“Liquidity means the ability to access your cash.”
Home INsecurity
By Marian Snow
Stranded Equity Could Be Disaster
America’s passion for homeownership should never be underestimated. Calling it the “American Dream” is more
than a cliché; it is a bedrock value. Owning a piece of property – a home of one’s own – has been central to our
country’s values since Plymouth Rock. Our homes are the foundation of our culture. They’re where we sleep,
where we eat with our family and where we spend time together.
Homes are also central to community life. Remember the image of Tom Sawyer, the classic symbol of Ameri-
cana, painting the fence and luring his pals to do his work? That proverbial picket fence will always be our
home’s first impression to the community. It represents our pride and our self-image to the world. We should
never take this classic imagery or the passion for homeownership lightly.
When speaking of community, a poignant image jumps out of my memory. It’s one of a small town mayor, stand-
ing in the village square, talking to a TV news reporter. His southern coastal city had just been ravaged by one of
the massive storms that barreled into the Gulf Coast a couple years ago. The hurricane made landfall just north
of Galveston in this little hamlet. Wind damage brought its usual calamity, along with subsequent ripple effect
devastation. Many homes were lost, including the mayor’s abode.
The reporter held a microphone to the mayor’s face and asked how he felt about the loss of his own home. The
mayor put his head down and shook it, saying, “Our home was totally lost. And the sad thing was … we had just
paid it off!”
False Sense of Security
What does the mayor’s regrettable story teach us? When disaster strikes, do you think you’re safe while “sitting
on your assets” buried away inside the fragile walls of your house? Low mortgage balances and high equity val-
ues give you a false sense of security. Although it sounds counterintuitive, the larger your mortgage and the lower
your equity position, the safer you’ll be. It’s not the other way around – as most people would have you believe.
Continued on page 30
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