I think you'll find over time that I'm generally a pretty optimistic person always looking to the bright side of things, but as I gain wisdom I also find myself being a realist as well. I keep seeing news about how the mortgage crisis is showing signs of improvement, but also see news such as "Employer health care costs to jump 9% in 2011". Thus meaning in the not so distant future, the cost I pay for medical insurance will go up, as well as my deductible which I've already seen climb from $10 to $25 in the last five years. Seriously, you can't be serious.
If it is true that in every cloud is a silver lining, we must also still account for the rest of the cloud which may not be quite as rosy. As I've followed the economy more closely in recent month than before, I keep hearing about two things that are critical to economic improvement, consumer spending, and the housing market. Always playing with what if's in my head (it's actually pretty noisy in there for most people's tastes I would think) I started to imagine what else may happen in the future that could upset the apple cart when it suddenly came to me, what about the hunker downers?
Let me explain who the hunker downers are to clarify the concept, and hang with me as I really have a point to my ramblings. I consider hunker downers to be those homeowners who are in general pretty responsible people, and always try to do the right things with the lives and finances. They save for a rainy day and with good reason, then one of them looses their job. So what does the hunker downer do? They tap their savings to supplement income. Now while unemployment rates seem to be improving, I don't think all the people who lost jobs have returned to employment yet. If they are lucky, they may have another breadwinner in the household to allow some financial coasting room, but let's face it, most dual incomes rely on dual incomes to get by.
Eventually, the inevitable hits and savings are nearly gone as the depressed hunker downer spend their day scouring through job ads and trying to separate the real opportunities from the opportunistic advertising posts for training or school (I'll talk about this another day). As the household has already been living on a lower income, you can bet they have stopped spending on anything but necessities, there goes their consumer spending. As the financial brick wall picks up momentum with the dwindling saving, they next start to look at how else they can save. They've spoken with their credit card holders who are working with them on a temporary program many are offering today for people in this situation to lower payments (kudos to those organizations who are really trying to help). Still, there's no consumer spending here.
Next they look at their mortgage. Depending on when they bought their home and their credit score, they could be in a mortgage with an interest rate of 7%-10% (not uncommon when the adjustable rates were dying), and God forbid they have an adjustable mortgage. Also, if the home was purchased in the last five years, they are probably upside down as well significantly decreasing or eliminating the likelihood of a loan modification. So they call up their lender and here's how the conversation could go:
Hunker downer: I'm sorry, but we have had a job loss lowering income for the past couple of years and have depleted our savings. In looking at my mortgage I see I'm paying 9% and would like to see if I could get a lower rate such as what is available for a new buyer maybe around 5%. As you can see from my payment history, I've always paid my bill on time, and with the lower interest on the loan I could afford to meet my obligation and keep my home.
Lender Employee Number 1: I'm really sorry to hear this, I see you have been a loyal and responsible customer. Let me transfer you to someone who can assist you with your problem.
Queue the music "The love boat...soon will be making another run...the love boat..."
Lender Employee Number 2: Hi, this is Employee Number 2, how can I help you today?
Hunker downer: Repeats everything explained to Lender Employee Number 2.
Lender Employee Number 2: I'm really sorry to hear this, I see you have been a loyal and responsible customer. Let me transfer you to someone who can assist you with your problem.
Repeat Lender Employee X sequence two more times with full explanation each time.
Queue the music "The love boat...soon will be making another run...the love boat..." yes, the same song is playing as before.
Lender Employee Number 5 (after full Hunker downer explanation): I'm really sorry to hear this, I see you have been a loyal and responsible customer, however we are not offering any loan modifications for existing customers, the low rates only apply to home buyers. Could you make the payment next payday?
Hunker downer: I can try, but I did explain I can't afford the house with the current interest rate, is there no way to negotiate a lower payment?
Lender Employee Number 5: I'm really sorry but we are not offering any loan modifications for existing customers at this time. Could you make the payment next payday?
I think you get the idea. My point is (yes, I have one), I think we will soon see the hunker downer facing foreclosures. They've tried to do everything right, we all probably know or perhaps are one, and from where I sit, I think these are our people as our economies mainstay. These are the middle class who will soon find themselves in foreclosure causing a ripple effect in consumer spending and foreclosure rates. Not to mention what will happen to their credit scores. These are average citizen trying their best to stay afloat and optimistic. I hope I'm wrong here and just spent some time cleaning out my mental attic, but I'm concerned. Concerned for the hunker downers, concerned for the economy, and concerned that corporations have learned nothing from recent history including the hunker downer being there for them when they took the government bailout money.
To you lenders out there, get with the program and help these creditworthy hunker downers keep their homes. To you hunker downers, hang in there, you're not alone. To those of you who know a hunker downer, give them a hug. Things will get better for you Mr. and Ms. Hunker Downer, you're always very resilient, and karma will set things straight down the road. If nothing else, these events teach us what's really important in our lives, the people we care for and those who care for us. A home is after all what you make of it.
-Seriously
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