It does begin with .gov. They stepped in and started this whole ball of wax with wanting loans for people that shouldnt get them. Created the whole bubble with all the new “owners” coming in. Screwed it up for the rest of us. Now they step in and “help” us by taking our money thats left and giving it away to wall st. Now we are supposed to step up? F_THAT!! They should have never jumped in and personally I see this as the best way to get them out. LET THE SYSTEM TANK!!! We need it to get back down to the reality level wher wages really are.

http://biz.yahoo.com/ap/081023/foreclosure_rates.html

In short, I think what you and others have described (walking away) is referred to as: ‘Cutting your losses’.

And I cannot necessarily argue with it, given the times. It would be great if we all stood firm on our obligations – especially when in the form of a contract and given the fact that we are adults and should be able to discern (i.e., not get caught up in the hype of a market trend), what is within our means and what is not. In other words, signing onto a $600k house on a $50k salary. Even $100k for that matter. But I’m not going to belabor this, as it’s already been round & round here and elsewhere. We’re done.

What’s looming right around the corner, are the social implications of this economic disaster. Don’t discount it.

This isn’t the 19030′s where in the midst of 25% unemployment, people still went to bed with only the screen door closed. There are many social norms either missing or long forgotten since that time, but they are going become front & center as we roll on into quasi third-world status.

The consistent theme with regard to most of my commentary revolves around what happens when a void (lack of responsibility) is created and what subsequently steps in to fill that void.

In times past, it was individuals, families and like-minded groups of people stepping in the gap to help each other and start anew. Today, it is more along the lines of ‘it’s somebody else’ fault’, let somebody else come in a pick up the pieces.

That somebody else is Government.

Abrogation of financial responsibility is pandemic of late – from the corporate boardroom, to the government, right down to the people who comprise our form of representative government – that would be you & me in case you’re one of those who think government is some nebulous entity that simply appears on cue.

In my mind, the first step to recovery will begin with the individual, the family and the local community. I will guaran-damn-tee you that recovery will Not begin with government – unless of course, recovery to you means having a bureaucrat dictating how to live your life.

Peace -

C.C.

I completely agree with you regarding fear and panic being the most prevalent driving forces in today’s economy. It’s true that from a distance everything seems normal on the streets, but when you talk to your neighbors, parents from your kid’s soccer team, co-workers, or even people in these blogs, it is clear that fear and panic is driving a lot of major financial decisions by consumers.

Neighbors of mine put $130k down on a $525k house two years ago and are considering walking away from it because it is now worth ~$300k. However their major driving force is not the loss of equity, but the fear of everyone else walking away and ruining the neighborhood.

It seems as though nobody wants to be the last one standing. Just as the last people to act when the housing market was booming look like real suckers, people I have spoken to feel like the last ones to walk away are going to look like fools. Who knows how the foreclosure laws will change in the future? (I live in CA where walking away is relatively penalty free) I would be quite surprised if we don’t see some major reform in the near future making it much more difficult to simply stop paying, live rent free for several months, and move on with a decent sum of money in your pocket.

Most couples I know have a split opinion in their households as to whether they should stay or go when it comes to their home. Women seem to view the house as a home and men tend to look at it as a business decision. But more and more the women seem to be leaning towards walking as they see more people walking. What is driving this? In my opinion it is fear of the unknown.

They don’t know who will be living next door to them next year. They don’t know if massive foreclosures will bring increased crime to the area and schools. As the family budgets get tighter, parents are having to work longer hours or take on second jobs to make ends meet leaving less time to supervise and guide their children. This will likely have a large negative impact on the peer environment their kids live in at school, at the parks, and in the neighborhood. This fear is going to spurn the foreclosures on, even for families who can afford to stay put. And sadly, these fears are very likely justified.

2) I stated that the 20% down, prime, 30 year fixed loans do not have an even 1% sdq rate. You came back with a statement about option ARMs and IOs in California…

Mr. Denninger smells what many others do. Not hard to decipher. The ‘unseen hand’ is moving and just about the only thing reliable in this current economic climate is the sunrise.

He’s right in that we are at the point where something catastrophic could happen – without warning. Doesn’t mean we won’t wake up & have coffee, but existence could become very different in short order.

Not to doom & gloom (easy these days right?), but look at this:

I tell my kid the other day – Take a look out there: Cars still running; people shopping, buying food, stuffs, etc; trains still running; companies still purchasing/selling. Hospitals still operating.

All ‘normal’ & good.

Now, what in your mind, holds all of this together? What could possibly happen to disrupt what is normal & good?

Explosions?

Or does it necessarily always have to be a physical event to turn our little worlds upside down?

In other words, how could something as ‘remote’ as an entity not being paid (or paid in currency that has effectively become worthless), make the grocery store shelves empty or the gas station dry?

See, we’ve never known it (extreme disruption, that is.) My Dad did for a brief time during his youth in the early 30′s to early 40′s., but most of us rambling about here have not.

This is what I believe Mr. Denninger is trying to communicate – that the seriousness of the current situation has more grip than most are prepared to admit or foresee.

I made a statement about 10 years ago, that the commodities which would never be in short supply as our country approached an area of strain that could not be moved any further (debt), would be: Fear & Panic.

I think those two gents are here. How long they stick around is up to guys like Denninger – and us.

Let’s do what we can while we can. Make the calls. Pass along sites like this one to your friends & family. Get the ground moving.

Peace -

C.C.

Mr. Mortgage—

This article was just put out my Denninger on the Market Ticker. My head hurts after reading it. Can you give us the executive summary “Mr. Mtg” style on what it means???

THANKS
Dave