An Economic Question
 

I don't know if this belongs in Political, but I'm pretty sure it isn't a "general forum" type of discussion.

We all know that the country--maybe even the world--is facing a long recession, maybe even a depression. The situation isn't unprecedented. It happened in the years between 1929 and WWII. Japan is only now coming out of deep economic problems dating back to the 1990's. The economic engine has slowed and will be difficult to re-start. Recovery must begin with increased spending by the consumer and the government will try many kinds of things to stimulate such spending--tax cuts, government-funded plans to increase employment, management of interest rates to very low levels, etc. All techniques that have been used before.

In the case of the current U.S. economic problems, the heart of the problem seems to be extraordinarily high levels of personal debt and a dramatic and sudden decline in the values of housing, reduced demand for housing, dramatically increased levels of mortgage loan defaults and foreclosures. We're experiencing a cycle that has almost stopped banks from lending and borrowers from being able to borrow. That cycle has spread to other capital goods industries--autos, large appliances, electronics, even items for major household rehab projects. Such decreased demand has exacerbated the economic decline with increased unemployment, reduced income, etc.

So now to my theoretical question. I'm hopeful that it's not a real situation that any of us would experience personally.

Let's say that you found that the value of your house or condo was substantially less than the amount of the mortgage loan you had taken out. Say the value of your house has declined to only 80% of the amount of the balance on your mortgage loan. Let's say that it's clear that the value of your house will not increase to equal the amount of your mortgage loan for, say another five years or so. As the result you know that you can't sell your house for an amount that would pay off the mortgage for that time. In the meantime your credit rating is suffering because of problems with your job. Your credit rating hasn't been a big consideration because the banks or credit card companies won't increase your credit anyway.

If you found yourself in that situation--would you continue to do all that you could to keep making your mortgage payments on time? Or would you simply stop making mortgage payments and live in the house until the lender foreclosed and forced you to move, simply using the amount that you were "saving" by not making motgage payments by spending it on living expenses, a flat-screen TV or a new car? I'm not talking about a personal bankruptcy. My question has to do with simply not continuing to make payments on a loan, the balance of which has become a lot more than the value of the house used as collateral for the loan.

Unfortunately, the situation I've described is a pretty real one for lots and lots of people. The way they answer the question I've posed will go a long way towards determining how long the recession we're all facing will last. What would you do?

Interesting, but go further. What about the programs they offer for first time buyers and so on. If you dont want to work or do just enought to get by, then you can get up to 40,000 for you down payment. Now the people that are working but dont make what most would call a whole lot can not get this assistance. Now the market is down. who is better off. The person that is trying is in the hole and the one with the assistance it better off and keeping the house. just had a friend do this. got 40 grand for down payment and was told not to worry about any foreclosure, this is a Gov Deal.

And you are definitely right. In today's economy, and especially with all of the perceived campaign promises and the bank bailout misinformation, we are in for 'interesting times."

Kahuna, based on your background, can you please confirm something - As far as I remember home mortgage contracts, if you default and the bank seizes the property and subsequently resells it (straight sale or auction), if the sale proceeds do not cover the note, the bank still can seek recovery of the delta from the individual. Is that your understanding as well?

There are those who will...as many already have....
 

stop making payments with no intent on leaving the home....knowing banks are refraining from foreclosing on mortgages that are upside down....and wait for a bail out....hand out...refinance to more affordable configuration.
The current "bail out" environment breeds creativity.

BTK

Don't Know
 

Steve, I was a corporate banker and never had much to do with personal banking or home mortgages. I've always been under the impression that if a lender took possession of property used to secure a loan, by foreclosure as an example, he kept the proceeds of the sale of the property and the loan was extinguished. I'm pretty sure that if the proceeds were greater than the amount of the outstanding indebtedness (including accrued interest and fees), that balance would have to be returned to the borrower. But I've always assumed that if the lender foreclosed and took title to the property, that the underlying indebtedness of the borrower was extinguished.

Will the bank be required to report the amount to the IRS and will the lender be required to pay income tax on the forgiven debt?

