What Happened to the "Stop Paying Your Mortgage" Meme?

Fed up with the homeowner bailout?

You can actually do something about it.  And I don’t mean write your congressman or buy a bumper sticker.

You can stop paying your own mortgage, free of fear that you’ll be kicked out of your home, provided you play it right.

And that’s not me making the suggestion.  In fact, it was all over the place just last fall.

You say you missed it?  You find the suggestion morally offensive?  Just hang with me a bit.

In October Peter Schiff wrote an op-ed for the San Diego Union-Tribune titled, simply enough, “Stop Paying Your Mortgage.”

After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away. Why pay your mortgage if foreclosure is off the table, and if you know that lower payments, and possibly a reduced loan amount, would result? A tarnished a credit rating is a small price to pay for such a benefit…

If your mortgage does become the property of Uncle Sam, the growingly popular impulse to “just walk away” should be replaced by “just stay and stop paying.” No one will throw you out. After a few months, or years, of living payment free, you will get a call from a motivated government agent eager to adjust your loan into something affordable.

One could argue Schiff was being tongue-in-cheek.  But Karl Denninger, writing the same month, was dead serious, offering an explicit and audacious justification for stiffing your mortgage holder:  If the mortgage holder was benefiting from TARP money, you’re essentially reclaiming some of your own tax dollars.

Since our government continues to pursue the idea that everyone from the imprudent speculator and even the fraudulent buyer who overstated his income, along with the bankers who literally stole billions, can and will be allowed to rip off the public treasury, creating tax burdens forever for ourselves and our children in a futile attempt to prop up home prices along with screwing future buyers by keeping homes unaffordable, I am forced to advocate that you, The Prudent American, do back to the bankers and your neighbor what the bankers and your neighbor did…

I know, its a radical step.  And one more time, you need to consult with both a CPA and attorney before taking any such step – spend the couple hundred bucks to get both in the same room and go over exactly what this entails and what sort of impact it may have on you.

But it would appear to me, at this time, that this is the only way you can recover at least some of the tax burden that you have been thus far and will be in the future assessed for our government’s idiocy and pernicious theft of taxpayer dollars.

By the following month, November, the suggestion had gone mainstream.  “Should you keep paying your mortgage?” asked Kathleen Pender, the San Francisco Chronicle‘s personal finance columnist.  “If you have significant equity in your home, absolutely.  If you don’t, it’s getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.”

Pender went on to quote Schiff and to outline precise, practical steps a homeowner could take.

Now again, all of this was last October and November.  So here’s my question:  Now that the Obama administration has rolled out a $275-billion “homeowner rescue” plan, why aren’t we hearing more about this?

What Schiff and Pender and Denninger laid out is a concrete plan of action in which you can reclaim what’s rightfully yours.

But we don’t hear any of that now.  All we hear instead is what might be called “resentment rhetoric.”  A long, dragged-out whine, and a misdirected one at that — targeting not the banksters, but solely the irresponsible homeowners.

Typical of this is the Tennessee Republican Party, which has begun selling bumper stickers saying “Honk if you’re paying my mortgage.”  4000 have been sold in five days, at $5 each, or three for $12.

This is the source of my frustration with Rick Santelli’s infamous “rant.”  It really doesn’t matter whether he nailed it last fall on the insolvency of the banks.  In popping off about the homeowner bailout, without taking the banksters to task at the same moment, he took his eye off the ball.  Especially because the plan doesn’t even help the people it claims to help — because it won’t enable them to build equity in their homes.  Indeed, they’ll likely end up further in hock to their lenders.

Imagine if someone could harness the frustration of these underwater “homeowners” (glorified renters, really) with the frustration of the people who’ve managed to keep up with their payments… and directed all that outrage toward the banks and the Federal Reserve that created the whole mess.

Instead they’re divided along red state-blue state lines — resentful right-wingers fed up with “deadbeat” homeowners who only followed the advice of esteemed leaders like Alan Greenspan and can’t understand why they’ve become an object of such vitriol.  Just look at the comments thread in the Wall Street Journal blogpost about the bumper stickers to see what I mean.

If I were more conspiracy-minded, I’d think it was all a bankster plot.  Divide and conquer.

It’s a sorry state of affairs in this country when they don’t even have to resort to such efforts.

On another matter: The Fed just told Bloomberg to go jump in the lake.  Bloomberg sued the Fed under the Freedom of Information Act to find out just what sort of toxic “assets” it was taking onto its books, and from whom.  The Fed’s rationale is fascinating — that the New York Fed, where most of the relevant documents sit, is not subject to FOIA requirements.  Is that because it’s not really a government entity?  The mind reels.

The Treasury can’t make that argument.  It’s under court order to comply with a similar FOIA filing by Fox Business.  The deadline is March 23.  We shall see.