Would you pay your mortgage late to take advantage of Gov. help?

[rnoldh]

I'm no expert, nor have I kept up especially well. But it seems like some or all of the "Save their home" programs like loan modifications are for those that are behind on their payments and/or unemployed.

But what about those that are not behind? Or have a paid off home. It does seem grating that help would go to those that were irresponsible or unfortunate, while no help seems available to those that were either responsible, fortunate or both.

I'm going to make this a poll. As a point of reference. I sold out when the RE market started to go South ( but not nearly at the bottom, wherever that is ). Truthfully, I would have been tempted to withhold mortgage payments and be eligible for special advantageous programs.

What would you do? What have you done? Do you feel a moral and legal obligation to repay debt ( like a mortgage ) or in today's crazy situation do you feel, "I should take advantage of everything and every loophole there is".

 

[Piobaire]

There's two aspects here, IMO. The practical and the philosophical.

The practical: why would I want to screw up my credit rating for something I can easily afford. Of course, I put myself in a position where my mortgage is only a tiny portion of our monthly income, so I guess my situation is not like that of many. However, having stellar credit is extremely helpful and makes many things easy. Simply not worth screwing that up for me. YMMV.

The philosophical: I would be breaking what I perceive to be the social contract. I believe I should work hard and live within my means, tapping into the social safety net only if I should meet with disaster. I basically think it would be unethical. Again, YMMV, as I know certain sub-cultures actually find gaming society a moral act.

I would pay my mortgage, loop hole or not.

 

[gnatty8]

Originally Posted by Piobaire

There's two aspects here, IMO. The practical and the philosophical.

The practical: why would I want to screw up my credit rating for something I can easily afford. Of course, I put myself in a position where my mortgage is only a tiny portion of our monthly income, so I guess my situation is not like that of many. However, having stellar credit is extremely helpful and makes many things easy. Simply not worth screwing that up for me. YMMV.

The philosophical: I would be breaking what I perceive to be the social contract. I believe I should work hard and live within my means, tapping into the social safety net only if I should meet with disaster. I basically think it would be unethical. Again, YMMV, as I know certain sub-cultures actually find gaming society a moral act.

I would pay my mortgage, loop hole or not.

sums it up for me also.. its a question of honor and character. I wouldn't trade either for a chance at a government handout.

 

[tiecollector]

Originally Posted by gnatty8

sums it up for me also.. its a question of honor and character. I wouldn't trade either for a chance at a government handout.

Unfortunately, most people would, especially those the gov't doesn't even really know is here.

 

[edmorel]

Originally Posted by tiecollector

Unfortunately, most people would, especially those the gov't doesn't even really know is here.

You're the best!!




Most mortgage companies don't begin to help anyone until they are 60 days behind on their mortgage. People who are in trouble have already been falling behind, purposefully or due to circumstances, so they can try and renegotiate with their mortage servicer, so I would not expect an influx of new people squeezing trying to squeeze into this gov't program by falling behind on purpose. If you made it this far, you are probably OK and will continue to pay your bills on time.

 

[SkinnyGoomba]

Basically you need to prove that you have a substantial change in income, to receive any help from the bank.

The bank will require that you prove that you've fallen on hard times, and they will require you to provide documentation such as a pink slip, credit card bills, ect.

If you just default on purpose, you'll **** up your credit big time, and probably get nothing to show for it.

Infact, many credit card companies will substantially reduce your available line of credit if you negatively effect your credit rating.

 

[nate10184]

No but as someone who worked in servicing on the commercial side I can tell you this is happening ... a lot. People who's property is by all accounts kicking ass suddenly miss a payment and want to renegotiate their loan terms.

It's getting weird out there.

 

[JoelF]

Originally Posted by Piobaire

Of course, I put myself in a position where my mortgage is only a tiny portion of our monthly income, so I guess my situation is not like that of many.