VK - I think you are correct, a walk away is a walk away. Clap the hands and you are free of the debt. It will follow you on your credit report but what is to stop someone from just walking away and renting for a number of years. With the glut of housing no landlord is going to refuse cash in hand on a month to month lease regardless of someone's credit background.

I think the question is more moral than financial. If you are indeed upside down or even break even then it makes financial sense to walk away. I'm sure that you could even buy a depressed piece of property afterward despite the walk away mark on your credit.

I have NO experience in the lending industry, but as everyone that has read my post know, I have opinions on what will happen. LOL

I saw, sometime during the last 6 months, a news report on a Boston news station that featured someone who knew he was going to default on his mortgage. Knowing his future credit was going to tank, he used his still viable credit to get a bank to give him a mortgage on a less expensive home. He convinced the bank that he was simply downsizing and his current home, when sold, would help him pay down the new mortgage.

The man, soon after purchasing the newer, lower mortgage home, defaulted on the first home. Simply walking away from a mortgage he no longer could pay. All this was intentional! When asked buy the reporter, if he thought this was a right thing to do, he stated something like "Why not? I've got to take care of me and my family first."

So, do I think that people will continue to walk away from their homes? You bet!

Human nature, such as it is, shows peoples true colors in times of trouble. Dishonest people will be dishonest. Honest people will struggle, but not walk away from their problems.

As I've said in another thread: Our government, though well intended, opened a can of worms with the Community Reinvestment Act. Instead of helping people with less than good credit obtain loans, as I'm sure was the only intent of the program, it opened the doors to everyone who wanted to buy their McMansions, to flip homes for profit and otherwise use the program for their own financial stupidity. Look where we are now, because of government interference in the natural processes of lending practice.

Taxes And Forgiven Debt
 

Here's how the accounting for bad debt works for a bank.

Bank examiners and the public accountants require that assets on a bank's books be "marked to market". For a bank a loan is an asset. Let's say that a bank had a $100,000 mortgage loan on a house. When the loan was made, let's say the house was worth $120,000. As real estate market values dropped, let's say the market value of the house--the collateral for the loan--dropped to $80,000.

Everything would be OK for the bank so long as the borrower stayed current with his mortgage payments. However, once the borrower became delinquent in his payments, the examiners and accountants would require that the bank mark the loan to market. Using the above example, the bank would have to write off the portion of the loan greater than the value of the collateral less the estimated expenses of liquidating the collateral. Again, using the above example the bank would probably write the value of it's loan down to around $70,000-75,000 (the $80,000 alue of the house less another $5,000-10,000 that it might take to foreclose, maintain and sell the house).

If the bank's proceeds from the sale of the house after expenses were less than the marked to market value they had in their books, they'd have to take another write-off to reflect that amount. If they actually received more from the sale of the house than they had already written off, they would take that amount into income.

The bottom line on houses that have to be foreclosed on and then sold by the lender is that there is no income to tax--only a substantial loss. Of course, if the bank has other lines of businesses that are profitable like credit cards or investment banking, the losses they take on their home mortgage business would offset any income the bank earned on those other businesses and any taxes would only apply to the net income.

Another real problem for banks is the effect of bad debts on their balance sheet and capital accounts. A bank, whether regulated by either the federal or state governments, is required to maintain a certain "capital ratio". Let's say that the required capital ratio is 20% of the assets on a bank's books. When he bank writes off assets, it reduces their capital accounts directly. So unless they add capital by retaining earnings or selling more equity, they have no choice other than to reduce assets to maintain the capital ratio.

That's what's behind the Fed's investing in the banks in the form of preferred stock. That investment can be added to the bank's capital to permit them to either maintain the assets on their books or even create more assets (loans) based on their new capital ratio. The problem that the banks seem to be facing now is that the amount of money invested by the Fed is insufficient to increase their capital ratios because the losses they are experiencing, as the result of more and more loan deliquencies and forecloses are greater than the amount of new capital the Fed is injecting into the banks.

