Umatilla Florida Blog

One of the main reasons that the housing/mortgage markets are in such a state of dissary is the blatant misuse of the term "equity". In recent years leading up to today's crisis, one often saw advertisements encouraging consumers to convert the "equity" in their homes to cash to pay off credit cards, vehicles, boats or other types of consumer loans. The consuming public was misled into believing that this "equity" was theirs to spend. This was a cruel deception that caused many homeowners with very comfortable mortgage payments to then refinance these mortgages to take cash out to pay off other types of debts. There are two reasons that this deception is almost criminal.

First, it encouraged uneducated and sometimes even very sophisticated consumers to further encumber the roof over their heads. I would never counsel any customer, relative or acquaintance to weaken his or her financial situation by risking the very home that keeps their family safe. By taking out home equity lines of credit or by refinancing their mortgages, these folks made a manageable situation unmanageable in many cases. Why would anyone want to trade the roof over his or her head to pay off an ATV or take a vacation? The unrelenting media assault against common sense in recent years urged consumers to treat the "equity" in their homes like an ATM.

Second, one should never even consider the "equity" in his or her home as their money until the home is sold. Yes, a person could have access to those funds, but then they will be required to PAY IT BACK. This money is NOT yours until the house is sold.

I fear that the mortgage crisis will get worse before it gets better. A great deal of the blame goes to massive misues of the term "equity".

Geoffrey Presson

Umatilla Home Zone

Barbara L. Johnson Realty, Inc.