Posted on 09/26/2010 7:41:50 AM PDT by Oldeconomybuyer
Millions of middle-income home- owners are struggling to pay down bloated, underwater mortgages while wealthier Americans are simply mailing in the keys to the mansion and calling it a day.
It's time for average Americans to start seeing their mortgage papers for what they are: records of financial transactions, not moral documents.
In a free-market society, an individual homeowner is not responsible for the strength of the nation's housing market. If anything, walkers may stimulate the economy, by spending a portion of the money they were sending to the banks each month.
Take a look at your finances and decide for yourself whether homeownership makes sense. A better decision for the future of your family may be to rent, pay off your credit cards, and put the savings in a college fund for your children or grandchildren.
Walk away from your house if it will be better for you to rent. And remember, walking away now doesn't mean that homeownership may not work for you later.
(Excerpt) Read more at mercurynews.com ...
The system will break down before you and your family pay for this mess. It’s time to think about what you will do when it does.
“I personally know of a case in Scottsdale, AZ where someone bought an expensive condo as an investment. He took out a mortgage for $600K. The place is now worth around $300K. Rents have also dropped. So how long should someone hang on to such a property that is bleeding them dry each month? If you sell it for $300K, where do you get the other 300K to pay off the mortgage?”
So the rest of us should pay for his financial gamble?
“Take a loan out to pay for whatever you want and walk away from the loan payments.”
Of course there was no responsibility for the underwriters who qualify buyers was there? They were just making loans. Nothing from the banks, they were tossing money to anyone with a warm breath. There was no responsibility for the Fed chairman who provided the easy money policy and said there was no bubble. No responsibility for the rating agencies who made it possible to sell the mortgage backed securities...
During the S&L crisis of the 80’s ~1800 people went to jail. How many have we had this time within the banking industry? I’ll agree with you when we start locking up everyone responsible for this mess...
Many, many people have done this. They have a job, can afford the payments, but the home is worth less than what they bought it for, so they leave. I see it every single day. I think you need to get out in the world of lending, real estate and law, instead of sitting in your mobile home blogging.
What planet are you living on? Both parties signed a contract, which had penalties for failure to live up to the contract conditions.........[snip]
I have no sympathy or sense of obligation to the banks. We both signed a contract. If you don't live up to the contract, you suffer the consequences. Why is that such a difficult concept to comprehend?
I know of many situations where people received a loan from a bank, could pay it back, and choose not to. I have seen it with primary residence, vacation home and people who bought during the boom to flip houses and then got hosed. They got the money from the bank, they used the money and they have the money to pay it back, but they don't want to. If you haven't seen it, well, I can't help it if you don't know what you are talking about.
The truth is the bankruptcy laws do allow some people to act immorally, too. You just have a post-American view on morality, in which nothing is immoral. I once had a client who went through Chapter 11 reorganization, solved his financial problems, and then after he was doing well again, went and paid all his prior creditors the amounts they lost when he went bankrupt. Now THAT is an American sense of morality, the same kind that said, "no I won't take welfare" and "a man's word is his bond". The morality that made this country great, and made people honorable. That is, sadly, going the way of the dodo.
But you are right, in one sense. It is a commercial transaction, and people can choose to breach a contract and suffer the consequences. If he is wrong, he can pay damages, after forcing the other side to file suit and pay a lawyer and all those other things that our system provides for. I make my living on those cases, where someone disputes a debt or just flat out refuses to pay it. Where there is a legitimate dispute, it is not immoral to litigate, even if you are likely to lose. Where there is no dispute, however, it is considered a civil "wrong", for which sanctions can be awarded, to file a general denial to a Plaintiff's complaint for breach of contract. An attorney commits an ethics violation for helping a client delay paying a valid debt in that fashion. The proper response is to admit the complaint, not file an answer denying the allegations. (I actually have a situation like that right now, and I am fully intending to seek sanctions against the opposing party and may report the attorney.)
