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  • Just Stop Paying Your Mortgage. Now.

    Boy, I feel like a sucker. Looks like JMJ's neighbor jumped the gun.


    Just stop paying your mortgage

    By Peter Schiff
    October 10, 2008

    If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government's landmark $700 billion bailout package has an important message for you: stop making your mortgage payments . . . immediately. Furthermore, if you believe that with some planning and sacrifice you may be able to meet your mortgage obligations, the government's message is clear: relax, don't bother.

    While angry voters have labeled the package as a bailout for Wall Street, it is more akin to a “Get out of Jail Free” card for anyone who acted irresponsibly during the boom. Here's why.

    Nobody likes foreclosure, least of all politicians. The new law clearly indicates that the government will make major efforts to reduce foreclosures through “term extensions, rate reductions and principal write-downs” of the troubled mortgages that it buys from the private sector. In other words, your new landlord will bend over backward to keep you in your home. The legislation telegraphs this by including a provision that extends until 2013 the exclusion of loan reductions from taxable income.

    When a financial institution holds a mortgage, homeowners must live with the fear of foreclosure. Private institutions only have obligations to shareholders. In the case of a defaulting borrower, they will look to recover as much of their principal as possible. If foreclosure is their best option, they will take it in a heartbeat.

    The government has no such obligations. Its only goal is to keep voters happy. After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away. Why pay your mortgage if foreclosure is off the table, and if you know that lower payments, and possibly a reduced loan amount, would result? A tarnished a credit rating is a small price to pay for such a benefit.

    Unfortunately, this boon will not extend to those foolish individuals who either made large down payments or resisted the temptation of cashing out equity. The large amount of home equity built up by these suckers, I mean homeowners, means that in the case of default foreclosure remains a financially attractive option. As a result, these loans will be much less likely to be turned over to the government.

    If your mortgage does become the property of Uncle Sam, the growingly popular impulse to “just walk away” should be replaced by “just stay and stop paying.” No one will throw you out. After a few months, or years, of living payment free, you will get a call from a motivated government agent eager to adjust your loan into something affordable.

    To bolster your bargaining position it will help to be able to claim poverty. As a result, if you have any savings, spend it soon, before they call. Buy a bigger TV, a new wardrobe, or better yet, take a vacation. After the hardship of spending all of your refi cash, you probably deserve it. If you have any guilt just remember, Washington argues that consumer spending is the best way to stimulate the economy. Living beyond your means is a patriotic duty.

    If you do get the opportunity to live for a while with no mortgage payment, don't make the tragic mistake of using your extra cash to pay down your credit cards. As the growing level of credit card defaults will soon push credit card companies into bankruptcy, we can expect a similar bailout plan for American Express and Discover Financial. When that happens, expect massive balance reductions for Americans who can demonstrate the inability to pay. The bigger your balance, the greater the benefit.

    Taxpayers, however, will not be so lucky. The savvy investment strategists who see the government turning a tidy profit on its mortgage purchases have not factored in the incentives that will discourage nonpayment. The only way the government will be able to profit would be to buy the mortgages at deep discounts to actual loan values. However, if the purchase prices are too low, the plan will bankrupt the institutions it is trying to bail out. On the other hand, if it substantially overpays, which seems far more likely, it will bankrupt the nation.

    In any event, as more and more borrowers succumb to the allure and safety of nonpayment, look for the number of troubled assets to swell. This will ensure that the $700 billion merely represents the first installment in what will be a multitrillion-dollar plan. Just as government policies provided the primary impetus in blowing up the housing bubble earlier in the decade, its latest attempt at market manipulation will only result in making a terrible problem far worse.
    ~~ Veritas simplex oratio est ~~
    No matter how far a wizard goes, he will always come back for his hat. --T. Pratchett

    <---- You know you're getting old when you rely on your forum meta-data to remind you how old you are.


  • #2
    Re: Just Stop Paying Your Mortgage. Now.

    Awesome, I'm going to cancel my electronic payment today! 30" wheels would look nice on the truck :)
    |TG-12th| tHa_KhAn

    XBL GT: Khan58

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    • #3
      Re: Just Stop Paying Your Mortgage. Now.

      H E C K Y E A H..!!!!! Free livin' baby!!


      Comment


      • #4
        Re: Just Stop Paying Your Mortgage. Now.

        i was thinking the same thing. If they are just redoing mortgages and adjusting interest rates why not? I should have gotten one a couple years ago, id be getting it all back right now.
        that sounds like a good idea trooper.
        -Vulcan

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        • #5
          Re: Just Stop Paying Your Mortgage. Now.

          There was a big thing on the news about this today. Orange county (florida, not california, its where orlando is) is getting something like 60 million dollars for "neighborhood stabilization programs", where basically the city buys out the mortgage for pennies on the dollar and allows you to stay for 6 months before starting to make MUCH smaller payments to the city. Something in the range of like 200 bucks a month.

