When to walk away?

[brig2221]

Possibly because you comitted to doing it? I don't think there was any clause in your mortgage that said "Only if it's convenient for me and I feel like doing it." Oh, but right. You don't care about the "moral side". Ick.

The way you're putting out there, you're not considering walking away as the absolute last resort or because you have no choice. You're doing it because you feel entitled to profit on a house and are OK with letting other people pay for your financial comfort. That's just disgusting.

I highly suggest someone get off their high horse. There are many things in this world that are disgusting, this gentleman's situation is not one of them.

I understand the moral implications of this, but to me, it comes down to one thing in times like this, taking care of my family.

If we take the OP at this word, he bought a home he could afford and pay for. Through no actions of his own, employment in Michigan has gone down the tubes, and because of predatory lending and a utter complete lack of bank underwriting, now finds himself surrounded by foreclosed homes, and faces having to move, only he cannot sell or rent the home for anything near what he owes.

So he has two options:

A) He can gut it out, most likely lose all current financial security they have worked hard for to obtain, only to turn the house back over to the bank in the end anyway (most likely).

or

B) Send in the keys to the bank, take whatever penalties that come their way due to a foreclosure on their credit, but also put his family in the best position possible to survive.

I think all parties can agree that all things being equal, the OP wants to do the right thing. The question is, do you do the right thing and throw away any and all current financial security you have, or do you see the writing on the wall, and walk away now.

I think the moral implications on this matter are FAR much less Black and White than many of you to believe they are. As I have matured through the years, I have realized that all issues are not as black and white as we would have them be, and that you should always try to walk a mile in another mans shoes as it were before you pass judgment on them.

Me personally, I would be wrestling with the very same thoughts as the OP. On one hand, I did buy responsibly, and can afford my current house payment, and I certainly do not want to go into foreclosure. On the other hand, I can see the writing on the wall, that is, foreclosed homes everywhere, without much of a chance of selling my home at all, possibly losing everything I have worked so hard for in the process.

Who knows where the economy is going. Maybe we start to turn around in a year, maybe we limp along like we are for another couple years. With that kind of uncertainty, and a family to support, I might very well find myself in the position of turning in those keys for the well being of MY FAMILY, and for anyone in here to pass summary judgment on someone in this situation is just naive, or has never found themselves in a similar position. Just my opinion of course, I could be wrong.....

[Saving in So Cal]

To the extent you are trying to find out more about the legal consequences of walking away, the best person to give you those answers is a Michigan real estate lawyer. One important thing you will want to know is, if you allow the lender to foreclose on your home, will you be liable for the difference between what the home brings at foreclosure and the loan amount? This will depend both on your state's laws and the type of loan that you have. If you are liable, the lender can sue you, get a judgment, and then engage in whatever debt collection options are available to it, including possibly garnishing your wages.

You will also want to consult a tax accountant to learn about the income tax consequences of the various options. My recollection is that the IRS considers the difference between what the home brings at foreclosure and what you owe to be "forgiveness of debt income" that is fully taxable. I believe the same is true if you do a deed in lieu of foreclosure. This can be a significant financial hit.

In terms of credit consequences, the foreclosure will stay on your record for several years (I think 7). You will instantly become a subprime borrower and could possibly stay that way for the entire time the foreclosure is on your record. If you need credit during this time, it will cost you a lot more as you will be offered far less favorable terms than you can get now.

In terms of job consequences, some employers are permitted to consider a person's credit history in determining whether to employ or retain the person as an employee. If you expect to be looking for work in the near future and your field involves money handling/management or requires a security clearance, you can count on having to explain the foreclosure and perhaps being disqualified because of it.

I am sure there are many other consequences to consider. These are the ones that come immediately to my mind. Hope it helps!

[Gjowers]

I think the moral implications on this matter are FAR much less Black and White than many of you to believe they are. As I have matured through the years, I have realized that all issues are not as black and white as we would have them be, and that you should always try to walk a mile in another mans shoes as it were before you pass judgment on them.

I agree completely.

You guys want to talk about moral obligations, did you happen to see Mitt Romney on the Sunday morning talk shows last weekend? He's advocating that "legacy costs" must be reduced in order for the industry to compete and survive. Do you know what that means? That means by either act of congress, or more likely a bankruptcy judge the payments made to the PENSIONS and healthcare of retired autoworkers will be slashed. That means those folks who paid into the system for their entire career with the reasonable expectation of getting the pension and healthcare promised to them are going to get reamed. That is utterly immoral. But there is precedent, United Airlines did it in 2005 - the largest pension default in American history.

