Desperate Home Owners Use Plastic...

Some months ago, I wrote a blog entry on how mortgage companies were thinking of offering credit cards with a very small percentage in rewards going toward paying off the mortgage (kind of like an mileage card for an airline). For homeowners who pay off their credit cards monthly (and don't fly), this might make sense. But now, the word is out that some desperate people have taken to using plastic to avoid foreclosure--and they're not paying the cards off. Uh, oh...

Is this better or worse than the people who pay off their credit cards but lose their houses? A general rule of thumb is, do what you can to keep the house and give up on the cards. But using the unpaid cards to pay the mortgage is definitely scary. I suppose it could work if someone is fairly sure that s/he will get a million dollars in 2 months. But what if the lottery gods are frowning then? If the lender okays a lower monthly payment for now to stave off foreclosure, that unpaid credit card has a nasty interest rate. I suppose that if the house is at least saved, one could then sacrifice the card and then try to negotiate with that company later... Of course, after the late payments on the house, one's credit is already shot, so what's an unpaid card? That is, so long as the roof overhead isn't going to get taken away!

The article goes on to mention the fatal holidays fast approaching (at least, the Mission Inn put up its unlit Christmas decorations in September!). Ooh, think home made gifts! They're ... priceless! (That's what we'll be doing a lot of at my house--mostly from our 5-year-old but also quite a few from me. We're also going to make all our own Christmas cards. And hey, I think my clients will like the personal touch!)

Do I have any wise words for people in such desperate straits? Unfortunately, not really, other than that they need to go to debt counseling (real, non-profit counseling and not another con artist), and they need to get into a situation that they can afford right now. And for those who are starting out and thinking of buying a home, I highly recommend that start with what they can afford, and if it's not available, stay with family or rent, and learn how to save--which means not using those cards very much!


Article on Credit Cards and Mortgages