Press release of the week: ‘Take out a mortgage even if you don’t need one!’

As Wall Street and mortgage lenders try to wash their hands of an economic meltdown spurred directly by predatory and imprudent lending, they’re also trying to persuade leery and cash-strapped Americans that mega loans and debt is a good thing. An American thing, if you will. Like after 9/11, when Bush tried to turn spending into an act of patriotism in the midst of fear, the mortgage industry is using panic as a reason to blow through loans and incur more debt.

A press release this week from the CMPS Institute, an organization responsible for training and certifying mortgage bankers and brokers, reveals the lengths the industry’s heavyweights will go to in order to get a sale and keep Americans in debt, even after it’s common knowledge that years of reckless practices brought us here today.

Titled “Hurricane Wall Street: Four Steps Consumers Can Take to Protect Themselves,” the press release seems innocuous enough. It’s help for consumers, right? Wrong. In fact, there were “steps” here that were so rich (and so priceless) we couldn’t pass up shedding light on them.

The CMPS suggests: #3 – Max Out Your Home Equity Line of Credit Before Your Lender Cuts Off the Limit
“Lenders have been arbitrarily reducing credit limits on home equity lines of credit,” said Gibran Nicholas, Chairman of the CMPS Institute. “If you still have credit available on your home equity line, it could be very beneficial for you to draw out the money now before the lender reduces your limit. In this environment, it’s probably a safer bet to have the cash sitting in your FDIC-insured bank account in case you lose your job or in case you need the funds for any other reason.”

In other words, who cares if home prices nationwide have dropped nearly 16 percent since June of 2006? Take out all of that equity in your home now, because in a few years your home could be worth 30 percent less, according to some analysts, and when you go to sell it, your equity will be all eaten away and you might have to unload it in a short-sale. So use the cash now, pay the interest rates on the home-equity line–which is likely higher than your mortgage rate–and worry that you’re tens of thousands in the whole later!

#4 – Stop Making Extra Mortgage Payments and Take Out a Mortgage Even If You Don’t Need One
“Cash is king in a liquidity crunch,” said Nicholas. “The worst thing you can do in this environment is dump more of your cash into your home equity because you may not be able to get access to it if you run into financial difficulties, if the housing market continues to decline, or if the credit crunch gets worse.  Although it sounds counter-intuitive, you should have as big a mortgage as possible – even if you don’t need it – and leave as much cash as possible in a safe, liquid place that is readily available to you. This empowers you to weather the storm and also have your funds available to take advantage of bargain opportunities that are becoming available because others have not followed this advice. In this environment, the one with the most cash wins.”

Yes, the one with the “most cash” wins. And the one with the second mortgage on their house and a bunch of cash available for spending–but with increased debt, interest on that debt, and a home value that’s less than the debt owed–also wins the opportunity of a lifetime! A lifetime to pay, that is.

Let’s just recap here: The organization responsible for certifying mortgage brokers is issuing a press release masquerading as consumer aid that encourages Americans to take out more loans, increase debt, and spend on credit. And we should do this because of the credit crisis, they say. Still, pundits and free-market fundamentalists say the mortgage industry and Wall Street aren’t to blame for this mess despite proof and continued spin-fast marketing. If they’re so unimpeachable, perhaps the the CMPS is willing to bet the farm on it. They might go into debt forever, but at least they’d have cash for a few months. Now that’s American.