Fear of floreclosure
A story making the rounds in local banking circles tells of an upscale couple in a big house at Smith Mountain Lake. Behind in their jumbo mortgage they mailed the keys to their house along with keys to both of their luxury cars to First National Bank of Christiansburg and walked away from the house and a lifestyle they could no longer afford.
Bankers tell me such stories are common nowadays and often true. The housing industry, living too large for too long on a boom that had to bust, is in trouble and with them the banks and mortgage brokers who cut too many corners and handed out money with too much ease to those who really couldn’t afford to buy.
We have friends trapped in this cycle, some forced to sell their homes at a loss to get out from under a heap of trash debt.
A banker friend tells me this mortgage crisis in this country may surpass the savings and loan junk bond debacle that struck in the go-go eighties.
Trouble has already hit the urban areas and it’s coming our way. And that starts with "T" and that rhymes with "D" and that stands for "debt."
Debt has been, an continues to be, sold like candy to unwary consumers. Just look at the TV adds such as the CHASE “Freedom” card and others with consumer’s spending their brains out like synchronized swimmers (or brain dead robots) only to have the line suddenly halted by the one odd cog in the machine who wants to pay by cash or check. Doesn’t sound much like freedom to me.
It’s been proven that the closer you are to spending real money, i.e. cash or check, the more discriminating you are when parting with your money. McDonald’s didn’t put in the credit card swipers just to be nice. They average a good percentage more in sales than if the customer used cash.
Interest only mortgages (insanity), brain dead underwriting that take into account your credit score (I love debt score) and greedy bankers extending mortgages that have payments that gobble up more than 25% of the buyer’s monthly income coupled with naive and financially uneducated buyers with stars in their eyes of owning that McMansion have lead to this problem.
The borrower is slave to the lender and carrying debt robs you of your greatest wealth building power: your income. You can’t build wealth when all your income is being gobbled up by large mortgage payments, credit card bills and car loads.
Bottom line is that we’ve been spoon fed this diet of living on debt and we don’t like the after taste.