The Thinker

Free and clear

Protestors on Wall Street and elsewhere are occupying spots in major cities, trying to make the top one percent acknowledge the ninety nine percent. Many are without jobs. Those with jobs may have taken pay cuts, or were forced to go part time, or were required to contribute more toward health care or retirement. Many of those protestors also carry the burden of underwater mortgages. Others are saddled with burdensome student debt.

They are the unemployed, the underemployed, the over leveraged, the disenfranchised and the generally pissed off. If you are one of them, at a certain point you might as well pitch a tent in Zucotti Park. The weather may be too hot or too cold. You may have to wait in a line at McDonalds at 3 AM to use a toilet. You may suffer from insomnia from the din of a city that never sleeps and smell like a bus depot. But at least you are in the presence of fellow compatriots. You have known relentless misery, you are knowing more misery but at least you can talk with someone who really understands. And once a day or so you can shout out your lungs at the largely tone-deaf moneyed class who might, if the weather is nice, toast you with champagne from the balcony of the New York Stock Exchange.

Mortgage rates are at record lows, but little good this does someone who is underwater on their mortgage. Because they had the flawed judgment to misjudge the future, they are no longer credit worthy, so certainly no respectable lender is going to let them renegotiate their mortgage. The Sword of Damocles shall always be pressed against their chests. No, only good people, really special people, i.e. those with actual equity in their house and good jobs get to refinance their mortgages at crazy low interest rates. In that sense, maybe I am one of the one percent.

No, not really. Our income is not that lofty. We’d need $343,927 in adjusted gross income to fall into that bracket. We’re not quite in the top five percent either. We’d need $154,653 in AGI to qualify. We come close though, so we are definitely in the top ten percent, which is good enough for many of us with mortgages to get one of those sweet refinance deals. Unlike those with underwater mortgages, our property had about twenty years to mostly appreciate, so that when prices finally fell we still had plenty of equity. Plus, over nearly two decades we have chipped away at our house’s principle. The current balance on our mortgage is $64,211.24. We paid $191,000 for the house in 1993 and took a mortgage for $171,900 of the amount. It was not until two years ago that we managed to get the balance below $100,000.

Despite our current 6.875% interest rate, our credit union is still happy to refinance the balance of our mortgage, if we don’t mind giving them $2581 in various fees for the privilege. In exchange they will pay off our 30-year mortgage and give us a new 10-year mortgage at 2.875%. We should save $372 a month in interest, once we pay off the fees, which will take about seven months.

As for those of you with underwater mortgages, sorry, you are largely out of luck. I’d like to say we possessed some sort of genius, buying low in good neighborhoods but the truth was we were just lucky. My wife and I could easily have been underwater on our mortgage too. By chance and perhaps date of birth we rolled double sixes.

Please don’t be angry with us. Yet there must be some sort of element of unfairness here. Someone must be getting shafted when we start accumulating $372 more a month. Rest assured that just like the brokers on Wall Street this extra income will be unearned. I did not have to take a part time job at a Wal-Mart to bring home this extra bacon. I just had to fill out some papers, tidy up the house for the real estate appraiser and endure yet another loan closing ceremony. This will be our fourth, since we first owned a townhouse and already refinanced once. The only deficiency to our refinanced loan is that I will have less mortgage interest to write off on my taxes. Still, I would rather pay more taxes than pay a lender extra interest. Perhaps some of it will trickle down to some of you. I would not hold your breath. I don’t plan to hire a gardener, and I already got a service that mows the grass.

Granted, owning a house comes with all sorts of other expenses not factored into the principle, interest and escrow. The entire outside of our house with the exception of three doors has been replaced. Every appliance has been replaced, sometimes more than once. Still, I can remember the days when I was living on a marginal income and rented. Once a year like clockwork you could count on the rent being raised, generally well above the cost of living. Soon we will be paying less per month in principle and interest than we paid thirty years ago per month when we lived in an apartment. It makes no sense. Meanwhile, as the downsized give up houses and end up back in apartments, extra demand is making rents go up. This crazy disparity makes no sense to me. It probably does to a Republican like Herman Cain. After all, they are loooosers.

The day is not that far off (I am hoping less than five years) when we will make that final mortgage payment. Then there will be no more mortgage payments ever. We will own the house, not to mention our cars, free and clear. Moreover, for the first time since I was age twenty or so I will be able to honestly say that I won’t owe anyone a dime. I can lay down the heavy burden of debt from my shoulders at last. I plan a party on that day, and drinking a lot of expensive champagne. I might even get drunk.

Being free of debt won’t mean our lives will be free, of course. I don’t know what I will do with all that extra money every month. Perhaps with my decent pension and retirement saving I will truly retire and never work another day in my life. Perhaps it will get eaten up in ever more egregious health care premiums or long-term care insurance. For a while though I hope I can at least revel in being free from the burden of debt.

Perhaps I will pitch a tent in Zucotti Park.

 

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