As a lot of you already know I live in the Destin Florida area. I moved here in the 1996-1997 period, started a new life, with my wife, bought a nice townhome in 2000, and have been "coming back" ever since. But I must unhappily inform you the entire area may as well have been bombed based on the economic outlook and current conditons I see here.
The once "red hot" real estate market is gone (unless you have cash, and Cash is King!) I thought it was immoral to allow people to get "upside down" (where you owe more than something is worth at current values)in automobile sales. I watched it put my own oldest boy into bankruptcy five years ago. But the good news is that all he lost was a fancy new car, his credit rating for about two or three years, and had him eating humble pie for several months. (There's no way you can put a good "spin" on going from a brand spanking new hot car to an old motorcycle!)
Now the "upside down" car stuff was one thing, but this new "sub-prime mortgage" stuff is a whole other kettle of fish! The car thing was to move mostly American Auto Manufacturers inventory and keep autoworkers working, suck up the stop gap "losses", and stay alive as a business while the economy strengthened. BUT where is the "good" of the sub-prime stuff? In my humble opinion (and we all know what that's worth!)this is probably the mosst vicious, predatory practice ever perpetrated on people. Let me expand, why is it so bad, you ask.
First of all it was fueled by only one motivation, greed! What is the difference between a "drug dealer" offering a wide-eyed thirteen year old "free" hits of meth, coke, or heroin? The great "American Dream" was "pimped" to a lot of folks who, although they wanted it in a HUGE way, were not quite ready for it yet. It took away any "safety net", i.e. any "emergency out" they may have had. It let them get way in over thier head, borrowing more than they could reasonably afford to re-pay, and taking away "the Dream" in a cruel way,....foreclosure. A house foreclosure does not go away quickly, it lingers for at least seven years on your credit history. If you've a family it is a 24/7 reminder of "failing" to provide for them. And it will sour you like you would not believe. But so what,...is that the worse that can happen? Hell no!
The clowns allowing the mortgages then turn around and "bundle them" to even more greedy investors in large seven, eight, and even nine figure "bundles". For example you pile 100 of the $275,000 mortgages together and you have a $27,500,000 "bundle" kicking off an 8, 9, 10, and even higher percentage return every year, and they are all secured by real estate. So a few "go south" or fail, you just turn it around and sell it again. It's not like real estate is a "risk", or is it. While everyone thought the market would never end, the values would just escalate, and escalate, and escalate! The way it was going from 2000 to late 2005 you had to be a total idiot with an I.Q. of less than a "caveman" (ooops! Sorry guys, just a play on words) , not to become a millionaire.
The bad thing is that this little "time-bomb" of greed went global. Overseas investors and banks got involved in the buying of "bundles", the "bundles" got bigger, instead of $27,500,000, bundles rose to $100,000,000+, it was truly like owning the "Golden Goose",.....but then....
It all turned around. The old adage of your mortgage payment never exceeding a total of 25% of your aftertax income was a brief footnote to "the old days". The terms which had flourished a scant year ago evaporated. Terms like "Jumbo", "Wrap-arounds", "progressives", and "the flip" now became visible for what they were, a lot of "bullshit". World markets began to stagger, U.S. markets began to stagger, the "couple of odd bad debts" turned into "snowballs" of bad debt. Forclosure rates began to reach all time record numbers. The once firecracker of "I don't give a damn what it costs, I'll take it, make it happen" crowd began to doubt. Now instead of buying like a shark feeding frenzy they began to think about what and how they were buying. I've one acquaintance who mortgaged his family home to the absolute maximum concievably possible, in fact well beyond ANYONE's belief that it could even reach. He then bought several palatial places right on the ocean, started wrapping mortgages around multiple properties, "re-fi" the package into "bundles" and man he was rich. The "plan"? To set up a confusing trail of ownership of multiple properties leading to one "el Primo" place completely paid for by the "re-fi's and "cash take-outs" on the rest of the "house of cards". Then what? Well his plan was to bank enough to pay for his kid's college, max the "take-out" money on his businesses, much like he did on his main "ancestral home" in another big city, file for divorce, dump his wife, leave her the "ancestral home" as his settlement on the divorce, let the rest of the house of cards fold up, and voila! He had a fabulous home, completely paid for, covered uder the "homestead" act in Florida, pull in a personal bankruptcy, and walk away clean! And who would pick up all his "pieces"? You really think he cared? He had "offshored" money, leveraged all his "disposable assets",a/k/a "throw away homes", and was virtually untouchable. Unlike the young couple who are just beginning life and who "stretch" to own thier own home, signing for the "sub-prime mortgage", optomistically thinking "we'll be earning so much more in three years when the payment goes from "$677 a month" to the "$1432 a month" that it won't hurt!" You can find most of them now prowling around for a low cost bankruptcy attorney, or just walking away and moving out of state to try and "start over" again.
Sound depressing,....it is, and I know a number of folks in that position.
Now me? No, I saw it coming and " re-fi'd" my mortgage in very early '05. got a nice sub 6%, fixed 30 year rate, and even had it all planned so that my "retirement check" from Social Security when I'm 65 would cover it all. Oooops! Shame on me,...forgot about the damn hurricanes! Last March I had to writre a check for $5,400 for "homeowners insurance", which included "wind" or "hurricane" insurance, but in all honesty I really don't know if I can afford to do that again this March, so somebody bettter find a solution. My first home we bought in 1972 cost us $296 a month and that included the Principal on the mortgage, the interst on it, the annual real estate taxes, and the "homeowners insurance". That was 18 months of payments for me to even cover my current years "hurricane insurance". The worst part is I do not have the option of "gambling" even. That being the option of not carrying the "hurricane insurance", becasue the mortgage lender requires it!
AND the way it works there is a "deductible" on the hurricane insurance. I pay the $5,400 insurance premium for the year, AND have to "eat" the first $6,000 worth of damage to meet my deductible,....then I can file a claim!
Yup,...this "sub-prime" shit is going to bite a lot of people in the butt, the only "realisitic" solution is to increase the income to cover the costs, and since we in this country spend more time at our businesses hearing about how "things are too tight and we can't do any raises this year" we are left with the new model of funding the "American Dream", take in several families of illegal immigrants and give them an 8 foot by ten foot room for thier family of four, charge them rent and prosper, or re-read Robin Hood and try your own skills at "re-distribution of the countries wealth via Smith & Wesson negociations.
End of Rant
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