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The Newly Poor
How Financial Ruin Happens
The media is focused on the economy at the moment and the human misery that's caused by it. But too often the talk is in generalities - what the Republicans won't do, what the Democrats should do, what the polls say, what charts tell us.
The real story of financial ruin is between the lines and is best told anecdotally, even though that kind of information is often dismissed or discounted by saying "that's only one person's experience," or "they're the exception to the rule." What's missed in all this is the harsh reality of people's live, and what can be done to help solve real problems. In an attempt to enlighten us all and encourage movement toward solutions, hear this personal story as it's being lived out by one family spanning two generations.
In 2005 our daughter and son-in-law found a house they wanted to buy. It wasn't a large house or even very expensive - only about $75,000. They were both employed, he in construction, she for an optical firm. They were pre-approved for a mortgage, a loan they could easily afford. But a few weeks before the final signing of purchase papers, our daughter was laid off by the company that had employed her for six years.
What to do? They could cancel the purchase (in retrospect, a great idea), or they could look for someone to help underwrite the cost. No other friends or relatives were willing to step in (wise people?) so my wife and I agreed (after lots of private discussions and loads of trepidation) to co-sign on the mortgage. They bought the house and moved in.
Our daughter went back to school (retraining! the Republicans push that all the time; even the present administration thinks that's a good idea) at one of the premier universities in the country with one of the best education departments in the nation. Her oldest brother even helped fund her education, since only her husband was working then.
Skip ahead two years. She got her 4-year teaching degree in elementary ed and started looking for work, finally landing a Title One position with a charter school in their area of Michigan. Problem solved, right?
Wrong! After two years, approaching 2008, the charter school lost funding when the Title One monies weren't there. Then the recession hit, Michigan's GOP administration and legislature slashed funding to schools (e.g. ALL preschool programs in one city were simply eliminated). As a result, not only weren't school districts hiring; they were laying off teachers right and left. The only solution was substitute teaching, since unemployment benefits weren't available to her. Why? Because the Title One position was "temporary," not salaried - and hence didn't qualify her for benefits. No health insurance either, by the way.
Then the double-whammy kicked in. Her husband's construction firm laid off everyone that August, which gave him only 60% of his normal income when unemployment kicked in. Nine months later the construction company started up again, with a few minor adjustments: 1) the home office was moved 90 miles away, 2) no mileage reimbursement was given, 3) benefits were trimmed and 4) pay levels were reduced by 25%! So he took a summer job in Alaska with some friends, hoping to make bigger bucks.
In the meantime, our daughter found out that her former optical company was hiring again. After six years experience WITH THAT SAME COMPANY and a good work record, she'd be hired at once, right? Well, maybe - but at only 15 cents more than minimum wage, and an additional work load of 20% or more, with fewer benefits.
All this time, of course, they were getting behind in mortgage payments - two, three or four months, depending on the time of year. In addition, the bank was now sending out an inspector (at $15 a trip) to "check on whether or not someone was really living in the house yet," AND often making two, three and four trips to do that in the same day!!! Add late fees to those charges, plus penalties, and you begin to get the picture.
To round out the portrait, add this to your palette: she tried to apply for a reduced monthly payment amount, was approved (supposedly) - but when the first few partial payments were made on time they weren't applied to the loan. Why? Because they weren't the full monthly amount! And in addition, the "agreement" for reduced payments expired after three months, even though she'd never been informed that that was part of the agreement. Next she tried arbitration with a help agency recommended by attorneys my wife and I engaged on our behalf. That didn't work either.
So, as of December 23, 2011, neither of them are employed (her husband is doing small odd carpentry jobs to help out, and she is substitute teaching when it's available and working 18 hours a week at minimum wage as a health care aide (the group Pres. Obama just recently included in the memorandum guaranteeing them cover under the labor acts).
This nightmare has been going on for six years now, and my wife and I have contributed a LOT of money to the cause, trying to keep them afloat - including a check sent overnight mail this very day at a cost of $18.30.
Multiply this scenario by a few hundred thousand or a million, and you begin to see what we're up against in the U.S. regarding the housing/mortgage mess.
As to solutions, they're few and far between, thanks to Republican obstructionism in the Congress and negative actions by far too many state legislatures.
I do have one simple suggestion that would truly turn all this around. To read about it, check out my "hub" titled, "Rich People to the Rescue."