5. Building Wealth by Never Paying Off Your Mortgage
CHAPTER
FIVE
Building Wealth by Never Paying Off Your Mortgage
It seems like a crazy idea now, but many financial advisors during the boom told anyone who would listen that they shouldn’t pay off or even pay down their mortgage debt. Not only should everyone own a home, but everyone should have a mortgage and no one should ever pay it off. The conventional wisdom, built up from decades of government support for home ownership was that housing prices could never fall.
6. Social Conscience, Fiduciary Duty and Libertarian Ethics
CHAPTER
SIX
Social Conscience, Fiduciary Duty and Libertarian Ethics
The average Joe and Jane are quick to sign on the dotted line with what they think is the American dream clearly in sight. Meanwhile mortgage originators are only too eager to facilitate the dream, knowing that a secondary market created by the federal government is waiting to buy the paper.
7. The Cost (and Benefits) of Walking Away
CHAPTER
SEVEN
The Cost (and Benefits) of Walking Away
People that walk away from a mortgage aren’t insisting that they should be allowed to stay in the homes that serve as the underlying collateral without making payment. That would be morally objectionable. Ironically, because of the legal chaos created by securitization and the bursting of the housing bubble, delinquent borrowers are able to stay in their homes for extended periods of time (sometimes years) without making payments.
8. Houses vs. Cars
CHAPTER
EIGHT
Houses vs. Cars
It is argued that when one purchases a car on credit, that the buyer is underwater the minute he or she drives the car off the lot. This doesn’t give people the right to walk away from their car loans. Why should a house be any different?
As a rule, car buyers don’t structurally default on car loans. However, if the price of cars fell by half, and a person could buy the same car for half the price and cut their payments in half, there would be plenty of structural defaults on car loans.
9. Psychology of Regret
CHAPTER
NINE
Psychology of Regret
It’s an old bankers’ axiom, “your first loss is your best loss.” Or put another way, don’t follow good money after bad. The same applies to homeowners. As hard as it is emotionally to do, walking away from the down-payment you made going in when you purchased and the monthly payments made were your best loss. Feeding the loss by making payments each month is just spending good money after bad.
10. Conclusion
CHAPTER
TEN
Conclusion
“Economic interventionism is a self-defeating policy,” Ludwig von Mises wrote in Bureaucracy. “The individual measures that it implies do not achieve the results sought. They bring about a state of affairs, which—from the viewpoint of its advocates themselves—is much more undesirable than the previous state they intended to alter.”
Index
A | B | C | D | E
F | G | H | I | J
K | L | M | N | O
P | R | S | T | U
V | W | Z
13 Bankers, 51
60 Minutes, 1
A
Acorn, 33
About the Author
Douglas E. French is president of the Ludwig von Mises Institute. He received his master’s degree under the direction of Murray N. Rothbard at the University of Nevada, Las Vegas, after many years in the business of banking. He is the author of Early Speculative Bubbles (Mises Institute, 2009), the first major empirical study of the relationship between early bubbles and the money supply.
Contact: french@mises.org
Bagels, Barry Bonds, and Rotten Politicians
Bagels, Barry Bonds,and Rotten Politicians
BAGELS, BARRY BONDS,
AND ROTTEN POLITICIANS
