Posted on 12/08/2010 6:26:03 AM PST by Palter
You might call it, “Walking away from your home, for dummies.”
Brent White, the University of Arizona law professor who’s made a name for himself by urging more underwater homeowners to consider walking away from their homes, has published a 168-page book to help borrowers who are wrestling with that decision.
In a tone that is both conversational and precise, “Underwater Home: What Should You Do if You Owe More on Your Home than It’s Worth?” lays out the case for and against walking away from an upside-down mortgage where the home is worth less than the mortgage balance. As is his habit, Mr. White strips away many of the emotional reasons that are often touted to deter walkaways.
Mr. White, who specializes in behavioral economics and the law, touched a nerve with a paper last year that was one of the first to seriously challenge the long-held view that borrowers have a moral obligation to continue making their mortgage payments. He says he’s been inundated with thousands of emails from people that showed him “the real texture of what’s going on—what difficult times people are having, and how people really do struggle with these decisions.”
Mr. White tells readers that he hasn’t set out to recommend any particular course of action. Borrowers need to factor in their personal situation, and the laws in their state. “The bottom line is, people need to make their own call,” he says in an interview. He adds that he wrote the book because he realized “they may need help about how to think about it.”
(Excerpt) Read more at blogs.wsj.com ...
This Brent White is a prime example of what is wrong with our society, and why despite all the best efforts of Conservatives and moral people, America very well may be doomed. There is a difference between not being able to, and not wanting to, in any circumstance. I can’t decide which is worse, telling people that even though they can pay their mortgage they have no moral obligation to follow through on their contract so walking away is an option, or people taking the advice and doing it.
Maybe the best thing for the future of our country IS for it to all come crashing down. Let the grass hoppers starve to death through the long cold winter, so the ants can rebuild America like it was meant to be.
Interesting.
The talk of moral obligation is always directed towards the individual involved in a transaction with a corporation, but it never works the other way around corporation.
If you have a dispute your mortgage holder, a bank, credit card holder, car lien holder, and go into court and start talking about thier “moral obligation” to you, you’ll get laughed out of court. The only thing that matters as far as a corporation goes is its “legal obligation.”
If corporations don’t have a moral obligation towards an individual they are doing business with, why does the individual have a moral obligation towards the corporation for the same given transaction?
Agreed. I am way upside down (like many) and have considered walking away but there are so many emotional aspects to a “home” not just the structure of the house.
I wonder how the author would feel if people took ordered his book and then didn’t pay for it.
In my area, many homes have lost 2/3 of their value & still falling.
Many borrowers who had good incomes & qualified for their loans are no
w under or unemployed & no relief is on the horizon with Moonbeam back at the helm & a demtard legislature that can now pass any budget with a simple majority.
Hmmm, buy groceries & feed the kids or throw money at a near worthless asset? Tough choice.
I personally am not so quick to judge harshly.
The lenders are in the best position to help themselves—but instead of being willing to modify loans or accept short sales, they stonewall & stall until qualified buyers walk & make the modification process impossible.
” behavioral economics and the law”
Business without morals
You personally are not more moral or ethical in anyway than the people you are chastising. The houses in question were never worth anything close to the price the banks and assesors quoted the home buyers. This is where the term housing bubble came from. The contracts these people signed allow them to walk away. They are exercising an option the lenders agreed to.
Like a bumbling greenhorn con artist, the banks failed to get the money from the marks up front.
*shrug* I’m treating mine as if it is a rental with a stringent lease. I no longer think of it as a property that I will be able to sell and get a profit.
I need a place to live no matter what, and the mortgage is still less than a comparable rental.
And who knows? the market may yet recover...
Exactly.
The banks loaned in non-recourse states KNOWING there was a bubble. Thus, legally the borrower has an option to walk away.
The States can correct this or the banks can choose not to lend in these states. OR the banks could have asked for 20% down as a minimum.
Corporations understand the option to default (or renegotiate) and do it regularly. But we chastise households that exercise their options to default.
Again, the States and banks can change the game and forbid default. But they don’t. Why? Because if that was clear, the demand for homeownership would fall and the banks wouldn’t get their fees.
Notice there is no serious movement for changing deficiency judgement laws?
Well, if they didn't pay for it because he promised a lot more than he delivered, he might feel a bit chastised. Mortgage writers, in valuing a house at a price, implicitly 'promised' that the house was worth that much.
In your area, none of the homes have lost 2/3 of their value.
the prices have simply dropped to the true value.
I and many others have been explaining what was happening and where it would lead for many years. Click on the keyword housing bubble and scroll back 5 or 6 years. Does what we were saying then describe today right down to a “T”?
The question I thought of is: can a corporation (not the people working for it or the owners, but just the legal entity) have moral obligations as well?
Perhaps, as you say, “The houses in question were never worth anything close to the price the banks and assesors quoted the home buyers.”
But the home buyers agreed to those prices when they signed on the dotted line.
Nobody made them do it.
It would be interesting to find out what the political persuasion is of the folks that walk away from their underwater mortgages.
Good point.
But like the banks, he wouldn't have to worry about the deadbeats if the Govt. would pay him for those books that he didn't get paid for. - Tom
An Empire Built of Paper (Paleo Barf Alert)
'Perfect Storm' Brewing in Home Defaults
Housing Bubble Trouble: Have We Been Living Beyond Our Means?
“Agreed. I am way upside down (like many) and have considered walking away but there are so many emotional aspects to a “home” not just the structure of the house.”
Concur; also, I think the real question may be whether one would be further under water if renting vs making payments on their home. Everyone has to live somewhere and if it’s cheaper to continue to stay in one’s home than to pay rent seems to me one should stay put. Unless, of course, relocation is necessary to find employment - then the calculation changes.
It’s a business decision, just like Wall Street makes every day.
Can someone provide the exact moral code violated here?
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