House Underwater – Abandon Ship!

Citizen Wealth Foreclosure

foreclosure-thumb-440x330New Orleans I’ve been thinking about this for awhile in utter frustration at the Government’s protection of banks and unwillingness to write down principal to allow homeowners to rightsize their payments with their home values and protect their citizen wealth.  I’ve come right up to the line of accusing Treasury Secretary Tim Geithner of pimping for banks and just trying to cover his backside from his tenure at the New York branch of the Federal Reserve.  I am totally convinced that the big mortgage holders and mortgage servicers have played the government as total patsies, taking bailouts and incentives and then doing diddle for homeowners facing foreclosure.

I’m throwing in the towel!  I’m putting up the white flag.  It’s time to retreat, while we still have the shirt on our backs!

I’m now convinced the only way to protect citizen wealth for working families and force the issue to a real resolution, is for underwater homeowners to acknowledge the reality that they are only paying high rent with huge anxiety, and to walk away from these mortgages.  This is good for their family and as bad as it is for the community, and this has been the hangup for me, it may finally force the government and banks to do the right thing.

Part of the final straw for me was reading a piece in the New York Times magazine today in which a contributer, Roger Lowenstein, who is also an outside director of the Sequoia Fund, finally says flatly in so many words that the struggling homeowner is little more than a class-A sucker and full-time chump.  When the enemy starts not just robbing you, but making fun of you, it’s time to desert the field.  Fast!  [The Sequoia Fund is a mutual fund which last year reopened for new investments for the first time in a long stretch with their largest holding in Warren Buffet’s Berkshire Hathway.  This guy is not a bomb thrower just released  from the radical underground.]

Besides pointing out the total contradictions of banks and others walking away from their contracts and agreements while expecting the little guy to bubble deeper and deeper beneath the waterline, where we can imagine three piece suit Wall Streeters literally making fun of us down here in the neighborhoods, while they get read to cash their federally funded 6 and 7 figure bonus checks, Lowenstein notes that Brent White, University of Arizona law professor, figured out that a homeowner in Salinas, California buying at the top of the 2006 market with no down payment would – theoretically – have to wait 60 years (!) to recover equity.  Walk away, brothers and sisters – it’s time to abandon this ship!

If a family is worried about damage to credit, just rent for what you can afford, and SAVE some money.  Heck, save the difference in what you would have been spending to try to keep the house (including your payments for taxes and insurance!).  When the market right sizes on the value to loan ratios, if you have cash and have stabilized your own finances, you will easily be able to borrow money to get back on track, if you really want to own a home.  I know friends who have bought homes while  still working their way out of bankruptcy for goodness sakes! And, yes, then is not now, but now is also not going to last.  The robber baron wannabe conservative free marketeers are already arguing to let people lose their houses to foreclosure to rightsize the market and allow builders to start doing new houses at today’s prices to regenerate new home building and sales.  Believe me, there will always be credit for people with some money to put down, so it’s time to do that, not hang on and be the last sucker to go down with the ship.

In fact as a strategy for a family’s citizen wealth, it now make sense to keep renting and

look at other ways to build income security.   Many of us have always thought that too much investment was going into home ownership as a citizen wealth strategy, but that will take longer to change and to right size.  It’s an important fight, just not one that we can win right now.

If you owe more, especially significantly more, than the current value of your house, I hate to say it, but it seems to make sense to walk ticket and let the bank sort it out rather than going deeper in debt to hold on to what banks and the government have clearly by their inaction decided is a sucker’s bet and a white elephant.  Run while you still can!