Skip to comments.Are you an idiot to keep paying your mortgage?
Posted on 11/16/2008 11:11:44 AM PST by 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.
(Excerpt) Read more at sfgate.com ...
Penalize the hardworking and reward the slackers
"This is a once-in-a-lifetime opportunity," Schiff says. "People are going to feel like complete morons if they don't participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn't afford."
The government is offering loan servicers $800 for every homeowner they get into the plan.
Schiff predicts that loan agents "will be cold-calling people trying to get them into it. Just like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan."'
* It makes you wanna cry* That or -self censor-.
I have four homes. I pay the payments due every month. My parents taught me that and I’ve always done it that way. When I was younger I did without a lot of things my friends and relatives had, but I paid my bills. It’s the right thing to do and do it as long as you can.
What mortgage? Saw it coming long time ago.
I’ve been wondering the same thing. THe only thing I can come up with is that they’re looking at credit records for a lot more than making loans these days - like getting a job or an apartment.
But what about the moral obligation to pay off a debt?
I think the last collective generation to be taught this is now about to collect social security...
But at least I'm a conservative idiot who walks the talk.
Hey, maybe you can get some of our tax money back. Why don’t you rent three of them out to Section 8 Housing and charge and assload in subsidized rent?
Besides, it’s like jumping bail. You’re looking over your shoulder from then on.
I don’t have a mortgage payment, guess I’m screwed.
There was no overstatement of income required when I bought my house. They just qualified me for far more than I could ever have paid. I knocked it down by about 33%.
No you have one home and three rental properties.
Same here. Paid it off last year (yippee!).
But, they’ll get us with increases in property tax in a few years, I’m betting.
Bad stuff happens to people sometimes, but I can't imagine deliberately not paying a debt.
Thaks for emphasizing th important issues. I’ve lived in all of them at some time or another and my wife paid on one by herself for 12 years before we met. Started with no refigerator because she was squeezing every penny. So we still think of them as homes. Sorry to upset your dictionary.
I have a better idea.
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.
I resent getting charged for others criminality.
Wouldn’t dream of not paying my mortgage. That would make me no better than the leeches.
I have has section 8 renters and they were ok. The county had a payment chart and they had a limit. I had the renter pay $350 over the government payment. Already have enough tax breaks thank you.
They’re already doing it in Texas. The state lowered property tax rates three years ago, so the county raised my property value $20,000 last year despite the fact that property values have fallen by 20% in our county. With more delinquent foreclosures, the tax guys are squeezing those of us that pay or bills a lot harder.
If you default, and the government bails you out, are you still reported to the credit bureaus as a deadbeat?
No problem, I'm sure legislation will be forthcoming prohibiting your past credit indiscretions from being held against you.
We have two properties in Riverside CA. The county did an adjustment without us requesting it and lowered our tax bills. The other two counties we’re in, we had to request it.
I agree with Schiff. Whether you hate it or not, it makes little economic sense to keep paying on your mortgage when you are $200K upside down. Hence, that is why servicers have to be more aggressive in terms of lowering principal mods.
American Airlines and other companies restructure their debt to avoid bankruptcy. They are hailed for making attempts at avoiding bankruptcy. But if a homeowner tries to restructure their debt, Freepers and others make them seem like pedophiles. Why the different standards? THE BANKS KNEW OF THIS POSSIBILILTY, YET MANY REFUSE TO RESTRUCTURE EVEN IF IT LOWERS COSTS TO THEM! Why? Litigation, pure and simple. A confession that they knew that things could collapse.
Yes, bad people are “let off the hook.” But if we don’t do something, then we are in for a nightmare going forward.
Well, you gave your word.
Thank God people in the futures market don’t ask such questions. You give your word, you stick to it. No matter what.
They jacked ours up pretty high this year. Filed a protest ans did get it dropped some.
Of course, this was all before the meltdown so they didn’t come off near as much as what I tried for.
Hah, hubby applied for the Star program here and without even coming to the house, they reassessed us up almost $25,000.
They wouldn’t need help on the mortgage if they ‘owned’ the home.
It’s not ‘their’ home.
In Texas, property valuations are a huge scam. The politically connected can get their valuations at about a quarter what everyone else gets. It’s the worst of insider government, all at the county level.
I have a friend whose family of 8 lived in a tent for years. After work every day he and the kids went to work building their new home. It took years that way, but they came out of the experience with a debt-free home, with six kids who could tackle most any part of home construction, and a family that was more close than 99% of the nation.
His wife came from a wealthy family, but they determined to do things on their own.
Me too . . . mortgage paid up and my Jeep has 125,000+ miles on it.
The story is about whether you should keep paying on a home that is not worth the mortgage??
Let's say you took out $100,000 at 4% net (after mortgage deduction) and invested it in a safe liquid IUL program at 8% tax free. In 10 years. you'd have 200,000. If you wanted, you could pay off your house and still have the $100,000 with no tax burden.
Paying off your house is a false economy. There is no rate of return on equity. You can lose a lot of money with downturns. You can't always take it out when you need it (banks only loan money to people who don't need it-Bob Hope) and you have lost your largest tax deduction.
There are a lot of people in CA who refinanced at the height and walked away with a lot of cash..and know very well that they could not afford the payments. They weren’t taken..the bank and them took the investors in the mortgage backed securities. We have a friend doing this kind of foreclosurer every day..and the owners are savvy..not dumb.
They know they made out like bandits and they milked it for all it was worth.
All this is just going to undermine the mortgage business in the future and make it more expensive for everyone to get a loan..but mostly the honest conservative.
Why bother with the gov bailout ? Think like the pigmen Wall Street criminals.
If you’re underwater and can’t afford the payments, let the bank take the house. Why pay mortgage payments on a house worth far less than the mortgage ?
Stop paying and live free. By the time the bank gets around to foreclosing, you’ll have anywhere from 6-12 months or even more in some hard-hit areas to save what you would have paid for your mortgage, which you will then be able to use to rent an equivalent house for much less than a mortgage+prop taxes payment.
After some years, when housing prices have bottomed, take your saved money and buy the same house for a whole lot cheaper.
Folks, a mortgage is a contract, a business proposition between you and the bank. It’s not a moral transgression to use efficient breech - the bank agreed to its remedies when they signed the mortgage with you. You don’t pay, they take the house, your credit takes a hit. They thought that was fair when they signed the contract, and so did you. I just don’t get why some think it’s immoral to not pay - it’s why we have contract law.
A default and being behind on the mortgage is not the same thing. Never default, have an attorney write a deed to the lender first, and move out. That is payment in full in most cases.
Having said that, when Barack bails out Detroit, my car buying philosophy is going to change. I see no reason to keep enriching the UAW at my expense.
Unless you’re in serious financial trouble, probably not.
Even if you bought near the peak of the market and you owe more than your house is currently worth, if you’re making good money, paying your bills with money left over every month, your job seems moderately secure, and you have some savings, you’d be an idiot not to keep paying your mortgage.
But if you’re near the verge of financial collapse, then...
At least you have figured out you have one home and three rentals. Now you can file those taxes correctly.
Exactly ! Efficient breech - it’s a business decision, not a moral judgment on you.
None of us have control over future circumstances. It’s why you sign a contract, and why there’s contract law to enforce remedies.
It’s a business decision, and your household is a business.
:-} Funny you should say that. Me, my wife my two kids and our dog lived in a tent for 8 months when I got out of the Army. Long enough to make a deal on a house. Sadly though neither of us came from wealthy families though I would characterize my family life as “rich”.
When someone says they own a home, it doesn't mean they live in it. Perhaps the residents consider it a home.
How far do you wnat to take today's non-lesson?