walking away from a mortgage

[feh]

Just venting...

Saw a piece on NBC nightly news yesterday regarding mortgage defaults. They interviewed a guy in Florida who bought his house in '07.

He has the gall to look straight in the camera and say "I'm walking away from this house, even though I can pay the mortgage, because the value of the house has decreased since I bought it." Does he realize he's on national television and is saying "I don't honor my commitments"?

This lack of personal responsibility makes me see red. Having somebody's credit record trashed for 7 years is not enough of a consequence for this kind of behavior.

[jefffou]

Just venting...

Saw a piece on NBC nightly news yesterday regarding mortgage defaults. They interviewed a guy in Florida who bought his house in '07.

He has the gall to look straight in the camera and say "I'm walking away from this house, even though I can pay the mortgage, because the value of the house has decreased since I bought it." Does he realize he's on national television and is saying "I don't honor my commitments"?

This lack of personal responsibility makes me see red. Having somebody's credit record trashed for 7 years is not enough of a consequence for this kind of behavior.

Feh, I understand how you feel.

I heard an interesting viewpoint from someone on the radio the other day. His point goes something like this....."All the moral issues relating to secured debt (home mortgage debt in this case) are within the four margins of that mortgage document."

He further illustrated his point to say that both parties, the borrower and the lender took a risk. Both parties understand the terms. If you continue to make payments, he get to live in and keep the house. If you do not, you get to live somewhere else. There is no committment beyond this month's payment.

Not sure I take that viewpoint, as I probably fall closer to your camp. That's how I was raised. However, it is important to remember that the banks take substantial risks everyday that the borrowers don't necessarily have to help bear.

Just a thought.

Jeff

[wnlbutterfly]

I guess I don't understand at all...even if your house is worth less than your current mortgage, if you can still make payments why walk away? You have to live somewhere, and hopefully within the next 5-10 years you either have enough paid down or the value has gone back up that it isn't an issue.

I can only imagine what this will do to his credit and the ability to buy another home, he might be wishing he had stayed put.

[wincrasher]

I saw that segment. Looked like a nice house in a nice neighborhood.

But Florida is pretty bad right now. I think, in his case, he could recover if he just had patience.

What they don't talk about in the piece, is how short-sighted this is. They act like there is only an upside, i.e. saving by renting a place for 1/2 the price (yeah, right). They never talk about the cost of devestated credit - the higher rates you'll pay - even for your insurance. Or denial of credit cards, auto loans or even getting insurance.

This man will surely regret the decision. Don't feel like he's getting away with something - he's not.

[Cylenchar]

People who do things like this hurt the rest of their neighbors. I've had borrowers who could barely make their mortgage payments try to refinance to get a payment they can afford, who cannot because the foreclosures in the neighborhood have driven the appraised values down so much that the borrowers now owe more than their house is worth.

[disneysteve]

I've said before that I simply can't comprehend this mentality. I don't care how much my house is worth. I'm still going to keep paying the mortgage because I have to.

How come nobody ever complains about their car loan? Buy a new car, drive it off the lot and it is instantly worth 20% less than you paid and if you took out a loan, you are almost certainly upside down. I don't see folks walking away from their car loans.

[kork13]

They act like there is only an upside, i.e. saving by renting a place for 1/2 the price (yeah, right). They never talk about the cost of devestated credit - the higher rates you'll pay - even for your insurance. Or denial of credit cards, auto loans or even getting insurance.

This is the part that kills me -- the fact that news media outlets are putting forward examples like this 1DOt as VICTIMS!! Showing them as doing "the smart thing"! They're putting people like this on a pedestal, only encouraging more people to do it. yet another reason I have an intense distaste for the media.

[bjl584]

I don't see folks walking away from their car loans.

Often people will find that their car walks away from them though, as the repo man often visits in the middle of the night.

[markusk]

I want to present a contarian view.

Is the decision to buy a house a moral decision or a financial decision?

A mortage is a contract between two parties with risks/benfits/consequences clearly spelled out (although most are in "tiny" font).

If someone brought a house at the top of the market at 500K, with no money down, and is now worth 200K, does it make sense for the person to stay even if he/she can continue paying the mortagage? Is the decision to stay or leave a moral or a financial decision? Who took the risk when the house was bought? If you believe in the banking industry, the risk is all yours and not the banks'. The banking industry want you to know that this is a moral decision -- and they will ruin your credit to prove it!

On the otherhand, banks walk away from deals that don't make sense all the time. JPMorgan recently walked away from 5 buildings that bought at the height of the market in San Francisco. It was a finacial decision for them in the best interest of their stock holders.

[disneysteve]

markusk - We bought our house because we wanted to live there. We didn't buy it as an investment or to make a profit. Whether it is worth more, less or the same as we paid for it is irrelevant because it is our home. Whether it is worth more, less or the same as we paid for it has no bearing on us making our monthly mortgage payments. We paid what we felt was a fair price. We borrowed the money we needed to borrow and committed to making the payments for the term of the loan. Walking away is a criminal act IMO and should be treated as such.

[ukgaz]

Interesting conflict of views regarding this subject. I can see reasons for walking away if...

Value had dropped so much AND owner is approaching retirement and is it does not make financial sense to stay put, ie you brought a house for $400K before the market crash and is now worth $150K and by the time you retire you are in or below the level when you brought

[imsospiraleyes]

markusk - We bought our house because we wanted to live there. We didn't buy it as an investment or to make a profit. Whether it is worth more, less or the same as we paid for it is irrelevant because it is our home. Whether it is worth more, less or the same as we paid for it has no bearing on us making our monthly mortgage payments. We paid what we felt was a fair price. We borrowed the money we needed to borrow and committed to making the payments for the term of the loan. Walking away is a criminal act IMO and should be treated as such.

I'm glad that society, as a whole, does not view it as a criminal act. The last thing we need to do is start putting non-violent people into our overcrowded prisons.

[Mantaray14]

The largest foreclosure in RE history just went down with the Tishman Spier (however you spell it) default on Sty-Town and Peter Cooper Village in NYC. I don't see many complaining when corporations and banks themselves walk away strictly as business decisions. I'm usually too cautious to end up in that type of situation, but if I did, I would do what's best for my family in the long term. That may mean staying or leaving depending on many factors. I blame our leaders and the fed for for allowing this to happen more than the little guy. People who get swept up in manias and walk away from debt slavery don't end up with much (except a broken dream maybe). How about the people who made money hand over fist the whole time and are going to move to Singapore after they finish deep sixing the American economy completely (think Hank Paulson). The anger should be directed where it belongs.

[disneysteve]

Interesting conflict of views regarding this subject. I can see reasons for walking away if...

Value had dropped so much AND owner is approaching retirement

Someone nearing retirement shouldn't be buying a home with a mortgage. If you own the home outright, there would be no reason to walk away.

[disneysteve]

I'm glad that society, as a whole, does not view it as a criminal act. The last thing we need to do is start putting non-violent people into our overcrowded prisons.

Not all crimes are punished with jail time. There can be fines. Wages can be garnished. Something could be done to make the deadbeat repay what is owed. Skipping out on a loan that you can afford to repay isn't okay no matter how people try to justify it.