Every night the local NBC affiliate in Phoenix has a sad foreclosure story. They rip the banks, Freddie and Fannie, the Obama “save the house” failures, errant paperwork, and in the end, thanks to the TV station, someone gets one last chance to get a house back that was locked or ready for auction. But, there is never a follow-up story. Why? Because, statistics show, in a very large number of cases, the house goes to foreclosure anyway.
Why wouldn’t a TV station run this version of foreclosure. The one that predominates today.
The average time for foreclosure today is now 17 months. That’s up from 11 months two years ago. Why is this going up? Because banks don’t want to make the local TV expose.
Let’s assume the average buyer bought the house 5 years ago. The house was purchased for $250,000 and the buyer put $5,000 down. Pretty common five years ago. At 5.5% interest they had a monthly payment of $1,122 a month. Housing prices started dropping and the house is worth $150,000 today. The buyer’s skipped a few payments in 2008 but made some. They have not made a payment since September 2009(16 months). They have saved $17,952 in mortgage payments and, let’s estimate, $5,000 in real estate taxes. Or, $22,952 by letting the house that is underwater go into foreclosure.
They can now go down the street and buy the same house they were living in for $125,000. They can make a 10% down payment, or $12,500. Their mortgage payment would be $421 a month at 4.5%. They have two years of savings to make mortgage payments. The $22,952 the didn’t pay in mortgage and taxes on the first house less the $12,500 down payment they put on the second house. So, they lived in the first house for 17 months free and they will be able to live in the second house for another two years without hitting break even on where they would have been if they had made the payments on the first house.
What a sad, sad story the TV news people could tell. The poor banks, and, you, through Freddie and Fannie, being swindled by people who letting their underwater houses default and buying another with the savings and living there for another two years with what they screwed you out of in tax dollars that Freddie and Fannie will need to offset the non-payments. How unfair that millions of Americans can live free for 17 months then move to a similar house and live for another two years with the savings from not making mortgage payments on the first house. People, who should not have qualified to buy a house the first time, and can somehow do it again if they put the money they didn’t pay for the first mortgage away to buy a second house that Freddie and Fannie own.
It’s the same old propaganda. When farm prices are in the tank the media and Hollywood and Willie Nelson show the poor family being thrown off the farm. Now that they, the corporate farms, are screwing the world on farm prices and John Deere stock in off the charts and farm land prices are rocketing up, not a word. That’s how you got tax dollars to support crop prices, farm subsidies, and ethanol as long as the eye can see.
Now the same groups, excluding Willie, are trying to put you on a similar guilt trip about people being evicted from their houses. Next time you see one of those remember that family has not made a mortgage payment or tax payment for at least 17 months. They should have a little put away and can walk away from a house that is worth less that they paid for it, and buy one that is going to cost much less and survive.
