So, you were one of the millions who were swindled into buying a new home when interest rates where at an all time low and housing prices were guaranteed to go up, assuring you a bountiful equity nest egg on your retirement…You have been lied too!
Mortgage Trap
I can’t tell you how many potential buyers I spoke with over the past few years who gave me the same line. “You really need to buy a house now, we are. Home prices only go up and with interest rates so low you are making money.” Now those same people are stuck with half million dollar houses that are actually worth two hundred thousand or less. They will never be able to sell these over priced monsters and are locked into obscenely large mortgage payments for the next thirty years.
How can a house possibly go from a value of seventy thousand dollars in 2000 to over a half a million dollars in 2006, especially when wages are stagnant in the area and job growth is nonexistent? It can’t. This was an artificial housing bubble created to move large amounts of wealth from the desperate home seeking lower classes to the elite. This “get rich quick scam” perpetrated on the lower wage earners by banks and mortgage institutions promised the American dream of home ownership through low initial payments and false promises of continued appreciation in housing values.
The artificial bubble also helped stave off the impending depression our country is moving into by producing growth in the housing and finance markets. The jobs produced in these two booming fields offset the massive loss, through outsourcing, in the manufacturing and technology related industries. These “temporary” jobs are now going away and will not be replaced.
The last thing the bubble did was trap many home owners into a debt slavery situation. As wages tumble and jobs become scarce you will do anything to keep your home. You will work more hours for continually decreasing pay. Unions will be shunned and “trouble makers” will quickly be eliminated. You will become an obedient slave to your mortgage.
The Bankruptcy Reform Act of 2005 eliminated the ability to declare bankruptcy for most Americans. Bankruptcy was the safety net used to protect your home and keep your family from being kicked onto the streets from job loss or catastrophic illness. The banking industry saw the hard time coming years ago and paid congress to remove bankruptcy protection for Americans guaranteeing their profits. They even continued to issues these fraudulent loans after they saw the downturn coming.
Mortgage Industry Immoral
Is it morally right to offer someone making sixteen thousand a year at Wal-Mart a two hundred thousand dollar mortgage on a house you know to be over valued by half? Even if they could afford the teaser rate of six hundred a month, the reset to fifteen hundred a month after two years will sink them. The loan institutions knew this and gave the mortgages anyway. Now these home owners are desperate to refinance and these same loan companies are refusing them because the house is over valued or their credit rating is not good enough. Where was the oversight?
These same mortgage companies that shielded themselves from bankruptcy and have made billions off their immoral practices and fees are now in Washington asking for a bailout. It’s the American people that need the bailout. What has Washington done for the homeowner in trouble.
George Bush recently announced a plan brokered by his office to help homeowners who’s mortgages are about to reset refinance at the same rate for five additional years. Here’s the catch, you have to qualify for the loans. In other words, if you have ever been late with a payment you are not eligible for the program. So, this is a program for homeowners who don’t need it, people who are in actual financial trouble cannot qualify, this makes no sense.
From George Bush and his “ownership society” to the lending institutions raping the public with fees to the real estate appraiser who overvalued the home, they all are guilty of crimes against the American people. They all lied to you!
Walk Away From The Mortgage
Walk away from it. Put the keys in the mail and walk away. Sit for a couple of months in your house don’t pay the mortgage, pocket the money. Use those dollars to buy a very cheap mobile home or trailer, the smaller the better, you will want to be able to move it. You will own this home outright no payments.
There is no debtors prison yet so get out from under your mortgage now. Your credit is going to be wreaked anyway so don’t let that scare you. Your neighbors are in the same situation so don't let the so social stigma stop you. You have no equity built up to lose. You have no moral obligation to pay for these well designed traps, remember you were lied too.
Inflation and falling wages are going to rule for the next several years. Do you really want to be trapped paying a huge mortgage while your family starves. Large home are a status symbol that few can really afford. In the coming years status will be measured by how healthy your children are, not by size of your house. You should not be forced to decided between feeding your family and paying your mortgage, so don't get trapped, get out now.
Friday, January 4, 2008
Mortgage - Just Walk Away
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11 comments:
Excellent advice! I did it fifteen years ago and have never looked back. Though one additional bit I can add from bitter experience is to suggest cut up your credit card. The interest alone will make even a small debt grow and grow without giving you anything in return. Getting out of debt, whatever form it is, and staying out is number one priority. Now is the time, it will get more and more difficult. When everyone is selling off personal belongings to make a little extra money, the market will flood with second hand goods and you won't even have that possibility in the future.
Thanks,
You are absolutely correct. You should eliminate all your debt. Debt is the trap.
It would also be nice to have a small piece of land to put your trailer on but this is not necessary.
For a person in that situation (bottom up with enormous payments) it is great advice. Jingle mail is the way to go in that extreme situation. However I think they key is to make sound choices BEFORE that happens.
Buying a house is the traditional American way to financial security. Houses are a great investment for THE LONG TERM!!!!! Those folks who jumped in when prices were going up 100% a year and thought it would make them rich overnight were fooling themselves.
Plan on a house going up in value a few percent a year (after inflation) are being realistic. This also assumes that you get a FIXED RATE MORGAGE THAT YOU CAN AFFORD for a house that is ACCURATELY VALUED!!!
