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Underwater Mortgage Advice: The New Financial Rules of Home Ownership

Guest post by: Bud Gragg

Article Overview: When you're facing an underwater mortgage you're facing a situation where none of “the rules” matter that much anymore. What rules are we talking about? We're talking about the rules that say that you must always pay your debts, no matter what. We're talking about the rules that say it's actually bad to look out for yourself and your family first.

Underwater Mortgage Advice: The New Financial Rules of Home Ownership

When you're facing an underwater mortgage you're facing a situation where none of “the rules” matter that much anymore.

What rules are we talking about?

We're talking about the rules that say that you must always pay your debts, no matter what. We're talking about the rules that say it's actually bad to look out for yourself and your family first.

Just why would people think that those rules apply to people with underwater mortgages, especially when families are having trouble making the payments? First, those rules became rules for good reasons: when you are dealing in good faith and the other party is dealing in good faith, you really ought to do all you can to honor your end of the bargain.

But look at that sentence again. The clause “and the other party is dealing in good faith” matters. Do you really need us to prove to you that mortgage lenders haven't been acting in good faith?

OK, we have to admit that mortgage lenders were put in a bind in the 1990s when the Clinton administration and Congress told them that they had to make mortgages more easily available, even to people who couldn't afford them. But what have the large financial institutions done with that mandate?

They've pushed mortgages like never before. They've allowed people to get mortgages without proof of their incomes. They've pushed ARMs—adjustable rate mortgages—on a gamble that families would be able to afford the larger mortgage payments when those mortgages reset in five years, and every year after, to reflect inflation.

They've pushed mortgages like dealers push drugs. And because most people in our country don't have a good basic financial education, we've been mainlining the credit drug for 20 years.

Oh, and let's face it—greed played its part on our end as well as on the bankers' end of the deals. I know that Kristin and I wanted that dream house, never mind that it was more house than we'd ever need!

At the same time, the very financial institutions that insist we keep playing by “the rules” break them regularly. Do you think that the CEOs of these financial institutions keep paying the companies' mortgages when those mortgages are under water? Think again—and look it up!

Finally, these same financial institutions are the ones that have been bailed out by our government. Why? Because they caused the recession that we're in the first place!

I don't know about you, but I'm certain that, if Kristin and I were to try the shady financial dealings that these mortgage lenders and other bankers were into, that we'd be in jail fast. We're pretty sure you would be, too. Instead, these jerks are getting their multi-million dollar bonuses paid for out of our tax money!

With all this in mind, what rules do we think you should apply to yourself and your family if you're faced with an underwater mortgage?

We'll tell you—and this is the cardinal rule: Look out for your own best interests. Your only real responsibility is to yourself and to your family.

We don't care if you made an honest mistake in dealing with your mortgage lender or if you let yourself be handily convinced to take out more mortgage than you could afford. You don't deserve to ruin a huge part of your life because of that mistake. And your children certainly don't deserve to suffer because of it.

The people with power think we should play by different, stricter rules than they do. When it comes to dealing with your underwater mortgage, we say: Don't listen to a single one of them.

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