The American Middle Class Family is Getting Thrown out on the Street
Posted by Michael A. Kamperman on August 21, 2009
Over 1 in 8 mortgages in America are now 30 days or more past due. The Mortgage Bankers Association has reported that 13.2% of all mortgages are more than 30 days past due, which means people owe two or more payments. So who are these people? Mainly they are parents with children who are still living at home who are not wealthy. While exact data is not available, it is reasonable to assume that perhaps up to 1 in 5 families with children living at home and classified as lower to upper middle class are delinquent on their mortgage. How is this possible if only 1 in 8 people are delinquent on their mortgages? Well, currently about 66% of all households own a single family home. About 83% of married couples own a home. Most of the truly poor people in America do not own a home, although recently some did. Many of the non-poor married couples who do not own a home consist of those recently married for the first time still renting and those near the end of life who are living in assisted living situations. Most of the others are so mobile they do not purchase a home, or they live in natural rent areas like New York City. Basically, it is the dream of most middle class married couples to purchase a home. The data that 1 in 8 mortgages are delinquent is for all mortgages, whether they were made last month or 29 years and 11 months ago. The vast majority of mortgages owed by people who have been in their homes for 15 or more years are not delinquent. Most of the married couples who have been in their homes for 15 or more years have seen their children grow up, move out, and in some cases move back in. Basically, the vast majority of troubled mortgages are to people who have been in their homes for less than 15 years. Most middle class families with children living at home have been in their homes for less than 15 years.
Yet middle class families with children are not only reeling from significant price depreciation on their properties. They are also reeling from suffering a disproportionate blow from the unemployment crisis. Most employers that have laid off workers have based their decisions on seniority. Therefore, job losses are much higher amongst people in their 20’s and 30’s than it is for those in their 40’s and 50’s on average. So the crisis is not only most acute amongst families with all ages of children living at home, but especially amongst families with younger children.
Sadly, Washington seems oblivious to the crisis. Today Ben Bernanke, who was our last and best hope to give the economy the jolt it so desperately needs, predicted the economy would soon return to growth. Apparently Fed Chair Bernanke is too focused on Wall Street and not nearly focused enough on Main Street. How will a world economy that is dependent on the spending patterns of U.S. households with children return to growth when 1 in 5 of these households are struggling to hold on? What kind of consumer confidence can exist in middle class families not affected by the crisis when all of them know a close personal friend or family member that has lost their job? At this point we are back to President Obama, who desperately wants to be re-elected in 2012, as our last best hope. If I were him I would refinance every existing mortgage in America at 4% without an appraisal, a credit check, a new title policy, or a verification of income. And for those people that are delinquent I would simply add the delinquent payments to the mortgage balance and give them a chance to start over. All of the money for existing mortgages is already out the door and in one way or another the American taxpayer is already on the hook for over 80% of all mortgages. We don’t need change we can believe in, we need leadership we can believe in.