If you want to live in a trailer or a small cabin then more power to you. However there is nothing wrong (and a whole lot right) with buying a reasonable house which you can afford. I currently live in an apartment and am looking forward to buying a small reasonably priced house in the next couple of years. Over time I will upgrade to a moderate sized house on a piece of land.
Accurate value is the key. Personally I am out of debt and will do everything to stay that way the future is just to uncertain for me. Plus I already have the small house on secluded mountain land. I am just saving up enough now to do some upgrades to the power system and drill a well.
I have mixed ideas about buying a house. The thing I want most is privacy and flexibility. Only a house gives you that...in an apartment, the landlord can come in anytime, you can't make changes, etc.
But agreed, a house is a big purchase and you should do it wisely because a mortgage that is out of your means can be a killer, literally and figuratively. Personally, I looked around until I found a fixer-upper where nothing structural or major was wrong, it just needed updating. Paint, fixtures, etc. All stuff I knew I could easily fix myself. I talked the seller down several thousands of dollars from their asking price, and my monthly mortgage payment right now (including property taxes) is less than a comparable 3-bedroom apartment rental and only 25% of my net pay.
A house can be a good idea for a lot of people if they do it within their means.
Bigbear, I have been reading your blog all day, it is very informative and entertaining. I and my friends are moving, slowly, towards a self sufficiency lifestyle in northern NM, and what I am reading here is of great help. Thanks. I am completely debt free, as I have been for most of my adult life. I do not own a home, I rent, as I prefer to be able to move when and how I wish. I have really enjoyed much of what you have written in your blog. However, I would, respectfully, disagree with something you wrote "Mortgage-Just Walk Away". You state, "you have no moral obligation to pay for it, remember you were lied to". Bigbear, if a person is lied to, and remember, the home purchasers were equal partners in their own misfortunes (caveat emptor), this doesn't exonerate them from their 'moral' obligation to abide by a contract they signed. Walking away is not the same as foreclosure, but the consequences are, unfortunately, identical for the most part. The whole thing is a terrible end to this dance of greed on the part of everyone, from big banking, to the mortgage industry, to the current administration to the home buyers themselves. Everyone wanted to make buckets of money for 'nothing' but there had to be a loser, and it was the already stressed middle/lower class. Ethically, yes, the losers in this case should have some recourse, perhaps 'walking away', as they have so little recourse provided them. But 'morally', no. To justify doing wrong because wrong is done to you, that is the mentality of the 'winners' in this situation, an "I don't give a damn about anyone or anything, so long as I come out ahead", whatever 'ahead' is. And this is less about freedom, Bigbear, than about integrity. It is not just the greed of this government/private sector alliance but also of the many whose overreaching desire blinded them to their own personal fiscal responsibilities that leaves ALL of us, and our children, having to foot the bill, and which we probably cannot pay. My apologies for an initial entry that would seem to criticize, that was not my intent. Just in all that I have read, there is much discussion of the faceless and 'legion' entity known as our government, and little comment on the individual responsibility in error. However, all in all, I again thank you and the other links and commentators for your blog. Keep up the very, very good work and best wishes in your move to your cabin.
Anonymous,
I couldn't disagree more. The loan industry and corporate government knew this was coming. They fully understood that home values were criminally overstated and that millions would lose their homes. This is why they passed the 2005 Bankruptcy Reform Act. They knew it was coming and still fleeced the public to the tune of billions to maintain their all important cash flow.
I would argue that it is your moral obligation to walk away from these criminal slave mortgages. They loan industry fully knows that most people will have a moral compulsions to fulfill their contract. They bet on this, they count on this, it is what allows the banks to make billions off the morally upright. It is just a control mechanism and if the people do nothing they banks go on using this powerful weapon to support their unjust gains.
When someone walks away from a home it says to the loan industry and government conspirators that you are not going to take it any more. There is not personal benefit to the home buyer to walk away. If home prices had not been manipulated to maximize corporate profits the banks would have sound collateral to fall back on. All you are doing is giving them back the item which they conned you into buying. You are not trying to gain you just don't want to play anymore.
Remember you are not gaining from this action. A powerful message is sent to the corporate elite that we will not sit by and allow you to enslave us. This is called a revolution.
this doesn't exonerate them from their 'moral' obligation to abide by a contract they signed.
This is working under the assumption there is a moral obligation. Contracts do not equal moral obligation.
One point against this though.
I certainly want a simpler existence and am currently in a less drastic but still upside down mortgage ($300K home bought 0 down in 2005. I still want to replace my home for a smaller, simpler one at my earliest chance which I can own outright. However, while I was prodded by many to purchase a home, I and only I chose to take the loan and did so in the full knowledge of the payment terms. There was spin, but it was ultimately my decision, and one that I owe it to myself to see through until I either pay off the home or get to a point I can sell it. There is something to be said for personal integrity, independent of any contract signed.
nice post
I opted not to go with the flow and buy a house when interest were in their lowest. True, I would want a house for myself but being in debt all my life is not my cup of tea. So when the idea of mobile home came up, I really looked into it. Sure, there was a lot of stigma in owning a mobile home but it's up to you to pick a suitable place for it. What matters is that you own a small house and STILL be secured about the future. In the end cash and having savings is more important than status. For more info, see http://modularhomeblog.com/prefab-mobile/much-much-does-it-cost-to-move-a-mobile-home.html
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