Homeowners Used Home as ATM: Equity Loans Now Hasten Foreclosures From the Bay Area, the Central Valley of California etc

Homeowners Used Home as ATM: Equity Loans Now Hasten Foreclosures From the Bay Area, the Central Valley of California etc
Homeowners Used Home as ATM: Equity Loans Now Hasten Foreclosures From the Bay Area, the Central Valley of California to the Florida Coast.

How is it that some homeowners end up owing more than their home is worth? Well for the past few years starting in 2001 and ending in 2006, homes came to represent a new currency. If you had a home, you had cash. All it took was for the homeowners to get the home appraised and refinanced. The money they took out was ready to be spent on pricey, but sometimes unnecessary things such as one or two extra vehicles, toys and various other gadgets for the household. Those who had other sources of income ended up taking trips to the far corners of the earth. The surprising thing that happened is that banks and mortgage companies were ready to give credit. A home may be refinanced up to three times with no red flags being sent out. Now that credit is assessed closely, many of these people are left with no money. By then, the house values have greatly decreased. Homeowners are stuck. They can not refinance their homes because they end up owing more than the house is worth. Many homeowners just decide to walk away from the shell of the home. The equity is gone. The house only remains standing. And the wild grass continues to grow before it gets grown.

There is no doubt that rising home values from 2001 to 2006 caused many homeowners to launch themselves into this kind of exuberant lifestyles. The trips to Reno, casinos, Las Vegas and other fun destinations were numerous. All of this was being funded by money that was not truly there to be spent. With the tumbling of home values and sales, many families are waking up homeless and realize that the primary function of a house is to be a home, but not an ATM or mini-bank. From higher to lower income individuals, homeowners are being hurt. Those who got caught up in the subprime market end up suffering more. The question is what is more important: Is it the house or the expensive, unused toy? While the house is getting lost to foreclosure, the toys are being carted away into storage space, apartment or condo rentals. In the next few months, it is not unreasonable to see that the rental industry will be picking up quickly. As interest rates get adjusted more, more people will have to move out their homes. When it becomes impossible to use home equity to pay for monthly expenses, then some homeowners are really starting to see the core ideas of personal finance. The ideas of saving for hard times never come to them either.


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