Have you done the math on your mortgage? What is that 30 year payback schedule really costing you over the long term? A lot of people are making tough decisions about keeping homes that may not be the best investment at the moment...or possibly ever. But like most people, if you have lived in your home for very long you become attached to more than the physical aspects. Your memories and lives are intertwined in your community and sense of your self in context.
Oddly, the idea of every paying off our mortgages seems almost foreign to us. We live with debt. Debt feels normal. How did this happen? A mere 80 years or so ago people didn't live this way. What has changed in our culture? I'll tell you what's changed: the value of the dollar has been serously devalued since 1933. But that's another story of enormous proportions.....meanwhile, back at the debt wheel:
Bad Loans = Good Investments! As it turns out, if you are in danger of defaulting on your loan, chance are you are in a high interest product that was originally rigged to explode. And explode it has. Now it also turns out that your lender is often very happy to string out the agonizing process of 'helping you' for as long as it takes. Why? Bad loans accrue interest, penalties, interest on the interest and interest on the penalties. And as long as you keep that string rolling the servicing lender makes more and more for keeping you on the debt wheel. Your debt piles up and they make more money on that growing pile.
Bankers who are too helpful get fired! Perhaps you caught a few of the recent tell-alls by insiders in banks who threw up their hands in disgust when told to 'stop helping people'. I've had my suspicions for some time that keeping the servicing drawn out collecting fees was their goal. It seemed to me that looking the other way at inefficiencies was how things worked once folks got behind. There is no other plausible reason that getting your loan modified should take ninety plus days! The lackadaisical attitude of debt mitigation departments was odd to me. Until I saw the arrears piling up. Fees and penalties in addition to the arrears are making loans balloon amazingly fast.
Quotas on Foreclosures: Here is the evidence of an insider at EMC (servicer for Bear Stearns) speaking out about her efforts to do what she thought was her job: help homeowners stay in their homes. This person was fired for stopping a foreclosure sale because Bear Stearns actually wanted to foreclose on a valuable home with a small mortgage. http://www.youtube.com/watch?v=vxyRFSYe7ws&NR=1
Every day a new program is announced: Hope, HARP, HAMP...MHA 2MP? Programs designed to stem foreclosures are legion and ever evolving. A few of the largest banks are even talking about Principal Write Downs and 2nd Mortgage extinguishment starting in July 2010. Naturally they are finding a way to be paid for their trouble via your tax dollars. So...if you thought all this stringing you out was really for your own good. Stop. Do the math. The longer you are in your mortgage the more your bank makes and the longer you are in that mortgage given inflation and the value of money over time, you become quite a little factory for your bank. Even with the low teaser rates and your APR being lowered by a good MHA modification, if you wind up in a 40 year loan instead of a 30 year loan the bank is going to make more in the end. At some point soon it is becoming apparent that not all of the banks can keep being paid by us to keep paying themselves more.
At what point do we stop paying banks to get richer? When enough people leave their homes by strategic default in disgust? When enough people decide they'd rather rent than be chained to the debt wheel forever? When Congress figures this out?
We have thrown at least a Trillion dollars at this crisis so far 'helping people' and yet not many people feel all that helped. Bank of America says they have modified 600,000 loans. Really? Only 8.4 Million to go then? Not even Fed Chairman Ben Bernanke knows where all that money of ours went. How about a little accountability? What a concept!
Be a citizen : speak up. Click this link and plug in your zip code: http://www.congress.org and email, write or call your representatives or better yet, the entire financial services committees in both the House and Senate. They need to hear from you. Your stories, your concerns, your ideas. Perhaps its time to staple of Notice of Default on Congress's door for reneging on their responsibilities to American citizens!