Suppose people are as well prepared as they can afford to get -- water, food, cash, heat etc --- and then thousands are laid off or can't work because of loss of electric power. What then? Will mortgage lenders start massive foreclosures? What happened after the stock market crash of 1929? I'm sure there was opportunity for the rich to get richer at the expense of the poor, but were many people forced to leave their homes?

-- Sylvia (in Miss'ippi) (bluebirdms@aol.com), March 16, 1999

Answers

Some states (Colorado being one) are passing laws to preclude foreclosure when/if Y2K causes the owner to interrupt their payments, whether due to the mail not being delivered or due to Y2K problems at the bank, etc. I expect most will have passed protection laws as they have a greater body of voters in home owners than they do in lendors.

-- Brett (savvydad@aol.com), March 16, 1999.

Brett-- I hate to be cynical but which one do you think contributes the most to the politician's PAC's?

Sylvia-- There was a tremendous redistribution of wealth during the depression (with the rich getting richer, etc.). Most of the banks do not want any properties. Frankly, they don't make anything from an empty house. The worst case scenario would be to be among the first to go down the tubes. You have little chance of renegotiation. If you're one of the last, they probably won't even notice.

As remarked in a couple of earlier threads, the biggest danger is taxes, nonpayment and sheriff's sales. NO HOPE there. The county will get it's money and they don't care how long they have to hold property.

-- Lobo (Hiding@woods.com), March 16, 1999.

Moratoriums on forclosures were legislated in several jurisdictions after 1929. The consequences of depression were accordingly transfered to mortgage lenders, including banks and their depositors, whose income on the savings that they had loaned abruptly ceased. Their ability to recover their savings was either defered or lost.

-- Watchful (seethesea@msn.com), March 16, 1999.

Lobo,

You have a point, but immediately I wonder how such legislation even got written if state politicians only got PAC interest and nothing from their constituents. Nonetheless, it is out there. For those considering buying a home (possibly going rural), you might consider seller-financing as an option. Banks are a bit impersonal and probably don't think much of repossession; I would think someone who knew you personally (or at least face-to-face) would have a harder time of it. That may be naive - I've been accused of that before in this column. Besides, if your lender was someone with whom you had regular personal contact during Y2K, you could wind up using barter items as a means of payment (I've heard "neo-feudal" used in connection with Y2K before - this suddenly smacks of the same).

Serf's up?

-- Brett (savvydad@aol.com), March 17, 1999.

Don't forget...many people will walk away from their mortgages, if a deflationary scenario unfolds as in the 30's. At that time, property values deflated to 20-25% of their original price. As deflation takes hold, and prices drop, many will abandon high mortgages, further escalating the crisis. So if deflation starts...look out. There are already ominous signs that is has. Ever wonder what happened to inflation? Look a Japan's high property prices...way overinflated...and their subsequent deflation will infect this country very soon. When the public catches on that prices are dropping, they stop buying..because they are waiting for the bottom..problem is, its a lot further down and devastating than most realize...

-- rick shade (Rickoshade@aol.com), March 17, 1999.

Rick..I think you're probably right about the deflationary scenario and property abandonment.

Brett...Suggest you read the laws they are trying to pass. Best I can tell from the rough drafts on the governmental sites, they do not deal with inablity to pay as a result of job loss, only if the banks are on holiday, USPO toasts, etc. All of the limited liability laws that have passed so far do one of two things. They either protect 'your' legislators from suit or they protect companies from suit for damages resulting from noncompliant products. So far as I know, no laws protecting we civilians are even before committee anywhere.

Anybody got more information?????

-- Lobo (Hiding@woods.com), March 17, 1999.

I remember around 1983 many laid off folks in Pittsburgh were sued in foreclosure. The judge refused to evict the residents, even though the law was on the lenders' side.

Pennsylvania elects its Supreme Court. Guess who got elected to the Supreme Court soon thereafter!

-- GA Russell (garussell@russellga.com), March 17, 1999.

This is the reason I am pre-paying my mortage from 12/99 through 03/2000!

-- Buffalo Bob (Buff@hal.com), March 17, 1999.