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?
I agree. If you have a car that went down in value, you don’t just give it to the bank? People need to honor their commitment.On the other hand, this nation must abolish the federal reserve bank, which creates the economic boom and bust cycles. Interest rate of almost zero % is like stealing our money!
“Sure it might make sense...if you don’t mind reneging on your legal and moral obligations.”
Well my house is paid for, so I don’t have a direct stake in the issue, but I don’t believe there is a moral or legal obligation involved. It’s a business deal, nothing more. The buyer is betting (with encouragement from the “experts” that the prices will continue to go up, and the lender is betting that he will be covered even if you default. Also BTW, the buyer is paying the lender interest to cover the risk of a default, so there’s no “moral” issue when interest is paid on a loan.
As for the moral part, he lender didn’t loan you the money based on your “word”, he loaned it based on his ability to foreclose if you didn’t make the payments... And if he foreclosed and the property brought more than you owed, he would keep the extra cash.
As for the “legal” part, that’s what bankruptcy laws are for... There’s nothing illegal about going bankrupt.
Moral obligations, sure, but what legal obligations? You’re not taking the house with you.
Exactly. But you might be surprised how many self-described conservatives in this forum will disagree with you.
Morality in business? A contract has terms, including penalties. That’s called making a deal. If you incur penalties, you haven’t broken any moral code. You’ve incurred penalties that were part of the agreement. A bank knows their is risk of default in a mortgage loan. I am sure they charge enough to cover the risk. A person should do what is in their best interests, as long as it’s legal.
“Sure it might make sense...if you don’t mind reneging on your legal and moral obligations. “
LOL... right... sure.... if the banks had no risk in drawing up loans for these contracts then there is no moral or obligation. You should look up the meaning of “legal” in the dictionary because you do not seem to understand.
I have been told from several sources several times that many people who have a successful business have been bankrupt at least once before. Nobody seems to condemn these people for not paying back on these loans even after they have a successful business and have the money.
My first house went negative for awhile but I still paid my mortgage. It was still cheaper than rent and I had the money. Last year when I bought my new house I paid about 1/3 of what the last person owed on it.
To make the numbers simple lets say I paid $100,000 and a person a few houses over has a mortgage a comparable house for $300,000. There are several more houses available in the area for $100,000. He can not refinance to the lower rates available because he owes to much. If this was business and not homes most would just consider it a learning experience and they would leave.
What should an individual be different?
“Sure it might make sense...if you don’t mind reneging on your legal and moral obligations.
“
What is moral about the way the mortgage and housing industry was manipulated by the bankers such that mortgages were a necessity and home prices were extremely manipulated?
An immoral system cannot later claim morality.
I'll start by saying I'm not in a position to walk away from my notes. I've owned my homes for years and still have significant equity.
Mortgages from 2004-2007 were made in an unrealistic bubble much like internet stocks in the late 90’s. Simply put the homes were never worth 2x’s what they were worth in 1999 anymore than yahoo was worth a PE ratio of over 100. It comes to a simple business decision that the commercial side takes every day. I see no difference. Is it worth it to walk away and start over if you are $x under water?
Is it despicable to walk away from a mortgage? Mortgages were supposed to be made once upon a time with buyers skin in the game with 20% down. Walk away and there's equity left on the table. These mortgages were made with little for down payment, nor thought to whether the new home owners could pay the mortgage. Many were were made only to be bundled, rated by Moodys & S&P, securitized and sold to the world. The banks/brokerages that provided the money put our freedoms at risk here to make a buck. Bring back Glass-Stegle and start heating the tar.
Claw back the bank fees from the major banks and Goldmans, et, al. There's plenty of blame to spread in this situation besides people walking from bad decisions & mortgages.
Why would you pay for credit cards if you won’t pay your mortgage?
Mixed feelings on this. It's easy for those of us lucky enough not be in this problem (me included) to say this.
But I have heard stories from people where it seems like an ok thing to let the house go.
But many others just don't want to do the hard work, and are looking for someone to blame for their greed and lack of responsibility.