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Tuesday, June 1, 2010

Bailout, middle America style

Owners Stop Paying Mortgages, and Stop Fretting

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.” ...


Eventually these individuals will have to declare bankruptcy and go lick their wounds in an apartment.

...and realize it's not such a bad thing.

...and take comfort in the fact that that's where General Motors, Goldman Sachs, JP Morgan/Chase, and their individual directors and officers should be floating belly-up right now.

This is why things will be different from now on: more and more Americans are realizing that cash flow is not necessarily wealth, that debt is slavery, and that they can get by with much, much less.

And it doesn't stop there. The gild is off Wall Street's lily. For the elderly, a stock of canned goods and cheap ammo, not to mention silver coin, is as likely to appreciate as much as the computer entries that say you own 1/1,000,000th of a mutual fund that owns 1/100,000th of Wal-Mart. For the young, they're going to realize the numbers just don't add up over time for the 401k and the exurban house--might as well rent in town and buy metals and CD's. The New Deal's intergenerational social contract is broken: Social Security and Medicare are bust. Even municipal pension funds are up in smoke. Individuals will start withdrawing from the system--immigrants have worked under the table for decades, and they'll be joined by Millenials who have no other choices.

The beast--the money-making machines for the elite--will be starved one way or another, and it's about damn time.

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