In the foreclosure setting, the party walking away is in the same moral position as someone who owes on a contract and who has no defense to it. If they choose to breach it, the consequences normally should be that they pay the bank the damages that result. The problem is that the laws, passed by leftists, have skewed the options available to banks so that they cannot recover the money easily from the borrower, and they cannot recover the money from the property, either. Due to federal interference with lending, they were forced to go to these relaxed lending standards and give loans where the bank was not protected by the value of the property or the income of the borrower. If you add to that mix borrowers that think it's ok to intentionally fail to repay a loan they have agreed to pay, even when they can, then you have a formula for the collapse of the US financial system. Which is what we have been having. You also have a situation that damages all the other borrowers out there, the good ones, the ones who honor their obligations because they gave a promise.
I think you are confusing whether it is "immoral" to intentionally breach a contract with whether it is criminal. I am not from the post-Sesame Street era. I was not raised by hippies. I still think it is wrong to give your word on a contract and then not honor it, even when you have the ability to honor it. Call me an antique, but I would bet that FReepers are more like me than like you. Your view is part of the rot.
By the way you are arguing so strenuously, I would guess that you did a walk-away, and are trying to justify it to yourself. True?
Fine with me - nail all of the enablers. I'd like to see them start with Dodd and Frank and every other pandering pol in congress and the senate.
Then they can move on to Bernanke, Paulson and otheres. There are no doubt thousands and thousands who belong in jail.
But still, with the individual it comes down to personal responsibility for our own actions and choices and there seems to be less and less as the years go by.
You got that right.
Amen, bro. The stupid investor bought a property with a 600k mortgage and it’s now worth $300k. He chose the property, he asked for the money, he paid it to the seller. Unless the bank guaranteed the value of the property, the party who should lose $300k is the stupid investor. If the stupid investor has 300k in assets, I would love to help the bank get it from said stupid investor. If the bank loses that $300k on this one loan, we all end up paying for Mr. Stupid Investor.
Ditto, great post.
“but not anywhere near as much as the government.”
There is no doubt that before government intervention in 1977 with the original CRA banks were on a straight road of investment. However, in the early 1990’s, many banks, brokers, and other parties took advantage of the fact that Fannie and Freddie, et al, would take just about any mortgage in a portfolio, so they wrote mortgages for any breathing thing and even a few dead ones.
When we say “banks”, we tend to talk about the big dogs, yet, that isn’t where most of these bad mortgages came from. Places like Wachovia, Countrywide, Washington Mutual, Ameriquest, etc., cropped up to take advantage of the fact that the government wanted to see sub-prime loans.
I think everyone, all of us, are guilty in this situation. We voted in the creeps in congress and let them get away with the CRA and other bad banking laws, lax regulations, lax regulatory oversight, etc. We just stuck our heads into American Idol and said such banking things were just too complicated to understand so we just didn’t want to. We like those 6 seconds sound bites to tell us how to vote. We like thinking there are smarter people than us so let them run the financial institutions of our nation. We like to play dumb. Well, dumb is what happened and dumb hurts.
We liked those cheap loans. We like those no hassle loans. We liked buying anything we could rationalize, no matter the cost. We liked being told that property was an “investment” and “would only go up”. We liked that artificial prosperity. We loved it. We just want to bitch now that the entire system has collapsed and we, too, are caught short.
Congress, banking institutions, borrowers, voters, and anything or anyone remotely connected with mortgages and housing is to blame. How much blame for each isn’t important. We are all to blame. This didn’t happen in secret. It was in our faces, in our lives, every day, and we didn’t lift a finger to question what was happening. I bet, considering the negative consequences we face now, many would go right back to the ways of pre-2008 in a heartbeat.
The sad thing is this isn’t over, not by a long shot, and, yet, many are voting and demanding more things that will hurt us even more. We are just too stupid to live.
No, the rest of us should not pay, just the bank that loaned him the money and him.
Why should the bank pay? They didn’t hold a gun to his head and make him borrow the money that he gambled with!
Everyone wants something for nothing, its an incredibly seductive concept!
Any real stats or just your personal observations? What percentage of the massive record foreclosures fit your description? Regardless, it is a private contract between the bank (lender) and the borrower. So why should I even care what motivates someone to walk away. The terms of the contract cover the consequences.
I think you need to get out in the world of lending, real estate and law, instead of sitting in your mobile home blogging.
I currently own three properties, my home and two rentals. This is my third primary residence. I understand what it means to buy and own property. FYI: I have never lived in or owned a mobile home. Projection?