So my theoretical question that started this thread has very real consequences that will effect all of us. The more borrowers who decide to simply walk away from their houses because their value is less than the amount borrowed simply makes the banks weaker and weaker. Their capital simply won't permit them to increase lending. In fact, they may have to continue reducing the amount of their loans.

While the American public tends to think that the $700 billion approved by Congress is a big number, it really isn't when compared to how much the European countries have injected to save their banks. It's a sad thing to say, but even what we consider to be a huge outlay of taxpayer money does not appear to be even close to what will be needed to permit the banks to begin lending again--getting money into the economy in order to begin the process of economic growth.

We are all facing very tough times--much of which history will say was caused by too much debt created by both the public as well as our government. This problem is going to take quite a while to get fixed--probably years.

And it is going to get worse for many over the next couple years.

With all of the talk of "tight credit" is the realization that houses are taking an across-the-board 20-25% reduction in value. I know the house I'm trying to sell in DC I'm going to take $100+K loss at minimum, since I found myself having to buy in mid-2004 (when prices were at the highest) and now sell when things are tough. We've had to be realistic in pricing the place at a rate which makes it "mortgageable" (below what we paid for it) and still it's been slow. As is always the case, there will be those who make money at the same time others lose money, but that's business.

Any boost in consumer or homeowner credit that is not tied into keeping the money circulating within the community (as opposed to shipped outside the country for Made-in-Elsewhere goods) will only feed the problem. It is impossible to exit a recession while being upside-down continually in balance-of-payments.

A Couple of Questions to Kahuna
 

1) In the 80's S&L debacle, I know of several instances where the banks approached underwater homeowners with a demand to increase their equity in the property. Of course few people did this, but my question is do you know if banks still have that legal option as most mortgages are written today?

2) Also in that time, the IRS was nailing folks for tax on the "gain" realized on the forgiven portion of a mortgage debt. This subject has not some up in any recent discussion I've heard. Do you know anything of the status of this today?

I'd keep repaying my debts. When you borrow money, you pay it back, not walk away. Something my daddy taught me.

This whole thing started when the government forced banks to make sub-prime loans to people who couldn’t afford to make the payments in the first place. Likewise you had people purchasing homes at the peak of the price bubble (how stupid is that) getting interest only loans, 100% financing, etc. Everyone and their mother knew the housing prices were going to slip back (they always do.

My philosophy is no bail outs period and let the market sort things out. The tax payers are going to get soaked into the trillions of dollars when this is over and so far it’s not helping one single bit nor is the money being used how it was intended. The bailout is a scam and serves nothing more than to allow the government to get control over more of the private sector. The government largely caused this mess and now they are forcing us to pay for it. The second half of the root cause is just plain financial stupidity by some home buyers and others that do not live within their means or do any kind of financial planning even on a simple level.

They way to fix this problem is for the government to step out of the way, lower personal income taxes, cut cap gains and let the private sector fix this. I think we’ve all been around long enough to know government doesn’t fix things they break things.

Regarding the credit issue, I’m sure it’s out there but I frankly haven’t personally seen it. My bank just raised my CC limit… again. I have no problems at all getting car loans, home equity loans or anything else I want. The banks seem quite eager to loan money and in fact I just inquired about a loan on some property I was considering and the bank said no problem at all and I’m just Joe the Plumber, no one special.

I agree with you 100% :agree::agree:

A little off topic but does anybody remember the reason given for the establishment of the Department of Energy during the Carter Administration?

It was very simple, and at the time everybody thought it appropriate.

The Department of Energy was instituted August 4, 1977 TO LESSEN OUR
DEPENDENCE ON FOREIGN OIL.

And now it's almost 2009, 32 years later and the budget for this necessary department is at $24.2 billion a year, they have 16,000 federal employees, and approximately 100,000 contract employees.

Ah yes, effective, efficient bureaucracy. And now we are going to turn the banking system and the auto industry over to them with billions of dollars of our tax money for a problem the government says they can fix.

Things that make you go hum...

