Jack M. Guttentag The Mortgage Professor

Yahoo! Finance User - Friday, June 12, 2009, 10:02PM ET  Report Abuse

• Overall: 4/5

I am the person who sent Mr. Guttentag the email he quotes in the 1st part of this example. To those of you saying I have been irresponsible here's a few more facts. Some of these defend me, others show some just plain bad luck and bad assumptions that I think anyone in our situation would have made. 1) Since graduating college in the mid-1980's I have progressively built my career from making 15K annually to a mid-six figure income prior to being laid off. 2) I had ALWAYS - each year - progressed in my career, never a year without a raise, for close to 25 years now so based on that trend (including the "dot-bomb" years 2000-2001) I never would have dreamed it would take this long to find a new position. Previously my longest time between positions was 5 weeks. 4) We also expected to receive an inheritance from family which caused us to not save as much as we should have - I admit that mistake. That inheritance has evaporated (due to stock market decline) to the point our relatives are scared to help us because they need to keep their assets, and I do not blame them at all. So, when I do get a new position, we have certainly a challenge to restart our retirement since our previous planning is out the window! 5) Due to that same stock market decline the savings of over a years worth of income was cut in half. 6) However, we have always figured that having 6 months to a year of savings for a rainy day was sufficient. Up to now it has been. I will not make myself feel guilty for not anticipating the worst financial meltdown in the country since the Great Depression. But, I now feel if we make it through this - we can make it through anything! Challenges build character! 7) We have children to think of and have tried to not let this layoff and resulting financial issues negatively impact their lives - yet. We have tried to keep things as normal as possible (with obvious cutbacks in any frills) for their sake. This does include making EVERY effort to keep our house that we love and was supposed to be our "forever" house. My wife said the day we moved in, she only wanted to leave "in the hearse when she had passed on". We want to keep it that way. We're going to keep it or go down fighting. 8) For those of you who feel we have been fortunate and had an above average lifestyle, I agree. The Good Lord has blessed us so far. But, also, I have worked hard, sometimes 12 to 16 hour days for what we have accomplished. And I would do it again. No regrets. 9) Life is about making judgement calls, taking calculated risks, and pushing oneself to accomplish the plan God has for in store. "Nothing ventured, nothing gained". 10) Call me irresponsible if you will. I do not regret my choices so far, but I do admit my mistakes, and I learn from them. Lessons from this downturn so far: a) Save more in the future. b) Don't build retirement plans around a theoretical inheritance - no matter how big you think it may be! c) No matter how accomplished you are in your career, "stuff happens" that can be a humbling experience - even when none of it is your fault. Be ready! By the way, the economy may be picking up!! - at least from my view. The phone has started ringing since 6/1 and I have had either phone screens or in person interviews all this week. For those of you who want to help build and not tear people down, we thank you for your thoughts, encouragement, and prayers! I thank Mr. Guttentag for his viewpoint and advice.

Yahoo! Finance User - Friday, June 12, 2009, 5:05PM ET  Report Abuse

• Overall: 2/5

In reference to the first letter, you should have more than a couple of months worth of savings to cover your mortgage in case of a layoff. If not, you should not be in a house with a $4,000 monthly payment. Sounds like a case of "bought more house than you can afford". You should keep your $4k for other expenses and immediately put your house on the market. Sell it for whatever you can get and go rent for a while. You don't deserve to own a home. As for the second letter, you sir (or madam) are nothing but human garbage. People like you who try to scam the system and defraud the rest of us are everything that is wrong with 21st century America. I hope you don't get your loan mod and are forced to burn through every bit of your savings paying your overinflated mortgage that you chose to take out, eventually winding up broke and living in a refrigerator box under a bridge.

Frude Dude! - Friday, June 12, 2009, 2:10PM ET  Report Abuse

• Overall: 4/5

Sheesh! I wish I had three years of finances in the bank. Guess this shows why this system is screwed up. You hear the stories about people being three months behind who cannot get a loan modification, and then you have someone who can survive for three years based on what they have in the bank applying for a loan mod.

Kens - Thursday, June 11, 2009, 11:58AM ET  Report Abuse

• Overall: 1/5

Both of these stories are examples of people who got themselves into a bind by failing to plan ahead. If you can't afford to ride out unemployment for a year DON'T BUY A HOUSE THAT HAS A $4,000 mortage! If you're looking at having a loan restructured YOU DIDN'T READ THE ORIGINAL LOAN TERMS CLOSE ENOUGH! How about a little self accountability?

