600 Million Reasons to Worry
March 12, 2007
by John Galt
Joe and Mary America had it good. Here it was 2003, and of course they had great jobs, two cars, two kids, a nice house, 1.5 dogs and 1.5 cats. Ain't America great! So one day, just a normal day in the middle class life, Joe had to take his lunch break and head on into the local bank to transact some business. While making idle chit-chat with the teller, the blood fell into the water. The shark, er, bankster, swam over and said, "hey, Joe, want to save some money and pay off all those pesky credit cards?" Well despite the slobber on the banksters chin, Joe couldn't ignore the idea of getting out of debt and saving money, so hypnotized by Ditechitis, he listens to the bankster's brand spanking new A.R.M. Deluxe Program which offered a free toaster oven if approved. He reads the small print, like a dutiful husband and says "let me show the wife!"
Joe and Mary discussed this offer and of course signed on the bottom line. The deal let them refinance for 1.1% for three years at a locked in rate, despite the fact that no payments would be applied to the principle, and best of all they could use the money to improve their home and pay off bills. After the paperwork was done they extracted around $40,000.00 from their refinancing, thus losing all the equity in their home after ten years, but by God life just changed as they could live like the neighbors, the Jones. They took $20,000 to pay off half of their credit card debt, $10,000 to improve the home with a new hot tub. Then they found out a way to get the other $10,000 classified as a needed vacation for the family to Hawaii. The kids loved it. And hell, the house was painted and had a hot tub now.
Happy New Year! It's 2006 and with the daughter turning 16 in January, well, the obligatory purchase of a car for her just had to happen. So now, with over $2000 in monthly payments for cars alone, old Joe got a tad bit nervous. God help him if anyone gets super sick or requires surgery. Thankfully they eat three square junk meals a day so life is good. Then in the summer of 2006, Joe gets called into "the corner office" which he knows is not good. In the room is a gentleman of Asian descent who just glares at Old Joe. Joe gets the news he's been dreading forever. The Delphi plant is shutting down and his job as a paper clip folder has been outsourced to Mexico. Clean your desk out now he's told and his heart just sinks. "Damn, if I had only started to save a dime after the refinancing" he thinks. Too late. He heads straight home in his one year old forty-five thousand dollar pick up truck he still has 6 years to pay on and grabs a beer. Then suddenly, one hour later at 2 p.m., Mary shows up in her one year old forty-five thousand dollar SUV, crying like a baby. The Asian guy was the trainee who's replacing and retraining the folks in Calcutta who took her job, you know, the rubber paper stamper and CSRs.
Shocked, they both bawled their eyes out and drank themselves to sleep, leaving the kids to fend for themselves for dinner and freaking out with worry. The next day, the second hammer fell; their A.R.M. was reset to 6.40% and another increase was probably coming next year. Their property taxes, homeowner's insurance and monthly payments have doubled in 2006 and without those auto industry jobs, they were supposed to smile and love it. And you wonder why Bubblevision never shows Joe and Mary on t.v.?
The next day Joe called the union head on their behalf and they were informed they get 6 months "layoff pay" and then could collect unemployment after that. Wow, we're saved they thought. Until they saw the first check. Joe immediately hit the bricks looking for a job as did Mary. Luckily they lived in an industrial town, so the need at 7-11 and for paper delivery people was high. Mary was fortunate because the bag boy at the local grocer said they needed good English speaking cashiers. They talked and both figured that the auto industry couldn't possibly stay this bad forever so they took the jobs and agreed to just rotate payments month to month as the banks would never want to try to collect all that debt they owed. Boy, were they wrong.
Bubba, woke up from New Years Eve down here in Tampa with the worst hangover of his life. He wasn't sure if it was the newfound competition for his job, with illegals operating without licenses and using black market suppliers or if it was the empty bottle of cheap liquor by his bed. He was a middle aged man, hard working and loving his skills as an electrician. During the boom times and after the hurricanes, Bubba worked 17 hours a day, but he didn't mind. He made a good living, got out of debt and just was happy to be an average American. Yet the hard times started in late 2005 when he noticed, "hey, that's not fair", as contractors and developers started hiring illegals in his position. He said to some of his former friends, "you keep doing that and I'll report you to the state" to which they reminded him that if he ever wanted to work in this state again, he'd best shut his yap. Depressed, he plodded on, watching his income drop and the bills mount up. His home was getting to expensive to live in. Bubbas was no splurger, heck, he was modest by comparison to Joe and Mary. He had a two bedroom one bath house he financed twice in the last 10 years to get a better rate and take equity out for repairs. Little did he think the wave of real estate selling would ever impact him. But now work was scarce. So he took a job asking people if they would like to "Supersize that meal" just to make ends meet.
Back to Indiana. Joe and Mary put their vacation home they bought in the 1990's down in Florida on the market when they got laid off. It's now been 9 months and no bites, despite reducing the price four times. And now, the banksters that loved them three years ago were on the phone. They reminded them that they were behind in their mortgage payments and the property taxes were now past due. Then their homeowner's insurance sent them the standard Floridian "you're fired" form and they were toast. Default was a coming and there was nothing they could do to stop it. After talking to a bankruptcy attorney they realized they would lose everything. So they held out and hoped and prayed because that Realtor in Florida, you know, the one now in the same situation as Mary and Joe, promised them they could still sell the house and break even or heck, even rent it out.
Too late.
The foreclosure notice was signed for by their daughter, even though the parents told the kids to never sign for anything from the mailman now, this one came certified and with all kinds of "LEGAL NOTICE" stamps on it. The game was up and they knew it. Or was it.
Before 2006 was over, the auction fetched all but $28,000 that they owed on the home, so that was a relief. Until the bankster letter, came in the mail. The 1099 was a shock, but the $28,000 was listed as "earned capital gain income" and now they had a tax debt, homeowner's property tax delinquency notice, pending foreclosure on their primary residence, the daughter's car being repo'd next week, and worse, the son needed dental surgery at age 12.
Everything above is a fictional story. Or is it? Your neighbor, or one of them, is probably just as foolish. A lot of people think they can just wait and pray that things improve.
Not true. With the new laws, the banks know their time to collect is limited so they are going for the jugular. And families are being destroyed nationwide. There are 600 million reasons to worry and Joe and Mary are just a symptom, not just a reason. Because once your neighbor goes into default, your property values decline. You can't refi for the amount you purchased. You can't sell for what your home is owed. You're living there, like it or not. Trapped. Like a rat. A greedy one at that.
Those executives at Countrywide are not fools. They know what hell they have wrought upon us. They know what is coming. And it's worse than I originally thought.
They got theirs, you got yours.
Oh, and the Jones, that lived next door to Joe and Mary and had everything, well, they went bankrupt. Remember that "we're in debt up to our eyeballs" televison commercial? Well, that was them.
And the property values declined 25% in one year as a result. Because that neighborhood was an automotive industry employee neighborhood.
But cars, farms, food, and homes do not make our economy now according to the experts. Flipping burgers, delivering papers and teaching Spanish classes do.
Worried yet?