| Interview: Barbara Corcoran |
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We often hear them sold as a good way to pay catastrophic medical expenses. What's your take on that? |
 Let me ask you: Do people really do that? In all of my speeches, all the people I talk to, I've never had anyone raise that. Is that an urban myth? I've just never met anyone who has done that. I'm not sure that's really true. Calamities are more apt to be covered, if anybody has any insurance.
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Do you think there is more misuse of home equity today? |
Yes.
You know why? Because until recently with this soft
(housing) bubble thing, people really felt that there
was "fat" in the house and they had the
right to use it. They just felt the sky was the limit
and, my God, isn't it a waste that we're living as
we are or our kid's not going to college or we're
not paying off our credit cards or we're not buying
that plasma TV? And we have an equity of like $300,000
extra in our house that we're not even using? So that
kind of stinkin' thinking goes on. I think the fat
real estate values that rose by the week in the last
five to seven years really lent themselves beautifully
to people abusing the privilege. That said, that's
human nature.
Now that housing prices are leveling out, do you think people have put themselves in a bind by tapping their home equity?
Many people have, but most people have really used it judiciously. You know what? The lower the price of the house, honestly, the more apt people were to use it out of the extremes, either dire need or frivolous expenses. I think you tend to see the extremes in the lower-priced houses. And I think if you checked the foreclosure rates, you'll find that the foreclosure rates are typically much higher in the lower-priced areas than they are in the higher-priced areas. That's where you get the most abuse. You also get the most scams in terms of the mortgages that people sign up for in the first place, usury rates, things like that. On the upper end of the marketplace, you get more bridging the gap for job loss or college tuition.
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