I Hate To Be An I-Told-You-So

In May of 2005 I wrote a long post debunking the wisdom of taking out a creative mortgage. Turns out I was oh so right. If you live in a metropolitan area of any size I will bet that there is a story in your local newspaper today about the rising home foreclosure rates. It seems that those swell ARM, no-down, interest only and negative amortization loans weren't that smart after all. According the spokesman for "The National Association of Mortgage Guys Who Thought Mortgaging To The Hilt Was Smart,But Don't Now" (NAOMGWTMTTHWSBDN), rising prices for gas, food and credit card interest are hurting the families that don't have any money left to pay a bigger mortgage payment after they pay all the bills. Gee, I wouldn't have guessed that. It also turns out that a cooling housing market is making it harder for those families trapped in these bad mortgages to sell their homes. It is even harder for those who paid too much because, "Hey, housing prices always go up". Where were all these creepy mortgage jackasses when they made these sucker loans? What a bunch of creeps. The spokesman for NAOMGWTMTTHWSBDN suggests that if your mortgage payment has become unmanageable, you should call your credit card companies or other creditors and try to work something out. Let me translate that from the special language of NAOMGWTMTTHWSBDN.."Good luck,sucker!" So, what should you do if you are stuck? First, if you can refinance to a manageable fixed rate loan, do it. If not put the house up for sale and prepare to move to a rental. While you dig out of your mess pay your obligations in this order. 1. Food, gotta eat. 2. Utilities. 3. Make the house payment. Don't let it fall behind any other debt. It is where you live. If you keep current, you can't be foreclosed on. 4. Pay your car if you can. Keep current one at least one. Try to sell your car if necessary. No car is better than no house. 5. Lastly, pay unsecured debt what you can. They loaned it to you unsecured, they are in last place. All they can do is sue you and it will be a long time before they do. I am not saying to stiff anyone, but there is a priority to this mess. Let them sue you. Most people in danger of losing the house don't have anything worth taking so a judgement is meaningless. Don't worry about your credit rating. You can fix that later. Don't spend time talking to collectors except to tell them that you are working on it. Tag: Life