An accepted Calfornia oxymoron is debt is equal to wealth. Today we take a special look at the lives of debt millionaires.
Irvine Home Address … 29 LOOKOUT Irvine, CA 92620
Resale Home Price …… $1,300,000
{book1}
Some boys kiss me, some boys hug me
I think they’re o.k.
If they don’t give me proper credit
I just walk away
They can beg and they can plead
But they can’t see the light, that’s right
’cause the boy with the cold hard cash
Is always mister right, ’cause we are
Living in a material world
And I am a material girl
You know that we are living in a material world
And I am a material girl
Madonna — Material Girl
Arriving Early
I have noticed that many in California believe the trappings of success are immediate. You get a job, and you lease the BMW. You get a $1,000 a year raise at work, you get an additional $10,000 credit line. You get married, and you borrow $1,000,000 and get your dream home. You have no need to save or wait, you can have it all now. You service the debt for your working life, and you obtain a reverse mortgage to retire on your boundless appreciation. Once you go into debt, you never, ever get out.
To "arrive" in life is to obtain every object of status you desire. Rich people arrive once they have saved enough money to pay cash for a few indulgences. High wage earners arrive once they can prove enough income to service a $1,000,000 debt.
Ponzis are changing the definition of a millionaire. In California debt equals wealth, so a millionaire is someone capable of obtaining and servicing a $1,000,000 debt. A million dollars in debt makes you rich.
I cannot fathom what is must be like to feed a beast that large. Right now the debt monster has a low 5% appetite, but what will those adjustable rate mortgages feel like when rates go up? To paraphrase and parody Irving Fisher, perhaps interest rates have reached what looks like a permanently low floor.
Irvine properties in default on $1,000,000+ mortgages
The following list of addresses are in default on mortgages over $1,000,000.
|
Address
|
Value
|
Loan Balance
|
SaleDate
|
Published Bid
|
| 59 GRANDVIEW | $ 2,975,376 | $ 3,350,000 | 6/9/2010 | $ 3,542,938 |
| 65 GRANDVIEW | $ 3,018,675 | $ 3,556,567 | 5/28/2010 | $ 3,351,639 |
| 1672 REYNOLDS AVE | $ 1,924,306 | $ 7,170,000 | 9/10/2010 | $ 2,570,000 |
| 27 STARVIEW | $ 2,149,100 | $ 2,990,000 | 7/7/2010 | $ 2,361,129 |
| 58 CEZANNE | $ 1,339,060 | $ 2,250,000 | 6/16/2010 | $ 2,186,850 |
| 136 STARCREST | $ 1,369,470 | $ 3,900,000 | 7/19/2010 | $ 2,119,577 |
| 31 VILLAGE WAY | $ 1,842,061 | $ 2,485,750 | 7/6/2010 | $ 2,089,102 |
| 17801 CARTWRIGHT RD 250 | $ 3,036,374 | $ 3,487,500 | 6/10/2010 | $ 1,981,419 |
| 8871 RESEARCH DR | $ 2,788,321 | $ 3,609,000 | 9/1/2010 | $ 1,980,000 |
| 51 CEZANNE | $ 1,549,068 | $ 3,770,000 | 6/7/2010 | $ 1,939,524 |
| 28 SYLVAN | $ 1,739,418 | $ 1,810,000 | 6/28/2010 | $ 1,851,139 |
| 23 CLOUDS PT | $ 1,617,945 | $ 3,550,000 | 7/2/2010 | $ 1,800,000 |
| 35 TRIPLE LEAF | $ 1,128,734 | $ 1,726,660 | 6/3/2010 | $ 1,725,079 |
| 24 ROSE TRELLIS | $ 1,212,019 | $ 282,800 | 6/10/2010 | $ 1,693,240 |
| 27 MOMENTO | $ 1,794,521 | $ 1,800,700 | 5/27/2010 | $ 1,652,288 |
| 24 PISMO BCH | $ 1,432,305 | $ 1,700,000 | 5/27/2010 | $ 1,644,278 |
| 23 SHADY LN | $ 1,393,233 | $ 1,990,000 | 7/28/2010 | $ 1,600,000 |
| 33 TALL HEDGE | $ 1,553,769 | $ 2,836,709 | 6/3/2010 | $ 1,563,247 |
| 29 ANTIQUE ROSE | $ 1,127,091 | $ 1,630,000 | 6/10/2010 | $ 1,504,574 |
| 29 LILY POOL | $ 1,218,079 | $ 1,470,000 | 6/10/2010 | $ 1,484,931 |