I’ve got to say that it really frosts me that the stereotype of people who “choose” to walk away from their mortgages is that they are irresponsible, credit card toting shop-aholics with sub-prime mortgages who never should have been allowed to buy a house in the first place. Certainly some of you must know one of the countless young couples for whom this just doesn’t fit!

If not, let me tell you about one young couple I know well. Family consists of father employed full time, mother now employed full time, and 1 y.o. baby. Conventional mortgage, car payments for 1 car (the other paid off), student loans, and medical bills for a c-section that was not fully covered by medical insurance.

He was downsized about a year and a half ago – got another job right away, but there were medical insurance issues – thus one of their bills. He now commutes 2 hours each way. Then her job moves. She now commutes 2 hours each way. They would like to move closer to work but can’t sell their house for enough to cover remaining mortgage. Figure they would still owe almost $40K. Both jobs are vulnerable to the economy, so both take second jobs. Now child care is an issue and another big expense.

Bottom line is stress is taking a toll on their health, their marriage, and the baby is spending way too many hours in day care. They are both discouraged and don’t see any way out. They are not planning to walk away from their mortgage but I wonder what they will do if either or both of them lose their jobs.

And the really sad thing is I know 3 other young couples in a similar situation. All are good solid responsible people who were doing what they were supposed to do. The details change but the impact of having a house that is worth lots less that what you bought it for doesn’t. So, please, spare me the stereotype.

I don't think it's a stereotype issue. Certainly there are situations where good people go under for the third time and not for a lack of trying. I'm talking about all those who did jump it way over their heads and had no business buying a house at that time nor did the bank have any business making those loans. That's partially what caused this mess.

In San Diego I watched person after person buy houses for $500k - $750k that only a few years before were selling for $200k - $400k. The only way they could afford to get in was 100% financing, adjustable rates, short term interest only payments. Oh, and don't forget their property taxes more than doubled.

Now they are loosing their homes left and right not to mention being horribly upside down. What did they expect would happen?

But it is a stereotype. Whenever the mortgage crisis is mentioned it is always in connection with foreclosures and subprime loans. I am willing to bet that many people simply forget that a great many other people have been hit by this as well. So, are "most" people in the "not responsible" category? I'm not so sure. I'd love to see some hard numbers on this. Otherwise it is too easy to say scr*w 'em, it's their own fault.

And If You Think It's Bad Now...
 

...you can't imagine how bad it'll be, paticularly in the upper Midwest, if we let the auto companies go bust. In Michigan about 20% of the working age people are on some form of government assistance now--unemployment, food stamps, etc. If the car companies go bust you can't imagine what's going to happen in many towns in Michigan, Ohio and Indiana.

Some economist who testified before the Senate Banking Committee today described the economic effect of permitting the car companies to fail will be "cataclysmic". I agree with him. Even though a bailout of the car companies is offensive in so many ways, the alternative will be worse.

Captain, I'm sorry I can't answer either of your questions with confidence. I'm surprised to hear that banks asked for more equity back in the 80's. I've never heard of that. I'd be surprised if language permitting lenders to do that was in any of the "modern" mortgage loan documents. I don't have a clue in the tax question.

Very well spoken. Seems most think, the people that are not of "MONEY" to steal a line from the Move Titanic, Should not have bought a house. And if they did and loose it then they are just simply taking the easy way out and say heck with this loan. There are those that will do just that, but as in the case here from Another Linda, this proves a side of the story most can's see happening. There are so many people in this same situation. I can tell you there are people living here in TV in the same boat. I was talking to a couple yesterday about to loose their house and have to move in with family. I posted on another thread about First Time Home buyer programs that give people up to 40,000 for down payment assistance to buy home they cant afford. But families that are trying hard and make a little money can not get the same assistance. There is so much that contributes to the problems.

