A county auditor sent the following info to my sister about foreclosure 'help'. First, the old adage, "If it's too good to be true, it probably is," is very wise. When that warning bell rings in your head, stop whatever you are doing and listen to it. Don't do anything until you have thoroughly researched the company or individual you are working with. Second, if it costs you money to proceed, walk away. Programs like ESOP that my office is working with, have been researched and have a proven track that includes the endorsement of the State Treasurer. ESOP does not charge; they work from grants. Please don't spend any of your precious capital on what may very well be a scam! We have several families who have paid to have work done that they could have done for free, or where the scam artist walked away with the money once they had it in hand. Third, know what they are suggesting and what you are signing. Do NOT sign blank forms or let someone else fill out your paperwork. Many a homeowner has signed away their home to a scam artist. Fourth, beware of agents who say they will sell your house quickly. Some of these people work with investors who are going to give you the lowest price they can get away with to get your house. Make sure you work with reputable real estate agents! Fifth, avoid low-interest mortgage loans on the phone or Internet. The caller gains your confidence and then gets vital information such as your Social Security number and bank accounts. The loan is quickly transacted (on the phone or on-line) and you start faxing the documents they need and sending wire transfers to close the deal. Never give out your Social Security number or bank account numbers to anyone on line or over the phone! NEVER a good idea, always a sign of trouble. There is tons of information on line about scams. Please take the time to research this important subject to protect you, your home and your assets.

I used to think morality mattered in situations like this, but I'm not sure if I feel that way anymore. I sold a house to young immigrants from Poland once, and their free-wheeling/creative aggression when it came to questioning financial rules was eye-opening. Afterwards I wondered if it was because they grew up with a less controlled economic system than ours. Capitalism is inherently ruthless at the macro level. Why should it suddenly grow a conscience at the micro level? Smart investing require making smart business decisions. Which path makes the most sense financially for your family, long term? Crunch the numbers, make a decision, and then live with it. Personally, if I were in this situation my first responsibility would be to protect my household's financial strength, no matter what it took.

Berniek is right: Much of the blame here falls upon the shoulders of the politicians (led by then-President Clinton), who forced banks to begin some rather foolish lending practices. Alan Greenspan certainly did his share to push this concept of "everyone can borrow" during his time as Fed chairman. Between creative financing, no money down offers, and other such options, the government has given people plenty of rope with which to hang themselves. We Americans haven't proven ourselves to be particularly strong in the moderation and self-discipline categories over the last 30-40 years. Also, remember the climate that existed in the 90s, when I bought my first house: Spurred on by the soaring housing prices, people were convinced that buying "as much house as you can afford" was a good move. Housing was considered an investment that couldn't fail. Yes, the experts began preaching about "the housing bubble" long before it hit, but the masses couldn't grasp how this sure-thing could ever fall. And there's always been a (faulty) basic belief that "If I couldn't afford it, the bank wouldn't lend it to me." I fully agree with those who say that Real Estate agents will push buyers to their upper limits and beyond, and banks will lend what they can -- it's all about profits for them. Yet, the home owner DOES also bear the brunt of personal responsibility. After all, who cares most about whether I can afford my mortgage -- and still buy groceries and other things I need? Clearly, it's ME! I reap the rewards or punishments of my decisions, so I should do the math and know whether I can comfortably afford a house (or anything else) before I buy it. However, we've sort of left that thinking behind in today's buy-now-pay-later society. We're constantly told that "we deserve" this or that thing. That if we're going to finance it, we deserve to have exactly what we want. That "everyone" has debt. We've got to get past that.

I had a long conversation with my original mortgage broker and he basically said this was a great deal, especially if I'm only going to keep the house another year or two. He feels the LIBOR is going to increase dramatically as soon as the economy strengthens. He said historically the LIBOR moved much faster than the other mortgage indexes, and he felt it had the potential to be much higher by the time my current mortgage was due to reset in 2012. So it seemed better to lock in the 4.357% fixed rate for 5 years rather than risk a higher rate when the loan converted to fully-amortized. In the meantime I'll save $1000/month in interest payments, so this is a good thing as well. I still don't know what my mortgage bank's incentive for doing this is, but at this point I guess it doesn't matter, I'm going for it :-)