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Sunday, January 4, 2009

Job Loss and Mortgage Mess: Two Stories

Today, I would like to juxtapose two stories.

The first, from the Wall Street Journal, presents one instance of the housing bubble. The essay presents (with pictures) the tale of a house, 500-plus square feet, unfit for habitation, being appraised at over $100,000. The owner received a mortgage for the full "value."

The occupant, a 61 year old woman, with a history of alcoholism, used the money to pay off debt. She eventually moved out, leaving the home to be occupied by her son, who could not afford the mortgage.

The part of the article that aroused much outrage was the mention that the owner has not worked for many years, but lives on $3,000/month from various sorts of assistance. Also arousing outrage was the army of “professionals,” including the appraiser, who participated in (and profited from) the mortgage industry.

Story #2 is from the CNN site. It presents quite sympathetically the tales of two young men, who lost their $100,000-plus/year jobs. Both had to take jobs paying substantially less.

Here are two vignettes.
Vignette 1: “Shaun Chedister, 30 . . . was laid off from his job at Washington Mutual at the end of last year. After eight months of actively looking for work to help support his wife and four children, he accepted an offer from Ernst & Young even though the new position as an executive administrator paid less than half of what he was making before. . . . . But the adjustment to making $66,000 a year from $125,000 has been hard. 'For the last four to five years I'd been making six figures,' Chedister said. ‘My lifestyle had been at a certain level.’”
Number 2: “After Jarrod Posner, 34, was laid off from his $110,000-a-year job as a mortgage lender for D.R. Horton, he had to change careers to find employment. After months of looking he took a job as an enrollment counselor at the University of Phoenix - a position that paid $33,000…’I was actually thankful because I was getting a job, but at the same time my wife and I realized we had to make a lot of lifestyle changes,’ Posner said. “

OK. Maybe I am embittered. But does anyone else see the connection between the stories? Those salaries of the CNN story are awfully high for people in their early 30s, especially since the jobs don’t require much specialized training or education. One worked in the mortgage industry and the other worked for WaMu, the bank that represents, if I’m not mistaken. the largest bank failure in US history (a function of those irresponsible loans).

Weren’t those big salaries dependent on lending a la the WSJ story? Did the housing bubble prop up the whole economy? Someone: please explain!

6 comments:

The Fabric Bolt said...

Ha! I read that article. I would LOVE to live off of $3,000.00 per month from various government sources. We all should be so lucky!

Chance said...

I think, sadly, that the explanation is exactly what it seems to be. Greed, theft, exploitation. I keep hope this whole mess is about something else, that it is just some misguided error, but no, at the end of the day, I think it is just that. I totally see the connection between the two stories.

Frugal Scholar said...

@Fabric: Well, we don't know the whole story on this...I'm trying to be of a kindly frame of mind!

@Chance: Things are kind of scary. I'm hoping it will all go away soon...

The Fabric Bolt said...

"Kindly frame of mind?" Well, then, I hope you don't mind being of a kindly "frame of pocketbook, too!" I read the entire article in the paper. How many senior citizens make it on less than $3,000.00 per month? - much less! How many families make it? If you refinance your home - which was a pile of crap, for that large sum of money, then you are a complete fool - and so is the lender. You have no income, (other than the government check) and you refinance? And you are given the refinance money? Seriously - that is so wrong it makes me want to bust a vein. That is a prime example of what is wrong with our economy now. Sad, yes, however it is much more maddening, than anything else.

Frugal Scholar said...

Sorry to offend! By "kindly," I meant that perhaps we didn't know the whole story. Some of the WSJ comments noted that perhaps she got money for taking care of children (another issue, I admit!); others said that her income claims were perhaps not verified.

I don't know. I don't live on a whole lot more than that (3000/month). And I live on a LOT less than the 32-year-old mortgage broker did in his heyday.

Again, hope I did not offend!

Clark said...

I am one of the gentlemen in the CNN Story.

I would be more than willing to discuss or answer questions.

Email me at gillies0909@gmail.com