The latest “celebrity” foreclosure being reported in the news is that of a family who had been featured on the ABC program “Extreme Makeover.” Although they received a four-bedroom house for free and were also gifted another $250,000 for scholarships and a home maintenance fund, the house is now scheduled for sheriff sale. The outcry among blog authors and critics is a commentary on the contradictory attitudes regarding the foreclosure crisis and the issue of failing in America.
There is no doubt that this family made some serious financial errors, but the reason they went into foreclosure was due to a business that failed. They used the house as collateral for a 100% LTV, $450,000 business loan to start a construction company. As anyone who has followed the economy for the last year knows by now, real estate construction has taken a beating as the housing market has cooled and more existing properties are sitting foreclosed or abandoned.
But all in all, if the family took out the loan to begin a legitimate business to make money building structures for consumers, then there is little to be ashamed of in the failure of the business. Businesses in America fail every day, and few commentators have been heaping scorn on the numerous large corporations that have already filed for bankruptcy due to the economy. For some reason, though, it seems that this family is being held up as an example of how borrowers and lenders both squandered their resources in a vain attempt to make a quick buck in the housing boom.
If the homeowners’ business had been a wild success, it is likely the family would have been featured again on some follow-up show or news segment as an illustration of how wonderful the system can work, as long as people are given a helping hand by private industry and the community. Unfortunately, just the opposite happened, the business did not last, and the family has been labeled as failures. Even some of the volunteers who helped build the house on the show have been reported as angry at the waste!
But this outcry against the family misses the point that they attempted to use the resources they were given and begin a new business providing value to the community. Unfortunately, it is impossible to tell if a business will be successful until it is begun, and there is little reason to be ashamed simply because a business fails. The worst that this family did was not make sure they were more protected, or go into the venture more slowly and with better knowledge of the industry. But taking such risks are part of the experience of owning a business.
In fact, the outcry and criticism of this particular foreclosure is more a comment on the prevailing attitudes toward failure in America than a valid assessment of the family’s situation. Failure is just not allowed in America, a nation of go-getters, entrepreneurs, and self-made men. Because the entire financial and economic system is based on an adversarial relationship, there must always be losers and winners in business dealings. But with everyone trying to be a winner, the social stigma of losing can be enormous.
That is one reason there has been another emotional outburst over the story of a woman who committed suicide because her home was going into foreclosure. Losing in the financial game means losing one’s social status and sense of personal worth. The credit score is a self-esteem score for many Americans, and the amount they can borrow at a time is an indication of how well they are doing in life compared to how poorly their neighbors are doing.
Such attitudes and identifications with abstract scores need to stop if people are ever to accept failure as a natural part of their lives, both personally and economically. We all make mistakes, start business that fail, get sick, forget to plan for the future, lose jobs, and find ourselves swinging from success to failure in the blink of an eye. Rather than internalizing failure to the point of suicide or heaping scorn upon others who fail and finding fault where there is none, maybe it is time to reassess our attitude towards failure in general.