There are so many that are trying their hardest working 2 jobs full time tyring to make end meet or make them at least work. I was reading some news articles and one of them made sense, they were talking how it is not really the poor that dont pay their bills. It is mainly the rich, that is why they are rich. They can find so many ways to get out of everything. I have been trying to find the one I came across web searching the other day in which a wealthy couple from the Bay area in California owed like 2 or 3 million in taxes, but we able to only pay only 250,000 and clear the lien they had placed on them. I guess if you make only 40,000 a year your a bad person if you have to let something go.

Sterotypes or not, there is so much that contributes to this crisis. It is not just the so called who most think are just "walking away".

I also agree all the bailouts are wrong. I also agree that the gov is not going to fix this and we should allow the companies and the markets to make thing work. But at the same time, we have to do something to change the way things are going to allow or help people keep what they have. Something I have never understood, why a house cost you 200,000. but depending on your credit it could cost you 500,000 to pay the house off in 30 years. The way interest adds up is crazy!!! How about this, instead of refinancing at a lower interest rate, which unless it is like 2% lower isnt going to help much, how about restructuring the way in accures. heck you could knock off 500.00a month off your payment. I know some are going to say you cant do that, it would hurt the banking industry. I belive that is already done!!!!

The foreclosure rate started to spiral out of control a couple years ago even before the economy tanked. The housing crises started by people loosing their homes mostly because they bought something they couldn't even come close to paying for.

I'm certainly NOT of money and we are a one income family. We buy what we can afford and don't buy when we can't afford it. When prices are high we wait and save our money. When prices are low we buy.

I saw many people in California living on the ragged edge. Both worked full time, they purchased $700k + homes that were really worth maybe $300k, both drove brand new cars, two or three kids, etc, etc, etc. Living the dream, right? If even one of them lost their job it would be a matter of a month or two before they went under. In my book that's just plain irresponsible and many of those situations directly caused the housing crises.

No matter if the economy is good or bad there will alway be those who play by the rules, work hard, make smart decisions and still get into trouble. That's just life and that will always happen. Those are the people that have my sympathy. In this situation it was just plan stupidity on the part of a lot of buyers that lead to this problem.

Now they are crying for reduced interest rates and even in some cases having the government / bank reduce their total mortgage amount so they can keep their houses.

Hey, where's my freebie mortgage reduction?

Reading all this makes my stomach hurt.

I personally would scrub floors before I walked away from a debt. That is just plain stealing.

I suppose that sounds stupid in this day and age.

:agree::agree::agree:

No, Graciegirl, that thought sounds to me like character and integrity which is often missing these days. There's nothing stupid about your statement. :coolsmiley:

I agree GG, nothing stupid, but not necessarily realistic. In the case of my young couple, they are not now in trouble. They can afford their house on 1 salary. But lots can happen, especially if they can't sell their house without owing $40K. In trying to save for a disaster that they've seen their friends experience, he is picking up all the overtime he can get and working 14 hours a day or more during the week. She teaches for about 6 hours a day Mon - Thurs, works her second job Fri nites, and double shifts Sat and Sun. So when exactly do they wash floors? They certainly have no intention of walking away but they are very scared.

They thing that bothers me is that I believe there are many couples like them. They are part of the baby-boomlet and were just at the age when they were saving their money and buying their first houses. My couple had friends who were transferred out of state. They did walk away and now they will not be able to buy another house for many many years. What were they to do? They couldn't sell their home. I don't see this as a matter of character and integrity and yet the problem is most often referred to in terms of deadbeats.

Yeah, I know life isn't fair, but unless you've been there, you shouldn't act morally superior.

I have been there. I just handled it as I was taught. I am very very careful with my money. I certainly never was given anything in my life and wasn't born with money. We existed with one car for years in our married life with children and eschewed going out when we were dating in order to save the 20% down payment that we needed for our first home that had a 30 year fixed rate mortgage. I cut my hair and my kids hair and sewed and baked. We have always paid off all credit cards at the end of the month. Oh never mind. People do have choices. I have worked hard and so has my husband. I can't remember when he didn't put in 12 hour days, six days a week and even now is still working. I have worked all of my life, starting at my first part time job in a bakery outlet when I was fourteen. It wasn't easy but we never bought anything we couldn't pay for.

