Why It Pays for Mortgage 'Ants'
To Help Mortgage 'Grasshoppers'

Question: As we hear more and more about the benefits being given to those in a mortgage crisis, it's increasingly frustrating to those of us who are paying our mortgage on time and in full each month. If someone who can't pay in full or at all is going to get a lower rate, or reduced premium, why shouldn't I have the same benefit? 

-- Kasha Brackett, Worthington, Ohio

Kasha: Your question brings in mind two classic tales: Aesop 's fable of the ant and the grasshopper, where the ant works hard all summer gathering food for winter, while the grasshopper sits by and does nothing, and the Bible's parable of the prodigal son, where the older son stays faithfully by his father's side while the younger one goes off to foreign lands to carelessly spend his father's money. In both, hard-working protagonists watch in increasing frustration as more irresponsible characters enjoy themselves. It's only natural that their resentment grows.

But just as there are eventual negative consequences for both the grasshopper and the prodigal son, there are downsides for people who can't, don't or won't pay their mortgages.

If borrowers default and go into foreclosure, their credit is adversely affected for seven years -- during which time they may have trouble getting loans for cars, college tuition and other necessities, or have to pay much higher interest rates than the "ants." Job prospects may be hurt, too, since potential employers sometimes check candidates' credit histories to see if they're reliable about paying their bills.

If they work things out with their lenders and get a suspension of payments or a lower interest rate, the benefit is only temporary -- eventually, they'll have to make up the difference by paying more each month or paying for a longer period of time.  "Ultimately, you have to become current on your loan," says Brad German, a spokesman for Freddie Mac, which buys loans from lenders, packages them, and resells them on the secondary mortgage market.

What's more, though there's a lot of talk among politicians about helping people caught up in the lending crisis, help isn't automatically given. To get a break, you must be able to prove to your lender that you can't pay because of illness, job loss, or other unavoidable hardship.

Still, the troubles of those who got in over their heads during the housing boom, whether knowingly or unknowingly, do directly affect those who didn't take the same risks. Because of massive defaults, mortgages are now harder to get and require bigger down payments than they did three years ago.

So why should "ants" do anything at all to help the grasshoppers? Simply because they must. Without responsible ants, neighborhoods across America will become a wasteland of foreclosure signs, home prices will plummet, and the country will sink into depression.

Remember, too, what the father said to the dutiful son who complained that the fatted calf was being killed for his prodigal brother: 'Son, you are always with me, and all that is mine is yours.'" (Luke 15: 31)

In the long run, responsibility is both recognized and rewarded. 

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

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