Today we were at 341 meetings. For those that do know, 341 refers to the section of the bankruptcy code that gives creditors an opportunity to question debtors that have filed bankruptcy. Generally, no creditor bothers in Chapter 7. The hearings are administrative (generally) and a formality. The average hearing lasts less than 5 minutes including the swearing in part.
I listened to about a dozen. Only one or two did not own real estate, the rest were all way underwater on their homes. Only a couple were losing their homes, most were going to be able to keep them - but you have to wonder....
10 to 20% underwater appeared to be average. I would be willing to bet a bunch of them were in adjustable rate mortgages which have NOT been failing as much as predicted over the last several months BECAUSE interest rates have been so low. But rates are going to go up long before prices recover and all those people are going get squeezed big time. Filing bankruptcy now will probably keep some of them in their homes, others will be able to hang on longer, but the majority of them will still end up losing their home and largest investment before this is over.
The housing problem is not over. It is not even stabilizing. It is a pause, the eye of the hurricane. People buying homes right now in many places figure that at worse they might lose a couple of percentage points but "no one can pick the bottom right?" Right.
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