| 16500 ASTON | $ 1,200,270 | $ 2,916,000 | 8/13/2010 | $ 1,458,000 |
| 11 GAVIOTA | $ 1,520,671 | $ 6,652,937 | 5/27/2010 | $ 1,411,878 |
| 7 BUELLTON | $ 1,179,546 | $ 1,426,000 | 6/8/2010 | $ 1,327,302 |
| 101 LATTICE | $ 1,188,392 | $ 1,104,000 | 6/10/2010 | $ 1,322,836 |
| 24 TWIGGS | $ 1,181,325 | $ 1,529,800 | 6/1/2010 | $ 1,301,968 |
| 3131 MICHELSON DR 1702 | $ 1,276,361 | $ 1,226,600 | 6/3/2010 | $ 1,295,430 |
| 109 LATTICE | $ 1,218,342 | $ 1,282,500 | 5/28/2010 | $ 1,270,512 |
| 20 ROSE TRELLIS | $ 1,294,508 | $ 1,883,023 | 6/16/2010 | $ 1,267,500 |
| 24 ARBORWOOD | $ 1,092,891 | $ 1,428,000 | 6/18/2010 | $ 1,228,000 |
| 22 FAITH | $ 1,194,303 | $ 2,650,000 | 6/4/2010 | $ 1,223,705 |
| 40 DESERT WILLOW | $ 964,519 | $ 1,175,420 | 6/24/2010 | $ 1,205,941 |
| 15 PASO ROBLES | $ 1,219,922 | $ 1,346,250 | 6/10/2010 | $ 1,205,837 |
| 9 OLYMPUS | $ 1,520,417 | $ 1,200,000 | 7/10/2010 | $ 1,200,000 |
| 103 RETREAT | $ 1,200,302 | $ 1,620,000 | 6/22/2010 | $ 1,196,779 |
| 152 TAPESTRY | $ 982,692 | $ 956,250 | 6/14/2010 | $ 1,183,656 |
| 23 WALNUT CRK | $ 1,162,055 | $ 1,247,467 | 6/9/2010 | $ 1,153,285 |
| 39 CRIMSON ROSE | $ 1,340,634 | $ 1,760,000 | 6/2/2010 | $ 1,089,990 |
| 28 CRIMSON ROSE | $ 1,250,228 | $ 1,530,000 | 5/27/2010 | $ 1,088,739 |
| 147 TAPESTRY | $ 1,183,862 | $ 1,341,000 | 6/21/2010 | $ 1,088,509 |
| 16480 BAKE PKWY | $ 1,689,903 | $ 1,946,700 | 6/30/2010 | $ 1,081,500 |
| 5 BAYPORTE | $ 1,060,316 | $ 1,347,500 | 6/16/2010 | $ 1,079,174 |
| 41 MOJAVE | $ 1,248,973 | $ 1,080,000 | 6/21/2010 | $ 1,062,837 |
| 129 LATTICE | $ 1,071,133 | $ 1,000,000 | 6/10/2010 | $ 1,062,797 |
| 29 LOOKOUT | $ 1,248,257 | $ 1,048,000 | 5/29/2010 | $ 1,048,000 |
| 59 BAMBOO | $ 857,115 | $ 1,601,000 | 6/14/2010 | $ 1,043,759 |
| 19 PETRIA | $ 930,592 | $ 1,080,000 | 6/7/2010 | $ 1,034,881 |
| 8083 SCHOLARSHIP | $ 1,313,197 | $ 2,595,000 | 6/28/2010 | $ 1,033,331 |
| 29 PASO ROBLES | $ 1,395,677 | $ 2,010,000 | 6/3/2010 | $ 1,018,865 |
| 20 VILLAGER | $ 1,018,786 | $ 952,000 | 6/14/2010 | $ 1,006,757 |
| 36 PRAIRIE | $ 1,266,928 | $ 1,401,486 | 6/22/2010 | $ 1,000,000 |
| 20 TOPIARY | $ 1,531,562 | $ 1,704,347 | 7/29/2010 | $ 999,950 |
| 12 GALAXY 24 | $ 861,094 | $ 1,062,000 | 6/11/2010 | $ 988,749 |
| 20 BRIGADIER | $ 1,824,777 | $ 1,880,000 | 6/29/2010 | $ 980,000 |
| 31 SHEPARD | $ 1,148,118 | $ 1,366,000 | 8/21/2010 | $ 966,000 |
| 40 VACAVILLE | $ 899,371 | $ 1,289,880 | 7/16/2010 | $ 960,000 |
| 13645 ALTON PKWY A | $ 1,099,580 | $ 2,047,000 | 5/27/2010 | $ 899,679 |
| 18971 GLENMONT TER | $ 1,064,859 | $ 1,091,800 | 6/28/2010 | $ 895,949 |
| 64 ROCKPORT | $ 808,905 | $ 1,026,000 | 6/2/2010 | $ 872,698 |
| 2 HICKORY TREE LN | $ 897,980 | $ 1,102,900 | 6/10/2010 | $ 863,428 |
| 5502 SIERRA ROJA RD | $ 955,606 | $ 1,375,250 | 6/2/2010 | $ 818,490 |
| 6052 SIERRA SIENA RD | $ 1,029,837 | $ 1,000,800 | 6/10/2010 | $ 801,982 |
| 46 WHITFORD | $ 831,784 | $ 1,016,000 | 7/24/2010 | $ 791,000 |
| 17752 FITCH | $ 2,752,146 | $ 2,216,657 | 8/18/2010 | $ 750,000 |
| 18 HIDDEN CRK | $ 1,330,028 | $ 1,911,641 | 7/20/2010 | $ 200,000 |
This list barely scratches the surface on the problems stemming from the lack of a jumbo loan market. For example, only 6 homes in Irvine with an estimated value over the conforming limit of $729,750 went through foreclosure last month. There are 146 in pre-foreclosure or scheduled for auction. In Orange County, there are 2,046 in the foreclosure process over the conforming limit, and only 101 foreclosure sales.
