Written by madhaus – but due to a quirk in WordPress I can’t change the author.
By Don Lee, McClatchy-Tribune
Posted: 11/04/2010 02:21:32 PM PDT
WASHINGTON — For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.
But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It’s not that these homeowners will stop making their payments. It’s just the opposite — that they will keep doing it.
How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending — a drag on family finances, the housing market and the overall economy.
And the drag could persist for years.
That’s right! Continuing to pay your mortgage every month when your home is underwater is UN-AMERICAN! You’re THROWING MONEY AWAY that could be jump-starting the economy. Instead of buying a gas-guzzling SUV or taking your entire extended family to Hawaii, you’re paying the bank more than your house is worth or may ever be worth again.
7.8 million mortgage holders owe 25% more than their home is currently worth, and 4 million (including 672,000 in California) owe more than 50% of their home’s value. And these loans are at far higher interest rates than the current national average mortgage rate of 4.25%. These people can’t refinance, because their homes won’t appraise high enough to retire the old mortgages. They can’t sell for the same reason: it won’t cover the debt. They don’t give the homes back to the banks because they don’t want the black marks on their credit ratings. They can’t even qualify for loan modification, because they’re still employed.
They’re stuck, and the entire economy is stuck with them. All these people stuck in their repriced homes means fewer real estate transactions, fewer real estate commissions, fewer trade ups to bigger homes. And that means housing prices everywhere will stay stuck, as will consumer spending and job creation.
If only they would just stop paying their mortgages until the banks finally notice. They could probably get at least a year’s free housing before those busy robo-signers take note. Maybe Danielle and Jim Earl could give them some pointers on how to stay in the house as long as possible.
Really, which is worse: a foreclosure on your credit report, or paying 10 or 15 or 20 years’ worth of mortgage payments until your house is once more worth what you paid for it in 2006? After all those financial shenanigans during the bubble, being foreclosed on won’t be any more of a stigma than getting divorced or laid off.
Do you owe more than your home is worth? Then stop paying your mortgage. The entire country is counting on you!