They got the money from the bank, they used the money and they have the money to pay it back, but they don't want to. If you haven't seen it, well, I can't help it if you don't know what you are talking about.
So who cares? The bank made a decision to loan the money based on the value of the property and the credit rating of the borrower. Failure to pay means confiscation of the property and any equity the borrower had in the property. Every time money is loaned, there is a risk of non-payment.
I think you are confusing whether it is "immoral" to intentionally breach a contract with whether it is criminal. I am not from the post-Sesame Street era. I was not raised by hippies. I still think it is wrong to give your word on a contract and then not honor it, even when you have the ability to honor it. Call me an antique, but I would bet that FReepers are more like me than like you. Your view is part of the rot.
You can try and make this personal, but introducing morality into a loan, whether it is for a car or a boat or a home is not the issue. This is about individual choices and consequences. The contract terms determine accountability. A home loan is no more sancrosanct than any other loan. There is nothing to say that I must cash in my 401K, borrow more money from friends and neighbors, etc. to "honor" my obligations to the bank for the home, which is really the collateral for the loan. If the banks are losing money on these loans, then they made a mistake and should suffer the consequences.
By the way you are arguing so strenuously, I would guess that you did a walk-away, and are trying to justify it to yourself. True?
Never. Thankfully, I have a perfect credit rating. But I grew up in less than affluent circumstances. I am well off now, but I understand what it means when someone loses their job and must sweat every bill whether it is the mortgage payment or the electrical bill, etc. My parents grew up during the Great Depression.
I have had renters who didn't pay or damaged my property. I took appropriate legal action to get restitution, but I never have believed that they were morally obligated to pay me. We had a lease agreement. I took a risk renting to them despite due dilligence. End of story.
What I find morally reprehensible is the government using taxpayer money to bail out the banks and credit unions for making bad decisions.
I am really offended by your moralizing and personalization of the issue. Can't you discuss something without condescenion and personal attacks?
I posted something to the original poster, and you chose to respond to me by asking "what planet are you from" and other choice comments. When I get a smart ass person saying something like that to me, I might be inclined to be less gracious. When they are clearly uninformed, I might even condescend. Sorry it happened to you, but it only happened because you were a smart ass and uninformed. Polite uninformed people never get such treatment from me.
LOL. No, it is the stupid bank that gave the investor the money. It is up to the bank to determine if it is a good investment or not. The property belongs to the bank until the buyer pays off the mortgage.
If the stupid investor has 300k in assets, I would love to help the bank get it from said stupid investor. If the bank loses that $300k on this one loan, we all end up paying for Mr. Stupid Investor.
Why should the "stupid" bank have such leverage over an individual? The property is the collateral for the loan along with the down payment and interest charges? Doesn't the mortgage agreement spell out what the terms are in terms of failure to pay? It seems as though you want the bank to not only obtain the residence, but also get whatever is left on the loan balance.
If you have a 30 year $150,000 mortage at 7%, you pay a total ammount of $358,971 or $208,971 in interest payments.
If someone asks to borrow money from me, do you think that I should ascertain the probability that I would get the money back? And if I made a mistake, whose fault is it? Or more importantly, who absorbs the loss?
You have to get your facts straight. My first post to you, #96, never mentioned "what planet are you from?"
Your post #121 to my post #96 started off with "I will use small words this time." Then the "Duh" word.
When I get a smart ass person saying something like that to me, I might be inclined to be less gracious. When they are clearly uninformed, I might even condescend. Sorry it happened to you, but it only happened because you were a smart ass and uninformed. Polite uninformed people never get such treatment from me.
LOL. Your ignorance is only exceeded by your arrogance.
The guy who asked to borrow the money should absorb the loss since he was the gambler who lost it.
And yes, I have bought many properties and I know exactly what I signed. And even if I didn’t know what I signed whose fault is that?
“Even-though I place most of the blame on the government”
There is no doubt our government is basically out of control and We the People are having less and less influence on it or control over it. That said, we still don’t do nearly enough to change that situation, and we don’t want to. We just hope to duck under the radar, make some money, live without government wreaking our lives and pray old age isn’t going to be the poor house and lonely. Well, reality is sinking in. We had better get control by any means necessary else we and our offspring will face a total collapse of sanity. He had better do something now while we are still young enough to make the change.
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