Also, since banks know the jumbo market is hopeless, fewer of these homes have been served notice. The shadow inventory of squatters with huge loans is bigger than the banks are willing to face.
Shadow Inventory's Shadow
It isn't only the distress we see that feeds into the problems with housing. Visible inventory includes the properties on ForeclosureRadar.com on which there has been some filings. Shadow Inventory includes those properties where the owners are not making payments but the bank has not begun foreclosure proceedings. Shadow inventory's shadow includes all the Ponzis who are not currently behind on their mortgage payments but are completely dependant upon increasing debt in order to survive. The people in Shadow inventory's shadow living the life of a Ponzi will implode before this debacle is truly behind us.
Over the last few weeks, I have collected a few stories about Ponzis living in shadow inventory's shadow. The names and circumstances have been changed, but the essential facts of the following stories are true.
Property ladder to oblivion
One family lived in a 1,500 SF 3/2 in a comfortable area of Irvine. They HELOCed about $200,000 out of their property, but they still sold it in 2006 for a hefty profit and a check for $250,000 of remaining equity. They took this $250,000 and put it down on a $1,100,000 dream home. They now have an $800,000 interest-only mortgage. The husband is a sole breadwinner whose based salary is about $120,000 a year.
This family is treading water after borrowing 6.6 times their income. Unless or until house prices go back up and they are able to access HELOC money like they used to in their old house, they will not make it. In 2016, their $800,000 mortgage will amortize over 20 years, and their payment will go sky high. Of course, their plan is to refinance the $800,000 debt in 2016, probably with another interest-only loan. They cannot afford their house, but they pay the huge rent on money to stay there. They do not show up in statistics on shadow inventory, but they are doomed.
Baby on the way
One family bought a small home in a really expensive market in 2005. They put $100,000 down, and they have a $950,000 mortgage which is now underwater. The husbands job is secure, but the wife is pregnant and wants to quit work when the baby is born. She can't afford to. Because of their house loan, she must work to make ends meet. The HELOC money they were counting on to renovate the house and substitute for her wage income is not forthcoming. They are trapped and unhappy. They may not be doomed to lose the house, but keeping it is ruining their family life and future plans. They are very house poor.
Side business suffers
One family bought an ocean view property in 2004 for about $1,100,000. Two years later, they sink several hundred thousand into a renovation, and they refinance with a $1,400,000 Option ARM. The property would currently sell for about $1,000,000.
When they took out the Option ARM, the man had a base salary of $120,000 per year, and he was running a side business making about $100,000 — or so he said on his loan application. The side business dried up during the recession, so they have drained all savings and tapped their other credit lines to keep making the minimum payment on their Option ARM. The only way these people survive is another infusion of borrowed money or the side business coming back. Even then, their prospects are bleak. Their real hope was for the housing ATM machine.
