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So I was reading in the newspaper that now there's a government program where I can refinance and get a cheaper rate even if I'm deeper underwater than the Titanic. Which I am.

House Poor: Morality and Mortgages?

House Poor©

Morality and Mortgages

By Homer Guthrie

Expert Homeowner

So I was reading in the newspaper that now there’s a government program where I can modify my mortgage even if I’m deeper underwater than the Titanic. Which I am.

I called the first mortgage guy who found in my spam file on my email and he was happy to hear from me. He told me that it was called HAMP and that I qualified since Freddie Mac owned my mortgage. Isn’t that something? You learn something new every day.

Except there’s a problem, he said. “You’ve been paying your mortgage on time.”

He was the first mortgage person I had ever talked to who agreed with me. For ten YEARS I’ve been paying the mortgage on time. When Countrywide and Washington Mutual bailed out after ripping off thousands of borrowers, I paid my mortgage on time. Goldman Sachs and Lehman Brothers can go bankrupt , but not me. First of the month and my check is in the mail.

I didn’t think it was fair but Felicity, my wife, said that just because those companies were bums didn’t mean we should be. We had to set a good example. (For who, I wondered, since the kids are grown.) And then there’s our credit in case we want to buy something, she said. (And you-know-who frequently does.)

So she found some government bureaucrat somewhere on the Internet who said we have a moral imperative to pay our mortgage no matter what. He was probably the same guy who invented HAMP. Just like the government to put out a press release about a great new program and then tell honest working people who pay their mortgages on time that it’s not for them.

“Moral imperative? You’ve got to be kidding,” I said. “There wasn’t much moral imperative going around when all those people got sold subprime loans they couldn’t afford.”

But I wasn’t worried. I had a real live mortgage EXPERT who agrees with me. You need to quit paying your mortgage for three months before you can get into the HARP program, he told me. The mortgage expert said the program was for people who were having a hard time paying their mortgages. I figured I qualified. Writing that check every first of the month is awfully hard on me, that’s for sure. I wasn’t alone. He said he had lots of other customers like me who weren’t behind on their payments until they talked to him. Then they wised up and got cheaper mortgages. Sounded good to me, but Felicity hit the roof.

“That’s crazy,” she said. “What happens if we don’t get approved?”

“That’s an easy one. We save three months of mortgage payments.”

“No we don’t, you dunce. We will still have to make those payments plus interest and we will probably lose one hundred points off our credit score. Besides, it’s the right thing to do.”

So I did a little more research about this moral imperative thing, which wasn’t very hard. What about the government itself? Does the local tax assessor’s office feel a moral imperative to lower your property taxes pronto when home values take a pasting? I don’t think so. Who cares if suffering homeowners have to keep paying property taxes for years as if they lived in mansions when Zillow values their home as if they were rotting foreclosures? When they finally get around to lowering assessments, they raise taxes somewhere else to make up the difference-like it’s our fault that home values tanked.

“So you’re going to stop paying our taxes too?” asked Felicity. “Good luck with that.”

Well, then I found out that there are thousands of people just like us could care less about their moral imperative. They are walking away from their mortgages because continuing to pay them is just throwing good money after bad. They even have a name for it. It’s called “strategic default” and there’s even a college professor in Arizona who says it’s the right way to go.

Felicity laughed at that one. “When we lose our home can we move in with the professor? He probably lives in a trailer park in the crappiest part of Tucson.”

It was clear she didn’t have an open mind so I decided I would find a way to prove to her that forgetting about moral imperative now and then just isn’t such a big deal. Credit cards came to mind. I never could figure out what I got in return for the money I sent in every month to credit card companies so I stopped paying one of them. As soon as the due date passed, they started calling and emailing like I was a long-lost relative. At first they said patronizing things like “we’ve always treasured our relationship with you because we know you are a coward and pay on time.” As time passed, they got meaner. They sent me big ugly envelopes plastered with black type that said “OVERDUE” and “ACCOUNT SUSPENDED” just to embarrass me in front of my mailman. When they called, at first they were nice people in India with lilting accents like in Bollywood movies. After I was 60 days past due, the robo-call machines called incessantly. At 90 days, Felicity found out about my little experiment when her card was rejected at Kmart.

Felicity was so mad at me that she nixed the whole HAMP thing and ordered me never to talk to my mortgage friend again. So it was no surprise to me at all when I read in the paper the other day that the HAMP program wasn’t getting as many takers as theyu had hoped. The article said the experts couldn’t figure out what the problem was. How could so many homeowners pass on such a great deal, they wondered?

Well, duh. I’m an expert homeowner and take it from me, all they need to do to make the program work is get rid of this moral imperative thing. In fact, if Congress would just pass a law saying morality and mortgages make about as much sense as morality and politics, we probably wouldn’t have a housing problem at all.

Read House Poor every Monday on Real Estate Economy Watch.

To contact Homer or to inquire about posting House Poor columns on your site every week, write him at admin@reeconadvisors.com or post a comment.

Copyright 2012 by Reecon Advisors LLC. All Rights Reserved.

7 comments

  1. I don’t understand the problem here, or what that supposed agent told you about having to miss payments to get into HARP 2.0

    The HARP 2.0 program specifically states, on their website, as a REQUIREMENT of being approved for it, that:

    “The current mortgage must be up to date with no late payments in the past twelve months.”

    You are not supposed to be delinquent to get into the HARP program. In fact, you cannot get in if you are delinquent. This sounds like it would be perfect for you, since you are reliably up to date on all your payments.

  2. Max,

    I guess Homer is wrong again.

  3. Second mortgage or home eiuetqis do show, when recorded and this is the issue. I used to work for a title company for a major lender and issues do arise. Some lenders send the home equity to be recorded themselves, lenders don’t know all the variables that go into a recording, they miscaculate fees, don’t know about cover pages, maybe there’s a dual tax id and it costs more, some states only accept single sided mortgages. Maybe the county rejects the mortgage as the font is too small, the notary stamp bled through the paper, or there is no stamp or seal at all. If it’s rejected, the county sends it back to the lender, who most times thinks the mortgage is recorded until the borrower goes to refinance and the he is not on record so it takes them 6-8 weeks to go to their vault where they hold everything to either figure out the mortgage was not recorded or they don’t have it at all.I don’t know why people like home eiuetqis, for some it’s a status thing ..I have a 500k home equity ..some need money quick and dont understand the full economic process and think home eiuetqis are a good deal because the rate is low. Like any other mortgage product, home eiuetqis have their usefullness, but it’s not for everyone or every situation

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