I ran across an article today that asks whether people who currently pay their mortgages are dumb. My primary answer is: Perhaps, but you should do it anyway, for both moral and practical reasons.

Moral reasons to pay your mortgage

Of course, not everyone has the same moral philosophy, so this argument won't necessarily sway anyone who doesn't already agree with me. That said, if anyone is on the fence, hopefully my argument here will give you the little push you need to fall on the moral side.

Debt is nothing more than money owed to someone else for a good or service received now. Some people think of debt as promised money – it's not. Debt is money that rightfully belongs to the person (or company) making the loan. They hold title to it because it was theirs in the first place.

(I am going to skip over the complication of fractional reserve banking for the time being. Just note that my statement above isn't completely true in all cases when you consider that banks are allowed to generate money out of thin air. But that's an issue for another day.)

Since debt is money that belongs to someone else, when a person stops paying that debt back as agreed, they are stealing. To me, this is a pretty cut-and-dry decision, in my opinion.

I understand that some people offer excuses for why they can't pay debt back, but most of these are attempts to appease their own consciences. Without refuting a specific list of excuses, when it all boils down to it, lenders have a right to the money they've loaned out.

That's not to say it's wrong to seek a change in the conditions of a loan. It is fully within a borrower's rights to renegotiate the terms of a loan at any point, including asking for a reduction in interest rate, principle amount owed, monthly payment amount, length of the loan repayment, and so on.

However, these things should be done directly by the parties involved, or an agreed-upon arbitrator or mediator. They should not be forced upon one or both parties by the government or any other third party. Taking advantage of such third-party or governmental coercion is no different from simply not paying the agreed-upon amount.

Practical reasons to pay your mortgage

According to the article I linked to above, here's what someone can get when they stop paying on their mortgage:

• Reduction of your monthly payment to 38% of your gross income (requires proof of income)
• Reduction of principle if you owe more on your house than it's "worth" (repayable if the house is sold for more than owed)
• Temporary reduction in interest rate (for five years) to as low as 3%
• Extension of the term to 40 years

To be honest, none of these seem like overly great reasons to go delinquent for 90 days or more. About the only way I might consider this is if I owed significantly more than the house was worth (like 30% or more) and had a rate greater than 10%.

Let's also consider the consequences. As far as I can tell, there is no provision in this program to absolve people for their delinquencies. Which means that those 90-day late payments will show up on credit reports for the next seven-to-ten years. This will end up costing more in the long run by making credit harder to get, and the credit that is extended will be at higher rates.

Furthermore, there's no real advantage except immediate liquidity. Rate reductions are temporary (five years), principle reduction has to be repaid when the house is sold or if the house value goes up, and extending the term actually means you will pay more since you're paying interest longer. But even if immediate liquidity is necessary right away, there's also the risk that the "extra" money in the pocket now won't be put to good use, and that the people receiving this help will just end up in greater debt.

Conclusion

Obviously, my statements here are broad-stroke generalizations. I don't presume to know the situations of any particular individual, and I understand that everyone has unique circumstances that they need to work through to determine the best financial action for themselves and their families.

That said, my ultimate conclusion is that, for both moral and practical reasons, people should continue paying their mortgages to the best of their ability.