[Originally published January 7, 2009.]
Laura and Mary got up early the next morning, for Pa was arranging the financing that day. They rode across the prairie in the covered wagon for a long time. Finally, they stopped.
“Here is where our house will be!” Pa said. Laura and Mary hurried to look. All around them stretched the prairie. For miles and miles, there was only grass and prairie hens and wild creatures.
“Where is the school?” Ma asked.
“Where is the golf course?” Mary wondered.
“Where will the tax base come from to support the development of adequate infrastructure?” Laura wanted to know.
“Now, Laura, don’t pester,” Ma said.
But Pa chuckled. “Well, little Half-Pint,” he told Laura, “all those things are right here, just waiting to be built with good old American know-how, elbow grease, and sticktoitiveness.”
“And perseverance,” Ma added.
“That, too,” Pa agreed.
Just then Jack the brindle bulldog barked. A man Laura and Mary had never seen before rode up on a mule.
“Hullo, Edwards!” Pa sang out. “Caroline, this is our neighbor, Mr. Edwards. I met him yesterday down at the creek. Mr. Edwards is a wildcat mortgage broker from Tennessee. He is going to finance our house for us!”
“I am pleased to meet you, ma’am,” Mr. Edwards said, bowing. “And I’m tickled to be able to offer you and your husband the finest 5/1 negative-amortization loan this side of the Mississippi!”
“Tell us more,” Pa encouraged him.
“Well, now, your teaser rate is only 1.5 percent!” Mr. Edwards went on, pausing to spit tobacco juice into his hip pocket. “Don’t that beat all?”
“It sounds wonderful,” Ma said politely in her gentle voice. “And what will our rate be after the introductory period, Mr. Edwards?”
“That depends on those scoundrels in Washington!” Mr. Edwards declared hotly.
“Pa, how much will we pay for the house?” Mary asked.
“What we pay doesn’t matter much, Mary,” Pa explained. “At 1.5 percent interest, we can easily service the debt on the principal.”
Laura was confused. “But when do we pay off the principal, Pa?” she asked.
“She’s got you there, Edwards!” Pa laughed. “What about that principal?”
“Those are two mighty smart daughters you have there, Ingalls,” Mr. Edwards said admiringly. “Well, it’s pretty simple. Your loan will reamortize every 60 months. The minimum payment will be recalculated at that time, but your rate will vary annually according to the then-current prime lending rate. Of course, your regular rate and payment resets will continue to apply, but these will be capped at— Look! A jackrabbit!”
“Good game surely is plentiful in this country,” Pa observed.
“You’ve said it, Ingalls!” Mr. Edwards agreed. “And once all the Indians are gone this land will be worth millions!”
“That’s true enough, Edwards,” said Pa. “But you are taking the short view. I’m minded to give mortgages to all the Indians, and sell them more houses.”
Mr. Edwards whooped and threw his coonskin cap high in the air. “Now, that’s the kind of thinking that made this country great!” he shouted. “Why, we can issue mortgage-backed securities with a weighted-average-gross coupon of 9 or 10 percent!”
“We’ll live like kings!” Pa exclaimed.
“Ingalls, you’re the brokerin’est fool that ever I did see!” Mr. Edwards told him, spitting into his mule’s ear.
Pa and Ma signed the papers.
Laura still didn’t understand. “But, Pa,” she asked again, “if we never pay off any of the principal, how will we build equity in the house?”
“Don’t worry, Laura,” Pa reassured her. “In a year, this house will be worth twice what we paid for it. And if we need cash before then I can always hew some equity out of an oak stump with my ax. Oak is good hard wood.”
Then Laura felt better. Pa could make anything with his ax.
“You see, Laura,” Pa went on, “Uncle Sam has made a bet with us. We have bet that housing prices will continue to rise at historic rates for the foreseeable future. And the government has bet that if real-estate values plummet, honest citizens like us will be too stupid to do anything but continue paying out our hard-earned 5-cent pieces for property that was never worth more than a fraction of its appraised value. Either way, we are going to win that bet!”
“Charles,” Ma remonstrated. She did not approve of gambling, even in metaphors.
“But what if land values do drop?” Laura wanted to know.
Pa’s blue eyes twinkled. “That can never happen, Half-Pint. Why, it’s just as likely that all our crops will be ruined by a blizzard, or a prairie fire, or a horde of grasshoppers!”
Laura and Mary and Ma and Pa all laughed at that idea. Jack barked and barked. Mr. Edwards ran around his mule in circles, slapping at imaginary bees.
“And I’ll tell you what else, Caroline,” Pa added. “As soon as the house is built and the oats are planted, I will drive the wagon to Independence and bring back some granite countertops for your kitchen.”
Laura and Mary hugged each other at the thought of a house with boughten countertops!
“Oh, Charles!” Ma protested. “Store-boughten countertops! But Independence is 40 miles away!”
“Pshaw, nothing’s too good for you, Caroline,” Pa told her. “Besides, I can put it on the credit card.”
“Well,” Ma admitted, “it will be nice to live like civilized folks again.”