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…
That being the case, fsrg and Snappy, then why should anyone, anywhere bother to honor contracts, or even keep their word? Is it only the fear or desire to avoid retribution, or go to jail, or have someone come over and beat the crap out of you, that makes anyone do what they have promised in writing to do? Where does the idea that it is “right” to pay someone back, or do what you said you’d do, come into play? Some underlying principle is at work, call it morality, fair play, karma, whatever.
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Employers also check your credit. I know for a fact people that have not gotten jobs because of bad credit.
that sh+t SERIOUSLY has to STOP. that is so fundamentally wrong its not even funny. is there a way to write to congress to make this illegal!? it’s really f’ed up and it really REALLY angers me. having bad or no credit has NO effect on how you do your job. maybe in accounting, but still, ones credit report should be blocked from employers. grrrrr i hate this world
*rob*
That’s what I wondered about, Dave. Why would the bank not go after the homeowner for the balance of the mortgage? Regardless of whether the banks are full of crooks, why would anyone expect them to let the homeowner who *can* pay walk away from the mortgage???
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. If you tried to do that with any other type of loan, you’d get tossed in jail for fraud and rightly so…if you can’t afford to pay it, that’s one thing, and I do recognize that many financially illiterate people got sandbagged with some outrageous loans, but for the average guy who bought a house, saw the price drop and now plans to walk away from the mortgage, i have zero sympathy. Sure, you can actually do it, but no one will have to wonder whether you are a welch or not if you do…
If I was an employer, I’d have to think long and hard about hiring someone who did that. As a landlord, I’d feel the same way about renting.
tybur6- what are you talking about? How does loan securitization remove your obligation to pay? what difference does it make if you owe the money to one bank, or a group of investors? You owe it – it’s THAT simple. You probably wouldn’t even be getting a mortgage if it weren’t for loan securitization…
If that’s what he’s talking about, these people get what they deserve.
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True. And what they’ll get is a more affordable/sustainable living situation.
Posted by: joeingowanus at January 15, 2010 11:07 AM
ANd a life of financiaal hell. Do you really think the lender won’t see right through this?????? There’ll be a lawsuit against the borrower. The lender will have access to their financial records (by subpoena) and will see this scam for what it is.
They will not let them out of it and they will make their lives hell, as they should.
Ditto to what fsrq said at 11:17
If you feel a moral obligation to pay, that comes only from within *you*. That doesn’t make your feeling obligated a bad thing or somehow wrong, but that’s something you put on yourself and is nowhere in the four corners of the contract you signed.
Montrose Morris — you are absolutely right. What you portray is a HEALTHY society. But that’s not what we have. You say, “I just need time and a temporary break while I get back on my financial feet.” You have expressed your deep-seated moral obligation to make good on your promise… does that bank share your sense of obligation?!
You are very lucky if you have a bank that (1) still even owns your loan and is acting as more than just a broker, and (2) recognizes their role in fulfilling the obligation.
The bank (when operating properly) makes the loan essentially on 3 factors – 1. LTV (will they lose if you dont pay) 2. Income (can you pay the loan) and 2. Credit history (past performance as a predictor of future performance)
The bank doesnt rate your “morality”, doesn’t interview you to determine your “values”, doesnt do a background check to see if you are “honest” – the reason….because its a contractual relationship, if you break the contract the terms of your default are spelled out -> morality and social constructs has nothing to do with it.
Why is the credit risk that significant? Tons of people with bad credit continue to get jobs, obtain loans, etc. True, their consumer credit might be at higher rates, but the mortgagor may be changing their economics by walking away such that they won’t need to use consumer credit significantly anymore.
What I don’t understand is why there is higher attention to the risk of the creditors seeking to obtain judgments, levy accounts and/or garnish wages? If the difference between the loan amount and the value after default is more than $100,000 I have to think that it is worthwhile for the lenders to pursue the borrower (at least in states like NY with personal recourse — personally, I like the California model as it shifts the risk of loss of value to the theoretically economically sophisticated party).