In recent years, new words (or jargon really) tied to the ongoing credit and mortgage crisis have found their way into fancy official dictionaries.
Just take the 2008 Merriam-Webster dictionary word of the year, “bailout.”
Or “subprime,” which was the 2007 word of the year as voted by the American Dialect Society.
Clearly these words have been used frequently as of late, which explains why the big shots are finally giving credit where it is due.
But what’s new in 2012? What’s the latest in mortgage crisis linguistics?
Well, Merriam-Webster didn’t invent a new word, but they did give new meaning to a very common existing one.
In a 2012 update of Merriam Webster’s Collegiate® Dictionary, they added a new “sense” for the way “underwater” is used, as it pertains to a mortgage. Sure, it was a word before, but now it’s taken on another meaning.
For the record, Merriam-Webster defines an underwater mortgage like so: “having, relating to, or being a mortgage loan for which more is owed than the property securing the loan is worth.”
In other words, buying at the wrong time and watching your property value fall off a cliff. Or serially refinancing your mortgage until you zap all your home equity, and then panicking as your loan-to-value ratio skyrockets.
Sign of the Times
While one could take this as a bad thing, it’s really just a sign of the times. And it could actually be seen as another step toward recovery.
We had the subprime debacle back in 2007, followed by the bailout in 2008, and now we’re finally dealing with underwater mortgages head-on.
In time, hopefully most borrowers will get their noodles above water and everyone will know the importance of home equity.
So instead of going with a negative amortization loan, borrowers will opt for fixed-rate mortgages, or even shorter-term mortgages like the 15-year fixed, which as I’ve noted recently, is already happening.
Homeowners may also come to the realization that using one’s home as an ATM machine isn’t a best practice.
All in all, it’s a new mindset, that housing isn’t the be all and end all solution to instant riches. We’ve finally come to terms with the fact that you can indeed buy at the wrong time and lose your shirt.
So in a sense it could be a good thing, aligning expectations with reality and setting in stone some negative connotation for housing.
By the way, “man cave” was one of the 2012 new additions as well. You know, the place husbands go to get away from the reality of knowing their home is worth half what they bought it for.
Oh, and “f-bomb” and “systematic risk” also made the list. It has been a good year.
(photo: Horia Varlan)