Growing up, my parents always taught me lessons. They said to do the right
thing, even when it's hard, to play by the rules, to work hard. They told me to stay in school. When I got older, they told me to pay my bills on time and cautioned against living beyond my means. They told me think about my future, and to save for my retirement. They told me to put money in an emergency fund so I could cover three to six months of expenses. These lessons are probably the same ones you, and most other parents, teach their children. I listened, and now I am fairly successful, with a good job and a good education.
I also own my house. A house I bought the "right way." I saved for my house. I put 20% down on my house, because my parents told me I should buy a house that I could afford to put 20% down on. I furnished it with TVs and couches and beds and chairs that I was able to pay cash for. I got a 30 year fixed mortgage with payments I could afford on my salary. It's a house I love. I bought this house as a single person in 2006 and it is small and tiny and perfect for a single person like me. However, it is also a house that is identical to my next door neighbor's, and his house is currently for sale for less than half what I paid for mine.
He is being forced to sell due to job layoff and divorce, both common in this economy. I will miss him if his house sells, or if he is foreclosed upon. But on my side of the property line lies another problem.
Historically, in a normal, stable market, home prices are expected to double every 10 years. So, if I do the "right thing," and assuming we actually are at the bottom of the market, I am looking at another 10 years before I can recoup the $40,000+ dollars I put down on my house when I purchased it. I never intended to live here for 13 years. Three, five, maybe seven years tops, but never 13!
I want to do the right thing. I am a complete "Rule Follower." But what really bothers me is that there are people out there that bought more home than they could afford, and the government and the banks are helping them. They put down NO money, and the government and the banks are helping them. I bought a home that I COULD afford, so I get NO HELP. No one will even talk to me until I'm late on my payments, and since, in my eyes, I promised the bank to make my payments, I can't, in all good faith, just stop making them. I can't even refinance my mortgage at current interest rates, since have so much negative equity, that I would have to pay Property Mortgage Insurance, and that would increase my payment to where it currently is.
I could just liquidate my savings, put 20% down on another house -- heck, maybe even my neighbors -- allow my current home to be foreclosed upon, and just trash my credit for the next seven years. Many people are doing that. But I can't do that to my credit. Or to my current code of ethics. And I like the house I'm in A LOT.
So here's a solution I came up with, to help people like me, who want to stay in the home they can afford, but don't want to be forced to potentially short sale the house in 5 or 7 years from now. In my current mortgage payment, about 15% of the payment goes towards the principal. The other 85% towards the interest. Of course, this ratio changes ever so slightly each month, with another dollar or two going towards the principal as each month passes.
Why not force the banks to reverse this? Why not let those of us who bought at the top of the market, but yet don't want to or have to lose our home, have MORE of our monthly payment go towards the principal? If I ended up here for the full 30 years of my loan, the bank would get the same amount of interest from me. But, if I could have 85% of my monthly payment going towards my principal, I would pay down my loan faster, and have a chance of selling my home and getting my initial investment back sooner. And, the bank would still get the amount they loaned back from me, with
interest.
I do not want to be forced to trash my credit, and my neighborhood's property values, by being "another" foreclosure. But, Mr. President, I don't want to live here for another ten years. As a "Rule Follower," I feel like I'm in a prison. A prison that's nice, and I can come and go from, but yet I can never really leave. Unless of course, I break the rules. Is this what we want the current generation of children to learn? That those that play by the rules, lose, and those that break the rules, win?
Sincerely,
Kim Heisel
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