Apparently in conjunction with an Associated Press article on the surge of subprime foreclosures, Dan Shaw has a story on foreclosures in Indiana.
Lenders in Indiana, Ohio and Michigan made 8.7 percent of the mortgage loans in the country, and those three states had 19.9 percent of the loans in foreclosure, the study says. Moreover, they had 15 percent of the foreclosures that were started in the first quarter of 2007.
The study cites the loss of manufacturing jobs in Indiana, Ohio and Michigan as an important cause behind the rising numbers. While some of those have been replaced by service jobs, they have not been as plentiful as the number lost. Nor has the pay equaled that found in manufacturing work, the study says.
I forget where I heard it, but someone was talking about “interest-only” mortgages and remarked, “Back in my day, we called that ‘rent.'”
Actually, I think that interest-only mortgagages are worse than rent. Typically the worst you’re on the hook for in a rental is the rest of the lease, so maybe a year’s rent – and most landlords are pretty flexible with that if you’ve been a decent tenant and they can rent the place back out. An interest-only mortgage in a slow housing market means that you are likely to be upside down, especially when you figure in paying the realtor.
Yeah, plus renters usually don’t pay utilities and don’t pay upkeep, insurance, property tax, etc.
While the loss of manufacturing jobs, predatory lending, and interest only loans serve as a catalyst, the ultimate reason for the high percentage of foreclosures (not all mind you) is ill-educated consumers living beyond their means. Doug, you specialize in collections, wouldn’t you agree that while a lot of foreclosures, bk’s & collections are medical related, the overwhelming majority are people simply in over their heads?
My clients tend to be collection agencies for hospitals, so my sample is skewed. But when I ask them about the rest of their debts, overwhelmingly they seem to be medically related. There is a fair amount of credit card debt, but it’s not nearly as prevalent as medical debt in the cases I tend to see.
My typical debtor is in his or her 40s or 50s, has a lot of medical bills, is not well educated, and is partially employed or on disability or, my favorite, is “applying for disability.” For those who are employed, take home income is somewhere around $200 – $250 per week. Rent is somewhere around $300 – $400 per month. Usually a number of children are involved, often from a mix & match selection of partners.
It has always seemed to me that the major difference between rich people and poor people is how many mistakes they can afford to make, or the size of an emergency it takes to swamp someone under.