You were expecting that question to end with a promise of riches, weren’t you? Well, more and more people have had foreclosure take them by surprise lately.
Are you behind on your mortgage payments? Are you facing foreclosure? If so, you are not alone. I went through it myself not too long ago. At first, I was embarrassed to admit it, but now I realize there’s nothing to be ashamed of.
If you are feeling guilty, embarrassed or ashamed of the financial straits you are in, maybe my story will help.
I worked as an engineer for the same company for the last 17 years. I thought I had job security, but last August I was laid off. This has happened to a lot of people lately.
It wasn’t long before I realized I had a cash flow problem. Unemployment benefits didn’t even cover my mortgage, let alone food, utilities and HOA dues.
I tried to get my lender to negotiate a loan modification so I could keep my house. But the bank knew that unemployment wouldn’t last very long so I didn’t qualify. They wanted to see proof that I would be able to pay my mortgage for years to come, not just for the next six months.
Meanwhile I was searching the newspapers and the internet for a similar engineering job, but the job market was very tight. My previous work experience was in a very specialized field and there just weren’t any jobs to be found.
I did see a lot of ads for opportunities to make money online. I thought I might be able to cover my bills that way. So I started following one guru after another trying to make it big in internet marketing.
I lost my job in August and by November I had to start choosing what bills to pay and what would have to wait. The mortgage was my biggest bill so it always got put on the bottom of the pile.
I was lucky that I had something to fall back on. You see, I married a Chinese girl whose family was well off. A few years ago my wife’s family had bought us a house (in China) free and clear of any mortgage. The construction had been finished for more than a year, but it was still empty just waiting for us to move in.
I figured that if I lived in China I could rent out my house. I would be able to use the rent money as the proof of income the lender was asking for to negotiate down the mortgage payment. Then the monthly rent would cover the mortgage.
I found a tenant to rent my house and I packed up and moved to China. But the tenants did not pay the rent on time or even in full. Without proof of a reliable income, the bank was not willing to negotiate at all.
With no documentable income, even President Obama could not save my house. Eventually the bank took my house from me.
Did you know, there are over a million families facing foreclosure in the United States today? While President Obama has made efforts to help these people, it doesn’t do much good for the people who have lost their jobs.
So how did we get into such a mess, anyways?
Here’s how in a nutshell:
With interest rates at a historic low, lenders changed their business model to make their money in the up front points and fees rather than the interest paid over time.
This made it possible for lenders to sell off the loans packaged up as mortgage-backed securities. Since they weren’t planning to hold onto the loans, they went a little crazy and offered loans that they knew would not be repaid.
Homes became more affordable because people who should not have been able to qualify for a loan were offered deals they could not refuse. With the increase in demand the real estate market responded with phenomenal price increases.
The Wall street investors who bought the mortgage backed securities, were seeing fabulous gains as housing prices soared so they were willing to overlook the fact that many of the mortgages backing their investments were doomed to fail from the beginning.
This has resulted in a record number of foreclosures, which led to banks having financial difficulties. Credit became harder and harder to get. Businesses depending on credit had to close. This created a snowball effect that caused consumers to lose confidence in the economy.
Consumers stopped consuming and the economy hit the brakes. A kind of self-fulfilling prophecy: You better save your money because the economy is weakening because nobody is spending money because the economy is weakening…
Well, things are starting to turn around and President Obama has started to make some changes to help homeowners in trouble. There are signs that the economy is starting to pick up.
Most people don’t have the option to pick up and move to China if they wanted to. But there are other options. Some people are turning to some novel ways to save their homes. Some of these ways are actually working. Have you heard about the woman who saved her house by selling apple cake?
You can find out more about what people are doing to save their homes by visiting my website.