I need that bonus
Many people spend like drunken sailors running up huge credit card bills and pay them off with yearly bonuses. Over the last two years, one family received no bonus which used to be almost 50% of the husbands take-home pay. The lack of a bonus did nothing to curb their spending. They are paying the bills on their $1,300,000 mansion, taking vacations, and generally continuing to spend in a conspicuous manner. So far they have managed on increasing credit card balances.
Perhaps they believe big bonuses are in the future, perhaps they think the housing ATM will save them, or perhaps they are simply committed to living as Ponzis until their creditors cut them off. Either way, it doesn't seem likely they will sustain ownership even when the bonus money comes in.
None of the people I described above appear on any measure of housing distress, but given their situations, most of them will not make in through the next five years in their homes. Financial distress will cause them to sell and move.
Who will take their place?
The Ponzis are far more common than frugal savers with huge down payments and high incomes. Heavy cash buyers are common in Irvine's market, not because there are so many of them, but because they are the only ones capable of paying our still inflated prices. Because there are more Ponzis than frugal replacements, there will be more Ponzi homes coming to market than the frugal buyers can absorb. Lenders know this. They are restricting inventory as long as they can hoping that somehow the Ponzis will get bailed out and the banks will have someone to sell their houses to. So far denial and inaction has worked out well for the banks — unless you count the loss of income from all those squatters….
Today's would-be millionaire couldn't cut it
The owner of today's featured property used his million dollar loan and a substantial down payment to acquire the property. Unfortunately, his reach exceeded his grasp.
Today's featured property was purchased on 11/16/2006 for $1,478,000. The first mortgage is $1,048,000 and the owner used a $430,000 down payment. The current asking price. would yield him about $180,000 out of the $430,000 he put down. I question whether he will get the asking price. Not much is selling at these price points.
Irvine Home Address … 29 LOOKOUT Irvine, CA 92620 
Resale Home Price … $1,300,000
Home Purchase Price … $1,478,000
Home Purchase Date …. 11/16/2006
Net Gain (Loss) ………. $(256,000)
Percent Change ………. -12.0%
Annual Appreciation … -3.4%
Cost of Ownership
————————————————-
$1,300,000 ………. Asking Price
$260,000 ………. 20% Down Conventional
4.94% …………… Mortgage Interest Rate
$1,040,000 ………. 30-Year Mortgage
$267,342 ………. Income Requirement
$5,545 ………. Monthly Mortgage Payment
$1127 ………. Property Tax
$450 ………. Special Taxes and Levies (Mello Roos)
$108 ………. Homeowners Insurance
$105 ………. Homeowners Association Fees
============================================
$7,335 ………. Monthly Cash Outlays
-$1468 ………. Tax Savings (% of Interest and Property Tax)
-$1264 ………. Equity Hidden in Payment
$497 ………. Lost Income to Down Payment (net of taxes)
$163 ………. Maintenance and Replacement Reserves
============================================
$5,263 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$13,000 ………. Furnishing and Move In @1%
$13,000 ………. Closing Costs @1%
$10,400 ………… Interest Points @1% of Loan
$260,000 ………. Down Payment
============================================
$296,400 ………. Total Cash Costs
$80,600 ………… Emergency Cash Reserves
============================================
$377,000 ………. Total Savings Needed
Property Details for 29 LOOKOUT Irvine, CA 92620
——————————————————————————
Beds: 6
Baths: 6 full 1 part baths
Home size: 3,500 sq ft
($371 / sq ft)
Lot Size: 5,300 sq ft
Year Built: 2007
Days on Market: 16
Listing Updated: 40318
MLS Number: P734262
Property Type: Single Family, Residential
Community: Woodbury
Tract: Wdmf
——————————————————————————
3,500 sq2 house with 6 bedrooms, 6 1/2 baths, marble floor, granite countertop and island, fully landscaped and hardscaped, gorgeous conditions, more than $100,000 upgrade w/ backyard barbecue island for family entertainment.
Ignore Cassandra at Your Own Risk
Part of the reason that lax lending standards fueled the housing boom and created the subsequent bust was top managers ignoring the cassandras in their midst, according to a new report.
On the Developments blog our colleagues James R. Hagerty and Nick Timiraos take an in-depth look at the study prepared for the Mortgage Bankers Association by Clifford Rossi, a former banker who is now a finance professor at the University of Maryland. While the report focuses on problems with the risk models, one of the issues raised is risk managers being shouted down by business managers.
A strong economy made managers less risk averse, and the push for profits drowned out warnings. Part of the problem is that business managers came into the equation with hard data on profits and past performance, while risk managers were armed with fuzzy possibilities.
