Posted on Friday, November 12, 2010
Most financial hardships are especially troublesome from the perspective of the homeowners' psychological stability. Couple the initial event like a job loss or medical disability with all of the potential effects like foreclosure or repossession, and it is no surprise that money troubles are at the top of the list of stress-inducing thoughts. With rising foreclosure rates and the stealing away of the American Dream by subprime mortgage companies and psychopathic financial institutions, the housing crisis has been creating various instances of self-destructive behavior in former homeowners.
First there were reports of "jingle mail," homeowners who fell behind on their homes and, instead of attempting to work out the problem, simply mailed the keys to their properties back to the lenders. Worse than that were reports of foreclosure victims who set fire to their homes in a desperate effort to collect the insurance money and pay off their mortgages. The most disturbing possibility, however, is that homeowners will lose all hope and take their own lives to avoid the humiliation of being publicly evicted with no other place to live.
Rising foreclosure rates and rising incidences of exhibited mental health disorders will go hand in hand, to a certain extent. The financial hardships that often lead to foreclosure, and the realization by homeowners that they have no other options than to give up their homes, generate enormous amounts of stress. To be sure, many of these problems are little more than irrational fears, and the loss of a home is certainly not the end of the world for people. Unfortunately, the problems feel all to real and the threats of lawsuits and being homeless can seem very real to homeowners who know they have missed several mortgage payments.
The worst possibility is when these fears cause a sense of complete paralysis on the part of foreclosure victims, who retreat into their own heads to avoid dealing with the problem, hoping that a solution will magically present itself. In this case, the owners simply refuse to pick up their phone when the mortgage company calls, do not call the lender to see if they can qualify for a repayment plan or other option, and are even too frightened to request assistance from a third party foreclosure help company. This is obviously the wrong response to a financial crisis, but it is a common and understandable response.
It is, however, up to the owners of the property themselves to break out of this sense of despair; no one can help them until they take the first step and request assistance. The great thing about requesting help, though, is that the homeowners have now stated the problem and have taken the first step in solving the foreclosure -- they have accepted they can not fix things by hiding from themselves. Many homeowners who have shaken off the chains of their own fears realize that change and doing something about the situation are far less stressful than wallowing in a state of depression and fear of the unknown.
Of course, the problem is how long the owners wait to begin solving their problems. The further behind in the mortgage they fall, and the longer they wait to ask for help, the more difficult it will be to stop foreclosure. This is for two reasons. First of all, the more payments they miss, the more it will cost to refinance, qualify for a mortgage modification, or sell the house. The lender has no trouble adding late fees, court costs, legal fees, and other penalties to the mortgage balance, and interest accrues on these extra charges every month, pushing the homeowners further and further behind.
But more importantly, the second reason that waiting is a mistake is that the very act of avoiding the problem becomes self-reinforcing. The homeowners procrastinate waiting for help to avoid facing the fear of being turned down for a workout or being threatened with eviction. In turn, this procrastination reinforces the irrational fears, which reinforce the act of waiting until nothing but a true psychological shock will convince the owners to wake up and ask for help. This moment of realization may come too late, possibly in the form of a three-day eviction notice.
Unfortunately, few mainstream articles or books are available that discuss the psychology of homeowners facing the possibility of losing a home to foreclosure and what they can do to overcome irrational fears and get to work saving their homes. Our own psychology of foreclosure section is a modest contribution, and more articles are appearing in the mainstream media about how to cope with financial stress, but much more can be done. Ultimately, though, it is usually the homeowners who have not even taken the step of reading about foreclosure that are in the worst danger of causing themselves or others damage because of high anxiety caused by money problems.
Posted by Nick in Psychology of Foreclosure