I’ve been reading tons of articles online about how walking away from your mortgage when you owe more than your house is worth, have little or no equity in it and/or are having a hard time selling it is a good financial move for some people. The people that choose to do this are basically using an escape clause written into their mortgage contract. But, some people think that people who choose to do this should be crucified.
- Check out this article … “Jingle mail:” The Awful Sound Of “Voluntary” Foreclosure. Someone posted a comment to this story that said ‘It disgusts me to know that people are voluntarily foreclosing on their property … there should be more severe repercussions against those who simply walk away- such as NEVER being able to obtain credit ever again.’
- And, this article … A matter of pride - No one should make it easy to walk away from your mortgage. The guy who wrote it says ‘People need to own up to their responsibility — and, yes, continue to pay for a house that may not be worth as much today as it was yesterday.’
Some people think that voluntarily surrendering your home back to the mortgage company and accepting the consequences somehow makes you unfit for society. They think you should be forced to stay and pay the payment, even if it means having to take a third or fourth job. They think that if you walk away, you should be sent to a debtor’s prison and tortured due to the horrible injustice you perpetrated against your fellow citizens for letting your house foreclose. They think you should never be allowed to have credit again and should be forced to wear a scarlet letter for the rest of your life. Give me a f*cking break.
Why don’t these people respond with the same outrage when huge companies perpetrate these purported injustices upon others? For example, companies lay off people all the time because they outsource those jobs to cheaper labor overseas. Where’s the outrage? Companies cancel the pensions of their faithful employees all the time. Where’s the outrage? There are bigger and far more pressing issues that this outrage could benefit. Wanting to nail someone to a cross who let their house foreclose isn’t an appropriate or helpful use of that outrage.
Most every contract comes with some sort of an escape clause that can be used as a last resort. Foreclosure is a mortgage’s escape clause. Why shouldn’t it be used if the person who signed the contract wishes to use it? For the people who think others who let their home foreclose are terrible human beings, I’d like to ask, ‘Would you be willing to sign a mortgage that doesn’t allow for foreclosure? Instead, if you can’t or don’t want to pay your mortgage, you’ll be imprisoned until you work off the debt.’ I’ll bet you anything they won’t sign it.
Update 02/14/08… Today, I read an article by Marcie Geffner called Walk-away homeowners are bitter pill for real estate published in Inman News. In it, Geffner writes:
(fair use excerpt protected by Section 107 of the United States Copyright Act)Â
Lenders, institutional investors and individual shareholders will get stuck with the financial losses that result when borrowers irresponsibly refuse to pay their mortgages. Nearby homeowners will suffer the ill effects of foreclosed, vacant and uncared-for homes, which create blight, attract squatters and put additional downward pressure on home prices. And let’s not forget the children of walk-away homeowners, who are exposed to a lifestyle that depends on irresponsibility and irrational debt.
Moreover, walk-away home ownership perpetuates the sad modern notion that a home is neither a lifelong place of residence nor a long-term investment, but instead, just another disposable consumer product that differs little, if at all, from a television set or a tube of toothpaste. Buy it. Use it. And then lose it.
If legions of upside-down homeowners simply decide not to make their mortgage payments, the idyllic “American dream” may be exposed as no more than a fantasy, and at the end of the day, the bedrock notion of home ownership as good public policy may be placed in jeopardy. That’s yet another potential negative outcome of the current mortgage crisis that should give pause to anyone whose livelihood depends on real estate.
Here it is again, with my comments in [red]:
Lenders, institutional investors and individual shareholders will get stuck with the financial losses that result when borrowers irresponsibly refuse to pay their mortgages. [The word irresponsibly here is not appropriate. Sure, there are some irresponsible people in this country. But, more often then not, deciding to walk away from a mortgage even when you have the ability to pay is simply a business decision. Just like in the corporate world, you have to make business decisions regarding your personal finances. Remember when United Airlines decided to cancel employee pensions? Eventhough it screwed the little guy, that move was seen as a as a smart, responsible business decision by United's shareholders to reduce costs and increase profits. How is this different?! The shareholders and investors want to reduce costs and increase profits even if it means shafting the little guy. Now that the little guys are making decisions that not in the best interests of the shareholders and investors, we scream that they're acting irresponsibly. Give me a break. Cry me a river.] Nearby homeowners will suffer the ill effects of foreclosed, vacant and uncared-for homes, which create blight, attract squatters and put additional downward pressure on home prices. [No, it will bring home prices back down to realistic levels. To bad, so sad if it means Jack down the street might lose some equity ... equity he should have never had in the first place.] And let’s not forget the children of walk-away homeowners, who are exposed to a lifestyle that depends on irresponsibility and irrational debt. [Mommy, why are we eating rice again tonight? Because dear, that's all we can afford. We have to keep our house. Marcie says so. But mommy, my feet hurt! I know honey, your shoes are too small. But, we can't afford new ones. We have to keep our house. Marcie says so. Yes! Let's all be slaves to our overpriced, undervalued homes! Marcie says so!]
Moreover, walk-away home ownership perpetuates the sad modern notion that a home is neither a lifelong place of residence nor a long-term investment, but instead, just another disposable consumer product that differs little, if at all, from a television set or a tube of toothpaste. Buy it. Use it. And then lose it. [Spot on. Newsflash - It isn't 1950 anymore. Really?! People don't live in the first house they buy until the day they die. People don't keep the first job they had straight out of high school until their retire. Thanks to the relentless home builders, appraisers, real estate agents and mortgage brokers pushing prices higher and higher and higher, homes have become a commodity - little variation amongst the brands, therefore the lowest price with the loosest terms wins.]
If legions of upside-down homeowners simply decide not to make their mortgage payments, the idyllic “American dream” may be exposed as no more than a fantasy, and at the end of the day, the bedrock notion of home ownership as good public policy may be placed in jeopardy. That’s yet another potential negative outcome of the current mortgage crisis that should give pause to anyone whose livelihood depends on real estate. [This, I agree with. Real estate agents should pause and think about their choice of work. But, we all know most real estate agents are pigs. And by pigs, I don't mean an animal that rolls in its own filth. Well, some of them are those types of pigs. But, the vast majority of real estate agents are 'a person of piglike character, behavior, or habits, as one who is gluttonous, very fat, greedy, selfish, or filthy.' During the boom years, these real estate agents were rolling in money. They knowingly sold houses to people for far more then they were worth. And, all the better for them if they represented the buyer and the seller (double commission), which should be illegal by the way because in that case, they neither have the seller's nor the buyer's best interest at heart. How can they? They represent both people. Most every real estate agent I've ever come across, from the guy who sold my house to the woman who sold my grandmother her condo to the lady I used to work with when I was a mortgage broker. They all were pigs. And, a few were complete morons.]
Note: Yes, I used to be a mortgage broker. But, it didn’t last long. I realized I had to put my conscience aside in that business and rip people off blind in order to make money. That wasn’t me. I couldn’t do it.
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