“An all too familiar theme regarding the experiences of risk managers during the period is echoed by a senior underwriter at New Century: ‘Risk managers at New Century were viewed as a roadblock rather than a resource in many instances,’” Rossi writes in the study. “Yet firms that had for many years enjoyed strong reputations as effective risk management organizations such as Fannie Mae and Freddie Mac during the pre-crisis years also appeared to increasingly turn a deaf ear toward risk management objections to higher risk products.”
To be sure, the flawed models that the risk managers were using further exacerbated the problems. When the bust hit, even some of the worst-case scenarios weren’t pessimistic enough.
During the good times, no one wants to listen to the dire warnings of cassandras. But business managers might want to remember that though the mythological Cassandra’s bleak predictions sounded crazy, they were accurate.
I love this Peter Cassandra Schiff 2006 video spoils the Mortgage Bankers circlejerk. In the last segment, one of the smartasses sarcastically asks him if he should just slit his wrists in anticipation of the impending doom that is met by wild laughter from the crowd. I wonder how many of these wankers are still working today. Owned.
At the end he also says interest rates aren’t just going to the moon, they are going to pluto.
Currency crisis. Inflationary depression.
The housing bubble was that big.
“You get married, and you borrow $1,000,000 and get your dream home.”
This post is far fetched. It’s a great fantasy to think this is true in general for people residing in California. In reality there was a very small percentage of people who did this and thought this way.
Now the cash is coming out of the coffers and the posers are kicked to the curb.
I personally know several couples who did this, claiming they were brillant, and are now asking about getting back in the “game”. They never learn, they aren’t taught to fish, they just ask for more free fish.
LOOKOUT for that ugly paint job in the 1.3 million kitchen.
That must be what the listing agent meant by “gorgeous conditions“
IR needs to factor in new paint for ‘furnishing & move-in’.
IR, when you say “The following list of addresses are in default on mortgages over $1,000,000”, are you referring to mortgages with NODs, or 90 days late, or 30 days late, or … ?
And I notice that some of the addresses are businesses. Different economic situation for them…
The listed properties all have NODs filed. Shadow Inventory would be much larger.
I lived thru the CA housing bust of the early 90s. There was no squatting then, properties were foreclosed and put up for auction. That’s how I got an amazing deal on a beach condo. I never foresaw all this shadow inventory. It really makes me angry. Banks should be required to foreclose, dam the consequences.
What’s even more outrageous is how the banks are allowed to bid up the prices on all these houses at auction to whatever they want. Just where is the bank finding all of this cash to buyback all these houses and withold them from the market? They take bailout money and pretend that their balance sheet is positive. What a crock – a crooked rigged system. Now they are just trying to corner the market and hoard all the inventory while the non-renter population majority grants their blessing so they can screw the next buyer themselves when they eventually try to pass the turd.
I know a few families who are underwater and earning less than they did a couple of years ago; but I don’t know for certain if they’re part of the Shadow Inventory. Unfortunately, it is taboo for most people to talk about the specifics of their finances. So it’s not always easy to tell who has really reached (home 4x+ household income).
I do have a friend who’s lost quite a bit in a $1M+ Irvine home. He parlayed the equity profit from the sale of two previous homes into a 2006 purchase of a $1M+ Irvine home. I think his home is probably still worth more than the mortgage, since he put-down $300K+. Who knows for how long… The equity loss is painful. It’s especially painful for guys like him who have econ undergrad degrees and MBAs, since he recognized the bubble, but chose to purchase anyway. However, the equity loss is the least of his worries right now. Like many, his household income is down from 2006. It’s never fun servicing a jumbo mortgage. It’s less fun as it eats into more of your diminishing income.
An econ degree means you are officially indoctrinated.
for those who haven’t heard of Gerald Celente, check out his website at.. Trends Research..
It is really confusing the way market going. Look at 55 Rising Sun, it sold at August 2005 price!
55 Rising sun is a very interesting property if anyone wants to dig it out. It was purchased on 2007 by the seller in one day or so with the price around high 700k. Somehow this transaction was not shown up on the MLS public record. Does any one know why the seller agent can make up this? The seller is an agent. The agent and her husband earned 100k from this sale.
Suckers really are born every minute.
Debt = Wealth is 1984 speak or CA non-recourse speak when you can walkway from the debt with HEW cash in your pocket.
IrvineRenter,
What about a series looking into FL RE crash and Great Depression I vs. CA RE crash and Medium/Great Depression II? Who were the inflater of the ballons and what market conditions (i.,e., finanical inovations) allow the boom bust cycle? Who were the market makers in the 1915-1945 vs. 1990-2010? Are they related?
