Why it might be better if you default on your mortgage
Another sad chapter of this financial crisis begins. It turns out it now may be better if you stop paying your mortgage on time. After all, the Senate is looking to provide "relief" to all those folks who can't meet their monthly payments, using a technique called a "cram-down."
In a cram-down, the bank reduces the monthly payment as well as the principal amount you owe. Banks who've resisted this (Can you blame them?) are caving in to political pressure. Apparently the last hold-out was Citigroup, which has now agreed to the program.
What's that you say? You've been faithfully making your mortgage payments and you resent the idea that someone who can't meet their obligations should receive money from the government (which, of course means money from YOU). Well, get over it. You see, those who either took on too much mortgage in the first place; or whose adjustable rate has increased beyond their ability to pay (something they should have planned for, of course); or those whose home has lost so much value it's worth less than their mortgage - or a combination of all three - will now be getting some of the "bail-out" bucks that the big banks have gotten. Of course, it looks like they'll have to declare Chapter 13 bankruptcy to qualify, but who cares. After all, bankruptcy doesn't really have the stigma it did years ago.
As for the careful, prudent savers, who live modestly, even below their means, and therefore will suffer through the recession but continue to pay their mortgage: Sorry, you lose. Of course, if you simply stop paying your mortgage and declare bankruptcy, you too can get in on the action.
Boggles the mind, doesn't it?
In a cram-down, the bank reduces the monthly payment as well as the principal amount you owe. Banks who've resisted this (Can you blame them?) are caving in to political pressure. Apparently the last hold-out was Citigroup, which has now agreed to the program.
What's that you say? You've been faithfully making your mortgage payments and you resent the idea that someone who can't meet their obligations should receive money from the government (which, of course means money from YOU). Well, get over it. You see, those who either took on too much mortgage in the first place; or whose adjustable rate has increased beyond their ability to pay (something they should have planned for, of course); or those whose home has lost so much value it's worth less than their mortgage - or a combination of all three - will now be getting some of the "bail-out" bucks that the big banks have gotten. Of course, it looks like they'll have to declare Chapter 13 bankruptcy to qualify, but who cares. After all, bankruptcy doesn't really have the stigma it did years ago.
As for the careful, prudent savers, who live modestly, even below their means, and therefore will suffer through the recession but continue to pay their mortgage: Sorry, you lose. Of course, if you simply stop paying your mortgage and declare bankruptcy, you too can get in on the action.
Boggles the mind, doesn't it?
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