A Fraud on the American Taxpayer

This morning I was listening to Clark Howard when some Deadbeat called in about his mortgage loan. He currently owes $350,000 on his mortgage but estimates now that his home is only worth $230,000 due to declines in the economy and housing market. So Mr. Deadbeat decided he didn’t want to pay what he originally agreed to and called his Financial Advisor looking for a way out.

The Deadbeat’s Financial Advisor instructed the Deadbeat to stop making his payments. Mind you, the Deadbeat can afford to make his payments, but is choosing not to, trying to game the system to forgive part of his loan balance. Instead of paying the lender for a loan he willingly took, the Deadbeat is putting his payment into a savings account each month, earning interest as his mortgage goes into default.

Why would he do this? Legislation is being batted around Congress that would forgive all but 85% of the current market value for home loans of customers who have found their home value drop. So Mr. Deadbeat with his $350,000 home loan, which he can afford, will get a new loan, guaranteed by the American Taxpayer for $195,500 (85% of the current market value of $230,000) at an FHA rate. That FHA rate will likely be lower than what Mr. Deadbeat originally agreed to pay.

What happens to the rest of his loan balance? He doesn’t have to pay it. The lender will have to write-off the difference… certainly giving them some kind of tax-break but ultimately coming at the expense of their stockholders. They obviously wrote a good loan if Mr. Deadbeat can still afford to make his payments, but they are getting hosed because Mr. Deadbeat on the advice of his Financial Advisor, aided and abetted by Clark Howard, are committing a fraud.

Mr. & Mrs. Taxpayer, welcome to the latest incarnation of welfare, where we are now rewarding able-bodied Americans who have the money, to stop paying their mortgage payments and commit fraud. Their reward for such despicable actions… a new mortgage loan that our tax dollars will guarantee. And if something happens and Mr. Deadbeat decides not to pay this debt as well… it will be our tax dollars once again to bail him out or be lost.

….

We bought a TV a year or so ago for $2,000. Financed it at no interest for 24 months. Two generations newer of that same TV is now on sale for $1297. WE STILL OWE MORE THAN THAT. Where is the government to bail me out because the value of my TV is less than I owe?

We bought an SUV about 15 months ago. I can guarantee you its not worth what I still owe on it. But I keep making my payments every month. I took out the loan willingly, bought the vehicle I wanted and promised to pay off that debt. I have a moral duty to live up to that obligation.

What about people who bought stock in auto companies a few years back or internet companies in the late ’90s? Where is their government handout because the value didn’t do what they wanted?

Why do we consider our homes any different? There wasn’t an evil mortgage broker convincing this guy to buy more than he could afford. He knowingly bought a house at the time and one can assume to he thought it worth the purchase price at the time. It was certainly worth the value at the time, and even though its not now, he can still afford it. But instead he’s gaining interest on the mortgage payments every month while the Tax Payer and the Mortgage Lender get hosed.

And guess what. When this turns around, the housing market picks back up, and his home once again is worth $350,000 or more… who do you think gets to pocket all of the equity or sell it for a huge gain? That’s right… Mr. Deadbeat, getting rewarded once again for perpetuating a fraud on the Tax Payer and likely making a hefty profit on YOUR investment into his house.

….

What happened to integrity? What happened to Personal Responsibility? Where has our country gone that it is commonly accepted to quit fulfilling your obligations so you can negotiate a better deal?

It makes me sick. And sadly this is all too common. We’ve known this was happening for a while, but for it to be talked about openly on a nationally syndicated radio program makes me sick. Clark Howard supposedly helps you “avoid getting ripped off.” But people are getting ripped off. The American Tax Payer is getting ripped off… as is the lender and the people who own its stock.

Shame on you Clark Howard. And as for the Financial Advisor… I can only assume he has a securities license through the Federal Government. If he does, we should seriously look into taking it back.

Unless, as a country, we find some personal responsibility again, I’m afraid we are doomed to fail. And the collapse will be much more severe than the current mortgage crisis.