Yahoo! Finance User - Thursday, June 11, 2009, 10:41AM ET  Report Abuse

• Overall: 1/5

This is bad advice about sufficient assets. At least for Freddie Mac owned loans, they recently changed the guidelines. If you have more than 3 times your monthly mortgage payment in the bank, you DO NOT qualify for a modification under the Obama plan. This is in the Freddie Mac published servicer regulations, which can be found online. Applying for a modification with more than that in the bank is asking for a rejection, and you cannot reapply for 1 year.

Michael - Thursday, June 11, 2009, 8:08AM ET  Report Abuse

• Overall: 1/5

"a borrower is morally obliged to make the payment if there is any possible way to do it." There is no moral obligation to repay. There is a contrual obligation to repay. Governments and Business can't have it both ways...if we are going to talk morality then they are on the hook as well. Breaking a contract seems to be totally acceptable as long as you are the Government or a company or very Rich. But middle class people....NO NO they must behave morally. Such crap! Life is short..do what is best for you and your family!

Yahoo! Finance User - Thursday, June 11, 2009, 3:35AM ET  Report Abuse

• Overall: 3/5

This advice, as far as it goes, is OK..don't use the retirement money. But by the time you are down to one month of living expenses seems way too late for that advice. In my opinion, no one should use retirement money to meet expenses, certainly not expenses beyond mere survival. OK, there would be exceptions if you know a job offer is coming, etc., but in general you should keep your legally protected 401k etc. money for your retirement. You really have to feel bad for the person in this situation...of course you want to keep your house...but if you can't, you can't. Better to cut your loses and move on than hit the wall with nothing in a month. Good luck. God bless you. Hope you can pull it out of the fire. What a horrible situation that so many people are in this fix. Putting the fraudsters that ran the banks, Wall St. junk peddlers, etc. that put us in this mess in jail would do a lot to make people feel there is some justice. Even if it doesn't help the result this time, it would lay a foundation for restraining unregulated cowboy banking and financial collapse in the future.

XX - Thursday, June 11, 2009, 3:22AM ET  Report Abuse

• Overall: 5/5

They really should have considered walking away from the mortgage months ago, and getting a cheaper place by rent. With a $4,000 a month mortgage, and taking it out of an IRA? If it's a Traditional IRA, they'll be paying taxes and early withdrawal penalties. Rent could be cheaper by a couple thousand and they could last longer. And it may have made sense to rent a place while credit was good BEFORE walking away from the mortgage. By drawing down on all reserves until the last month, that made me feel sad. :(

Yahoo! Finance User - Thursday, June 11, 2009, 1:05AM ET  Report Abuse

• Overall: 1/5

"The borrower in question has a family to consider as well." I guess you don't have to consider the family when you take the money, only when you have to pay it back.

Yahoo! Finance User - Wednesday, June 10, 2009, 5:25PM ET  Report Abuse

• Overall: 1/5

In the first example, those people just blew RETIREMENT money on an upside down asset because they are afraid of a ding to some arbitrary FICO score? That must be the reason because even in a recourse state retirement money is protected from judgment. The only advice that should have been given to these people is to use them as an example of what NOT TO DO. You are harming people with your care bear advice and should be ashamed. Greed is dead...PROTECT COMMON PEOPLE FROM BANKSTER SWINDLERS OR GET A NEW CAREER.

fmv805 - Wednesday, June 10, 2009, 4:54PM ET  Report Abuse

• Overall: 2/5

What is not mentioned in this article is that if you owe back payments, the Service company will not grant a modification unless your current income can support the original monthly payment plus additional payments to make up for not paying. So for instance, if your monthly payment is $100, but you haven't payed for three months, in order to get a modified payment, you would need to payback the missed payments in your modified payment. So therefore Service company will state your new payment at $200 for the next 3 months to catch up. The problem here is, if you couldn't afford the original payments, what makes banks think you could afford the increased modified payments. This is ridiculous. No wonder so many people are getting foreclosed, the modification process doesn't make any sense. Where did all that bailout money go if it's not being used to help people in trouble?

HR Dir - Wednesday, June 10, 2009, 4:50PM ET  Report Abuse

• Overall: 5/5

I'm sure that a LOT of people match the description of the letter writer - maybe not having a $4000 mortgage bill (or less like $3000), but imagine the scenario reads $1500 left in the 401K, which is enough to cover one more month... is that more to you liking? The advice is advice for the $500 a month mortgage or $5000 a month mortgage. Look at the BIG picture... Don't get so stuck in the details that you miss the message.

