my 2 cents: America should be seen collectively as a guy who was 45 years old not all that long ago.
He was named John.
The year was 2007, and housing -- like today -- was soaring, people were generally positive, but there was a problem. The 45 year old John had 3 kids and a wife who like the guy himself, could not find a job at all. Part time at a Walmart that was 13 miles away, they had some night time jobs restocking the merchandise, and people from other countries were getting all those jobs, but John was older, he had lived well most of his life. In fact, he lived in a beach neighborhood. Stocking shelves at night was really not his cup of tea.
The kids were young, Fortunately, the year being 2005, he had a house that was worth 1 million dollars. John had a small mortgage of $100,000 on it, and so he went in to see his banker and took a reverse mortgage, of $300,000 grand. The loan request was processed immediately and the 5 of them lived on that new money for 5 years. They kept all of their loans, the original 100 grand mortgage, a car loan and other expenses, -- which they had quit a few of, current. Plus they paid the taxes on the house faithfully. Their lifestyles were good and remember, the value of the house was inflating.
In 2012, with their house inflating, and the kids growing older -- not so tiny any more -- he and his wife went to see their banker again and said hey, our house just keeps going up, but we need another reverse mortgage. The banker said, "I agree, no problem. It would help if either of you were working, but I can still justify this second draw of $300,000 on your house." So the loan was made to the American, his wife and their 3 kids. With that second draw -- which his banker quickly approved -- John serviced the now expanding $600,000 reverse mortgage total, along with their other loans, and he also paid the real taxes so everything was pretty much ok. The family lived off the new bank draw quite nicely, all things considered.
In 2018, John went back (without his wife this time!) to his banker, and said:
"I am gonna need another loan, this time it will have to be $400,000 -- my kids are getting more expensive, the taxes on my house keep going higher, they go up it seems 15% every year, so too all my insurances, -- but my house thank god is worth so much these days! I had it appraised. The appraisal (he showed the banker a copy) came back at 1.4 million. When you approve this new loan, I will still have plenty of "equity." There will be just 1.1 million in total debt. I will still have 3 or 400 thousand dollars in additional 'equity.'"
The man's banker paused and said "you know, this would be a lot easier if you or your wife were working."
The man replied, "I know I know that but America has shipped out 60,000 factories to other countries the past 40 years. The TV news channels and government issued bulletins make no sense if you ask me.
"While CNBC and the government employees say there are a lot of jobs, the only thing I can get is a part time job down the street at the McDonalds. I will have to work with a bunch of kids. Even the smaller businesses have been closing up since the pandemic.. Please I need that loan. A lot of people are getting these loans you know."
The banker said, -- if you can get any sort of job, even this part time job at the McDonalds, I will also include your welfare income from the stimulus checks you got last year $1,200 month. With that I can make this last draw to you. Just show me you got that job, I don't care if pays only 8 grand per year, I will include it with the welfare checks you got last year."
John (listed on the loan application as "the borrower") got the McDonald's job, even though he was much older now, -- no longer 45, and his banker kindly did him a solid, The requested $400,000 draw was made. The man thanked his banker for such kindness, and the family lived on the new money for the next 5 years. Every bill was serviced, the family's living standards did not fall, -- well, only just a little, but everybody in his neighborhood was kind of doing the same thing. Nobody said much. In fact the family lived on the new loan for 6 years although things were very tight.
John and his wife knew the government politicians needed their votes, so they sort of figured, we can vote our politicians out of office if things really get bad. They are not gonna let us and our entire county go bankrupt! They will up our "stimulus" checks each month and we will get by. The entire Country can't go bankrupt."
Just recently this past week, April 26, 2022, John went in to see his banker. The request was the same, for 400,000 dollars. John had a new appraisal for him home, this time it was valued at 1.65 million, so the new loan would give him a total of 1.5 million in total debt. That was still 165 thousand in equity.
But the banker said no. He told john that the bank says that real estate has "peaked," and that because of the economy, the bank is saying that real estate probably won't go up much any longer, and it fact it may even level off. The Banker told John that too many people are in debt now, and real estate cannot just go up and up every year. He said "John, it is almost like a ponzi. Plus interest rates have climbed like crazy the last 6 months. Your payments are already very high, you are just eating through the loans we have been making to you that much faster."
John responded, "Ok Ok I get it, let's just make the loan for 200,000 dollars this time, that will leave plenty of equity. I still have great credit, you know that. We are never ever late on a payment, all of our expenses, but we are never late, we have excellent credit, that ought to be worth something!" But the banker said no, He said his own bosses would not permit any new reverse mortgage loans to John. Under no conditions. He gave John a lot of baloney and excuses. He told john that he already has 1.1 million, that the payments on the adjustable are skyrocketing, and he cannot even squeeze out a mere 100,000 loan.
The banker maintained, "You don't have the income, and for all "the Bank knows" real estate might actually go down somewhat. Plus "Your taxes keep climbing, they are three times what they used to be. All of your family's expenses have gone through the roof." (a direct quote!). "...John we might be going into a severe contraction. Have you seen the stock market lately? It looks bad."
John started to flip out right there in the bank's office, where the customers in the nearby bank teller lines could hear him clean as day, "but everybody is like me" he started to raise his voice and yell..,"this county has 50,000 people like me, probably a lot more."
But still the banker said no. No more loans, there was nothing he could do.
John said, "I never expected this, What are me and my wife gonna do for income, plus my 3 kids? Plus one of them now has a baby herself, and she isn't even working at all? What is the baby gonna do? I am gonna be out of my house without any loan of any sort whatsoever. You gotta give me a loan for chrissakes. What am I gonna do?"
The banker said nothing,
Well actually he said the bank is thinking of stopping its reverse mortgage business. He said the bank is having a lot of customers now being late on their home loans. "We've got people who have quit even paying." He said he might be out of a job himself.
