Spending Their Mortgages

I sold a rental home in 2006 at the peak of the market. The only way the buyer was able to "qualify" was for me to carry back a portion of the mortgage on a second deed of trust. The buyer was the epitome of a subprime borrower.

He hung on to it for four years, surprisingly so, and finally saw the light and defaulted in January. Because I held a second, I was privy to all the foreclosure filings that the mortgage company filed. The most interesting thing is that by the time he walked drove away from his house, he was $26,000 behind in payments to the primary mortgage company; that is, he hadn't been paying on it for 12 months by the time he was forced out. He, more or less, had lived for a year without having made a single payment for housing.

So, seeing how this one guy had no mortgage or rent payment for a full year, what do you suppose he did with all that money? Was it being saved?

Are you kidding me? No fucking way...Americans don't know how to save.

Now, consider that there are 7,400,000 mortgages in the U.S. that are not current. Many are only in arrears a month or two, but among this figure lies the guy who bought my rental. If you assume that just, say, 20% of these 7.4 million are following the same path and the average mortgage that would have been paid was, say, $1,100 a month, that's $20,000,000,000 a year that's suddenly "disposable."

If they ain't making mortgage payments and they ain't saving it...where's it going? I'm here to tell you: Asian foot massage parlors, cigarette shops, health spas, Comcast on-demand movies, gasoline, Old Navy, Kohls, Costco, joke t-shirts, haircuts, and Mimi's Cafe.

I know what you're thinking -- $20 billion? Meh, a drop in the bucket in overall consumer spending. But seeing how 72% of our economy is based on consumer spending and that $20 billion of that is from people spending their mortgages, sooner or later these Americans are going to have to resume paying rent on a housal unit somewhere and that "spending" is gonna dry up.

We're making this claim that the recession's over, but once these people resume paying rent, once the state of California ends furloughs and lays off thousands instead, once Sacramento RT fires 300 workers this summer, once gasoline goes to $3.45 on expectations of renewed demand, and once we begin to address our $1,200,000,000,000 national deficit and $12,000,000,000,000 national debt, tell me again that the recession's over, slick.

There are many, many people who've been able to hang out, housal payment free, for one hell of a long time. This is the American ethos of something for nothing being played out in every city, in every "community." These were people who lost out on the other American ethos of unearned riches, having wrongly assumed their housal units would rise 20% per year ad infinitum. This is no different from my cousin's neighborhood -- full of people living the American dream of something for nothing.