Every morning while I am driving in my car I hear the same commercial.
“Is your home underwater? (not literally but in the figurative sense as in:) Do you owe more on your mortgage than your home is worth?”
And I think to myself, how is this even possible?
Have you ever attempted to or actually bought a home?
It’s not possible unless you have a battery of, no, gang of, no, a veritable gaggle of “professionals” who swarm around you like house flies and come out of the woodwork like cockroaches just to charge you extra money for their necessary, no, needed, no, required by law, “expertise” to make sure that you can not only afford said homestead, but can also pay the absolute highest possible market value for that humble abode that you so happily desire.
There will be people employed by banks and law firms and mortgage companies with titles like, Loan Officer, Title Attorney, Home Appraiser, Escrow Officer, Credit Evaluator, Tax Assessor, Insurance Officer, you’ll meet adjusters and investigators and inspectors and application officers and termite investigators and more people with more titles than you’ve ever heard of or ever thought you would need to buy just one little old house.
And they will all be well schooled and well certified and well trained and professionally paid…by you the lucky home purchaser, and they will all come to a professional and certifiable agreement as to what your home is worth and what you can afford to pay and then of course what you will be expected to pay over the next 30 years or so.
And that’s pretty much how the process works, and yet amazingly enough, without one crime being committed 10.8 million Americans or 22.3 percent of all homeowners (The research firm Zillow has estimated that nearly half of homeowners under the age of 40 are underwater right now) have discovered that all of these professionals, with their degrees and diplomas and pedigrees backed by large banks and mortgage companies and financiers and government officials, have apparently had to take no more responsibility for their being wrong about the value of these homes being inflated and overvalued than a weatherman does when he gets the weather wrong!
“Oops, sorry but you now owe more than your home is worth. Our bad. We sold you something that wasn’t worth all of our professional opinions put together and guess what? Who could have seen this coming? Like a bad storm that took a wrong turn, we “the professionals”, just didn’t see it coming. It was a housing bubble that burst! You know, like a festering blister. Who could have seen that coming?”
Unfortunately for these homeowners they weren’t swindled, as it would have been called in the old days, but rather they now just own what is known as… “Negative Equity”. Ironically the very first meanings of equity in English were a direct translation from the original Old French equité, a word whose Latin root means “even,” “just,” and “equal.” So today’s unfortunate underwater homeowners are simply suffering from negative evenness, negative justice and negative equality. Which of course is not a crime when the wind is blowing like it’s 1984 outside!
But I digress because there is good news. Fortunately for all of the well paid “housing professionals” what happened was not a crime and today, the unfortunate homeowners or rather “Underwater borrowers” owe an average of $72,235 more than the value of their home, which must still be good news for the “professionals”, no?
And because the “homeowners” (I ask you: what do they actually own if the home that they “bought” has less value than the money they borrowed to pay for it?) can’t sell their homes and move without incurring a steep financial penalty… And since the homeowners and not the “professionals” are penalized for taking such lousy advice from “the professionals” in the first place (the word today is that prospective homeowners need to do their homework and checkout the professional advice they get before taking it!) the homeowners only recourse…as the advertisement spokesperson concludes in the commercial, is…REFINANCE!
Or in other words, since crime just ain’t what it used to be…as in criminal… please, please, please…
Let me be your weatherman.
ipledgeafallegiance 
Very interesting reading … and sadly true in many cases. Currently here in Brisbane, thousands of homes are literally underwater … just as your photo depicts … many uninsured … many who are insured will have a massive battle with their insurers to have their claims for flooding paid. Sadly many have just renovated after the last devastating floods two years ago. And others moved into previously flooded areas believing that the rare flooding would not happen again … so very soon.
Great analysis of the property bubble. And isn’t it ironic that America, the home of deregulation and free enterprise, has so many controls and state-appointed busy-bodies doing ineffective work? Still, you would be even more appalled by the bureaucratic nastiness in a country like Spain!
True and accurate. Sadly this is not the first time the monied have gotten that way by creating these artificial bubbles…and by no means the last. It should also be said, though, that as a people, we have to take at least some of the responsibility for this. We should know better than to expect to buy perfection. That whole idea of the ‘dream home???”–should we not instead work hard and build incrementally rather than just stepping into our mansion and assuming that all will be well?
Nonetheless, I do lament for justice. It’s been sadly absent in this whole affair.
“You don’t need a weatherman to know which way the wind blows…”
We refinanced once. It cost $7,000 after all was said and done. We never did that again. Great thoughts…
I live next to a mortgage broker, lawyer, and real estate agent. My dad was in the business also in the state of Alabama..He was very fair with people..I saw it first hand for over 20 years before he passed away in 1993. Yet I understand what you are talking about. It is a choice to buy a home and we have all been fooled. I feel fooled that I even have a 401K because of what wall street has done. .It is all a racket as far as I am concerned. Man you might have opened a can of worms!
I enjoyed your post. There will always be those who take advantage of and gain financially from the hopeful, the greedy, the ignorant and the dreamer. Greed will destroy every country on earth before the end.
What a mess. We are visiting my parents in Hemet, Ca. and the whole town seems to be underwater. Thanks for dropping by.
In Ireland they even brought in a “property tax” this year. So now your worthless property is costing you even more!
And now they’re offering to find a way to lower my mortgage costs…without even making me pay another fee! Of course, they admit, lowering the payments by setting a slightly lower interest at this point MIGHT mean I wind up paying rather more over time, since they’d want to start the 30-year clock over again (after 13 years’ payments)…. Of course I don’t expect to live long enough to have to pay the whole thing, but because they front-load the “interest” payments instead of paying down principal AND interest, for all the money I’ve already paid I don’t “own” a whole lot more house than I bought with the down payment. And I’m sure they would front-load the interest all over again on a re-fi….What a damned racket. In my part of the country, though, it was mad not to buy a house, because landlords were raising rents faster than house-sellers were raising “values”…. I do love my LITTLE house in dear old expensive Connecticut, but I think the house and I got a bum deal anyway. Actually my loan is NOT under water because I was fortunate enough to buy in a neighborhood that has only become more desireable since I moved here, but the house’s “value” isn’t as high as it had climbed just before the thieves’ scams fell apart back in 2008….