Yahoo! Finance User - Wednesday, June 10, 2009, 4:20PM ET  Report Abuse

• Overall: 3/5

The first writer is fairly well-off relative to most of the country if they have a $4000 mortgage payment. What's frustrating is that they are not financially savvy considering their past income level. I agree with other posters that they should have sold months ago, at auction if necessary. I also agree that there's no reason to feel sorry for the lender, because lenders made awful loans in the last few years. Let this example be a lesson to all potential home buyers for how *not* to finance a home. My guess is their down payment was a measly 0 to 20% of the total, and they counted on making a high salary for the next 30 years without interruption, or worse, to flip the house soon. Retirement savings is way more important than home ownership. And much more profitable. - w

Yahoo! Finance User - Wednesday, June 10, 2009, 4:12PM ET  Report Abuse

• Overall: 1/5

I'll tell you what your problem is bosorog...your problem is you actually read this garbage and expect this donk who knows little to nothing of the mortgage/finance industry to somehow shed light on your issues....you need to learn how to ask intelligent people who actually know what is going on these types of questions, then maybe you won't be left asking this wanna be "expert" on the matter....you already know the name of the program and you still ask this guy to "show you in writing"???!!! cmon man grow a brain, the guidelines are written out clearly and a simple google search will show you...or if you are that incompetent here, http://www.treas.gov/press/releases/reports/modification_program_guidelines.pdf, there it is in writing for you....educate yourself, cause your only other option is deferring to morons and well if you wanna live that way, you might as well pack it in right now and apply for welfare

bosorog - Wednesday, June 10, 2009, 3:19PM ET  Report Abuse

• Overall: 1/5

Jack what are the guide lines that the banks follow when you are appling for a modification., Have they been published anywhere. I know what our President has said, but is this not all smoke. The banks have recieve billions of dollars and passed little or nothing to main street. Are these guide lines as non transparant to the public as they where when they first recieved there bailout money. Show me anything in writting. I have noticed that our goverment has set up programs to help people such as Making Homes Affordable, but when you think about it. Its HUD who controls that, and if i am wrong please correct me, isn't HUD in control of FHA FANNIE MAE and FREDDIE MAC the same insitutions you are trying to modify your loan with. Is this like buttering the bread on both sides. Show show me guide lines that the banks MUST follow and i will be very happy.

Yahoo! Finance User - Wednesday, June 10, 2009, 3:11PM ET  Report Abuse

• Overall: 1/5

Why are you idiots still arguing about Republican vs. Democrat vs. Independent ????? You remind me of the 2-celled Sport's fans yammering about why you love the Yankees vs the Mets. GET A CLUE! They're ALL owned by the same scumbags. Learn to think for yourselves and identify FACTS rather than going for your favorite team. Party affliliation doesn't make a damn bit of difference anymore. They're all crooks beholden to Goldman Sachs or any one of another 100 corporate thieves.

Yahoo! Finance User - Wednesday, June 10, 2009, 2:42PM ET  Report Abuse

• Overall: 1/5

Whoever wrote "All I know is there was eight years for the Republicans to get a plan and get it right. I gave the republicans there chance. The bottom line is Bushes plan good or bad wasn't getting the job done. Lets give the new regime a chance and lay off the writer a little," is a retard. You didn't give the Republicans "there" chance. You may have given them "their" chance, but you don't seem bright enough. Things didn't go to hell until after 2006, when the Democrats regained control of the House. They promised to get us out of Iraqi, but we are still there. They were able to appoint their party members to head up committees, so we would up with the dummy Barney Franks telling us Fannie and Freddie were in good shape when they were not. We also got Nancy Pelosi to obstruct any Republican attempts to object to policies and to railroad through poorly conceived policies, such as TARP, the Fed's slush fund. Bottom Line: Please don't vote because you have no idea what you are talking about.

CB44 - Wednesday, June 10, 2009, 11:50AM ET  Report Abuse

• Overall: 3/5

It's time to sell the house even if it's at a loss...$4,000 this month or next, if you don't make a payment soon you're selling it anyway. Why delay? More important, why did you wait so long? When you are down to less than 2 months expenses and NO income, you have to be realistic and start selling assests. Find a rental apartment. It's not the economy that's hurting people it's the unwillingness to adjust their lifestyles to a new reality.

Yahoo! Finance User - Wednesday, June 10, 2009, 9:59AM ET  Report Abuse

• Overall: 1/5

When the price of oil hits $140 again, all of these deadbeats are going to be in deep shi* again. Bush is still getting rich off of oil, right, morons? Good thing you voted for Obama so the price of gas stays low, right? Wait until he tacks on more taxes to pay for his BS stimulus. Buy gold and buy shares in DXO as the dollar gets inflated to heck.

