They hadn’t saved a dime, put zero down, thought a no-interest, adjustable rate mortgage would last forever, and assumed the housing market would rise indefinitely. Now they’re about to lose their home and are looking for a handout. They feel “entitled” to stay in their home. You can blame the brokers, the banks, the government, the economy, and everyone else – but you wouldn’t be addressing the issue that is your neighbor is a loser who overextended him or herself, and one way or the other will bring you down with him. If the government doesn’t step in with some sort of bail out, then your neighbor forecloses. Over 3 million did so in 2008. That means an increase in supply and a drop in the value of your home. And, if your homes value drops too much (most already have or are headed this direction) you can’t refinance because banks don’t want to lend you more than the collateral is worth. On the flip side if the government pumps money into the economy to bailout these losers you artificially increase the money supply, drive down interest rates, increase inflation, and put a bunch of falsely valued assets on the books of banks. Not to mention, the country digs itself deeper into debt – tacking on another trillion to the trillion amassed by the last administrations poor spending habits.
What to do? If you are one of the increasingly few who work hard, don’t spend beyond your means, and make sound financial decisions pat yourself on the back and rest easy knowing you’ll be the ones leading the country out of this mess. Throw a block party or BBQ for others like you, and commiserate about the neighbors who are bringing you down. That’s about all you can do.