Have any of the changes in real estate and mortgage lending actually addressed the real reason people stop paying their mortgages?
Just read an interesting post that raises the question:
Why do homeowners stop making mortgage payments?
Because they ran out of money. The riddle does not end with “because they only put down 3.5 percent of the purchase price.”
It is the difference between bad economic policy and bad lending policy – Federal Housing Administration (FHA) lending policy in this example.
There has been plenty of people claiming that we had so many foreclosures because people did not put down more money. But would a bigger down payment have meant a home owner would have continued making their mortgage payments INSTEAD of feeding their children?
Or maybe you think the banks were forced to make loans to people that should have never been able to get a mortgage in the first place. We have all seen stories about how some buyers were “guided” into mortgages that were NOT the best choice for them. OR maybe guided into selecting a mortgage that simply was more profitable for the bank or mortgage broker.
The simple truth is most people stopped making payments because they had to. The argument that people stopped paying simply because they were underwater may be true in some rare cases.
As soon as you drive a new car off the lot, you are underwater.
Does this mean people stop making their car payments? Do you think you can get what you paid for anything the day after you bought it?
The truth is that while real estate can go UP or Down in value, there are not many other things you can buy that will go up in value like real estate can.
Tough Times Mean You Face Tough Questions
It is an inconvenient truth that the reason that the majority of people that stopped making their mortgage payments did it simply because they had to.
It wasn’t always about how much they put down…
It wasn’t about a bank being forced to make loans because of government regulations…
If you are broke, you have to pick and choose who gets paid.
Keep the power on or pay the mortgage?
Get groceries or pay the mortgage?
I am not saying it is OK to stop making your house payment. Just saying I understand why some people HAD to stop making their mortgage payments. They did not want to..
They had to!
So if the banks were not high on the home owners priority list when it came time to pay the bills…
Well boo freakin hoo!