Friday, February 27, 2009

about the current foreclosure crisis...

There is a lot of rant about borrowers who did something fraudulent and got a mortgage on a half million dollar house while having near zero income.

There might, indeed, be such cases, but those people would be "investors" looking to flip the house quickly in an UP market and not people buying a house in which to live...

We have seen the govt give away nearly a trillion dollars to banks, etc. which bought all those fraudulent notes (supposedly) in a effort (supposedly) to help the people of the US by stabilizing the economy and getting banks to again write mortgage loans.

We have not seen any value received for those dollars nor have we seen any help for real homeowners who are really caught in the double squeeze: lost income with which to pay the mortgage coupled with loss of value of the property making it impossible to refinance at a lower rate of interest, or to sell.

The outright gifts of hundreds of billions of our dollars to the banks and to Wall St undoubtedly were a great help to the bankers and financiers who received the largesse of the government, using our future tax dollars as a source, but there is not a hint of benefit to the millions of working class homeowners caught in this bursting bubble while attempting to live on fraction of their former income with rapid inflation of costs of living and tumbling value of their largest investment and 401ks that are worth a fraction of last years values.

The real beauty (?) of the situation is that it's not even possible to sell the house and cut the family's living expenses by moving into a lesser accommodation until conditions improve.

Instead we millions are caught in a situation where only bankruptcy will allow us out of the contracts we're in. This process will make many people a lot of money at the expense of millions of families made destitute and lacking even the credit score needed to rent a home.

I have read, with interest, for the past several months the crap put out by holier-than-thou people who are not in that situation - perhaps they haven't yet bought a home, perhaps they were lucky enough to have already paid it off or perhaps they have not yet lost one of the jobs they depend on to pay expenses or perhaps they are simply wealthy enough that losing 50% of their net worth or 75% or more still allows them to meet all obligations, whatever their situation - the one thing I've seen little expressed is common humanity.

The thing I have seen is a predatory glee, a sense of unbridled opportunism held in check only until they feel the property can be snatched up (stolen - is my thought) from the distraught people who are poised on the brink or who have already fallen into the chasm of foreclosure and bankruptcy and thus have made or will make these great bargain properties available to be exploited.

I'm happy for the good people who have, thus far, dodged the bullet - I really am - most of them are hard working people who provide jobs for many others and are entitled to the fruits of their labor. That being said, let me add that they are no more entitled to the fruits of their labor than are their employees.
The thing is that if this economy continues to slow, as it appears that it will, more and more of the comfortable middle class business owners will find themselves closing the doors of their businesses after having exhausted all that they had in trying to keep it going. At that point most of them will be in the same rough spot that so many now occupy, debt without means to pay. The thing that is different about small business owners (and large business owners) is that most consider themselves to be far above the common herd of mankind: "There are chiefs and there are indians." Nearly none will accept the idea that "the luck of the draw" had anything to do with their success, rather it was their innate business acumen which brought success. That's so true, until they, too, fail.

I may not lose my house, but like many, I have lost nearly half of my former household income - and what used to be a normal living expense has become a monthly struggle to meet which is added to the knowledge that it is worth less than the mortgaged value and might not recover for a long time. It cannot be sold except through a "short sale" and even that is difficult to secure.

For whatever reason, it seems that the lenders would rather foreclose than accept a short sale of the property - making it pretty much impossible to escape the court at some point for many families. I don't understand the reasons for the situation with the short sales but I'm confident that it has to do with the bottom-line of the lenders as that is all that matters to them.

This is a difficult and dangerous situation for the country as a whole, we are in the process of creating a new class in modern America - "the dispossessed" - which will number in the tens of millions before this sorry exercise is finished (if something of substance is not done quickly) and they - possibly we - will be cynical of government promises and hostile to big banking and other financial interests and aware that we have been sold out by the country as a whole for the profit of the few who were able to plunder the public treasury at will while our neighbors and former friends stood by and did nothing except call a real estate agent to check out foreclosures..

In the aftermath of the bankruptcy for many of the families involved will be the fact that with a sullied credit record employment will be much more difficult to obtain than it was before and even when the job market begins its rebound those people will be "damaged goods" relegated to less desirable positions as a result of having been driven to bankruptcy in this recession.

Not only that, but to add injury to insult, they will pay higher car insurance (people with lower credit scores have more claims?) and be required to post cash deposits for utilities and will be denied many opportunities which might otherwise have been theirs simply because they have damaged credit. As might happen to some, finding a job while having no permanent address, say camping in your RV at a convenient roadside rest area, is even harder.

Had the government really intended to solve this situation, they - all of them - would not have been stampeded like mindless cattle into hocking our grandchildren - more than they were before the fact - by handing out the money to the financiers without conditions or oversight, rather they would have deliberated and decided the benefits versus the cost of actions that might be taken and might have done nothing, or might have actually tried to use the money to help the people who actually needed help (not really likely)...

Had that happened, there would be a lot of bankers and Wall Street types in the soup lines with us commoners and the treasury would be a trillion dollars or so less in debt. The foreclosure crisis would be what it is and everything would still be as stated before, only they wouldn't need to raise taxes as much.

There is some hope that the new administration will figure out a way to keep us, in our millions, from being forced to default on our mortgage loans
but I'm afraid it's a slender hope, at best, as I don't see any understanding of what's at stake shining through the rhetoric coming from Washington, DC.

You can always buy gold, if you have any cash left after paying the 30% interest on your formerly 5% interest credit card balances. The gold merchants are looking for you, right now, trying to unload the stuff they've been stuck with since 1982. I always think it's amusing that they, who have the gold, want to exchange it for your soon-to-be-worthless, according to them, federal reserve notes... I'm missing something on that one.

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