I Sense Debt Looming Around

Remember the movie The Sixth Sense (1999) when the kid’s classic line was “I see dead people”? When we were in Belize, on the way to the bank machine, a local was wearing a t-shirt that said “I See Debt People”. This struck me as so funny, I asked permission to take a photo.

In today’s news, neither the slogan nor the reality is very funny. A news article states that 1/3 of the American people are in debt delinquency. They don’t just owe money, but they owe so much that the account has been closed and sent to collection. I used to be a credit collection agent for Sears, Roebuck after graduating college. This is nasty stuff. 

It is incomprehensible to me how one-third of the US could be in this situation. Just to drive the point home, 77 million Americans each have debt in collection that averages to $5,200. Wowser! is an understatement!

More than 40% of the population of thirteen states — Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Texas, Nevada, New Mexico and West Virginia plus Washington, D.C. has debt in collection. We have friends in each of the italicized names. 

These statistics don't include the poor or the working poor who do not qualify for a credit file.

Those Americans who have a credit history, but are not in collection, average a total debt balance close to $54,000; much of this is attributed to a mortgage.

Hmm…this certainly explains why so many say they cannot afford to travel. My heart breaks for them, but hey, we are leaving for Cádiz, Spain on Thursday morning. 

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And the Real Estate Beat Goes On

In this educational journey of buying property over the Internet, there have been many twists and turns. The Realtor that Mike had referred me to was very pleasant and accommodating for about a week, but then turned. He changed personalities so fast, a schizophrenic would be impressed. Suddenly, he felt we should come live there and rent for a few years before buying anything. Standard reasoning should be clear that if you are paying rent, you are not saving money for your down payment. That aside, he totally by-passed the fact that I said we were looking for an investment until we were ready to move back to the States sometime in the future. This felt like a brush-off because it was just that. Time to move on to Istvan's referral.

I e-mailed this Realtor Larry. gave him the lowdown on what we wanted, where we were at mentally and geographically, and asked if he could/would assist. He immediately arranged for a phone call to discuss things further. We spoke, he said he could help and signed us up for e-mail alerts on properties that came in through his agencies listing services. I was feeling heard and helped. I told Larry how much money we had in cash to buy a place. There were dozens and dozens of places within our range, but he suggested we still try to pre-qualify for a mortgage so that we don't use up all of our cash. He put me in touch with a loan officer at Bank of America. B of A is my secret nemesis, but we do have our checking, savings, and money market accounts with the CA B of A and we had our CA mortgage through them, making this a logical way to go.

The officer Larry referred us to, Peter, is a Platinum Member of B of A's corp of loan officers, the top 5% of the entire corporation. Shiny objects distract me and gain my attention, so Platinum was shiny enough to get me excited about working with Peter. After e-mailing Peter, he responded within a couple of hours. He immediately brushed me off, misreading my e-mail thinking we had no US income at all. Trying to keep my B of A contempt under control, I politely wrote back pointing out the error of his reading. Now understand, we only want a mortgage up to $30,000. It is not like we want to finance 75% of a property. We are just looking for a bit of cushion in case a really hot property comes along that is over our cash threshold. 

First Peter did not know if he could underwrite a loan for Americans living abroad. This took a couple of days and he found he could if we had sufficient US income. Well, I have no US income and our foreign income is not acceptable for US banking standards. Then we found out that the rules for giving loans to US citizens who are living abroad has changed in September 2009, not in our favor, of course. 

After Peter did much investigating, I had to scan and send off Ron's last two tax returns and copies of his 1099s for his retirement and Social Security as well as the evaporating pension fund. I included copies of our B of A bank statements, because I thought they were pretty damned impressive, but obviously not so. Peter wrote back stating that he could not run my credit report without any US income making it totally dependent on Ron. Now here is the glitch. Ron needs to have three open lines of credit to fully qualify. The problem here is that before we left the States, I paid off all of our credit cards and cut up most of them to avoid having debt. Ron still has a B of A Mastercard that he has not used in years and a Diners Club card. Ron's two cards are not enough according to Peter. After some pushing, he agreed to run a credit check anyway. We had a mortgage with B of A up until just five years ago. Ron had his truck loan through B of A. This idea that you have to be in hock up to your neck in order to borrow money is why our economy is in the shape it is in. 

We are waiting for the verdict, but it is not going to ruin my day either way. I can go either way. A mortgage will help Ron's Federal taxes, but being able to pay cash for a place and not having any big debt is are dream come true also.

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Public Service Announcement

I came across this graphic called "Credit Card Hell". To see the graphic larger, go to the original site http://www.mint.com/blog/wp-content/uploads/2009/06/creditcardhell21.jpg and click on the graphic to make it readable. Thank the universe, we do not have a mortgage, car loans, or credit card debt. We only charge on cards that have to be paid in full each month, so we have to keep track of our spending. The rare times we do have to shell out big bucks, like for Ron's quarterly estimated taxes for IRS, I put it on a special AMEX card for the frequent flier miles, but then pay it off is two large installments automatically through online banking. I just happened to look at the new rules of my United Airline Visa card, I do not use any longer, but keep for emergencies. After a missed payment, the annual accrual interest rate is 85%. Is that to keep the airline flying? No, it is to keep unsuspecting people in the grips of credit card debt. For others, there is hell to pay and a hell of a time paying off credit cards.

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