EDITORIAL: Paid your mortgage? Sucker
Federal help creates a perverse incentive
Las Vegas Review Journal Editorial

You bought a house you could afford. You obtained a loan that allowed you to live within your means and build some savings. You have paid your mortgage on time every month, year after year.

You, as a matter of federal policy, are a sucker.

For nearly two years, politicians have tripped over one another to reward the incompetence and blind greed that sent home prices and the rest of the economy tumbling. Lawmakers have declared that poorly run financial institutions are too important to fail, and that folks who put no money down on homes priced well beyond their budgets must be saved from foreclosure.

Not only are your tax dollars bailing out the bankers who issued high-risk loans, now they're helping your upside-down neighbor refinance a mortgage he hasn't paid in four months -- at no charge, at terms better than yours.

One can only take so much punishment for handling household finances responsibly. So it is no coincidence that Congress, which seeks to manipulate individual behaviors and the market as a whole with every bloated bill that blows through its chambers, is encouraging honest homeowners to abandon their integrity and get in the handout line with everyone else.

"It's a problem," Mark Zandi, chief economist and co-founder of Moody's economy.com told USA Today. "A lot of the (mortgage assistance) programs require you to be at some stage of delinquency. So homeowners say, 'What about me?' and they get delinquent in order to get help."

They actually had to pay closing costs and "points" toward reduced interest rates when they refinanced their homes. They hear the anecdotes about scofflaws who stop making their house payments, pay off consumer debt and pad their checking accounts, then get the lender to renegotiate terms. Others simply buy a foreclosed house down the street at a lower price, then dump their previous home on their first lender.

"We speak with homeowners every day that have few qualms about walking away from their mortgage or missing payments as a way to get in on loan modifications and low house prices," said Jeremy Brandt, chief executive officer of 1-800-CashOffer, a company that buys homes.

"The attitude is starting to move toward, 'How can the government help me?' Chad Olivier, a Louisiana financial planner, told USA Today. "We are seeing it on Wall Street, and now we are seeing it with the public."

The decision to stop paying a mortgage is not without consequence or risk. Delinquency can destroy a homeowner's credit rating, making future borrowing or conventional refinancing impossible. And lenders look hard at a borrower's assets before determining eligibility for federal assistance. Someone with savings or retirement investment accounts that could have been tapped to pay a mortgage on time might be denied aid -- and lose the house to boot.

No, only the truly overextended can get taxpayer-funded relief on their debt. So the guy down the street who used his credit card to buy two new cars and a boat and three flat-panel TVs before the adjustable mortgage rate doubled on his 3,500-square-foot house is guaranteed a spot in line before you.

Let's call federal mortgage assistance what it is in many cases: more welfare for the irresponsible.

No one has firm numbers on how many seething homeowners are deliberately withholding mortgage payments. But we know it's happening. And the corrosive effect of such a rebellion is sickening.

If the federal government continues to give citizens more incentives to abandon self-reliance and feed at the tax trough, the country's collective sense of entitlement will only get worse. We will become a nation of dependents.

Congress seems determined to remain on such a course. If lawmakers insist on such insanity, they must find a way to reward homeowners who've played by the rules and met their obligations, either through tax credits or increased deductions. And mortgage delinquents who receive taxpayer subsidies must be made to repay at least a portion of their benefits upon the sale of their homes.

Accountable homeowners won't stand for being made suckers again.