I recently read an article that said there is a shift in a fundamental belief that Americans have long held near and dear to their hearts. In the past, when times got tough, Americans paid their mortgages while not paying their credit cards. It used to be that home ownership was the Holy Grail. People would go through hell and high water to keep their house.

Not so anymore. According to this article, for the first time in history, more people are paying their credit cards first and not paying their mortgages when times get tough. This is indeed a very tough time for a great many people.

The reason for this shift is that people are finding they need to keep current with their credit card payments or get cut off. When the belt is tighter than ever, people are using their cards for basic necessities: paying bills with them, buying food and gas with them. If you get behind, the repercussions are swift and severe. Meanwhile, the mortgage goes unpaid for several different reasons. One is that the repercussions are typically a long way off. The foreclosure process is usually a long one, sometimes even taking a year and a half after someone stops paying the mortgage. Fortunes can be made and lost in that span of time, and a person could potentially get themselves caught up in that time. Secondly, due to the subprime mortgage business, many people have not invested personal money into their house. You can get a no-money down loan, making a traditional mortgage requiring 20% down a dinosaur.  When people don’t have a personal vested interest in something, it’s easier to walk away when times get tough. Thirdly, during the subprime mortgage heyday, houses were heavily marketed as investments. People were encouraged to tap into their equity, because it was advertised as an easy way to skim a little off the top, and that little bit would soon be refilled as the house increased in value. Mix a subprimer stuck with a house losing value, and it’s easy to see why a person would pay credit cards before their mortgage. It’s a recipe for disaster.

I read a statistic that said one in three homeowners nationwide is upside down on their mortgage. People are purposely letting their homes go to foreclosure.  



Amazing. I’ll bet nobody thought this would happen as a result of changing the rules to make it too easy to become a homeowner. Stefan found this amazing quote by Einstein that said:

“We can’t solve problems by using the same kind of thinking we used when we created them.”

Yet, I’m afraid we will try to solve this problem using the same minds as those who created it.

This definitely makes me look at houses differently. I cannot look at a house as an investment anymore. At least, not in the same way I used to. While it’s acceptable to buy a car and pay back the loan even though the value of the car is expected to decrease, it’s very hard to look at a house the same way. It feels unnatural. Homes are supposed to increase in value. They aren’t supposed to lose value. And while it’s okay to owe thousands on a car that isn’t worth the amount financed, it’s not okay for a house, where the amount owed is in the hundreds of thousands.

This is where we were tricked. It seems wildly unfair that a bank is unwilling to lower the amount owed on a house that isn’t worth nearly as much as the amount financed. Would you continue to pay a loan amount of $500,000 when what you bought is worth only $250,000? How long would it take you to rebuild the value back to what it was when you bought it? How long would you have to stay in that house because you couldn’t sell it because you’re woefully upside down? What if it never came back up in value? Why continue paying on a house when you know you won’t be able to sell it in a few years because it’s worth so much less than what you owe?

 Tack onto that the fact that a 30-year mortgage is steeped towards favoring the bank. You spend years upon years paying huge chunks of interest, with very little going towards principal. Case in point: on our $1,400/month mortgage, only $200 of our monthly payment goes towards principal. And that’s after almost 5 years of paying. When we first got the house, only about $97 was going towards principal. We’re paying roughly $200 more a month now than when we started out too, and that is going to escrow to pay for increased property taxes – even though an appraisal of our house says we can’t sell it anywhere near what the county says it’s worth. Now that I am paying the mortgage by physically going to the credit union and paying it, I’m taking a closer look at the break-down and it sours my stomach. (Note: I’m paying in person because after our fiasco with the credit union, I don’t trust them one itty bitty bit. I’m still leery that they might try and pull a fast one on us, but that’s a story for another time.)

Where is the incentive to stick with it? Nobody likes feeling trapped, and so many of us feel backed into a corner on this one.

A car can only lose so much value and we plan on replacing it when it gets too worn out. A house is different, because the devaluing can be in the hundreds of thousands versus a couple of thousand. Additionally, houses were marketed as long-term investments whereas cars are not. You put in your 30 years and after that time the house and all the accrued equity is yours. You typically don’t replace a house when it gets worn out, although in our very mobile society, only a small number of us actually ever stay in a house long enough to own it outright, so we could be fooling ourselves here.  Is it our perspective that makes cars and houses seem so different from each other? Or are they actually different and should be subject to different rules?

Stefan posed this little gem last night when we were discussing this topic. This one scares the living crap outta’ me, I gotta’ admit. So there you are, going along, paying your mortgage like a good little do-bee. You’re in your 29^th year of house payments and the end is in sight. You can practically taste it. Freedom is so sweet. When BAM! You lose your job. You can’t make your mortgage payments anymore. The bank comes along and demands payment or you face foreclosure. You can’t pay them so THEY TAKE YOUR HOUSE.  29 years’ worth of mortgage payments, sweat and pride, built-up equity, and your house is POOF! Gone. How is it fair that you’ve made 99% of the payments on the loan and they can still take your house? Where then, did all your money all those years go? (hint: you see all those fat cats in Washington?)  You certainly don’t get it back. AND…and then the bank can turn around and SELL YOUR HOUSE!!! For a profit!!! So they make all that money on someone else all over again!! I mean, don’t you own 99% of that house by now and the bank only owns 1%? But it doesn’t work that way.

When I look at it this way, I do not see the bank as being friends with consumers. Not at all. Ownership, clear and outright ownership, is the ONLY way to protect our assets.



Just some food for thought.

Anyway, on to lighter things! There is a woman named Heather Armstrong, who is the creator of www.dooce.com.  Years ago, maybe in the late ‘90s or so, she created this blog and she blogged about her job and how much she hated her co-workers and bosses and made fun of the company and the people who worked there. Well, turns out some people she worked with read her blog and they weren’t exactly thrilled with her opinions of them, so she got fired.

Somehow or another, as she continued to blog, her plight got picked up by the media and before she knew it, hundreds and thousands of people were reading her blog. She eventually was able to support herself solely through her blog via all the companies who wanted sponsorship. (Sponsorship is a fancy way of saying, “I’ll pay you xxx amount of dollars if you showcase my product/company somewhere on your blog,” i.e., advertising).

Her writing style, by the way, is absolutely whip-smart. She’s succinct, personal, clever and very funny. Intense, too! She’s very honest and open. I don’t know that I could do what she does, mostly because that’s a really intense spotlight to keep on personal relationships, because that is what her blog is about: her life, the people in it, and her thoughts about all of it.  I love writing, don’t get me wrong, and I love writing on this blog. But I am not comfortable enough to write about the things she does. I feel it’s too vulnerable of a position in which to put myself and others in my life.

A few years later, she wrote a book and it did very well. So she wrote another. Meanwhile, she kept blogging, and her husband eventually quit his job to work with her. She blogs, and he maintains the technical stuff.

Now, as of last month, she just landed a spot on HGTV. She’s going to be a host, or get her own show (I’m not sure on the details) on HGTV! She’ll still keep her blog, and her husband will still work with her. And she’ll keep selling books.

I am amazed by all this. I think it is absolutely wonderful. And I’m sure never in a hundred million years did she ever picture her life taking this turn. All because she got fired over her blog. Had it not been for that, I wonder if any of the rest would have happened.

Frankly, that is why I love her story. It’s a testament to the wild and wonderful, zany and unexpected world we live in. No amount of goal-setting, or “what ifs” could have produced what happened. It’s stories like these that I love most, for they give me hope when I feel I can’t see myself out of a situation.