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Mortgage woes keep sinking
by Larry Wilson
Feb 25, 2008 | 653 views | 0 0 comments | 13 13 recommendations | email to a friend | print
The mortgage mess still seems to be the Grinch that is chasing the downturn in our economy to worsen even more. The economy downturn is, to me at least, like a submarine whose diving planes have irretrievably gone into a disastrous angle of attack. Let me explain.

Submarines can only dive so deep before the pressure of the water causes the hull to collapse. That depth is “classified” for whatever reasons. To control the depth, a submarine has diving planes that look very much like wings on an airplane. They are controlled inside the submarine by a “yoke” very much like a “yoke” in an airplane.

When a submarine dives, the angle of attack on those diving planes cannot exceed a certain limit or the submarine will go into a nose down attitude that the diving planes will not be able to pitch back upward even with blowing ballast(air) into the nose to assist in either leveling off or climbing up toward the surface. If that angle of attack is too steep or if the submarine goes below a certain depth, the submarine will sink, implode and Davy Jones’ locker will have another naval wreck to add to the count.

Our economy is like that submarine. Our economic submarine is being steered by our mortgage mess diving planes. The Adjustable Rate Mortgages (ARMs) racked up their interest rates, causing people to lose their homes through foreclosure, causing the housing market to slump into a dive. People couldn’t refinance their homes now, because the value of their home declined due to the downturn in the appraised value of their home. This caused a situation where lending institutions would not refinance that home now, because what was owed on the home was way above what the home’s value was now and banks will not loan money for something that is worth less than the money they are loaning for the purchase of that home.

This caused people not to be able to sell their homes, because they owed more on the home than they could get if they sold it as they would still owe the lending institution more money, and in most cases, a lot more money than they could get through the sale of that home.

Likewise, people were not buying homes as they were valued less than the asking price, thus homes were not selling.

This caused housing starts to drop. Contractors are not building houses they can’t sell. Also, suppliers of all kinds of materials and services aligned with home building have seen a downturn in their sales, thus they have had to have layoffs and in some cases have gone out of business.

Those workers, who relied on a paycheck from their job in the housing market, now aren’t purchasing things like cars, jewelry, furniture, etc., thus those industries have also seen a drop in business and have had layoffs and closures as well.

We are into the winter season, which always sees a period of layoffs as certain jobs can’t be performed in bad weather. When you put all the factors together, we have a big mess in our economy and our submarine is reaching a point where we could be in an irretrievable dive if something isn’t done soon. The tax rebates that Congress and the President have signed for which we will all get some money back this spring will only be a slight blip in the effort to raise the bow of our submarine economy.

The upcoming good weather will help, but that is not the total answer by any means. Home lending institutions need to go back to the ARMs and reset them to their original levels and this would help stave the foreclosure rates to some extent and might possibly fuel the sale of homes again and ever so slowly rejuvenate our economy as a result. Let’s hope that the money guys quell their greed long enough to right our submarine economy.

Larry Wilson is a 50-year resident of Sparks and a retired elementary school teacher. You can contact him at
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