[augustus]

It may not be the dark ages but people losing their homes and having to deal with a bad credit rating for seven years is pretty bad.

Maybe in the dark ages, a second chance was a lot easier.

Today all our mistakes (finances, internet posts,errors of youth) will plague us for the rest of our lives (seems like).

[pg]

Actually you got even less of a second chance in the dark ages. Bad times drove smallholders (voluntarily or involuntarily) into serfdom, after which there was not only no second chance for them, but none for their descendants either.

[nradov]

In the dark ages most people couldn't get credit at all, and you didn't get a second chance if you died from the plague.

Concerns about bad credit ratings are largely overblown. There are plenty of people who have filed bankruptcy and then within 2-3 years had brought their credit ratings back up enough to obtain mortgage loans at reasonable rates. Lenders need to lend in order to stay in business, and since so many consumers have had credit problems recently you can expect to see lending standards for credit scores loosened in the coming years.

[jacquesm]

The whole 'credit ratings' thing is uniquely North American anyway.

It's only because you let it happen, in most other countries a bureau that keeps that kind of privacy sensitive information on individuals would be against the law.

[DrJokepu]

Credit ratings are just as prevalent in England as in North America. They are less heavily used in other countries but most countries have some sort of inter-bank debtor black list.

[maigret]

Yep - for example Germany has, it's called "Schufa" http://de.wikipedia.org/wiki/Schufa

[yummyfajitas]

There are really not very many people losing their homes.

However, many people are choosing not to exercise out-of-the-money home purchase options. But this is more a problem for banks than for people, since the banks expected most of those options to be exercised.

The language "people losing their homes" is simply a propaganda term designed to encourage politicians to take money from renters and owners and give it to option (aka mortgage) holders.

[trevelyan]

Banks aren't foreclosing because then they need to write-off the losses. I know a guy who's been living in a house he stopped making payments on for 1.5 years. No sign they're going to kick him out anytime soon.

[nostrademons]

"It's a recession when someone you know loses their job. It's a depression when you lose yours."

I know people, personally, that are losing their homes. I'm kinda wondering how large your social circles are if you don't know anyone in that situation.

Now, the people I know in foreclosure probably should be in foreclosure - they got that way through bad financial decisions in 2006 and 2007, and they were certainly warned at the time. House prices can't stay overvalued forever, and maybe this'll give those of us who were more prudent with our money an actual chance to own a home. But "propaganda term"? Really? These are real people with real homes. And they're not as uncommon as you'd think.

[yummyfajitas]

A person in foreclosure is, by the definition of foreclosure, not losing their home. They never owned a home, all they owned is a call option on a home.

[nostrademons]

They are losing the home they live in, which in practical terms is as bad or worse.

Average people don't care about call options or rates of return, they care that they have a roof over their head.

[yummyfajitas]

You can't lose something you never had to begin with.

Lets follow your logic. My lease runs out on Jan 31. Am I "losing my home"? If I'm not, what distinguishes my repo agreement/lease from other peoples call option/mortgage?

[lionhearted]

> Am I "losing my home"? If I'm not, what distinguishes my repo agreement/lease from other peoples call option/mortgage?

I actually agree with your basic sentiment, but there is an answer to this. Losing a mortgaged home hurts more than an apartment because people tend to have greater levels of endowment effects -

http://en.wikipedia.org/wiki/Endowment_effect

> In behavioral economics, the endowment effect (also known as divestiture aversion) is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not.

Endowment effects is looking pretty robust at this point, it's been shown on a lot of unrelated types of goods and services. People have a much greater attachment to a "home" than an "apartment" - I mean you can even think of the difference in connotation and prestige between being a "homeowner" and "renter" - this probably isn't a good thing by the way, but it's definitely real.

[billswift]

> I'm kinda wondering how large your social circles are if you don't know anyone in that situation.

And I'm kind of wondering what sort of circles you move in if you know several people in that situation.

[nostrademons]

They are all sorts of people - one was a childhood friend that I played with when I was 3. Another is a 60-something friend of my mother's. A third (not sure if she's actually been foreclosed upon yet) is my former landlady.

It is good to have friends - or at least acquaintances - outside of the high-powered tech industry circles. Helps you keep perspective.

[tmorton]

In pure financial terms, you're right. However, "people losing their homes" is perfectly accurate for some people. A home isn't just a house or an "out-of-the-money home purchase option", it's where you've put down roots and built up memories.

Some people made bad gambles, and are losing their "options." Others made bad decisions or were unlucky, and are losing their homes. Even if they're partially to blame, it's still a terrible situation.

[blogimus]

At least today (I believe in most, but not all countries) we don't have the specter of debtors' prison. I'd say that was a pretty hard barrier to a second chance.

[philwelch]

Actually there are two categories of debt you can still be imprisoned for: child support and taxes.

[blogimus]

I think we can all agree that these are special cases. In general, you don't go to jail until your family bails you out if you can't pay your car, house or credit card bill. or your business loan for that matter.

[joe_the_user]

I don't think we should be agreeing to these as "special cases" at all. Things are already too convenient for the state.

The government is arguably propagating these special cases at an alarming rate. At least one version of the "health reform bill" is reputed to make not having private health insurance a crime, as Massachusetts does at present. Sure, those who can document their poverty are supposed given help in these matters but this leaves a disturbingly large area where criminal codes are going enforce private debts.

[joe_the_user]

In the Dark Ages, you mistakes were passed down to your children and grand children - seriously. It's only the rise of a mercantile society that allowed children coming up not to be judged by their parents and grand parents.