I’ve always been fascinated by the old expression, “The Cobbler’s children have no shoes.” It refers to a person who is so concentrated on using their specific skill set to take care of others’ needs that they ignore their own. Carl Richards is a professional financial planner, a guy who people paid to manage their money. He shares how while in the middle of telling people what to do with their cash, he ended up buying way more house than he could afford and ended it up losing it all. It may be a long time before he and his wife can be homeowners again.
NYT published his autobiographical saga, which reads like a very familiar story to anyone who has been following the mortgage meltdown and aftermath. The key difference is that this guy, above all, should have known better. You don’t go with a broker who advertises on bus benches and picks you up in a gold Jaguar. You don’t get a 100% mortgage. You don’t do a pick-a-payment plan, and then pick the payment that’s so low that you’re actually adding to the balance every month. Most of all, you don’t buy a so-called dream house in Las Vegas.
Carl was deeply disturbed by the tough choices he had to make. At one point he was so stressed that he would vomit for 6 hours straight. He felt he had a moral obligation to pay his mortgage in full. Then he realized that wasn’t true. He had a moral obligation to take care of his family, but only a contractual obligation to the bank.
“I remained troubled by the ethical implications of what I was doing, but I soon started seeing some of my friend’s arguments echoed in the work of Brent T. White, a law professor at the University of Arizona,” writes Richards. “He and others were arguing that homeowners should act more like companies — taking into account legal and economic reasons for stopping a regular payment rather than “perceived moral obligations.”
In the end he didn’t mail in his keys to the bank and walk away from the house. He managed to squeeze out a short sale for $40,000 less than they paid for the house and was released from both of his mortgages. He and his family moved back to Utah where they are now renters. And there’s another old expression that’s a favorite of mine that applies to his new book on money that’s coming out: make lemons out of lemonade.