The Worst Possible Catch 22

This is one of those I-can't-make-this-up scenarios.  Honestly, I don't know how I would handle being in a situation like this.  I don't know how I'd keep going.  It's bad.  It's really bad.  Let me explain.

Homeowners in Tohoku whose houses were either totally destroyed (washed away or deemed unlivable), or partially damaged (still livable but needing repair) have the following options:  move into temporary housing (if they qualify), rebuild their home, or repair their home.  This post is about the latter two.

Here are the facts.  If a house was categorized as "completely destroyed" or "partially destroyed" but the owner has an outstanding mortgage, they are still responsible for paying that off.  Not having a livable home does not mean the loan magically disappears.  Now let's say they want to rebuild or repair their home.  They are responsible for repayment of the loan they take out for that, too.  That means they now have dual-mortgages.

There's good news.  Sort of.  Not really, actually, but there is an option pitched to these dual-mortgage homeowners that's meant to alleviate their financial burden.  Let me break it down for you.

If Mrs. W owes 20,000,000 yen (let's just say $200,000) on her original loan (for the house that's now gone), she can have her debt forgiven.  Again, sort of.  She can keep up to 5,000,000 yen ($50,000) of her own money (savings, if she has it).  Any other savings she might have goes to repay the original loan.  The bank will forgive the remainder of the loan if she hands over whatever savings she has beyond 5,000,000 yen ($50,000).  If she has land, say she owns the land the home was on, she must also give the bank that land.  She can buy that back from the bank over five years.  If she can't buy it back in that time, she loses it forever.  Any other land she might own (place of business) also goes to the bank.  She's left with the loan for the repair/rebuilding of the new house, plus the 5,000,000 yen ($50,000) she has in savings.  That's it. 

Here are some more stats.  The government initiated this program with the assumption 10,000 Tohoku homewoners would be interested in taking part.  To date 84 people have signed up.  There are two things wrong with this picture.  First, with hundreds of thousands of people displaced, the government created a debt-forgiveness program that would attract only 10,000 people?  Why?  Why not make it something that would appeal to 500,000 people?  Second, only 84 people have taken part?  Why?  Here's why.  Initially, the amount of money homeowners were allowed to keep from their savings was 990,000 yen ($9,900).  Everything else they had in savings had to go to bank.  Again, including land.  How are people supposed to live on $9,900?  Get a job?  Where?  What if they were fishermen or farmers?  To say the program had a very bad reputation from the start is being generous.  Add to this, most people don't know they are now allowed to keep 5,000,000 yen and not the originally reported 990,000 yen.  Why?  Many people, many people up north don't have a laptop, much less internet access.  They use e-mail only on their cell phones.  How would people who don't routinely surf the web ever find out about options available to them?  Then there's the problem of farmers getting up the courage to sit down in front of a banker to negotiate.  I'm most certainly not implying farmers are less intelligent.  I'm saying bankers have a tendency (generalizing here) to use big financial terms, throw around numbers and "Here's Plan A" and "Here's Plan B" as if it's no big deal.  Bankers are not knowing as the most empathetic bunch around.  For those who spend their days on a boat or in mud, the prospect of sitting down in front of a finance person is intimidating.

There's so much wrong with this, the worst possible catch 22.  I honestly don't know where to begin.  Let go of land and cash to have one mortgage forgiven?  Or, hold a dual-mortgage and work to pay it off (how?) over the remainder of their lives?  How and why isn't there another more creative solution?

The Japanese Government created this option and then handed it over to the banks with a "You handle this" message.  What's in it for the banks?  They can write off the loan they're forgiving, but is that enough incentive?

I find this catch 22 the worst example of inability to think outside the box.  Perhaps civil servants and bankers aren't the most creative group of people around, but the lack of empathy for those who have lost so much--even in a country as Japan with its rigid and strict adherence to rules--this is not okay.  I listen to those around me who honestly don't know what to do next and I ache for them.  I'm speechless all over again.