Are you an idiot to keep paying your mortgage?

SF Gate ^ | 16 Nov 2008 | Kathleen Pender

[BGHater]

Should you keep paying your mortgage?

If you have significant equity in your home, absolutely.

If you don't, it's getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.

Last week, the government announced a program that will substantially lower payments for many homeowners who have little or no equity, but only if they are at least 90 days delinquent.

Critics say the plan, which applies to loans owned or guaranteed by government wards Fannie Mae and Freddie Mac among others, could encourage people to suspend payments.

But what about the moral obligation to pay off a debt?

Elected officials have been chipping away at that by blaming the foreclosure crisis largely on predatory lenders. In a campaign fact sheet, President-elect Barack Obama says he "recognizes that the real victims in the subprime mortgage crisis are not the lenders, but the millions of borrowers who followed the rules and whose only crime was taking out mortgages that lenders told them they could afford."

Last year, Congress started removing some financial hazards of default when it passed a bill that temporarily waives the income tax on mortgage debt that is canceled when a homeowner is foreclosed upon, sells a home for less than the remaining debt (a short sale) or gets a loan modification that reduces the principal balance.

The tax waiver originally applied only to debt on a primary residence canceled in 2007, 2008 or 2009. Last month, in the bailout bill, Congress extended the waiver until 2013.

[org.whodat]

That doesn't necessarily mean they won't come after you for the balance of the debt after they sell it, but they are pretty busy right now and maybe they won't.

No, they would first need to go to court. The court house sell option is not there. In court they would lose and they know it. The only reason for the court house sell is to establish a legal chain of title for the substitute trustee. If you read a mortgage loan agreement you see that the property stands good for the debt, it is a hard sell to try and prove otherwise in court without saying they made a bad loan.

[metmom]

What’s a mortgage?

We bought a house we could afford. Yeah, it needed some work (still does) but it’s paid for, the vehicles are paid for, no credit card debt....

Even with reduced interest rates, when you pay off a mortgage, you’re still paying the bank money to borrow theirs and you’re still paying more for the house than it’s worth, in interest payments.

If mr. mm ever loses his job, we don’t have to worry about missing the payments.

[metmom]

I’m with you. Peace of mind is SO worth it.

Count me in.

All that obsessing about markets and interest rates and what if I'm not earning more money than I'm paying out, and declaring deductions on income tax, yada, yada, yada,.... just is not worth it.

We're comfortable, well fed and clothed.

And I should go out and try to make all kinds of money Why? So some socialist-elect can come along and *share the wealth*? (He's not trying to punish us for being successful? sure....)

No thanks.

[Tempest]

People don’t understand what moral hazzard means.

[SouthTexas]

Know what you mean, mines been paid for for almost 20 years.

I learned the hard way. Lost one in the 80s, before the gubmint starting paying them off, when the bottom fell out of the oilfield here.

[F. dAnconia]

That is an Excellent conservative-based solution to the problem. You should be running the chicken-sh&^ outfit currently running this bailout!

Cudos to you!

How about giving the money to those of us who put 20%+ down on a house that was within reason of our income in the form of shares in a REIT. The REIT in turn can go out a purchase the distressed properties and give the current owners an opportunity to “rent-to-own” within 5 years. Whatever profit is made accrues to the REIT investors, the people who made the smart decisions in the first place

[Diana in Wisconsin]

Agreed. We are going to live on the bare minimum over the next four years. I’m considering not buying anything outside of everyday things...just to keep sales tax revenue out of the hands of my blue, blue ‘State Leaders.’

I welcome the challenge, and I hope others do, too.

Bush is handing Obama a cr@p sandwich with this economy, caused by Democrats. I can’t WAIT to watch him choke it down. Put all the arugula on it that you want, Bub. It’s STILL a cr@p sandwich, LOL!

[metmom]

I like the way you think.

I’ve noticed that Christmas is a good time to buy stuff, particularly groceries, so I usually use my coupons and hit the stores and stock up. More so this year; not only because of what the economy may do, but should the weather turn out to be not so good in addition to that, there could be real problems with food supplies.

The second or third week of Jan is the absolute BEST for getting deals on clothing. The department stores are clearing out for spring and summer stuff by then and have incredible markdowns. Yeah, the selection isn’t always the best, but if you spend the time, you can get brand new stuff for a fraction of the cost, sometimes almost as low as you’d pay at Salvies (or other thrift stores) for used clothing.

I am looking to stock up this year in particular.

I also told my son to watch the stock market at the end of Dec. obama has indicated that he’s going to raise taxes and cut tax breaks for the *wealthy* and things like capital gains tax. Nobody knows what he’s going to do once in office and if he’ll make them retroactive.

My thought is that people are going to want to sell off so that the gains and/or losses are counted towards this years taxes instead of taking the chance on what will happen with taxes for 2009. Something about *sharing the wealth* would leave me uneasy about investments, starting Jan 20, 2009.

[genghis]

No, I’m the idiot who paid off his mortgage early by busting my ass and driving cars with hundreds of thousands of miles on them which I keep running by working on them in my garage. I’m also the idiot who has no credit card debt or who’s kids have no student loan debt. Why? Because I pay as I go.
But at least I’m a conservative idiot who walks the talk.

me too.
but i have lots of extra money every month and feel sooo bloody rich it is not even funny.
Having a cute wonderful chinese wife helps too.
I may be the luckiest guy on the planet.

[ovrtaxt]

Here’s my situation- we bought a house before the bubble really took off, in 02. We carefully planned and executed a remodel, and it came out very nice. At the end of the process, we had a beautiful place that was reasonably affordable.

Since the crash happened, foreclosures in the area have ruined the market. Running comps on our house has been a devastating process. We’ve lost 140K in equity in 6 months- with all the short sales in the neighborhood, we’re now down to our loan balance.

