Are Mortgage Modifications Sending Out The Wrong Message?

Mortgage lenders across the nation have been trying to stave off the sweeping number of foreclosures by modifying troubled mortgages. With homeowners having trouble dealing with upside down home values and unaffordable mortgages, mortgage modifications have become quite popular recently. Even with the slow start of HUD’s Hope For Homeowners program, mortgage modifications seem to be the most prominent “solution” to our housing crisis problems. 

SF Chronicle asks, “Are You An Idiot to Keep Paying Your Mortgage?”
Unfortunately, one has to ask the question if mortgage modifications are sending out the wrong message; not just to homeowners and potential homebuyers, but everyone, including children and future generations. In a recent article by the San Francisco Chronicle, the article makes a bold suggestion and asks readers, “Are You an Idiot To Keep Paying Your Mortgage?” In the article, they insinuate that current homeowners should consider purposely defaulting on their mortgages to become eligible for these mortgage modifications. With lenders reducing the interest rates and sometimes even the principal balance on these mortgages, the temptation is definitely there.

Exploiting the Loopholes
As these modifications have grown more popular, the number of those hoping to take unfair advantage has increased as well. As of right now, there are certain measures to prevent fraud and abuse-but the article is just as quick to point out the loopholes. For example, to prove a financial hardship warranting the 90 day delinquency, the article mentions that a borrower could “stop working overtime, or a spouse could even quit his or her job”. And, to justify purposely missing one’s mortgage, the article suggests that borrowers can always recover from a 90 day late on your credit report.

It’s a strange twist to these helping hands of mortgage modifications, but it’s no secret that there are always individuals bold enough to take such risky actions. More importantly, we’ve got to ask ourselves what kind of message are we sending out to other homeowners, potential homebuyers, and even children around the nation. Is bad debt and bailing on the payments a forgivable action? An action so common that taking advantage is no longer immoral?

With HUD and FHA relaxing some of the regulations for the Hope for Homeowners program, the trends seem to point out that mortgage modifications are an integral part of our future. To be fair, I know people must be pointing the finger back at corporations and the like who have frequently found similar loopholes through such regulation. Whether it’s the corporation’s tactics to avoid paying taxes, the credit card companies sticking it to consumers with their fine print agreements, or even mortgage lenders with their “toxic” mortgages, I know consumers have been anxiously waiting for their slice of the pie. 

For current homeowners and those who intend to keep on paying their mortgage, I know it must be difficult and infuriating to see what’s been going on lately. It’s a confusing message that is being sent, and it’s unfortunate that these modifications aren’t just serving those who really need it. 

***Since this article has been published, it has received quite the feedback. I encourage all of you to visit the original article for two reasons. First of all, read the entire article and find out what many homeowners are no doubt considering. Secondly, take a moment and browse through the comments section to see how hundreds have already responded. *** 

We’re always interested in what readers have to say, so feel free to share your opinion on what’s been happening lately. Let us know what you think, and how you feel about these recent loan modifications.

This entry was posted on Monday, November 24th, 2008 at 11:51 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.