          Thats just freaking insane. I'm a renter, and I manage to squeeze out 1300 a month for rent, 300 for electric, 150 for cable and 100 for water, amongst other bills like yard service and cell phone, car bills, etc. So I dont exactly see it as fair that people who made bonehead decisions during the boom get a better deal than I do. All these morons are going to be getting a free ride for half a year and then paying rent to the city for chump change while I'm saddled with a huge rent bill that turns a profit for my landlord. What a bunch of crap.

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          • #6
            Re: Just Stop Paying Your Mortgage. Now.

            Ferris your wrong....those morons got taken advantage of by the big bad housing market. They dint know any better, they dint know that they woudl have to pay for that house for 30 years, they dint relize rates change at any time....i mean no one told them that, they just signed a peice of paper not knowing anything about it.


            /sarcasm off.
            that sounds like a good idea trooper.
            -Vulcan

            Comment


            • #7
              Re: Just Stop Paying Your Mortgage. Now.

              My opinion is you let them loose the house and stick the bank with it. The bank will work hard to get the best price.

              The most you do for homeowners is if they did get stuck with a overpriced house and one of those stupid ARMs then you wipe the foreclosure from their credit record.

              *Edit

              I might include a provision encourage the banks to allow the family to live in the foreclosed home and charge a median rent until the market stabilizes and the true value of the home is known.
              Last edited by El_Gringo_Grande; 10-16-2008, 10:20 PM.
              I’m not racists, I have republican friends. Radio show host.
              - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
              - "A foolish consistency is the hobgoblin of little minds" - Emerson
              - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
              - If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette
              - "Let me now state what seems to me the decisive objection to any conservatism which deserves to be called such. It is that by its very nature it cannot offer an alternative to the direction in which we are moving." -Friedrich Hayek
              - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

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              • #8
                Re: Just Stop Paying Your Mortgage. Now.

                Originally posted by Ferris Bueller View Post
                Thats just freaking insane. I'm a renter, and I manage to squeeze out 1300 a month for rent, 300 for electric, 150 for cable and 100 for water, amongst other bills like yard service and cell phone, car bills, etc. So I dont exactly see it as fair that people who made bonehead decisions during the boom get a better deal than I do. All these morons are going to be getting a free ride for half a year and then paying rent to the city for chump change while I'm saddled with a huge rent bill that turns a profit for my landlord. What a bunch of crap.
                Sucker!

                j/k

                I bought at the peak of the market, but I was smart enough to get a 30yr fixed (next time I'll get a 15yr fixed) and my payment is only 1/4 of my income. When the lady at the bank offered me almost double what I actually got I (literally) laughed in her face and told her no thanks.

                That was the problem, people were getting offered WAY more than they could actually afford and they took it. i.e. I can get a $300K house while I work the drive-thru! I'll take it. Oh......in 3 years the payment will be $4000/month. Okay, I'll be promoted to fryers by then!

                I don't feel sorry for anyone that signed papers they didn't understand. I read, reread, reread and then read again the terms of my loan. I talked to my father (who worked at banks for a long time), took a home ownership class, and did my own research and shopped around. Spend 1 hour online and you'll find all the information you need to make a good decision.

                Now we are ALL on the hook for this mess! Welcome to the new Socialist States of America.

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                • #9
                  Re: Just Stop Paying Your Mortgage. Now.

                  Interesting little twist to the story, I found out just about 20 minutes ago that the house I rent has been foreclosed on because the homeowner defaulted on his mortgage. So now I get to spend the next month looking for a new place for my brother and my other roommate to move into. Luckily, I rent through a property management company, so they're just going to relocate us to another property in the area. Just another thing thats going to be a pain in my ass before I move to colorado in January.

                  Comment


                  • #10
                    Re: Just Stop Paying Your Mortgage. Now.

                    Originally posted by Ferris Bueller View Post
                    Interesting little twist to the story, I found out just about 20 minutes ago that the house I rent has been foreclosed on because the homeowner defaulted on his mortgage. So now I get to spend the next month looking for a new place for my brother and my other roommate to move into. Luckily, I rent through a property management company, so they're just going to relocate us to another property in the area. Just another thing thats going to be a pain in my ass before I move to colorado in January.

                    buy the house? If you already pay that much in rent as it is im sure you guys could come up with the cash to buy it. Im sure you can get it for a nice low price as well.
                    that sounds like a good idea trooper.
                    -Vulcan

                    Comment


                    • #11
                      Re: Just Stop Paying Your Mortgage. Now.

                      no chance. sounds good in theory, but the house is being sold at public auction on nov 20th and the paperwork says that the bank holding the lien has first dibs. current holdings on the house is in excess of 300k, and theres no way i can come up with that, even if i wanted to.

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                      • #12
                        Re: Just Stop Paying Your Mortgage. Now.

                        Wow, that blows. At least they sent you a notice. That's more than what a lot of banks have been doing for renters.
                        ~~ Veritas simplex oratio est ~~
                        No matter how far a wizard goes, he will always come back for his hat. --T. Pratchett

                        <---- You know you're getting old when you rely on your forum meta-data to remind you how old you are.

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