Marc's Mortgage Matter's

The historical cure for most recessions is a reduction in interest rates (standard monetary policy) and fiscal expansion. The problem with the current recession is that its primary cause is the credit crunch. Whoever was in the working world in the 1980’s remembers the S&L crisis, the resolution of which cost us $40 billion, which was only about 2% of GDP at the time. This time around, the impact is being felt in every aspect of the economy, from state budgets like California’s, the shuttering of investment banks like Lehman Brothers, the consumer who needs a new car but can’t get credit to buy one. The only good thing is that I am receiving fewer offers of credit cards in the mail!

The other day we were playing Monopoly. Of course someone inevitably landed on Park Place, which happened to have three houses on it, and he promptly declared bankruptcy, but then wanted to keep playing. It reminded me that "declaring bankruptcy" doesn't seem to have quite the finality that it once did. This year many well-known companies have done it, but still seem to be around. Individuals were sent (in the US until the 1830's; England until 1869) to debtor's prison, or at least threatened with being sent to a damp, dark, place with rats in it. In the United States, laws have always favored debtors versus creditors. But in 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act made it harder to declare bankruptcy, and prior to it taking affect there was a spike in filings that hit over 2 million! In 2008 there were about 1 million filings, which mean that in the US one in three hundred people declared bankruptcy.

But a bankruptcy is still, for the most part, considered a last-ditch option for dealing with overwhelming debt. Most of your assets go away, and your credit rating takes a fall (a bankruptcy for ten years, whereas a foreclosure remains on it for seven). Most homeowners will avoid a Chapter 7 bankruptcy and instead file for Chapter 13 if they want to avoid a foreclosure. A Chapter 7 filing can wipe out unsecured debts, but secured debts are tied to a specific asset, such as a mortgage secured by a home and which reverts to the creditor. A Chapter 13 bankruptcy doesn't actually wipe out the debt but can shield debtors from their creditors for several months during the forbearance period until a court-ordered repayment schedule can be worked out. During this time most homeowners try to work out a loan modification program. If you do need to go down these roads, do speak to a trusted attorney or financial advisor first.

With economic news sporting a warmer glow for the past couple of months, Federal Reserve Chairman Ben Bernanke boldly claimed that the "recession is very likely over." It's not unreasonable to assume that many people would respond with the query "So when does the recovery start?"

There is little doubt that the numbers, facts, and figures which define and describe the nation's output have taken a decidedly firmer tone as Summer progressed and that the Gross Domestic Product readings will likely turn positive before long. However, there is plenty of doubt that this new firmness will grow into a full-fledged growth pattern soon -- or without significant ongoing government support.

A store that sells new husbands called The Husband Store has opened in New York City, where a woman may go to choose a husband. Among the instructions at the entrance is a description of how the store operates: "You may visit this store ONLY ONCE! There are six floors and the value of the products increase as the shopper ascends the flights. The shopper may choose any item from a particular floor, or may choose to go up to the next floor, but you cannot go back down except to exit the building!"
So, a woman goes to the Husband Store to find a husband. On the first floor the sign on the door reads: “Floor 1 - These men Have Jobs”.
She is intrigued, but continues to the second floor, where the sign reads: “Floor 2 - These men Have Jobs and Love Kids”.
“That's nice,” she thinks, “but I want more.” So she continues upward. The third floor sign reads: “Floor 3 - These men Have Jobs, Love Kids, and are Extremely Good Looking”.
“Wow,” she thinks, but feels compelled to keep going. She goes to the fourth floor and the sign reads: “Floor 4 - These men Have Jobs, Love Kids, are Drop-dead Good Looking and Help With Housework”.
“Oh, mercy me!” she exclaims, “I can hardly stand it!”
Still, she goes to the fifth floor and the sign reads: “Floor 5 - These men Have Jobs, Love Kids, are Drop-dead Gorgeous, Help with Housework, and Have a Strong Romantic Streak.”
She is so tempted to stay, but she goes to the sixth floor, where the sign reads: “Floor 6 - You are visitor 31,456,012 to this floor. There are no men on this floor. This floor exists solely as proof that women are impossible to please. Thank you for shopping at the Husband Store.”