Michigan Mortgage

But it’s not my fault!

by Evan Vanderwey on 06/08/10 at 1:10 pm

Yesterday I had a scheduled call with a new prospective client. It was a script I hear often:

Client: “Here I am, minding my own business and making all of my payments on time and then through no fault of my own and because of all of these greedy banks, lying politicians, and people trying to get something for nothing, my house is worth half of what I paid for it. After two years of that, I decided it’s time to get what’s mine.”

My response: “Do you want some cheese to go along with your whine?”

It was soon frustratingly clear to me that this customer had used the same script more than once – it has become her justification for why they gave their house back to the bank.

Even more frustrating was the fact that nothing had negatively changed for them (income, expenses, etc.) since the day they purchased the home. They simply did not want to owe more than their home was worth, and they were willing to let the big bad bank deal with their problem.

If this is you, please don’t call me. I’m too busy helping people who are actually trying to do the right thing.

My last post explained that when you sell your home on a short sale or lose it in a foreclosure, you have to wait three years before you can get another mortgage.  This makes sense to me.

The three-year rule is meant to hinder the “dump and buy” practice that some are attempting to pull off.  If you purchased a home four years ago, you likely paid a lot more for it than you would have if you had purchased the same home today.  You also likely owe more on it than it is worth today.  That is a frustrating (even anger-provoking) reality for many – I myself am included in this category having built my home 5 years ago.

This phenomenon has happened before, but it is not the problem. The problem comes when as a result of these realities, some (many) short-sell their home (or give it back to the bank in straight foreclosure – same difference) and then try to buy another home at a much lower price.

This is the practice that’s not allowed, at least if you plan to use another mortgage to pull it off. Think about it. Would you lend to someone who defaulted on an obligation they made simply because it was not financially beneficial for them to keep it?  You wouldn’t, and neither will banks (more specifically FHA, Fannie, Freddie, VA, RD, etc.)

Hear me on this; I’m not saying that it’s YOUR fault that you are in your current upside down situation. That may or may not be the case. But neither is it mine, or the bank’s fault.

And further, your having done the right thing up until now (making your payments on time etc.) does not qualify you ethically to “get your handout.” You deserve nothing more than you have. You signed the papers. You bought the house. You can still afford the payments. What you deserve is to keep making them like you said you would.

Frankly, the “fault” (if there is fault) should be directed at those who gave up their home without making every possible effort to keep it.

So in a real and logical sense, those who whine and cry about the fact that “all of this wasn’t their fault” and that they didn’t “deserve this” and give that as the reason they gave their house to the bank, are precisely the ones at fault (at least partially).

This post is a downer, I know. Thankfully, I also meet people every day who are to be praised for the effort they make to keep their obligations – even when it’s hard, and even when it comes at a great personal sacrifice to them. My next post will be about these folks and what it means to give “every possible effort.”

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