Can We Get Out Of This Mess? Part Three

First, in April 1912 the "unsinkable" Titanic struck an iceberg and sunk. The Titanic had been pronounced "unsinkable" due to an amazing set of 22 watertight compartments built into the structure of the massive ship. The Titanic could remain afloat even if various combinations of watertight compartments were flooded, including, if I remember right, the first five compartments, if the ship were to experience extensive damage to the frontal area. The passengers were segregated by "class;" with some of the world's wealthiest people on the top decks, in "First Class." Below that was "Second Class," and in the lower areas of the "unsinkable" ship was "Third Class," also known as "Steerage." The iceberg punctured or crumpled the metal plates covering the ship, allowing water into the first SIX compartments. With that situation, the ship was doomed, as the weight of water entering the flooding forward compartments pulled the front of the ship down, which then allowed water from the sixth compartment to spill over into the seventh, and then that added weight pulled the ship down further to permit water to spill into the eighth compartment, and so on. A couple of hours later, the ship was gone.

Just a further note: Even though the ship was in such dire straights, the ship's personnel tried to prevent passengers in Third Class from getting up to Second or First Class to escape the rising waters below. Think about it!

Now, with housing prices in the tank and foreclosures mounting, unless those in need of help can be salvaged, others may well be pulled down, too. Here's why:

Once foreclosures began to rise and the housing bubble began to deflate, prices for housing fell. That may sound good (that prices fell), but when prices fell, it also began to endanger other homeowners with mortgages, as prices fell below what they owed on their homes. As foreclosures increased, and credit standards for a mortgage tightened, this general process continued, and in fact, it still continues to the point that at least 25% (some estimates say more) of all Americans who owe a mortgage now owe more for that mortgage than the property is worth. Now you might say, "So! What's that got to do with me?"

Well, if you happen to be one of those with such a situation, and the numbers are increasing, if something happens that your income falls to the point where you can't pay the mortgage, you won't be able to sell your property OR refinance it. Just for the sake of example:

So you owe $100,000 on your mortgage. Let's say your hours are cut at work, or that maybe you lose your job, or that maybe you have health issues with lots of medical bills. Whatever the reason, you can't afford the mortgage payment and you decide to sell your house and downsize to an apartment. When you talk with a real estate company, they tell you that due to foreclosures and the generally poor real estate market, that homes in your neighborhood are selling for $75,000. Now unless you've got 25 grand hidden under your mattress, or unless the "Good Fairy" slips that amount under your pillow tonight, you can't sell the property. The mortgage holder isn't going to eat the $25,000. The same problem is present if you want to refinance; you owe more on the mortgage than the property is worth. Ah, guess whose going to get a foreclosure notice? Then this will further decrease the property values of the homes in your neighborhood, so that Mr. & Mrs. Jones, who are having trouble making ends meet, decide to check into selling their house and are told essentially the same thing you were told. Guess who else is getting a foreclosure notice?

The Titanic sank from the bottom up, but eventually the water reached the top deck of First Class. Just for your information, we're ALL on THIS modern Titanic together.