Walking Away From The Mortgage

Mar 2nd, 2008 @ 5:06 PM by Alden Smith

An alarming trend is hitting portions of the nation – people are trying to stay current on their car loans and credit cards, but are not paying their mortgage payment.  The NBC Nightly News reported on this topic, giving a lot of reasons why this is happening.  Today, in The Indianapolis Star and on the KNXV-ABC News website, I see the same story related.

The NBC News reports that this is the course of action that people are taking because of several factors.  People are being hurt by the high price of gas, and the cost of groceries has taken a leap.  Transportation costs are hurting a lot of businesses, and NBC reports that people are using their credit cards to stay afloat, not a good idea in anyone’s book.

In the past, people would go without to pay their monthly mortgage payment in tough times.  Because the home is your single best investment, this has always made good sense.  Now, because of serial refinancing, people are finding that with the drop in home value and the tough times in the mortgage market, their homes are worth less than they paid for them, and worth much less than what they owe.

Using a credit card to stay afloat is putting people in a position that they will not be able to crawl out of.  Soon, they will find that the credit card has maxed out, and they will then be one paycheck from being in the street.  Neglecting to make monthly mortgage payments will only compound this, because their credit scores will suffer.  This effectively runs people out of options.

Credit counselors tell people that they should call their mortgage lenders and try to make some kind of arrangement to be able to stay in their homes.  Economizing, cutting back on superfluous spending, and living within a budget are the watch words here.

People used to be able to bail themselves out of tough financial times with a home equity loan.  The trend now, because of houses being devalued, is toward more reliance on credit cards.  The American public currently holds $1 trillion in credit card debt.  Yet foreclosures become more common by the day.  If the economy turns down even more than it already has, analysts fear that lenders will pull back even further on credit, and consumers will pull back even further on discretionary spending.  That would bring the economy to its knees.

States hardest hit with this problem of people not paying their mortgages are California, Nevada, Florida and Arizona.  These states are some of the ones that are showing the highest rate of foreclosure.  This continuing trend will only spell disaster.  Something needs to be done, and people are out of ideas and options.

One Response to “Walking Away From The Mortgage”

1. Mortgage says:

   March 2, 2008 at 6:47 pm

   This whole mess will just have to run its course and the American public is in for a hard lesson.