I ran across this article (original source) yesterday and it’s been bothering me ever since. As the story goes, some people are choosing to stop paying mortgages they can’t afford and letting their houses go into foreclosure. That, in and of itself, isn’t a horrible thing. Arguments aside, if you can’t afford to pay the mortgage, perhaps it’s time to cut your losses and move on.
But that’s not what is happening in these cases. These people have chosen to stop trying to pay their mortgages, let their house go into foreclosure, but continue to live there until they are forced out. And to make matters worse, they’re using the money they “save” by not paying their mortgage to go out to dinner, or to take their boat out for the weekend. Are you kidding me? They justify their actions by stating that the lenders are crooks that won’t help, so why should they bother trying. They’re merely scamming the scammers.
Let’s look at the facts here, though. I’m sure there are those out there that have lost jobs, had cuts in pay, or had some other catastrophic financial event resulting in an inability to afford their mortgage. But, from what I’m reading in this article, these extenuating circumstances do not necessarily apply. Instead, these people claim that the value of their homes has fallen, or that they are victims of predatory lending. Sorry, but I’m not shedding any tears.
I’m a homeowner, and I have been for a number of years. In fact, I became a homeowner when these “predatory” practices were supposedly at their height. I would argue, however, that anyone with a shred of common sense can easily spot these bad deals. Additionally, it shouldn’t be that hard to figure out if you can afford a mortgage or not. Seriously, if you have to devote more than 1/4 or so of your monthly income to a mortgage, perhaps you’re biting off more than you can chew. Perhaps a $300,000 house is a bit beyond your reach if you’re working at McDonalds and only making $40,000 a year.
Let’s look at this practically, though. If you find yourself with a mortgage you can’t afford, you have a few options. Perhaps the best option is to cut and run. That is, put the house up for sale and do what you can to move to something more affordable. If that’s not possible, perhaps because your house is worth less than the mortgage, a risk you take when you buy a home, then you may be able to justify not paying your entire mortgage. You should, however, pay what you can. If you can show that you’re trying, then you have significantly more power if and when you enter foreclosure proceedings. Worst case, perhaps it’s time to file for bankrupcy. While I have no first-hand experience with this, I’m told it’s not quite as bad as it sounds. I do have friends who have gone through this process and, in the end, they continue to lead their lives and live in their home, albeit a little more leanly than they did. Though, that may not be a bad thing either.
So, to sum things up, keep in mind that if you’re going to go down this idiotic route of not paying your mortgage at all, and ride the wave of “kick me out if you can,” then be prepared to pay dearly for the ride. There are laws that allow lenders to go after other possessions to make up the loss. So if you’re using that mortgage payment to go galavanting on your fancy boat, or keep up the payment on your car, you may not have that vehicle after the law catches you. Perhaps you’ll get away with it, but do you want to take that chance? In the end, someone will pay and you can bet that it won’t be the banks.