On Walking Away
Is it okay to walk away from your mortgage for no other reason than it doesn’t make financial sense to keep throwing your hard-earned money away? There’s no universal answer here, but in most cases, the answer is “Yes.”Importantly, the reason is not that “Wall Street deserves it” or “We’ve got to teach the banks…
jessibaby – I have to admit (despite legal training) I was unaware that some states do not allow recourse loans – that is insane
MM – if the contract spells out what happens in the event of default (which a home loan does) – then in a sense, you are not did-honoring the contract by not paying….you still have to honor the default part of the contract.
“If the loan is non-recourse – then….well….it seems clear that the lender recognized the risk”
just to add, assuming, the property was in a state that allows recourse.
Slopenick — breaking a contract is not fraud, and no one should go to jail because they think it’s more economically advantageous to them to walk away.
Snappy — I am also puzzled, but I know that there have been a bunch of cases around the country where the purported “owner” of the mortgage (which has been bought and re-sold countless times through securitizations) have been unable to come up with the actual paperwork to show that they in fact are the appropriate mortgagee when thy come to foreclose. That might explain why some banks are willing to write off the defecit, but I still find that hard to believe if the defecit is in the six-figures.
joe, my point uses as a basis for the argument that these are simply people who CAN still afford to pay but think that they should be entitled to something cheaper now, as maly pointed out.
This is either a case of financila ruin with no income or jest walking away from something that you have no desire to pay for.
I’m convinced that we are talking about the latter here, not a forced foeclosure.
“pretty unbelievable to me that so many people think its fine to walk away from their own mistakes and stick someone else with the bill”
You arent sticking anyone with the bill – home loans are almost always recourse – they can/will get a judgment for the difference – and if they dont, whose fault is that.
If the loan is non-recourse – then….well….it seems clear that the lender recognized the risk.
ANd a life of financiaal hell.
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The point is that most people are ALREADY in that financial hell when they are contemplating these decisions. Sometimes one level of hell is less hot than another.
Also, I personally doubt that we will see much in the way of repercussions for walking away since SO MANY are doing it around the country. And even if there are, it’s obviously worth the risk to most. For many it’s a matter of feeding their families or pay the bloated mortgage. That’s an easy one!
MM, I don’t necessarily disagree with your feeling an obligation to pay it back. I’m just saying that such a moral obligation is *not in the contract itself.*
MM post I think highlights the issue perfectly – while on one hand saying that seh feels a moral obligation to make good on her loan (noble no question) she also says – “I need time to get back on my feet” – and so if you look at it through a “morality” prism – then you could impose on the bank the ‘moral obligation’ to allow a lender in need of “more time”, extra time –
Now the bank may grant that time because 1. things take time anyway 2. the foreclosure would cost too much 3. the government prevents them from foreclosing, etc….
But I dont think it is “immoral” if the bank institutes foreclosure action if and when a debtor cant pay no matter their commitment to ultimately pay) – the bank has a contract – if you run into trouble (but are morally committed to make good) the bank has every right to enforce that contract….therefore conversely if economic conditions change and it makes sense for the debtor to walk away – then so be it – the consequences are clear and imho there is no “morality” involved.