"Free to Choose" The couple that walked from their home made a choice, keep their home and change jobs or keep the job and loose their home. They walked away from their home. It's our individual choice as to how we go through life and we all need to make choices as to the path taken. We live with our choices and have no right to complain when we make a choice that is not to our benefit. Yes, life isn't fair.

High five, Graciegirl! We could share stories regarding lack of income and hard work endured during our married lives and even as children ourselves. Our married children have modest homes and vehicles and will weather this financial fiasco. (But then they ascribe to Dave Ramsey's money policies and learned at the fiscally prudent knees of their parents.) Unfortunately, instant wealth is an illusion, very hard work is required in most instances. I think we need to recoup the simpler lifestyles of the 50's and 60's, a time when all of our 3 sons toys fit in one corner of the garage and the cars could be parked inside because there weren't many "things" stuffed in the garage.

There are legitimate hardworking families caught in the current financial sewer but they are the ones who have lost their jobs and income, not those who bought homes beyond their means with small downpayments. Sadder yet is the story of the retirees duped by the Wall Street guru's, therefore, losing a huge chunk of retirement income representing wages that can't be earned again or recovered.

Thanks Peachie. I shouldn't have reacted so heatedly, but this is a very worrisome time for everyone financially. Merry Christmas to all. Forgive my hot head.

And that is exactly my problem with the whole way this issue gets framed. You assume that the only people who are facing hard choices are the ones who have already lost their jobs or have bought homes that they couldn’t afford or spent too much money on toys and on and on. And I’m saying that there are lots of young couples who have saved up their 20% down, have a 30 year conventional mortgage on modest homes just like we did. But those homes are now worth a fraction of what they were. As long as they don’t have to move or sell the house, no problem – they just hang on. But what do they do when they have to sell?

And everyone has choices? Let me tell you a story about another couple. She bought a condo when she was single (yes, she could afford it!). He bought a house when he was single (and yes, he could afford it). They got married and moved into his house. Tried to sell condo and couldn’t. Not a problem as she was still working. Wanted a family. Saved money so she could be home for a couple of months – longer if condo sold. Problem pregnancy and ordered to bedrest. “Chose” to try to work a couple of more weeks until had saved enough. Had miscarriage. Problem solved. Yep they had choices. Very sad.

Can it really be that I’m the only one who knows these young couples? Can it really be that the rest of you only know the deadbeats? Hard to believe. Well, I’ll continue to stand up for the ones I know. They are good people and just as hard working and moral as we ever were. But they are facing issues we never had to face. Doing their own haircuts and baking won’t help them.

Another Linda, the term "deadbeats" is yours, not GG's or mine. We talked about choices. The time frame of the couple you mentioned most likely spans more than a years time, the length of the "deep recession" which was named as such this week. Assuming they met, dated, engagement period, wedding planning and event and then planning a child prior to the sale of the condo in a weak job market is a risk and they took it. Did they reduce the price immediately or make attempts to rent the property prior to marriage? Would you have planned a pregnancy given the information about their financial position you provided here? These are not evil people caught in these circumstances, it's about their choices. There is a plethora of situations that can be described for every distressed mortgage. Extremely difficult times are upon us and the results won't be played out for a long time. Citing haircuts and baking as the only possible way to make ends meet isn't fair. I can guarantee the couple you presented has never walked in the financial shoes many of us endured until they hit this mortgage mess. This couple will, mostly likely, overcome the obstacles in their path as the economy recovers it's footing in the next year or two. The lost savings of the retirees depending on the income now for quality of life in their final years will not be recovered as easily, if at all.

Peachie, I agree
 

Another Linda. I certainly wasn't even thinking about your couple when I responded to your post. I wouldn't even think of folks I don't know as failures and I apologize if you felt that my answer was lacking in compassion or was too simplistic.

My daughter Helene has a mantra and I think it is a good one. "You can't have everything you want". Mine is, Well, if it's not cancer.......". Difficult times require a lot of character. I am sure the young people that you know have it, and if they are your children they will succeed with determination. After all, apples never fall too far from trees.

