More Debt? No Way, No How

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Lenders keep trying to suck my family into a vortex of debt.

We're standing firm.

Just as President Bush was announcing a deal with the mortgage industry to freeze adjustable rates for up to five years in some cases, Countrywide was aggressively marketing a $365,382 cash-out refinance to my family.

We don't want it. We can't afford it. If anything, we're anxious to dump our 30-year, 6.5% fixed-rate mortgage for a shorter-term loan.

Just after hearing from Countrywide, we were also pelted with "convenience checks" for two MBNA credit cards and a solicitation to open yet another. Nearly every store where we shop has its own credit card with an enticing deal.

The Gap(GPS) offered us 5% in rewards for every dollar we spent on the store's card, plus free shipping from Gap.com. We recently booked a vacation through AAA, which tried to tempt us into opening a credit card that offered 2% off our trip.

A friend recently told me that he never stops hearing from Capital One these days. He said he opened a card with the company last year, but stopped using it after being continually deluged with solicitations to borrow even more money.

The greed never seems to stop.

Debt is the root of the country's present economic woes. Americans are losing their homes because many signed on for adjustable-rate mortgages that they ultimately couldn't afford -- loans that were often aggressively marketed. Home-equity lines of credit also tempted homeowners whose property values were skyrocketing. However, the adjustable rate associated with many such loans made the payments harder to stomach as the interest rate increased. Declining property values have left many homeowners who borrowed too much equity with a shortfall on selling.

Easy access to credit-card financing -- which lenders perpetually market to families like mine through seemingly endless snail-mail solicitations -- makes it easy for people to get in over their heads. A quick fix, such as refinancing to adjustable rate mortgage, may take the heat off for a while, the thinking goes.

But as we've all learned from recent turmoil in the housing and financial markets, what happens when borrowers can't pay the piper. Homeowners and their mortgage lenders aren't the only casualties. UBS(UBS) announced this week that it's taking a $10 billion writedown tied to the subprime mortgage debacle and selling off part of the company to investors in Singapore and the Middle East. The news followed equally troubling write-downs by Merrill Lynch (MER)and Morgan Stanley(MS).

So, why are lenders still aggressively hawking so much debt to homeowners and consumers?

My family was in the unenviable situation of owning two homes for six weeks this past summer -- our current home and the one we were trying to sell. We purchased our new home through a scary, but short-term, approach to financing: We borrowed equity from the old home as a down payment and then obtained an additional mortgage to cover the difference.

On one hand, I'm grateful that lenders were willing to take on our risk -- and they earned a lot of fees and interest. But I was also surprised by how easy it was to borrow so much cash. Having good credit certainly helped -- but that credential also seemed to cast us as prime targets for future debt solicitation by lenders.

The mortgage on our new home was ultimately assigned to Countrywide. A customer-service representative informed me during my first phone call to the company that we were eligible for $100,000 home-equity loan. She asked if I wanted to apply.

I needed more debt during those six weeks as much as the Atlantic Ocean needs more water.

We finally sold the other house, and I placed several calls to Countrywide about the procedure for paying down the existing mortgage with proceeds. Each time, a customer-service representative asked if I wanted to apply for a home-equity loan.

I've also received email, snail mail and announcements that accompany my monthly mortgage statements, all conveying the same message: "In appreciation of the exceptional way in which you have managed your mortgage loan, you may be eligible for a Countrywide home-equity loan in the amount of up to $100,000." I received the first such mailing Aug. 29 -- about seven weeks after I closed on the property, before my first payment on the loan was even due.

The recent offer for a $365,382 cashout refinance arrived as an "expedited delivery letter" in an envelope that looked like an important overnight mailing. The notice directed me to call that Saturday for my "exclusive customer discount."

We're now refinancing my home -- but through a different lender who offered a better rate with fewer points. We also have no intention of taking equity out of our house. In fact, we're planning for the future, instead of cashing in on the present, by refinancing to a 15-year fixed loan at 5.25% (with a half point), so we can pay off our home as we near retirement.

I understand though, how many families can get caught in a pattern of borrowing too much on credit cards and using their homes as a piggy bank to foot the bill.

But the vicious cycle might end if lenders stopped tempting strapped families with easy -- and excessively large -- sums of cash.

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