People who pay aren’t the problem

To the editor:

I am disappointed in the message you sent in Monday's editorial, "Paid your mortgage? Sucker."

I fully understand and even concur with much of your anger over the "reward for bad behavior" that seems to exist as lenders start dealing with delinquent loans, making concessions to eliminate the prospect of foreclosure. It is only natural as part of any problem resolution process that the first order of business is to deal with ... the problems. After all, in the present case, the loans that are current are not the problem. What's to be dealt with there?

I have been in banking for more than 40 years and a homeowner most of those years, and that makes me pretty much a dinosaur, but for decades through a number of incentives such as the FHA program and mortgage deductions for federal income tax purposes, it has been the policy of government to promote home ownership. Indeed it worked -- we've had the highest standard of living of any country in the world thanks to home ownership.

People bought houses to be homes, not to be investments, and as the real estate bubble burst we just kept paying because it was our home and our obligation, and no one ever contemplated walking away from from their promise to pay. Eventually, the market righted itself and we recovered our invested funds. And we sold our house and moved on, or up, and were thrilled with a profit of 2 to 3 percent a year. Of course, it was "funny money," because the new house we bought cost more, too.

You have in the past written editorials that addressed so many people who have all too often become unaccountable for their actions. But you seem to take an entirely different view by referring to anyone who has paid their mortgage as being a "sucker" and even suggesting that to their entitlement, they should stop paying as well. If you buy a new car, finance it and drive it off the lot, it's now worth less than the loan. If I follow your line of thought, I guess they should walk from that obligation as well.

People will always do what they believe is in their own best interests, and that included some very unworthy people buying houses and some others doing cash-out refinance after cash-out refinance and then spending the money on who knows what all. Lenders will do what is in their best interest as well, and that may include a concession in loan terms to avoid foreclosure and incur an even bigger loss.

A word of caution: If borrowers with jobs, assets and good credit choose not to pay, they may well find that the lender will not only foreclose but then move against them for any deficiency balance that results after the house is sold. They may well lose a lot more than their credit rating.

I would ask that you consider three things:

First, many of those who rode this rocket driven by the opportunity to simply take advantage of an ill-conceived market will pay through foreclosure and personal bankruptcy. Second, don't paint everyone with the same brush. There are going to be some success stories involving people who saw this opportunity, knew it would never ever come to them again and grabbed it. They would like nothing more than to fulfill their dream of home ownership, and they are willing to continue to pay if they just get a break. They won't walk because their house is not worth what they paid. Those people should be admired. And lastly, don't suggest to people who possess a sense of responsibility that now the American way is to stop paying on a mortgage just because the market moved against them.

Tell them instead that they get to keep their homes -- and their pride.

William E. Martin

LAS VEGAS

THE WRITER IS VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF SERVICE1ST BANK OF NEVADA.