Filed under: FICO, adjustable rate mortgage, credit score, debt relief, fixed rate mortgage | Tags: adjustable rate mortgage, credit score, debt relief, fixed rate mortgage
The people who took the conservative approach and bought a house they could afford are feeling like something isn’t quite right.
I had a conversation with one of my clients the other day that went something like this:
“So let me get this straight…I pay my mortgage every month, I bought my house with a 20% down payment, and I chose at 30 year fixed rate mortgage instead of an adjustable rate mortgage. Now, as a reward for all this good decision-making, I get stuck with tens of thousands of dollars in negative equity while my neighbors walk away from their houses with little damage to their credit score and they’re relieved of their debt???!!! I feel like a chump.”
For some reason, there are people in the world right now who believe they should be relieved of the consequences of their poor financial decisions. This would be like buying a share of stock in a company, having that stock lose value, and thinking that your money should be returned to you at the original purchase price. It just doesn’t make any sense to a reasonable person.
Why are we in a situation where people think they should be able to walk away from their houses? From the hundreds of stories I’ve heard most fit into one of these categories.
1. The inconvenience of living-up to the terms of the agreement. After all, how can people maintain a lifestyle they can’t afford if they are forced to live within their means?
2. The pervasive “entitlement attitude” in the United States right now. Just because you see something on TV doesn’t mean you deserve it without working for it.
3. Because everyone else is doing it.
4. Because nobody is saying it’s wrong.
I would even argue that this sort of behavior is fraudulent. When mortgage documents are signed, that represents a commitment (a legally binding commitment, by the way). Of all the documents a person signs in a lifetime, a reasonably intelligent person would know that it is prudent to UNDERSTAND what is being signed.
Why a person would sign legally binding documents without reading them is a mystery to me. This is a big purchase and there’s generally a lot of money involved. The lender was willing to loan the money with terms that were agreeable to both parties. If there was any question about the terms of the agreement, the time to object was BEFORE the documents were signed.
This would be like having a child, and deciding after the child reaches age three that you would actually rather not have the child. The time to make that call was BEFORE the child was born. Do you hear me, Nebraska?!
