Debt-Laden Homeowners Save the Credit Card Before the House

[BR_Parkway]

http://biz.yahoo.com/ap/070912/homeowners_credit_cards.html?.v=2

NEW YORK (AP) -- Conventional wisdom has it that people will do everything to keep their homes. Not any more.

The proliferation of no-money-down home loans over the past few years, coupled with the current housing downturn, is giving rise to a new mentality: People will risk losing their homes while doing everything to keep their credit cards.

"This is the biggest surprise we're seeing," said Elizabeth Schomburg, senior vice president of the Family Credit Counseling Service in Chicago. "People are actually coming to us with situations where they are current on their credit cards but are in foreclosure."

That partly explains why credit-card delinquencies have remained low -- despite the recent signs of trending up -- while banks and mortgage lenders are repossessing a record number of homes after years of lending excesses. As some consumers see it, they need to hang on to their plastic as hard as they can, especially at a time when faltering house prices are making it harder for people to access credit through refinancing or borrowing against homes.

[StrongBad]

1. This is just sad

When did Americans all of a sudden give in to a life of debt peonage by way of credit card?

Are people doing this recently because they're stupid, or is it simply because they've fallen on hard times given recent economic conditions and can't cope?

I'd say a little of column A and column B

[Gormy Cuss]

5. I'd say it's also a response to the harsh reality that holding on to credit ratings is essential.

It's hard to get a job, rent an apartment, or do much of anything else these days with a bad credit rating. I read an article recently on how turning back the property to the lender rather than letting it foreclose was less harmful to your credit rating. If you're going to lose the house anyway, might as well walk away with your credit cards in your wallet.

I agree, it's sad. I think it's time to take a serious look at our whole lending system.

[Lars39]

2. Fear of not getting medical care could be one reason to hang onto cards.

[BOSSHOG]

3. I'm glad I'm not a trend setter

We put a 70% down payment on our new home seven years ago and I wish it were more. We use the credit card only for emergencies (new heat pump, car repairs, needed big ticket items.) Credit cards are great but so is home sweet home which monthly grows a little more equity. Patience will make it happen and you have a roof over your head.

[Vickers]

4. I see otherwise intelligent folks at work with incredible amounts of CC debt

It is mind-boggling. Some of them have more in CC debt than I've spent on groceries and gas in the last 10 years (and I have kids!!!).

I think this is the reason people aren't freaking out about the national debt (when they SHOULD be). They think that somebody is just going to keep extending and extending that credit limit.

[gateley]

6. It's so they can "buy" groceries while waiting for their

next paycheck. Did you ever think you'd see the day when we'd be buying groceries on CREDIT? Even the IRS takes credit cards! Our grandparents and theirs would never have believed it.

[ecstatic]

7. I was so pissed at my grandma for refinancing to pay off card debt

Mind you, she threw away a fixed, 5.2% loan for an ARM that is steadily increasing. She was suckered into this and didn't talk to anyone (smart) first.

[MadHound]

8. Just another example of idiots in action

Keeping that precious plastic is going to do you a whole lot of good when you're ass is out on the street.

I'm sorry, but frankly this is why I don't support bailing out people in this mortage/subprime mess. Apparently they aren't going to learn a damn thing until it comes up and bites them on the ass, hard. So I say let it happen and we actually might have a better future. Bail them out again and again and this sort of shit will continue to happen.