Posted on 11/13/2008 9:54:47 AM PST by TrebleRebel
An article late last week in the San Diego Tribune offers up some very realistic, yet depressing advice about the current state of home ownership: Many homeowners would be best off if they simply stopped paying their mortgages. How so? The passage of the bailout bill meant that help for homeowners was assured. After all, politicians can't risk bailing out corporate America, while letting poor little homeowners lose their houses and be out on the streets.
If you've got little to no equity in your house and find it a struggle to pay the mortgage, just stop paying. The government is making it clear that we shouldn't have to sacrifice to stay in our homes regardless of the fact that we may have bought one we couldn't afford, lied on our mortgage application, or otherwise have gotten ourselves into major financial trouble.
The government is going to take "troubled" mortgages off the hands of banks, and plans on doing whatever necessary to keep homeowners in their homes: write down the principle owed on mortgages, give homeowners better interest rates (whether they deserve them or not), offer term extensions to stretch out the payments. The government will see to it that everything possible is done to keep you in your house.
But if foreclosure isn't really an option anymore, what incentive is there to make the mortgage payments? Traditionally, a homeowner pays a mortgage so that the bank doesn't take away her or his house. Now, without the threat of foreclosure, it seems almost silly to make mortgage payments.
Who suffers under this plan? Those who have a lot of equity in their houses and those who may be in a tough financial position but are committed to paying what they owe. If you've got equity, you're not getting a "get out of jail free" card because a bank will be all too happy to keep your loan on the books and foreclose if necessary. If you're in a bind but committed to making your payments, you almost come out of this looking foolish. Why pay when other people in your shoes are getting free money?
The writer of the original article suggests the unthinkable: If you've got little to no equity and you want to cash in on the government assistance (even if you're not currently struggling to make your home payments), go ahead and spend everything you've got saved. You'll be stimulating the economy and at the same time, you'll be making yourself poor. Don't pay off your credit cards with your cash, though. You'll need that debt to make your situation look even more dire. Because next on the list for bailouts might be the big credit card companies, and surely some help will come to you through that program.
This all sounds so crass and bitter, doesn't it? But this is the reality for those of us who have been working hard to pay our bills and get out of debt the honest way. Our government is creating a culture in which personal responsibility is not a virtue, it is a life sentence.
While some of us are taking responsibility and doing the right thing by paying back those who loaned us money, there will be thousands of consumers working the system to their advantage and getting free money. And who ends up ponying up that "free" money? You and me, my friends. We all pay for the financial mistakes of others when mortgages are forgiven and credit card bills are written off. How's that for a double-whammy on the responsible consumer?
The best way to deal with the situation is going to require a much more creative strategy. The government should buy the distressed properties, and then they should be rented out to the previous owners, the rent being paid to the people that bought it - ie. the taxpayers. The taxpayers then become landlords - or at least the responsible taxpayers who didn't get in over their heads in the first place. Does this sound fair? Discuss.
I was thinking about putting all of my CC debt onto my AMEX and just not pay it. If they are getting bailed out, what does it matter?
(OK, I wouldn’t really do it but we honest people are really getting screwed!)
Years of driving old cars and living in a lot less house than I could “afford” left me debt free and sleeping soundly. Maybe I should have bought a bigger house and gotten a new car every two years and been in hock up to my neck. I guess I’m just not a responsible citizen. Of course, if I had, I would have had to have voted for Obama.
No nation can survive that.
just send your bill to:
Obama’s gonna pay my Mortgage!
c/o The Messiah
1600 Pennsylvania Ave NW
Washington, DC 20500
There are a bunch of blogs where people seem to working out the repercussions of the bailout, and it is not pretty. We need a creative solution that will work. The present solution will only make things much, much worse.
http://bakersfieldbubble.blogspot.com/2008/10/stop-paying-your-mortgage.html
As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence.
An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.
If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.
“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”
“If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco
“This is not about trying to create fairness,” said Michael H. Krimminger, special adviser for policy at the Federal Deposit Insurance Corporation, which is working with Treasury on the latest plan. “The goal is to keep people in their houses.”
Still, he acknowledged, “a lot of people are angry because they feel some people are getting something they don’t deserve.”
Peter Schiff, the president of Euro Pacific Capital in Darien, Conn., who prophesied doom before it became fashionable, says he thinks just about everyone who is underwater and has few other assets should stop paying.
“If the government says, ‘Prove that you can’t afford your house and we’ll redo your mortgage,’ then people are going to try to qualify,” Mr. Schiff said.
Obama is president. It's ALL about fairness. And that means that wealth from productive people needs to be siphoned off and given to irresponsible people.
Just make sure you're not a responsible, productive citizen and you should make out pretty well.
that is an excellent idea.
I am in real estate in Las Vegas and I can tell you that this new ‘change’ in the bailout bill will cause at least tens of thousand of new foreclosures in Las Vegas alone.
The banks will not lend the money they are being given. Real Estate is basically the only part of the economy being told to walk the plank. And real estate is mostly not owned by ‘big business’, it is owned by indidivuals overwhelmingly.
As soon as I heard yesterday morning that the banks had just won the bailout lottery, I sent out an email to a host of my clients telling them that if they were considering foreclosure then don’t bother to make another payment because there is absolutely no rational reason to continue feeding an investment which you will never get out of (lot alone ever get out of with a profit).
The only people who will not walk are ones who are living in the house they are in and are not more than 20% upsidedown and don’t have an 8% rate. Otherwise, you can rent cheap in virtually any market where there are foreclosures so you are literally in the reverse of the normal economically sound principal of ‘don’t throw your money away paying rent when you can own’.
Now, the motto in real estate is going to be ‘why own if I can rent for half the price and wait for the nuclear cloud to dissipate’???
My credit score it 788. I have a lot of equity in my house and LOTS of available credit on my CC’s. I am thinking I should just refinance my house for as much as I can get and then get cash advances on all my CC’s.
My wife and I have lots of money in retirement acc’t and pension plans, and I understand as of yet the gov’t will protect that (hell OJ has his cash there and the Goldman’s can’t touch it).
If I cash out everything, I could then buy gold and silver and bury it my backyard. Come the crash when Obama takes over and starts spreading the poverty around, I can just dig it up and survive till things turn around. The gov’t is punishing people like me who pay their bills, and rewards the most irresponsible among us, so why should I get screwed while they benefit?
A nice 500K or so would last me a long time, job or no job.
great quote
If you pay taxes, you are paying someone else’s mortgage. Having the government give you back some of your taxes in the form of a reduced mortgage isn’t exactly stealing. It was your money to start with.
I pay my bills too but have been getting daily robo-calls on the bailout and to see if I qualify for federal money. Someone is pushing this big-time. If I did own a home, it wouldn’t be hard to rationalize getting my own money back.
I just can’t see it as being a deadbeat. If some usurious Yankee bank loses money,then I say HOORAY!!
parsy, who figgers they can kill you but they can’t eat you.
a gazillion foreclosures were reported last month. I doubt that anyone should feel safe with not paying
Darn good idea. Buy you a house in a corporate name, use a PO Box and get utilities in someone elses name. They can never find you to collect. I hate bill collectors. I hate banks and insurance companies.
parsy, the rebel.
Yeah. Right.
(Sarcasm)
You really want the government to own that many properties?
And how much money would it take to oversee that massive project?
And if they are renting, technically the “landlord” would be responsible for repairs, taxes and homeowners insurance?
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