[Goldy1]

AS far as long commutes, they suck. I hava worked anywhere from 10 to 45 mins from home. I don't get paid a lot so I wouldn't commute over 45 min, but I have never had to, and rather liked the jobs overall. It's all relative to pay. When I factored in "punching out an hour for lunch) which meant I was at work 9 hours including lunch for an 8 hour day and about 1.5 hours drive, it made for a long day.

I would hate to be a sales rep driving all over, but I know they can be successful.

[pearlieq]

I highly suggest someone get off their high horse. There are many things in this world that are disgusting, this gentleman's situation is not one of them.

Thank you for your kind suggestion. My interpretation of what the OP was saying was evidently not the same as yours. Neither one is more or less valid than the other.

Say whatever you want to say regarding the OP, but please leave me out of it.

[brig2221]

Thank you for your kind suggestion. My interpretation of what the OP was saying was evidently not the same as yours. Neither one is more or less valid than the other.

Say whatever you want to say regarding the OP, but please leave me out of it.

We can obviously agree to disagree on the the interpretation of what the OP was saying, no harm there at all.

That said, you made a post that I disagreed with on a public forum discussion group. If you want to be left out of the discussion, then why would you post in the discussion? Your request just seemed odd to me, that's all.

[b4freedom]

WALK AWAY. Call the bank and tell them you are walking away. Ask them on the phone where you can send a certified follow up letter. Live a cash life style for the next few years. When bankruptcy laws are favorable you can consider declaring bankruptcy when you need to. Right now they are not favorable.

Ignore the people spouting morality. This is not a moral issue. This is a survival issue. Walk away while you can, it’s only going to get worse. You do what you have to do to survive.

If I lived in SoCal or Detroit and paid $350k with little down on a house that is now only worth $150k and the chance of losing my job was high, I’d be the first one to walk. It’s going to take AT LEAST a decade for prices to recover.

[KatieNK]

ITA w/ the above poster.

[Inkstain82]

I haven't walked away from any debts, but I wouldn't feel bad if I ever decided it was in my best interest.

It's not immoral if they are charging me for the possibility that I might do it, which they are.

[cptacek]

It's not that we don't care to pay the lender back, cause we do. But all those who got fooled by the banks and all the banks who fooled people are effecting me, the responsible home owner. Why should we continue to get hammered the next few years, only to come out even, when we can cut losses now, and come out ahead? Why care about the lender's position when the lenders didn't care about putting people in poor positions in the first place. Especially since both parties are now screwing us.

This is not a survival issue. Don't try to paint it as one.

[pearlieq]

This is not a survival issue. Don't try to paint it as one.

Thank you!

That is exactly the point people keep missing here. This person is not desperate, they just feel entitled to make money on their house.

[b4freedom]

This is not a survival issue. Don't try to paint it as one.

This is a survival issue. This is a survival issue for all of America. You are witnessing the end of an Era. Perhaps even a soviet style collapse of the USA. We have entered a depression style deflationary tailspin that the fed is desperate to stop. The Fed rate at 0% to 0.25% will result in one of two things: It won’t work and the deflationary tailspin will continue. It will work and we will live with hyperinflation similar to what you are witnessing in Iceland. (The dollar has been collapsing against the Euro in the last two weeks.)

Most Americans are unaware of how large the bailout has really become. $700 billion is discussed with disgust and content. But the fact is that the bailout pledges have exceeded $7.7 Trillion as of Nov 24th (source: Bloomberg.com: News). The FED is refusing to disclose $2 Trillion already spent (source: Bloomberg.com: News). Another 3 is already being planned (source: Bloomberg.com: News).

There are two more waves for real estate collapse coming. The next wave is commercial real estate. This wave will start after Christmas when large numbers of stores start closing. The next residential wave is expected in 2010 when 50% of Alt-A and Option ARM loans reset (http://georgewashington2.blogspot.co...above-50.html).

[Inkstain82]

Oh look, someone who subscribes to a libertarian economic view is using an economic downturn and a normal fluctuation in the dollar to predict the End of The American Economy.

Sorry if I'm not buying it, I've only seen the exact same reaction/prediction every year I've been old enough to care about economics.

[Gjowers]

^ nicely put.

[cptacek]

This is a survival issue. This is a survival issue for all of America.

Well, if helpme111 walks away from his/her house and saves America, then go for it. Otherwise, it is a cop out.