The American Dream: Our Worst Nightmare

By Greg O’Brien, Codfish Press 

Got plenty of cash; it’s tied up in debt, the old quip goes. Only the joke today is on us, as the number of mortgage defaults from Cape Cod to Boston to New York and beyond is rising like the air temperature in May, and the dream of homeownership for some is becoming just that. Feeling the squeeze, several large mortgage companies are now reticent to make new loans, and many have tamped down on lending formulas, leaving many mortgage applicants who would have qualified in recent years out on the curb.

Ever try to blow too fast into a balloon? Makes you dizzy! And that’s what is happening to cash-starved homeowners, who bought into balloon payments, adjustable rates and other low interest gimmicks—enticed by banks and other lenders—and now can’t make the payments. As fast-talking huckster Art Fern, in a memorable Johnny Carson skit years ago, used to say: Got bad credit? We don’t care. Got no money? We don’t care. Don’t think you can pay? Then we care!”

Banks and financial institutions are showing a lot of “caring” these days toward over-extended homeowners, who dove head first into the deep end of the financial pool. Too bad no one told them it was empty. 

“Clearly we went too far,” Joseph E. Gyourko, a University of Pennsylvania Wharton School professor of real estate and finance, told The NewYork Times, stating the obvious.

It is evidently clear when you do the math. The average homeowner  carries $8,000-to-$10,000 in credit card debt, which does not include various home equity loans that often exceed the appraised value of the structure and are folded into the mortgage in a refinance when payments are due. Many homeowners are financing college educations in this way.  In an economy and a stock market that rises or falls, in part, on the basis of future value (today’s pork bellies), we’ve created vapor resources, and we have come to depend on them.  It’s a risky cycle. Like the greyhound at the racetrack, you never catch the rabbit!

Perhaps it’s time for some communal soul-searching, a reassessment of how Madison Avenue and the image-makers have defined success for our lives. A little scaling down these days is sound financial planning. Given our collective appetites for cars, vacations, pricy homes and costly schools, and our incapacity to afford them, you simply can’t get there from here, as they say Down East in Maine.

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