Accept my apologies. I always rankle when people assume that what we have now, we always had. I am so proud of what we have worked hard together to achieve.

We talk a lot about "choices," but the reality is the discussion is about "risk."

When we buy property with the idea that it will always increase in value, so the debt-to-equity ratio at time of purchase doesn't matter, that's a risk.

Where I grew up (in Boston) I can remember houses in the '60s and 70's where the value tanked and folks lost money. It happens.

Where I work and have a house (outside DC) the house I'm selling will result in an over-$100K loss from the original purchase price. My friend who came to DC with me chose to rent instead of buy. In the end, his overall housing costs will be much less than mine. It happens.

Friends who have "invested" (high-class word for "gamble") in stock, mutual funds, etc. which were to provide a rate-of-return higher than the run-of-the-mill savings account ignored the disclaimer that there is no guarantee now have paper-property worth much less than the amount "invested." It happens.

It's a tough fact of life that there are no guarantees in this world when it comes to money, value of property, profits to be made, or catastrophes (physical or financial). The younger the person, the greater the tendency to consider yourself immortal and/or immune to harm. The older the person, the greater the tendency to believe they are better-the average at assessing risks and good gamblers, and the mutual fund salesmen live on that perception, as do those who build casinos (who are their most frequent customers?) - as well as all of those credit card companies who flood mailboxes with "great" opportunities.

It's a shame that life can't be a rosy path to greater security, prosperity, property, et al. There's a lot of potholes and speed bumps on the path.

It's a jungle out there....

Like Another Linda, I have seen those I know caught in this quicksand through no fault of their own. Family friends. A young couple successful by all standards. She took a new job to do research. His company lets him work from home. Away they went. Go West, Young Couple. Go West.

They had a down payment. Bought what they could afford. They were responsible. They played by the rules. They thought they did anyway.

Nobody told them that there were no rules anymore. Their neighbors did not play by any rules. And neither did those who loaned those neighbors money. Speculators. Fraud. A government that did not care to watch. Why???? A lethal combination.

And this young couple did nothing wrong. Except for thinking that there were rules. Rules like there always had been. Rules that their parents told them about. Down payment. Buy what you can afford. You all remember those rules.

Now they are watching their hard-earned home lose value by the minute. They are surrounded. Multiple familes living in single-family homes. Neglected property. Swimming pools full of mosquitoes. No end in sight.

And researchers have to move for their jobs sometimes. Funding can run out for those projects. Then what? A hard-earned home that cannot be sold and a hard-earned PhD that cannot be used without the home being sold for a move. The American Dream becomes The American Nightmare.

I see the faces in this one, too, Linda.

Boomer

Now I am really depressed. I have made Another Linda dislike me and I lacked understanding of a simple problem.

Boomer, your post brought this problem into perspective for hard headed me.

GG,

It is a complicated and wretched time. And so many things are so hard to recognize and realize right away because it is so awful. And so different from anything ever before. If you do not want to be even more depressed, be sure not to read that link in my thread about the Business Week article. No matter what we have done right as individuals, we have all been betrayed.

But we will get through it. It will be harder for some than for others. And those who should be punished will not be. And our kids will always remember where they were at this point in history.

Sometimes it is so difficult to communicate in print. In a regular discussion, it all would come out so much better I think. Thank you for letting me know I helped with the communication factor.

And, btw, Mr. Boomer just said it is snowing out there in Cincinnati. :cus:

Boomer

True stevez, the "choice" a lot of people made was to take the "risk." Your quote on "no guarantees in life" is just what life is. I have friends that have bought homes without selling their condos first. They took a risk. They're both regretting the move because 3 years later they still haven't sold the condos.
Another friend is dieing of leukemia and bought a home in Port Charllote, FL with an interest only loan. How dumb can one get? It's been empty for 2 years and he walked away from the loan last month. He took the risk, even after asking my advice, and now whines about the $65K loss.
These people made "choices" that involved "risk" and lost. That's life.