Why am I being punished for having bought a house I could afford?

[jeffrey]

As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence.

An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.

If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break...

http://www.nytimes.com/2008/10/31/bu...=1&oref=slogin

[Joan.of.the.Arch]

Already in this forum we have seen the question of defaulting on a loan whose payments one actually can afford because of the house becoming valued for less than the mortgage. I imagine there are a lot of people squirming and working up anger about their own upside down situation. Eighteen percent of home mortgage payers in my state are in that situation.

To those who want to bail out on a mortgage they _can_ afford, I can now point out this drawback mentioned in the article:

Going into default, whether as a gambit to get a loan modification or to get rid of a burdensome house payment, carries risks. Under some conditions, lenders have the right to sue a borrower for assets beyond the house itself.

I had not known that about being sued for more by the lender. Well, seems right that they have the right to the full value of the loan---but more beyond the loan?

[cptacek]

Originally Posted by Joan.of.the.Arch

Under some conditions, lenders have the right to sue a borrower for assets beyond the house itself.[/i]

I had not known that about being sued for more by the lender. Well, seems right that they have the right to the full value of the loan---but more beyond the loan?

I think you might be reading this wrong. I would guess it means they can go for other assets until they seize enough to pay off the loan. I know with our farm loans, our entire farm is the collateral, not just the asset we bought with the loan they gave us. For instance, if we borrowed $20,000 to buy cows and every one of them died, and we fall behind on the payments, the bank can make us sell our tractor, or pickups, our...etc...until we pay that loan off.

[Judi Dial]

We're in the opposite case. We bought on the high side, on the way down the 1st Bush admin (Geo H) and have been here 15+ years. We re-fi'd the loan about 6-8 years ago to get a smaller payment and lower interest on the remaining balance.

We still owe $, but the properties around here went way up.

Originally we bought a house in a near-empty neighborhood next to a defunct ski resort. The resort has been resurrected, so the property values went way up. Assuming that our place is worth even 1/2 of what the last reasonable estimate I knew was, we owe less. The ski resort may go out of business again this year realistically.

But we didn't buy this place based on the resort, we bought a log house on an acre of land that was bank-owned, in a near-empty neighborhood.

In a lot of ways, we got lucky. In other ways, we couldn't afford to leave. DH got laid off within 6 months of our signing the mortgage here and got a job in OH. We couldn't afford to move, and the housing market here had nosedived in the 6 months after we bought it. He gave up the job in OH and went to work for someone else with no raise and no regular checks for four long, hellish years. At the end of that, we had very few assets left. I opened my bookshop with the last cash I had,and we punted.

The economy did better, and DH went to work for someone who actually did pay regularly. They laid him off 2 years later. Then he had nearly the same thing happen in 4 years. Everytime we started to get ahead, boom! something happened and we were stuck again.

So here we are. At the moment he's working and we can afford what we've got, except in all the financial ups and downs we ran up a lot of cc debt, and we're whittling away at that.

My house is worth more than I owe on it, and I can afford it (at the moment). Thank God!

Judi