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…
Arent most home mortgages ‘recoourse’ loans – i.e. you will be responsible for the ‘underwater part’ either way….however if you can avoid this with negotiation or bankruptcy – then as far as I am concerned it is ok (i.e. no “morality” at work)
If it is non-recourse then for sure there is no “morality” play – thats the reason for such a loan – and exactly how/why owners like Tishman/Trump/Maclowe – can “walk away” from their non-performing assets.
“hey will have no trouble renting.
I have never ever had anyone call, contact me about any of my past tenants.-gs3 ”
GS3 – no intelligent LL would put much credibility into what the former LL says (unless the tenant has already moved from former LL property) – because the way the court system is setup, the best hope a LL has to get rid of a problem tenant is for them to move (evictions are just too difficult) so most LL will say glowing things about a bad tenant to get them out – sad but true
For the record, I am having some troubles right now, but they will have to drag me from my house, I would never walk away. For several reasons. First, it is my home, not just a pile of bricks I bought as an investment. It is also home to two other families who rented from me in good faith, and I have obligations to them as well. Yes, I feel they are moral obligations.
I bought my house able to pay for it, and signed papers saying I will pay the bank back for the privilege, and I plan on doing just that. I just need time and a temporary break while I get back on my financial feet.
Just because fatcat greedy bastards on Wall St. threw out the ethical rule book does not mean everyone else should too. All societies are built on some kind of moral authority – notions that have been codified in law as right or wrong, acceptable or unacceptable, legal or a crime. It cannot be dumped willy-nilly, by those above and those down below, without rending the fabric of society, something we have seen a lot of lately.
Anyway, the scenerio here of people walking away from their mortgages that Blodgett is referring to is this:
They put nothing down in the first place.
They can rent a comperable property for practically nothing.
They have nothing to lose.
I read the statement as him talking about people who *can* afford to pay the mortgage simply choosing not to do so any longer because they deem that it “doesn’t make financial sense.” Did I read it incorrectly?
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.
Johnny — that’s a GREAT analogy. Moral obligation is really useful to get what you want (employee loyalty, hard work, fulfill contract terms), but goes out the window when you want something else.
Banks, corporations and the business world in general seems to have no problem exercising this “moral flexibility” — But the individual is expected to somehow operate differently. Interesting, no?
I interviewed Blodgett several times when I worked for a very prestigious business newspaper that will go unnamed here. He was the most honest of any of the analysts I spoke with, willing to say when a totally ridiculous dot-com startup was a pyramid scheme. (Well, not in so many words… but anyway he woudn’t make up crap about how they had a good business model). It’s ironic that he became the whipping boy for the dot-com crash and the built-in biases of analysts and market research firms that comment to the press.
Isn’t Tishman Speyer doing this, DIBS.
***Bid half off peak comps***
Yeah, I read this. Ho hum. Whatever.