Do you own your own home or do you just pay rent to a lender instead of a landlord?

The question isn’t frivolous. Rather, it speaks to whether your house is a place to live or an investment, a temporary abode or a more permanent living space, real property or just a roof over your head.

There are 75 million owner-occupied housing units in the United States, and of those, nearly 24 million don’t have a mortgage, according to U.S. Census Bureau estimates. These homeowners are mortgage-free because they paid cash for their home or paid off their housing debt over time.

On the flip side, there are millions of homeowners who’ve made little or no progress toward owning their home free and clear. Some bought their home in 2005 or 2006 with little or no down payment and a mortgage that didn’t actually pay off the debt. Others made substantial down payments that have since evaporated as house values have fallen. And still others extracted all of their equity through refinancing and spent the money on fancy remodels that rarely recouped the costs; first-class vacations; big-ticket purchases; or inflated standards of living that were well beyond their true means.

It’s no wonder, really, that so many people, wowed by the big numbers on their personal balance sheets, made the decision to cash out. We all felt so much richer during the housing boom, even if our wealth was only on paper. And for many, the easy opportunity to convert that wealth into ready cash must have seemed the height of good financial sense. After all, cash-out meant money that could be spent immediately instead of on some distant day in the all-too-unpredictable future.

Now that house prices have declined — modestly in some places and precipitously in others — the cash is gone and the houses aren’t worth enough to justify those second mortgages and home equity lines of credit. This scenario has become so commonplace that we’ve resurrected two terms to describe people who owe more on their mortgage than their home is worth. We say they are "upside down" or "underwater," neither of which sounds very pleasant.

Add to the equation one of life’s inevitable hardships — a job loss, crippling disability, life-threatening illness or other financial emergency — and a fair number of these folks will find a foreclosure notice in their mailbox. …CONTINUED

But there is another group of homeowners who won’t receive a foreclosure notice, but won’t ever own their own home outright, either. These homeowners didn’t extract huge sums of equity in one fell swoop, but instead slipped down the slope through repeated refinancings that took them from homeownership to what looks suspiciously like renting with a mortgage. Also in this group are homeowners whose loans have been extended to new 40-year terms. Their payments may be affordable, but they won’t make a dent in the principal for a decade.

Consider the words of Greg Gwizdz, national sales manager at Wells Fargo Home Mortgage in Des Moines:

"We see people who bought a house in 2000, refinanced in 2003, refinanced in 2006 and now they are going to refinance again. They have owned their home for nine years, and they have 30 years left on their mortgage. They keep focusing on the fact that the payment is $100 lower, but multiply the payment times the number of years that they are going to have to pay it and they are actually going backwards."

Collectively, these equity-less homeowners shift the paradigm of homeownership and give the word itself new meaning. Perhaps we shouldn’t even call them "homeowners," but rather "home occupiers with loans."

Make that "HOWLs" for short?

Marcie Geffner is a veteran real estate reporter and former managing editor of Inman News. Her news stories, feature articles and columns about home buying, home selling, homeownership and mortgage financing have been published by a long list of real estate Web sites and newspapers. "House Keys," a weekly column about homeownership, is syndicated in print and on the Web by Inman News. Readers are cordially invited to "friend" the author on Facebook.


What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

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