We have no equity any more.

This devaluation cycle isn’t over yet. The longer it goes on, the lower our values will drop. By next month, we may very well be upside down.

This was all through no fault of our own, we were not irresponsible with our plans.

We’ve had it for sale for over a year, and we’ve had zero bites. We want out. We have to move soon anyway for employment reasons.

Yesterday our payment was due. We’re not going to pay it. I’ll be calling the bank in a few hours.

[seoul62]

You need to replace King Paulson. You have ten times the financial savy than he has or the other financial guru’s on the scene or boob tube./Just Asking - seoul62.......

[ballplayer]

Mr Obama then does that mean when someone promises Change and then brings all the same left wing Commie hacks from the Clinton Administration back to the White House and then is about to unleash the Clinton Commies into the Den of Communists at the State Dept we should listen to what ever you have to say

[Diana in Wisconsin]

“Something about *sharing the wealth* would leave me uneasy about investments, starting Jan 20, 2009.”

You and anyone else who’s paying attention. Dad & I have had some joint accounts for a long time now. We’ve been holding gold & silver for 9 years now, so sadly, if the economy tanks even worse, it’s better for us. We also have a fund that shorts the S&P...and that’s been doing gangbusters these days. Remarkable returns.

So, while I hate to see others hurt, I think financially we may end up at the top of the heap. :)

Thanks for the shopping tips. I do most of the same. Do you have a Walgreen’s near you? Between their store sales and coupons, you can get a lot of everyday needs there. They’re usually giving me money back each week, LOL!

And I always stock up on staples. I’m looking at my pantry to see what I cookies I can make with stuff on hand for Christmas. Mom, Sis, a few assorted family friends and I will be doing ALL of our baking the day of December 3rd, then we have a cookie exchange. It works out well, is cheap and messes up Mom’s kitchen and not mine, LOL!

I’m going to IL on Wed. of this week with my girlfriends. We’re hitting Nordstrom’s and the other high-end retailers. They’re going to be selling stuff for a song...so we’re all over that, LOL!

[nicola_tesla]

You are correct in that every situation is different - a session with a good tax lawyer and CPA is invaluable for the money spent.

FWIW, while I’d like to be optimistic, I see no relief anywhere in the next 2 years. Option ARM recasts/resets will peak in 3rd qtr 09, unemployment is just starting to ramp, and yields on bonds are starting to ramp too - good for savers but really bad for those in debt. Tightened credit, while a very good thing, will depress prices further as it removes a lot of people from the buying pool for houses and cars. Increasing numbers of people getting to retirement age (Boomers) will mean more people pulling funds out of the markets, as will those who are laid off and can’t find jobs. We can no longer HELOC our way out of repairing household “income”, so there’s no borrowing to make numbers look good.

I don’t see good news really until ‘10 or later, so yes I think we have a long way to fall yet. 5000-6000 DOW and 500-600 S&P is where I think we go based on corporate earnings and that’s a lot of pain for a lot of folks.

[nicola_tesla]

It never ceases to amaze me that people say this about their side of the contract, but not about the other side. Is it immoral of the bank to accept a contract where the remedies/penalties are predetermined and agreed ?

Your household is no less of a business than any corporation. Run it as such.

[nufsed]

We are financial planners. We don't recommend tax people for overall planning. We do the plan and then we have our clients have their tax preparer look it over. We also invite our clients to have their tax preparer sit in on our planning webinars if they chose to do so. Most of them will refer their clients to an IRA. Most of our clients do better paying their tax now and having it tax-free during retirement. This is the direct opposite of what most tax preparers are doing, becuase they don't know better.

In the case of a roth, our program has fewer restrictions.

One of our associates went to a workshop last week and they said about what you said.

We're making our payments and I believe in 7-10 years we'll be where we were 3 years ago. 2 of our houses are in a resort community with a lot of amenities.

In 20 years when I'm gone. my wife should have some equity on all four properties and can use them to enhance her retirement if needbe.

Also, the population keeps increasing, so we expect rents to increase over time and catch up to the payments on the two houses where we're negative. On three properties, we're a total of under $300 short.

[ozark hilljilly]

“Paying off your house is a false economy”

Maybe so, but having no house payment to worry about every month is fine by me!
As long as I can cough up the property tax every December, we’ll be alright.
I ain’t looking to get rich...just survive these next 4 years.

[nufsed]

You can survive far longer AND be able to pay off your house at any time.

I think you missed the original point. You borrow $100,000 at a net of 4%. You make 8% compounding tax free. After one year you have 108,000. You paid 4,000 for the loan. After two years, you have 117,000 and still pay 4,000 on the loan.

If you have 200,000 in ten years and owe, 100,000, does that seem bad to you? Adn you'll have a death benefit.

You can draw out the 100,000 any time and pay off the house if you really can't sleep making money.

The way you're going, your asset is in equity with no rate of return, may not be able to draw it out when you need it, and if the house goes down in value, you lose a chunk of your asset.

Best wishes!

[SunkenCiv]

Here in the winter wonderland, I prefer to live inside. :’)

[SunkenCiv]

:’D

Unbelievable Video (Idiot Obama supporter)
Gleen Beck | Oct 31, 2008 | Glenn Beck
Posted on 11/02/2008 5:56:59 AM PST by Islander7
http://www.freerepublic.com/focus/f-news/2122494/posts

This video clip pretty much sums up everything Glenn has been saying for the past months in just a few seconds. An excited woman is interviewed after an Obama rally and says she will vote for Obama because ‘I won’t have to worry about putting gas in my car and I won’t have to worry about paying my mortgage’. Watch the woman get caught hook, line and sinker.