Across the country, homeowners are being advised to forgo their mortgage payments in order to make their situation seem more dire and help them renegotiate a lower interest rate.

Now I don’t fault homeowners for this, they are just trying to improve their situation, and many of them are hurting. They’re just playing the game.

However, Channel 4 KNBC in Los Angles ran a story tonight (see video below) about how commercial property owners are intentionally not paying their mortgages so they can get better interest rates (or pocket revenue and let it foreclose). They interviewed an older lady, who was a tenant of a building owner that was utilizing such a tactic. However, she was notified via mail to quit paying her rent because the building is going into foreclosure. Consequently, she is getting evicted and her credit taking a huge hit too.

As a recipient of a product (housing), the lady should pay regardless if it is being foreclosed or not (although I’ve read that a recent law makes renting defaulted properties illegal). It is a very confusing and inconvenient situation though.

So what’s the deal?

Well, it’s simply a negative byproduct facilitated by the Federal Reserve System, a cartel which sets interest rates artificially low. Throw in some scammy, unfair property taxes, loose credit standards, Fannie & Freddie Gone Wild (feat. Barney Frank - yuck!), a Community Reinvestment Act, absurd bail-outs … and this is what you get.

Just another ineffective and shady government system to game.