“Our real estate market rests on a razor’s edge. On that edge lie high mortgage delinquencies, 12 million homeowners who have no equity or negative equity, high unemployment stuck at 10 percent, an unprecedented loss in house values following a bubble greater by far than any in the last 120 years, and a frightened Fed and Treasury who literally own the new mortgage market in the United States. Predicting that we are done with falling prices may end up landing the speaker north of reckless. Desperation hides behind a mask of confidence.” at http://seekingalpha.com/article/207014-housing-desperation-hides-behind-a-mask-of-confidence?source=feed by Michael David White
A post comparing those two periods would be great. I have studied the first two episodes before so I have some basis for further research.
I believe the Florida land bubble was created by a peculiar trading-on-margin feature built into land sale contracts. The values got Ponzied so high that when the collapse occurred, the land contracts often fell through dozens of defaults by responsible counterparties all the way back to the original land owner. The Ponzi scheme collapsed back to near zero.
The Stock market crash was brought about by 10:1 margin. People borrowed money to bid up the value of stocks. The market can expand and contract quickly as margin enters and leaves the market. Eliminating margin would reduce volatility. We currently allow 2:1. I guess that puts enough air and volatility to make it interesting for traders.
I haven’t read anything about the connection between the two events. The Florida land bubble happened first. I think it crashed in 1926. The stock market crash was 1929-1932.
The Great Depression might have only been the Great Recession like ours if they hadn’t reacted to the slowdown by imposing the Smoot-Hawley Tariff Act of 1930 and the world doing same. The collapse of world trade is what made the Great Depression so damaging. I sometimes wonder if we would have avoided WWII if world economies were more dependent upon one another. The tariffs of the 1930 showed us just how bad it is if everyone tries to go it alone.
IriveRenter,
Will be looking forward to reading your future study. Post bust, Elenor Roosevelt had the military put bases into disease ridden area (swampland) over their inital objections. I’ve never seen an analysis on the military bases effects on FL land prices, just the issues of insect-borne illness on the military. I wonder how much it was done to prop-up the developers.
The stock margins calls and tarrifs are blamed for the Great Depression. I just not convinced that they are just a fraction of the causes. Exports were a very low percentage of GDP in those days.
I remember receiving offers to buy new houses with 10% cash credit back to complete yard work, owner upgrades, etc., 95% financing. In effect after closing, the 5% down was reimbursed. An automatic HEW. Was very tempted to do a flip, but felt it too good to be true.
Actually, the FL land bubble and stock market crash of the 20s had the same root cause. People obsess about the stock market crash, but it did not cause anything, so much as it, and the land bubble were symptoms of the same disease, which was the manic credit expansion of the twenties.
The twenties were another credit bubble very similar to this one, and assets collapsed completely in ensuing years as the credit bubble deflated. The instruments were not quite so complex nor were there nearly so many layers of leverage, but there was enough asset inflation and loose credit to create a monster debacle when the bubble burst. It meant over 10 lost years for people of my grandparents’ generation in addition to the widespread deep poverty we have so many memorials of in photographs from the era.
The generation that reached early adulthood when things started unraveling rapidly in 1929, and suffered through over a decade of job losses, total lack of opportunity for advancement, and extremely tight credit, following. They were deeply imprinted by the misery of it and became the most frugal, cautious people ever, and as long as our financial system was in their hands, we were safe. But generations since, who grew up in ease and prosperity and had ample opportunity plus easy forgiveness for major mistakes, became very reckless. I expect the pendulum will swing sharply back the other direction with the generation just now reaching adulthood, and this generation will be very sober and careful, for they will be similarly traumatized as this disaster continues to play out over the next 10 years.
“Unfortunately, it is taboo for most people to talk about the specifics of their finances.”
During the boom no one had a problem talking about how brilliant they were for taking out a liar loan and financing a house they could never afford.
These HELOC abusing phonies are going to have a hard time adjusting to their pathetic little status seeking lives once the credit spigot has been cut off. Maybe the creditor law firms and collection agencies waiting in the wings to come after them will teach them a little bit of wisdom as to what is really important, but I doubt it.
Nah! Wait for the next bubble. The guy forgets it. The bank forgets it. Both are back in business.
The best case scenario for the bank is to let the Guy stay in the $1mil house for free because it will at least maintain the the property. If the guy is kicked out by bank no one else has the $1mil to buy that property. Happy bag holding suckers.