Looks like you've bought into the scaremongering that a huge swath of the U.S. population is desperately overleveraged, either unemployed or about to be, and on the brink of homelessness through foreclosure. No statistics here, but I sure do not know anyone like that. Most people have plenty of equity in their homes, still have jobs, pay their bills and are doing just fine. This program like all the others may help a couple of lucky people but is primarily designed to be gamed by the banks, credit counseling agencies, servicers, community groups and on and on.

 

[raphael]

Bloomberg posted the following on mortgage deliquency rates and foreclosures:

http://www.bloomberg.com/apps/news?p...refer=economy#

It's REALLY bad out there.

=========================================================================
01/31/09 12/31/08 11/30/08 01/31/08 01/31/07
=========================================================================
Bankruptcy 1.42% 1.40% 1.39% 0.90% 0.82%
of which Prime 0.67% 0.63% 0.63% 0.24% 0.12%
of which Alt-A 1.18% 1.16% 1.14% 0.39% 0.07%
of which Subprime 2.59% 2.59% 2.56% 1.88% 1.90%
Foreclosure 7.94% 7.56% 7.40% 4.50% 1.76%
of which Prime 4.10% 3.71% 3.49% 1.36% 0.34%
of which Alt-A 6.99% 6.55% 6.22% 2.52% 0.61%
of which Subprime 13.31% 12.98% 12.83% 8.80% 3.55%
Real Estate Owned 4.06% 4.10% 4.13% 2.29% 0.66%
of which Prime 1.77% 1.72% 1.67% 0.55% 0.11%
of which Alt-A 2.82% 2.86% 2.88% 1.10% 0.18%
of which Subprime 7.56% 7.71% 7.78% 4.70% 1.37%
=========================================================================
01/31/09 12/31/08 11/30/08 01/31/08 01/31/07
=========================================================================
Delinq. (30,60,90,REO&Fore) 24.13% 23.17% 21.69% 14.43% 7.28%
of which Prime 12.87% 12.08% 10.79% 5.27% 2.22%
of which Alt-A 23.51% 22.49% 20.25% 10.59% 4.45%
of which Subprime 38.88% 37.71% 35.99% 25.77% 12.88%
Delinquency (30 days) 4.18% 4.26% 3.76% 3.29% 2.33%
of which Prime 2.51% 2.60% 2.17% 1.61% 1.05%
of which Alt-A 4.71% 5.05% 4.41% 3.40% 2.40%
of which Subprime 6.05% 6.00% 5.45% 5.13% 3.59%
Delinquency (60 days) 2.64% 2.49% 2.15% 1.79% 0.91%
of which Prime 1.59% 1.45% 1.20% 0.75% 0.26%
of which Alt-A 2.99% 2.90% 2.38% 1.60% 0.61%
of which Subprime 3.83% 3.63% 3.23% 3.03% 1.65%
Delinquency (60+ days) 19.96% 18.91% 17.93% 10.86% 4.45%
of which Prime 10.36% 9.48% 8.63% 3.46% 0.97%
of which Alt-A 18.80% 17.44% 15.84% 7.19% 1.85%
of which Subprime 32.81% 31.69% 30.53% 20.61% 8.79%
-------------------------------------------------------------------------

=========================================================================
01/31/09 12/31/08 11/30/08 01/31/08 01/31/07
=========================================================================
Delinquency (90 days) 5.31% 4.76% 4.24% 2.28% 1.11%
of which Prime 2.90% 2.59% 2.26% 0.80% 0.24%
of which Alt-A 6.00% 5.13% 4.36% 1.97% 0.44%
of which Subprime 8.06% 7.34% 6.64% 4.04% 2.20%
Delinquency (90+ days) 17.31% 16.42% 15.77% 9.07% 3.54%
of which Prime 8.77% 8.02% 7.43% 2.70% 0.70%
of which Alt-A 15.81% 14.54% 13.46% 5.59% 1.24%
of which Subprime 28.96% 28.05% 27.28% 17.55% 7.13%
=========================================================================
SOURCE: Bloomberg non-agency database of 45 million securitized loans.

