The Mortgage Dilemma: To Pay or Not to Pay

Remember when mortgage debt was sacrosanct? When house payments were at the top of a borrower’s budget and cash flow priority list? It’s hard to believe one generation of home loan borrowers has witnessed the nation’s longstanding prioritization of mortgage payment obligation flip on its head.

 Yet scores of Americans are having this kitchen table conversation every day. Many mortgage debtors are opting to pay credit card balances, health insurance premiums, and to buy groceries and gas over making their monthly house payment on time, or at all. Having one’s credit rating soiled for several years, or dropping to a less than stellar FICO score doesn’t tip the scales for borrowers in the negative equity zone who are making much harder real life choices these days. What does tip the scale when deciding to pay or not to pay the mortgage are things like job loss, illness, divorce and interest rate adjustments. For more and more well intended borrowers, the mortgage decision is made for them by unforeseen economic circumstances.

 Being in good company has somewhat eased the social stigma of not paying one’s mortgage. In 2009 2.8 million homes were in the foreclosure process. It is estimated that in 2010 and 2011 up to 4 million additional home loans will experience some kind debt obligation failure. According to RealtyTrac 30% of the nations residential listings are either short sales or REO (bank owned) offerings.

 Today’s homeowners who are in the negative equity zone need to assemble a dream team of advisors comprising of an educated Realtor, a smart CPA who can advise on tax consequences, and an attorney specializing in short sales and foreclosures who can advise and negotiate debt forgiveness if necessary.

 To pay, or not to pay the house payment? The choice is no longer a stigma: it’s an epidemic.

KatieSompleis a local 10 year real estate veteran. Her real estate articles and market analyses can be found at www.lifestyleproperties.com. She can be reached at (707) 235-8585.