The foreclosure filings piling up across the country are taking a toll not just on banks and Americans' personal finances, but on their mental state as well.
Nearly 1.7 million homes have been foreclosed upon so far this year, and the pace has accelerated. RealtyTrac reported on Thursday that there were 55% more foreclosure notices issued in July than a year earlier.
The related stress can lead to an increase in unhealthy behavior, like not eating or sleeping properly, self-medicating with alcohol or drugs, and damaging personal relationships or employment. Some have even taken their own lives.
One couple facing foreclosure in Prineville, Ore., left their car running to kill themselves and their three dogs, according to a
USA Todayarticle.
ABC News reported that
another woman in Massachusetts fatally shot herself after faxing her mortgage company a note saying that "by the time you foreclose on my house I'll be dead."
Content Continues Below
While these may be extreme examples, there is no doubt that the economic downturn is causing mental anguish for Americans across the board, and that those who are in danger of losing their homes are likely to be hit the worst. ComPsych, a Chicago-based provider of employee assistance programs, says it received 21% more calls related to finances during the first six months of the year, with eviction calls up 25%. The company has added more on-site training sessions for personal finance to help employees cope with financial stress.
"Our experts say this is being driven by economic hardship and uncertain times," says spokeswoman Jennifer Hudson.
Karl Frank, a financial planner with A&I Financial Services, has seen three of his clients go through the painful twists and turns of losing their most valuable asset, with different results.
One couple, Sally and Mike, purchased a $500,000 home with no down payment as the Denver area was approaching the peak of its real-estate boom. Sally was a part-time employee and Mike was a full-time government worker, and their cumulative salary totaled less than $100,000 per year.
Soon the interest rate started to balloon, and with one child in college, and another two approaching college age, the couple sold their home at a loss and pulled out all the funds from their retirement accounts and "lost 40% to Uncle Sam" on those assets, Frank says, due to early-withdrawal penalties. Sally got a second job to make ends meet.
"Colorado real estate was going so well and they got into a home they just didn't belong in," Frank says. "Their lifestyle went from living the good life, living the dream to just depression. They're still kind of struggling with that, but we kind of lost touch because they no longer have an account with us."
On the other end of the spectrum was a school administrator who earned $150,000 per year and planned to profit from the local real-estate boom. He acquired rental properties, and purchased an $800,000 luxury home. He spent another $200,000 to improve the house, which was in the popular neighborhood of Harvey Park near the University of Denver. He planned to sell it for $1.4 million.
Unfortunately, 40 other homes in the neighborhood went on sale at the same time, saturating a housing market where consumers had little appetite or capacity to purchase them any longer. His realtor now estimates he might sell the home for $750,000. The value of his rental properties declined sharply as well.
To make matters worse, Frank's client lost the job he had been in for more than three decades. (Frank declined to provide his name, citing privacy concerns.) A business coach suggested he take his severance package and take a six-month vacation, which he plans to embark on shortly.
"It's terrible," says Frank. "He's just under water and he's just going to let the thing go under foreclosure. He's not broke but because of the stress, he lost his job, too."
The American Psychological Association
provides tips for those coping with such financial anxiety. The group suggests that you don't overreact to a bad situation, but also don't become passive. It's important to identify the key problems, formulate a plan and stay focused on improvement and long-term goals despite short-term problems or pain.
If you find yourself moving toward unhealthy behaviors -- smoking, drinking, drugs, gambling or emotional eating -- consider seeking help from a mental-health specialist before it becomes a serious problem or causes damage to your personal relationships or job.
Credit counseling services and financial planners can also help in times of economic stress.
And on the bright side, the APA notes, "times like this, while difficult, can offer opportunities to take stock of your current situation and make needed changes."
Frank provides another example of a couple who lost their property but are turning the lemons into lemonade. Kurt -- who works for a homebuilder -- and his wife Jackie owned one home in the Denver area, along with a vacant piece of property. They planned to build a $1.5 million house on the lot that would only cost about $200,000 to build because of Kurt's homebuilder connections.
However, the tight credit markets made it impossible for the couple to obtain a construction loan. They were forced to sell their $450,000 primary residence at a loss when the interest rate reset at a higher rate and Kurt stopped receiving his annual bonus amid the housing-market downturn.
Although it caused much stress in the family, they are now renting, thankful that Kurt still has his job, and are holding onto the lot to build their dream home when market conditions improve.
"Sometimes having a dream like that can offset the depression and frustration you feel with something else," says Frank. "And if you can take comfort, you're in good company: You've got multimillionaires who are foreclosed on and you've got some real-life folks."
© 1996 -
2008 TheStreet.com, Inc. All rights reserved.
Most Read Articles from TheStreet.com
Stocks With Insider Buying, Buybacks: CVS
Large repurchases make CVS and Lexmark stocks to watch.
Kodiak Joins 'Stocks Under $10' Watch List
The main catalyst for the oil and gas company lies in the Bakken Shale play, located in the Williston Basin of North Dakota and Montana.
Cramer on Top-Searched Stocks: Joy Global
Joy Global is among the most-searched stocks on <I>TheStreet.com</I>. Here's what Cramer had to say about it recently.