Maybe in the dark ages, a second chance was a lot easier.
Today all our mistakes (finances, internet posts,errors of youth) will plague us for the rest of our lives (seems like).
Concerns about bad credit ratings are largely overblown. There are plenty of people who have filed bankruptcy and then within 2-3 years had brought their credit ratings back up enough to obtain mortgage loans at reasonable rates. Lenders need to lend in order to stay in business, and since so many consumers have had credit problems recently you can expect to see lending standards for credit scores loosened in the coming years.
It's only because you let it happen, in most other countries a bureau that keeps that kind of privacy sensitive information on individuals would be against the law.
However, many people are choosing not to exercise out-of-the-money home purchase options. But this is more a problem for banks than for people, since the banks expected most of those options to be exercised.
The language "people losing their homes" is simply a propaganda term designed to encourage politicians to take money from renters and owners and give it to option (aka mortgage) holders.
I know people, personally, that are losing their homes. I'm kinda wondering how large your social circles are if you don't know anyone in that situation.
Now, the people I know in foreclosure probably should be in foreclosure - they got that way through bad financial decisions in 2006 and 2007, and they were certainly warned at the time. House prices can't stay overvalued forever, and maybe this'll give those of us who were more prudent with our money an actual chance to own a home. But "propaganda term"? Really? These are real people with real homes. And they're not as uncommon as you'd think.
Average people don't care about call options or rates of return, they care that they have a roof over their head.
Lets follow your logic. My lease runs out on Jan 31. Am I "losing my home"? If I'm not, what distinguishes my repo agreement/lease from other peoples call option/mortgage?
I actually agree with your basic sentiment, but there is an answer to this. Losing a mortgaged home hurts more than an apartment because people tend to have greater levels of endowment effects -
http://en.wikipedia.org/wiki/Endowment_effect
> In behavioral economics, the endowment effect (also known as divestiture aversion) is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not.
Endowment effects is looking pretty robust at this point, it's been shown on a lot of unrelated types of goods and services. People have a much greater attachment to a "home" than an "apartment" - I mean you can even think of the difference in connotation and prestige between being a "homeowner" and "renter" - this probably isn't a good thing by the way, but it's definitely real.
And I'm kind of wondering what sort of circles you move in if you know several people in that situation.
It is good to have friends - or at least acquaintances - outside of the high-powered tech industry circles. Helps you keep perspective.
Some people made bad gambles, and are losing their "options." Others made bad decisions or were unlucky, and are losing their homes. Even if they're partially to blame, it's still a terrible situation.
The government is arguably propagating these special cases at an alarming rate. At least one version of the "health reform bill" is reputed to make not having private health insurance a crime, as Massachusetts does at present. Sure, those who can document their poverty are supposed given help in these matters but this leaves a disturbingly large area where criminal codes are going enforce private debts.