Saturday, May 17, 2014

Mortgage Woes


"There is nothing more fun that sticking it to the Man!"

I have noticed a new trend in the past few years. More specifically, since the "great crash" which began the now famous "Great Recession". It is simply the will to walk away from a huge financial obligation without any remorse. It has a couple of different names these days - default or "short sale". It is a way for some to think they have really "stuck it to the bank".

Now please let me begin by saying I am no friend of big banks. In fact, my bank for forty years has just pissed me off by charging $10/month for the privilege to keep some money in their vault. No excuse for that kind of money grubbing. However, as sleazy as they may appear in how they do business, I will keep my obligations to them. In other words, with my car loans or the remainder of my mortgage, I will honor them, I will make my payments. My word is my bond.

Banks got into the mortgage business for one reason only - to make money. They don't want your house. However, that is the collateral you put up when you sign a mortgage agreement. If you default, the bank will simply take your house and have you lawfully removed from the property.

A very common misnomer is when people refer to the house they are living in as "their house". In reality, until the last payment is made, the house belongs to the mortgage company, usually a bank. The agreement you sign when you buy a house is that the bank will let you continue living there as long as you make your payments to them. It really is that simple.

A "short sale" is almost as nefarious as a default. Let us suppose someone has a mortgage for $300,000 and for a variety of reasons, the house is now only worth $200,000. A "short sale" is selling the house for $200,000 and then telling the bank "that is it - all you will get". There are actually licensed realtors out there telling people that is now a viable option. My opinion is simply this - telling a bank they need to swallow $100,000 of your obligation is no different than robbing the bank of $100,000. In both cases, the bank is out $100,000.

Some will say, "So what? They can afford it!" That is true in a rare instance. However, if we all walked away from our mortgage responsibilities, our banking system would immediately collapse. We would find ourselves in a deep, deep depression. It would be the end of our lifestyle as we know it.

If you know someone who is considering a default or "short sale", as a friend, as a neighbor, as a fellow citizen, try to talk that person out of it. Regardless of what you hear through the rumor mill, no good thing comes out of this. A default or "short sale" not only hurts the lending institution, it also kills the person's credit score for a long, long time. It changes a lifetime of personal responsibility into one of a deadbeat.

One final thing before I finish. Sometimes, for reasons outside of a person's control, they can no longer make payments on the house. If that person is honest with the bank, and comes forward early enough, most banks will work with that person for a positive resolution. Again, banks don't want to be in the business of home ownership. However, if you intentionally try to screw the bank, remember one thing - banks hire lawyers by the dozens, and many times a person will only screw themselves. 

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