Tommy Denton

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What goes up almost always comes down, but the approaching holiday season is a bad time for the risen, joyful hope of home ownership to come crashing down in the anxiety and foreboding of mortgage defaults.

Only those who haven't been paying attention would be unaware that the celebrated, inflationary housing juggernaut of the last few years has entered an inevitable downward trajectory of the economic cycle.

Along with that decline, the unpleasant news of defaults is stirring at least as much anxiety and foreboding among mortgage lenders who helped stoke the red-hot market with unbelievably attractive incentives for borrowers.

There's a reason that customers ought to be wary of "unbelievable" incentives, because they're almost certainly that: unbelievable.

According to Treasury Secretary Henry Paulson last week, mortgage delinquencies and foreclosures are steeply rising nationwide. The burden, not surprisingly, is falling heaviest on low-income families lured during "good times" into the rock-'n'-roll housing market by high-interest loans that reflected the relative risk of people who tend not to have enough money to cover all their financial responsibilities.

Such "credit distress" -- don't you love it when accountants strain to display a poetic flare for euphemism? -- is causing mortgage companies to develop gastric distress over the likelihood they'll be left holding the bag as the no-longer-paying, newly homeless turn over the keys.

Actually, the creative ones will find ways to shift their potential losses to some other institution through packaged refinancing or eventually through federally insured programs.

As Paulson noted, "Expanding opportunities for more people to buy a home is a good thing. But we do not want Americans to become overextended and see their dream end in foreclosure."

To prevent as much of that overextension as possible, Paulson proposed that banks and savings and loans adhere to a new set of federal standards -- issued in September -- to let people get mortgage loans "without taking unnecessary risks."

His observation would appear to be a little late, because such concerns apparently did not dawn on lenders who were conjuring up schemes in the last few years to attract more customers through low- or no-interest loans subject to jarring, upward monthly payment adjustments in the future.

That future is happening now, and the former sweet, "generous" deals are morphing into harsh and unpleasant reality.

But resist the urge to put all the blame on the lack of discipline, if not moral fiber, among borrowers for allowing their fantasies to overwhelm hard financial calculation. Potential borrowers may have had stars in their eyes and an irrational willingness to suspend disbelief in opportunities too good to be true, but those desires for a shot at owning hearth and home -- or a bigger, better one -- received encouragement from loan officers under pressure to maximize loan activity.

Unfortunately, taking chances with financially marginal customers not only preys on the often less-sophisticated but also, in time, may compromise the institution's financial integrity. The increasing rate of delinquencies and foreclosures has many bankers shifting nervously in their pleated leather executive chairs, fearful that the mortgage defaults could cascade in the coming months.

That anxiety would become even more acute if, as a few gloomy economists have projected, the national economy slides into recession in 2007.

Paulson's new Treasury Department guidelines properly direct lenders to explain the hazards of interest-only and other "nontraditional" loans, which seem to be especially attractive to potential borrowers tempted to stretch the limits of their resources so that they, too, may acquire their portion of the American dream.

Alas, the rampant overextension through debt by so many Americans -- the national savings rate as a result is now zero -- I find hard both to understand and reconcile.

Granted, I'm cheap by nature and diligent practice. But I also recall many years ago when my father had cautioned early and often about the importance of home ownership but also the need to avoid becoming "house poor."

By that he meant knowing the difference between the house you desire and the house you can actually afford. By extension, that applied to any desire.

That may be a simple lesson in elementary economics, but learning and applying it can save a lot more than anxiety and foreboding.

Denton's column appears in the Sunday and Tuesday editions of The Roanoke Times.