To Never Have Loved At All?Today, we might say that is it better to have "owned" your own home for a year or two than to never have "owned" a home at all (You don't really own a home until you have paid it off.)? Frankly, that is an interesting question. Jim Cramer says that if you "bought" a house with a $400,000 mortgage, and the house is now valued at $300,000, you should walk away from it. I saw a lot of this happen in the 1982-1983 recession (though the sums were smaller, by far).Even in my own case, I became what was to be a small investment in a large (28,000 acre) ranch in Wyoming. It was to be a 0.03% limited partnership. During the crazy prime rate rise in the late 1970s (when Carter told Volker to stamp out inflation) and early 1980s, my interest grew to 3% as people walked away from their investment. We came within 10 days of declaring Chapter 11 and creditors settled the short term debt for ridiculous sums (in at least one case it was 10 cents on the dollar). So we got rid of the short-term debt. There was a plan to also finance getting rid of the long term debt by assessing the investors to buy a 14 year Treasury at 14%, but I voted for it though not enough of us voted for the assessment (there had been others). So I was up to a 9% interest. When it came to an assessment of $5,000 each just to finance putting the ranch up for sale, I walked too. BUT, just think, my obituary can say that I was a former rancher! What a laugh. And as a limited partner, my credit rating was not touched.So ladies and gentleman, people are going to walk away from these debts, and they can say they were a former home owner. Somebody gets holding the bag. Now we faced up to the problem in the U.S. during the Saving and Loan Crisis of the early 1980s and the Feds had fire sales on Saving and Loan assets, but we got over the problem and the country later prospered again. The Japanese refused to handle their bank/real estate problems and are not out of the woods totally yet. Which way do you want to go?I know many of you do not want to hear this, but this administration, which we collectively voted in, wanted to show that a higher percentage of families owned their homes than ever before and led us down this track. So WE are responsible for this, and WE need to solve it. OK, so you didn't vote for this administration, but, in a Democracy, we have to go with the majority so we are ALL in this together. Though I don't want to minimize the hardships walking away from a mortgage and leaving a home has on the foreclosed, they CAN walk away. But what are the consequences of the economic crisis and mess to the nation? It looks to be very severe.brucedoe
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