18 Mar
Mortgage debt

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A report by Transunion reported results of a study revealing that the amount of people current on their credit cards, but delinquent on their mortgages had increased 6.6% in the third quarter of 2009.  One conclusion, drawn from the data (by another company) is that “People might be willing to lose their homes than face loss to access to credit.”

Is there a lot of truth to that? Well, consider this excerpt in answer to that question from Mr. Dave Ramsey ( that addresses a realistic reason this is not the case for the majority in this situation:

“Our firm has counselors all across America that meet with people every single day and I will promise you that almost no thought went into this [paying credit cards over mortgages] and they certainly didn’t sit down and develop some perverse theory that they needed their credit cards more than they need their house, and that credit was more valuable than the house.

They did not do that, no, they are “freaked-out”, “overwhelmed”, “not thinking”, “stress-induced”, “making stupid decisions” that’s who they are.  I know, I’ve been one of them and I’ve counseled them for twenty years.

So, this isn’t some sophisticated analysis by a consumer saying, ‘I need a credit card more than I need a house; I might have to lean on that if I’m unemployed.’…

This is a deer in the headlights; they’re not thinking.  ‘I’m going to stand here and get run over’ is what they’re thinking, because they’re not thinking, they’re paralyzed.

…And so that’s not why people are current on their credit cards and behind on their house.  You know why they’re behind on their house?  I can tell you, two reasons:

Number 1:  The house payment’s a big payment, the credit card’s a little payment and they feel like they’re doing something by paying the credit card and then they don’t save enough in the budget to knock the house payment out.  They’d rather pay three little bills than one big bill because it feels good.  Real simple.

The second reason is that the mortgage company will not call you from their collections department and threaten you, and scream at you and call your mother names until you’ve been late about 3-6 months (you won’t even get a phone call).  The credit card industry will call you if they heard a rumor you were thinking about being late.  Credit pressure, collections pressure is instantaneous, thorough, and overwhelming from the credit card industry and almost non-existent from the mortgage industry.  And so, these freaked-out people oil the squeaky wheel.  That’s why they’re current on their credit cards and behind on their house.”

Mr. Ramsey concluded that the overall analysis (of the unnamed company) was inaccurate.

However, we wanted you to see that debt does affect our reasoning and does generate fear of the unknown.  It can cause us to make illogical decisions in the attempt to find our way to debt-freedom.  The “pressure” of debt initiates many “false” reactions.

When at all possible, think things out before making decisions.  When that “overwhelming” feeling hits you, stop and breathe.  Think like you would if you were not under the stress of debt (from a debt-free perspective).

You are not alone out there.  Keep making strides toward being free (take on additional work, keep your priorities in order, stop spending what you don’t have on what you don’t need, and BUDGET so that you can see where your money is going to go, not where it went).

The program containing this information (in its context) was broadcast February 4, 2010, by The Dave Ramsey Show radio program, so it may not be available.  If you would like to hear this story in full, please let us know and we will see how we might be able to make it available to you (with their permission).



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