Issue link: https://newsleader.uberflip.com/i/146256
Sarasota News Leader July 26, 2013 OPINION Page 72 ger owned a $400,000 house, but instead a $200,000 home, thought they had lost $200,000 and stopped spending. When some people stop buying, that means others stop selling (again, the yin and the yang). And then others stop distributing and still others stop manufacturing — which means people are laid off and then they really do not have money to spend. the payment of a great deal of the interest before even a small amount of the payments are applied as increases to the principal values for the homeowners (decreases to the principals of the loans from the bank). The portion of the house they owned was the original down payment plus all subsequent payments of principal minus the amount that was taken out in equity loans. Most homeowners, when they make payments, think they are increasing their ownership in their home — paying down the principal. Actually, they are simply paying the banks the interest on their mortgage loans, as most mortgages require by the banks' own actions — by knowingly issuing bad loans — and how much was a result of the gutting of banking regulations (paid for by campaign contributions from the banks) over the past few years or by bank lobbyists making hay while the sun was not shining, is open to question. Ignoring Wall Street, no one on Main Street questions the fact that the banks bore a great deal of the blame (as did, There really should be a new word, other than "homeowner," to describe the people who think they own a house when they are simply the tenants of some bank. They are tenants In actuality, the homeowners never owned a because, if they stop making payments (call $400,000 house; they maybe owned $30,000 it a mortgage payment or call it rent; it comes (their down payment) of that $400,000 resi- to the same thing), they can be evicted. dence, and the difference between owning $30,000 of a $400,000 home versus owning If someone in this predicament does not have $30,000 of a $200,000 residence is minimal. enough money coming in to cover mortgage No matter the supposed value of the house, payments, the only solutions are to lose the they only owned a $30,000 stake in it. Unfor- home to foreclosure or to try to stay in the tunately, the psychological aspects were not house until the value increases to the point minimal: People stopped spending, the domi- where the person can sell it, pay off the bank no theory came into play and, as a result, they and have enough left over to buy a less expenlost their jobs. Not having a job meant no in- sive home. come, which meant not being able to make their mortgage payments. They found them- ANOTHER SIDE OF THE STORY selves in the same fix as those who had to The situation was different for banks: No matmove and could not. The houses were under- ter who was to blame, they were considered water and the homeowners were drowning — too big to fail. How much of that view was and their homes went into foreclosure. based on PR hype, how much was brought on