To contact the reporter on this story:
Alex Tanzi in Washington at [email protected]

 

[JoelF]

^ These are non-agencies so the data is hugely skewed to start with, and none in any case would be eligible for Obama's program. And even on the worst (1/31/09) cut of these already questionable data, over 98% of people are not in bankruptcy and over 75% of the loans are problem-free.

 

[rdawson808]

No way. For starters, this is primarily an ethical issue for us; we can afford our mortgage and owe it to ourselves to pay it off on our own.

Second, I don't want to screw up our credit rating. We do plan to buy a new home in the about 5 years. I don't want to make that any harder than it need be. Not to mention that defaulting on one thing could effect others (credit card rates, etc.).

All that aside, I thought I read something about one of the requirements being that you're spending more than ~32% of your income on your mortgage. We're at like half that.

Plus you have to have a mortgage either backed by or directly through Fannie Mae or Freddie Mac. I think


As to JoelF's contention that most people have equity in their homes: it's very easy to be upside down if you bought in the last say, three years. Sure anyone who bought before the big boom is probably fine, but there are a lot of people upside down from what I hear from friends and neighbors.

 

[odoreater]

I don't buy this stuff about it being an ethical issue. Believe me, neither the bank nor the government have any ethical qualms about bending you over, pulling your pants down, and sticking it to you. The fact that you think your ethics require you to bend over peacefully only makes it that much easier for them.

 

[rdawson808]

Originally Posted by odoreater

I don't buy this stuff about it being an ethical issue. Believe me, neither the bank nor the government have any ethical qualms about bending you over, pulling your pants down, and sticking it to you. The fact that you think your ethics require you to bend over peacefully only makes it that much easier for them.

Am I bending over? I signed the mortgage as an educated adult and knew what I was getting into. I can afford to pay my mortgage--quite comfortably too. Your contention that anyone in a similar situation is being treated unfairly or unethically is just wrong, in my opinion. The bank will carry out the terms of the contract; they will do exactly what they told you they will do.

This seems to be predicated on the fact that interest rates are now lower and those of us who signed mortgages at a higher rate are being "screwed" or something. What if the situation were reversed and interest rates had gone up. Is it okay for the bank to essentially find a loophole to force you into a higher rate? No.

This would be a different discussion if I was misled or some fraud had taken place. But that's not hte case.

b

 

[odoreater]

Originally Posted by rdawson808

Am I bending over? I signed the mortgage as an educated adult and knew what I was getting into. I can afford to pay my mortgage--quite comfortably too. Your contention that anyone in a similar situation is being treated unfairly or unethically is just wrong, in my opinion. The bank will carry out the terms of the contract; they will do exactly what they told you they will do.

This seems to be predicated on the fact that interest rates are now lower and those of us who signed mortgages at a higher rate are being "screwed" or something. What if the situation were reversed and interest rates had gone up. Is it okay for the bank to essentially find a loophole to force you into a higher rate? No.

This would be a different discussion if I was misled or some fraud had taken place. But that's not hte case.

b

I can understand paying your mortgage because you can afford to do so comfortably and because it is practical for you to do so, but this idea that some how "I entered into this contract as an educated adult and I'm obligated by my ethics yada yada yada....the banks uphold their side of the agreement, etc. etc." is just nonsense. The bank skewed things so much in their favor and so long ago (and with the aid of government) that I personally don't think it's a question of ethics anymore.

In fact, I don't believe any contracts create ethical obligations. Contracts create legal obligations, and that's the end of it.

 

[Dakota rube]

The only rationale I can find behind this whole mortgage write-down deal is eliminating — or at least minimizing — the number of repossessed houses coming on the market. That is a huge factor in driving down housing prices, as buyers in the market know a bank is likely to take what they can get, as opposed to a homeowner trying to realize a profit, or simply cover a mortgage balance.

If re-writing a mortgage, even writing down a principal balance, keeps a house out of repossession, it is really benefitting anyone who owns a house and is making their payments; maybe it will curtail a further drop in values.