Dear Readers, I got a very moving email from a reader this week. They are taking a $1,000 a month loss on a condo they bought in California in 2006.

But now we are just a ticking time bomb… My retirement savings will likely be less, my assets fewer, my children’s college loans greater… and on and on.

This issue is beyond my area of expertise.

So, I would really appreciate it if any of my personal finance blogger friends could offer her some helpful advice.

Please leave your advice in a comment so she can read it.

Thank You!

– John

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Hello Mr. Wake,

“The Big Short” Isn’t Over for Millions of Americans.
I recently stumbled upon the above article when I was researching what I should do about my underwater home. I am not quite the homeowner described, but pretty close.

My husband and I bought a condo in San Diego county in 2006. We were very young (23 years old) and pretty naive. We have a subprime loan mainly because we were too young to have enough employment history to qualify for the 30 year fixed loan. The 30 year fixed was what we had wanted. The loan we ended up with was supposed to be fixed for 7 years which we thought was a pretty safe amount of time. 7 years seemed like an eternity to us, at the time!

Anyway, we stayed in our condo when the market tanked and we still own it. I just wanted to share with you the reason we stayed: We considered it our obligation to our community, our neighbors, and our economy to not contribute further to the problem. We also wanted to preserve our credit. Now we have our second baby on the way and we are stuck in an 800 square foot condo in a not so great school district.

We decided this year to move out of our condo and rent it out. We moved in with my inlaws so we could try to save a down payment for another home. We are taking a $1000 per month loss on the condo now. Even with the sky high rents, the rent still doesn’t add up to cover the mortgage, let alone the HOA fee, property tax, and insurance.

Again and again we are faced with 0 options for what to do about this problem. We are still trying to meet our obligation and save our credit, but I truly don’t know how much longer it will last. We have mounting childcare costs. I doubt that we can even qualify for another mortgage on a home bigger than the one we have now given the loss we are taking every month on the condo. I do not know if we can afford rent on a bigger home than the one we have now.

We can’t be the only ones wondering how much longer we can hold out. I share your concerns about what will happen in the future if we don’t deal with this problem. If prices don’t go up, will we all finally have enough and start defaulting again? If prices do go up, will we all rush to sell immediately?

That was a very long way for me to say thanks for writing that article. It resonated with me and I wish this issue got more attention in the media and the political arena. I don’t think it’s just going to go away if we just keep pretending it doesn’t exist.

Thanks,

[Name Withheld]

P.S. I also read the post, U.S. Attitudes Toward Strategic Defaulters vs. Non-Defaulters.  I would vote that we are neither. I think we WANTED to be heros and indeed we were naive. But now we are just a ticking time bomb. In addition to the potential supply problem we cause which you pointed out, we have jeopardized our own financial well-being for years to come. This does have an affect on society. My retirement savings will likely be less, my assets fewer, my children’s college loans greater… and on and on. I think we have contributed to prolonging the agony. I wish all the time that I had just followed my own best interests long ago.

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