I had a great conversation with a previous client and business owner today who is in a tough position on a home he purchased several years ago and is upside down by about $200K.   Considering that he put 20% down when he purchased this $600K home it is frustrating to say the least for him to be in this position.   They have assets, a growing small business, and terrific credit (800+ FICO).   He has only 1 loan on the property and it is a non-recourse loan.   He is stuck in a $3800 mortgage payment on a home that would would rent for about $2000.   His lender (Wells Fargo) has denied him on a loan modification to reduce the principal balance because he supposedly does not make enough money.   Since he is self-employeed this is a common situation.   Obviously he can afford the payment, but yet this is the reason they say he cannot qualify for modification program.  

He is painfully aware that this is the worst investment of his life and he needs to find a way to end this delima.   The best choice seem to be finding a hard money investor or seller who would finance him with 20% downpayment and then dealing with the current home by doing a short-sale.   He does not want to rent and he does not qualify for any conventional financing while he still owns the current home.

One of the interesting things he said today was that he feels trapped in a social experiment of housing.   I had never thought about like this before and he hit the nail on the head.   The goverment and big banks have performed and our still performing a social experiment on a grand scale with housing.   They are busy taking care of each other while making the rules and seeing how consumers react.   If you put 10 cigarettes in a rat cage what do you think will happen?   Odds are the rat will take the bait and chew on a cigarette.   The governement and banks change the rules of the housing market in a similar way to see if we take the bait and do what is expected.   The banks know that if they do nothing for the  millions of American’s in the same position as my friend, the odds are they will do nothing and just keep paying his mortgage.    Do you ever think it is wrong that the  government and large banks  seem to have an endless supply of capital to pay their bills  and  accumulate more debt, while the small business owner and self-employeed have few options?    If you are  payroll employee with a W-2 who has no control of whether you lose your job tomorrow  the rules say they can help this person, but not the small business owner who is penalized for taking tax write-offs the government  says he is entitiled to receive.    The list of examples is endless to make comparisons on how the government and large banks have enticed consumers and changed the rules that do not benefit us. $3 gasoline and War for 10 years, healthcare, bubble housing market and allowing bundling of mortgages, Insurance industry and AIG, Wall Street, Energy Company Monopoly’s, Financial Bail Outs & large banks, Wallmart, and the list just goes on and on.   Do you feel trapped in the Social Experiment and what can you do to get free from Government and Big business’s grip on your life?