There is a couple that lived just south of Woodward Park that finally lost their home in 2011.
The word “finally” is important since the home for all practical purposes went into foreclosure nine months before they finally moved out.
Neither husband nor wife lost their job. At the same time they did not have pay raises for the past several years, much like everyone else. There also was no catastrophic expense - medical or otherwise.
What happened was in late 2009 their artificially low monthly mortgage of $2,300 ramped up to $3,200 under the balloon payment provision of their loan.
They paid the extra $900 a month for four months before friends told them they were essentially patsies. Taking the couple at their word, the extra $900 a month was a big burden but they figured if they cut back extensively on things such as cable, the type of meals they had, and didn’t go on vacation they could make a go of it. The downside of that is they wouldn’t be putting money away for retirement.
So they did what tens of thousands, if not hundreds of thousands, of Americans have done. They stopped making mortgage payments but continued to live in the home while the bank scrambled to deal with the property.
Based on their original mortgage payment they saved $21,700 over nine months, since they were not making any kind of payment for shelter, mortgage or rent. Today, they live in another neighborhood in a slightly smaller house with a monthly rent of $1,850.
It is one example of what a J.P. Morgan economist estimated has generated $50 billion in annual savings to those who opted to join the squatter economy.
Arguably, it is one of the reasons why the economy didn’t take an even deeper nosedive. A lot of folks - at one time or another - were doing quite well in terms of cash flow and standard of living despite having their home foreclosed.
Foreclosures since 2006 by and large haven’t been the result of job loss, a catastrophic expense, reduction in income or all of the things that once cost people their homes. It has been the result of funny money loans taken out by people who either bought too much home, should never have bought in the first place, or were looking to flip for a profit.
In a sense, who could blame them? There were more than a few stories out of the Bay Area of people making more money selling their home every two years or so than from their job. Greed is always tempting.
There are a good number of honest folks out there that are struggling to keep their homes with loans that have more often than not morphed into balloon payments.
Whatever the reason they opted for the mortgage they did, they should be lauded and helped in any reasonable way to try to get manageable payments.
But as far as having carte blanche sympathy for everyone who walked away from mortgages you might want to consider the fact a lot of people went from big payments to smaller payments by going from a foreclosed home to a rental home without downsizing or impacting their lifestyle.
It underscores the need to reshape America’s affordable housing debate. It should not center exclusively around home ownership but rather on affordable monthly housing costs, regardless of whether someone is renting or buying.
This column is the opinion of managing editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.
