankruptcy. Many work two or three jobs to pay off their debts when it might have been easier to just file the paperwork for bankruptcy.

So, who ultimately is to blame? As cartoonist Walt Kelly's Pogo character said, "We have met the enemy and he is us."

Many of us simply live far beyond our means and astute businesses rather lucratively cater to our personal lending needs with credit cards. We would all be better off waiting to make major purchases, but since consumer spending drives a large portion of our economy, bringing spending back into line would probably do harm in the short term, but it would be the right thing to do.

What's worse: the disease or the cure?