Maybe Squatters And Their Unpaid Mortgages Can Save The Economy?

Can Our Mortgage Be Saved By Squatters Who Are Not Paying Their Mortgage Payments???

The last few years have been interesting to say the least, We've all seen home values deflate, unemployment increase, and investments devalued. And once that is done, it starts all over again in a vicious cycle.

We're all looking for answers:

How can we turn the economy around?

How can we establish sustained job growth?

Why is Jersey Shore still on TV?

Is there really a shadow inventory of REO homes and what can we do about it?

It goes on and on and on, lots of problems but very few possible answers. A recent article on Bloomberg authored by Robert Willis and John Gittelsohn may offer some hope, albeit from an unusual source.

The article describes how many (former) homeowners have been squatting in their homes, holding out against the pending or past foreclosure and using their unpaid mortgage payments to pay down loans, revolving c/c debt, or to buy cans of catfood for dinner until they find better employment. Beleive it or not, those people on your street who are setting fires in their living rooms to keep warm may be our way out of this mess.

This 'squatter's rent' is estimated to approach $50 billion in 2011. These monies are expected to contribute to a 2.8% increase in consumer spending this year. Consumer confidence is a key part of the vicious cycle I mentioned earlier. Investments falter, consumers lose confidence and restrict spending to increase savings, companies lower production and layoff employees, unemployment leads to home values declining, and MBS and other investments falter again.

We Americans are great at living in the moment and we definately do not like to sit around in a funk. I expect that we are already tiring of tightening the belt and even those of us with little expendable income will be looking for ways to live it up a bit. Squatters and former homeowners that are now renting can spend more than when they were keeping their mortgage current. Getting these dollars pumpled into the economy could lead to a decrease in unemployment or possibly even job growth.

If this newfound source of (somewhat) discretionary funds are really in the billions of dollars we may just find that these squatters who are occupying the 'shadow inventory' will contribute more to our recovery than we might like to admit. That said though, the huge increase in unemployment over the last year may also be why Jersey Shore is still on.