The New Homeless

Ronald Reagan said “what we have found in this country, and maybe we’re more aware of it now, is one problem that we’ve had, even in the best of times, and that is people who are sleeping on the grates, the homeless, you might say, by choice.” However, based on the rampant level of unemployment, reduced real estate values placing many homeowners in “under water” or over leveraged situations with the mortgages, and increased delinquencies in home mortgage payments (not merely in the subprime world either), the question arises whether you will become homeless?

We have become inoculated by the homeless. We see them at street corners with cup in hand – albeit a Starbucks cup at times – asking for money. They sleep in our streets. The men and women look unkempt. But we are so used to seeing them that that fear does not usually set in.

Now picture this scenario. You’re self employed, or work for a business that’s been going through layoffs. In this marketplace, almost all financial and real estate companies have experienced layoffs. Maximum unemployment benefits will not cover the cost of COBRA for your family’s health insurance plan. Statistically, you’ve got too much debt because you’ve been living the lifestyle of the community. Nice house, refurnished kitchen with granite counters, big screen television have all been debt financed. May have been paid for on a home equity line of credit, maybe with a “no payment until 2011” deal, maybe with a credit card. Regardless, keeping up with the Joneses is costly.

All of a sudden you find yourself in a situation where you have reduced or no cash coming in, and myriad expenses going out. The feeling of sitting down and paying your monthly bills is distressing. You try and pay all of the bills, but there’s not enough cash. Creditors are calling your house all day and night asking for their money, plus, of course, the astronomical late fees and high interest rate that you had at one time agreed to pay (please see the small print in the agreement you never read).

Your creditors’ retain lawyers who start suing you, your mortgage company begins foreclosure proceedings and eventually, after a period of time, YOU ARE HOMELESS. You’re not filthy (yet) and you’re not out asking strangers for money (yet), but how will you get food? Where will you live? What will you do?

I hope your situation doesn’t get out of hand like the example described above. There are many options for borrowers to manage their credit card and consumer debt, as well as their mortgage debt, should times become difficult. Too often consumers feel that bankruptcy is the only option, without fully understanding the ramifications associated with a legal action. Attempts for short sales (the process of having your mortgage lender agree to accept less for your debt due to the fact that your home’s value can no longer cover the loan amount in a sale) are a possible solution, but after your home is sold where do you live?

If you had a tooth ache you wouldn’t extract your tooth with pliers, you’d see a dentist, and if you need a haircut I hope you don’t look in the mirror and cut your own hair; therefore, if debt becomes overwhelming, creditors are constantly calling and you’re fighting with your spouse and scared about losing your home, I implore you to call a professional who is adroit and knowledgeable about situations of this nature. While labeling something with the prefix “New” makes it seem better that the prior version, the New Homeless is not something you will enjoy.

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