Hugh - Wednesday, June 10, 2009, 9:49AM ET  Report Abuse

• Overall: 1/5

What world is the first guy living in? If he plans to use his last $4,000 for a mortgage payment, the mortgage must be approximately $500,000 and if the mortgage was 35% of income, then his income would have been about $150,000 per year. He says laid off recently (is that last month or two?) and he only has $4,000 in their IRA? What was he thinking? If he has been contributing to their IRA regularly for more than a couple of years, then he should have over $50,000, saving about 10% per year. Oh, I forgot. This is America where you can have everything you want without considering long term impacts or risks. Even if he gets a job in the next month, when will the next cheque arrive as at that level of income, first cheque won't arrive until about 1 month after you start, He is going to miss a mortgage payment anyhow. If the borrower in question had his family to consider, he should have done it years ago and put some away for this rainy day. Jack, if you're not making up these letters, this is an example of why we're in this housing slump. Too many people wanting and being approved for large mortgages hoping that everything is going to run smoothly. Sh*t happens. Plan for it. No sympathy.

Yahoo! Finance User - Wednesday, June 10, 2009, 9:04AM ET  Report Abuse

• Overall: 2/5

Its all gonna hurt all of us in the long run , this bailout. We will pay for the sins of irresponsible others through our taxes. We will pay for Chryslers CEO's Golden parachute through our taxes. We will pay for those who went over their heads in Credit card and mortgage debt also.

Love2Fly - Wednesday, June 10, 2009, 3:22AM ET  Report Abuse

• Overall: 1/5

What kind of an idiot runs down his/hers IRA down without having done anything before the $4K balance. I have regular savings to last 12months and then anther 15months with my IRA/401K if I were to get layoff. I'll be freaking out at the 6th month when my regular savings are 1/2 the initial balance. I'll be taking any p/t jobs at Wal-Mart and McDonald's for income; I'll be probably renting my house and living in a one bedroom apartment; I'll be eating chicken and pasta every nigth. Fortunately, I'm very good at my job to get layoff and my wife and I save plenty to keep our 27month cushion.

Jed - Wednesday, June 10, 2009, 12:26AM ET  Report Abuse

• Overall: 1/5

Gaah. If you can't pay your mortgage, just walk away. But maybe first, cut up and sell the trees as firewood. Pull up the lawn and sell it as sod. Strip out all the re-cycleable metals for scrap. Sell the appliances. Then, rent the house to illegals for cash up front, and flee to another state. Also, max out your credit cards to buy gold and silver coins. That's the Wall Street Way!

Here's a thought - Tuesday, June 9, 2009, 8:42PM ET  Report Abuse

• Overall: 5/5

Finally some comon sense advice. Walk away people hoard your cash. In the famous words of Hommer Simpson DEFAULT! DEFAULT!

jeff - Tuesday, June 9, 2009, 8:15PM ET  Report Abuse

• Overall: 1/5

THe hell with nonrecourse loans---bring back debtor's prison, for gov idiots too!

Yahoo! Finance User - Tuesday, June 9, 2009, 7:05PM ET  Report Abuse

• Overall: 2/5

All I know is there was eight years for the Republicans to get a plan and get it right. I gave the republicans there chance. The bottom line is Bushes plan good or bad wasn't getting the job done. Lets give the new regime a chance and lay off the writer a little.

Jone - Tuesday, June 9, 2009, 6:57PM ET  Report Abuse

• Overall: 5/5

Excellent advice for people that are in trouble making payments. Inverters take risk by lending money to sub prime borrowers. In return, they charge higher interest. It's a fair trade! It just turns out that the extra interest they charged didn't cover the money they lost in the housing market. Don't waste your saving!

Nate - Tuesday, June 9, 2009, 5:27PM ET  Report Abuse

• Overall: 1/5

Unbelievable. This really does begin to make me lose faith in our country as a whole. These people are clamoring for "change" and complaining about a lack of integrity on Wall Street. Well, where is your integrity when you are asking how to hide money money on an obligation you created. Disgusting.

Yahoo! Finance User - Tuesday, June 9, 2009, 4:54PM ET  Report Abuse

• Overall: 1/5

wow. not a lot of effort in this article. very, very poor.

wgaf - Tuesday, June 9, 2009, 3:45PM ET  Report Abuse

• Overall: 2/5

i won't comment directly much on this blog that looks to have taken 10 mintes to write. I am entertained by folks putting blame of bad mortgages on the Congress of Clinton era. That is like saying that a person driving a car from New York to North Carolina would be rsponsible for someone else driving the car into the ocean in Florida. Sorry, GW and friends got in and "stayed the course" 'cause they were not fit to drive.