Tuesday, April 17, 2007

Angst in affluent America, Part 2 / Greenberg

the commercial is a must see.... unbelievable. could be one for fools day......but it was real.

der werbeclip ist wirklich ein muss...schwer zu glauben das der real und kein aprilschwerz ist

SAN DIEGO (MarketWatch) -- You may have seen that LendingTree commercial with a happy-go-lucky guy named Stanley Johnson, who brags about his big house, his new car and how, "I even belong to the local golf club. How do I do it?" he continues with a big, dumb smile, "I'm in debt up to my eyeballs." Lowering his voice, but still smiling, he adds, "I can barely pay my finance charges." The smile doesn't leave his face as he drives a riding lawn mower, saying, "Somebody help me."



Thanks to easy credit, many Americans have been living well beyond their means. But that credit picture is beginning to change. And when you think about where the U.S. economy might be a quarter or two from now, you have to wonder how many Stanley Johnsons are out there. This isn't the stereotypical subprime borrower, with a spotty credit history and low credit score, but instead people perceived by friends and neighbors to be living the good life, some even sporting good credit scores.

With the mortgage markets tightening, especially as certain types of adjustable-rate mortgages face a wave of forced refinancings, we will know soon enough. For a preview, all you really need to do is check with someone like R. Douglas Ley, a certified public accountant and certified financial planner in Macungie, Pa. Many of his clients live in a wealthy part of New Jersey. He was the-then anonymous CPA mentioned here last week, in a story that prompted an avalanche of e-mails and postings on my blog. See blog ( excellent comments http://tinyurl.com/2jh9r2 !)


"I am shocked," he said at the time, "by the bad and deteriorating financial condition of many of my clients."

Much of what Ley said was merely anecdotes. Still, such stories suggest there are more Stanley Johnsons among us than we may think. There are plenty of people who are doing just fine. In fact, it appears, based on reports from some CPAs, that many who created wealth in recent years through wise investments or high-paying jobs still are genuinely wealthy. But it is the tales of trouble that resonate for anybody trying to figure out whether the equity in overinflated homes really was a large driver of the economy in the past few years. Based on conversations with CPAs, mortgage brokers, financial planners and others from all parts of this country, there is little doubt it played an important role.


thanks to http://calculatedrisk.blogspot.com/
größer/bigger http://tinyurl.com/2jdlf6

No region is better represented with ready-to-tell stories than Orange County, Calif. That is where, until 2005, Donald Parker owned a large insurance agency. He recalls how low mortgage rates spurred business in late 2001 with refinancings and home-equity lines of credit that required proof of insurance. "It really became excessive by the summer of 2004," he says.

"That's when I started noticing that many of my clients had either refinanced or added a second mortgage or home-equity line of credit multiple times within the prior three years often doubling or in some cases tripling their mortgage balances."

He adds that it wasn't the expansion of mortgage balances that was so alarming. "It was all the new, expensive cars being purchased and added on to their auto insurance," he says. "Often people were calling to replace a Honda Accord with a new BMW or Mercedes. We were also receiving a lot of phone calls from our customers asking coverage questions: for instance, 'Is my new Rolex watch covered if I lose it on vacation in Hawaii?' "

If CPAs and insurance agents are among the first to spot the problems while they are occurring, divorce attorneys like Bruce Hughes, also of Orange County, are among the first to see the actual fallout.
"We see it as it happens," he says. "From industry to industry over the years, they come in groups when various industries go through turmoil. Now it's real estate's turn. I can't tell you how many mortgage brokers, builders, developers and others associated with the building industry have come in for a divorce in the past six months and it's increasing." Those not associated with real estate, but hurt by the false sense of financial security because of it, are no doubt next. Calling Stanley Johnson.

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2 Comments:

Blogger creditandmortgageindex said...

Wow, what an excellent article! The commercial is good and it does make one wonder how many Stanley are out there who look real happy but are drowning in debt!

Invite you to write for my site Bad credit loans and post your articles with your due credits.

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