Walk Away? Why not, the big banks do it, and condemn US!

[DeadManCrawling]

http://mandelman.ml-implode.com/2010/01/strategic-default-is-a-moral-dilemma-that%E2%80%99s-simply-adorable-dont-you-think/

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I concur with this entire piece. I have written on the bk forums about this at length, and this fellow captures the nuance and spirit I have tried to, with less success, in my posts.

[justbroke]

I need to get me one of those potted plants! Nice article.

[backtoschool]

Great article. I think we WILL see the middle class walk away from their mortgages in large numbers. That has already started.

If the numbers get to the point where it is game changing to profits for the banks, then, and only then will we see fundamental changes in the way that mortgages are awarded and traded. It was only well after WWII that you saw large scale home ownership by the middle class in this country, and if the middle class defaults en masse on their mortgages, and those mortgages are eventually acquired by large holding companies, etc., we will simply go back to the model we had for most of this country's history, where the majority of the middle class are renters. So what? Ownership was an illusion anyway.

The only real problem is that municipalities will no longer collect any property taxes in the short and mid term, until large holding companies buy up the foreclosed properties. And then we will not have decent public schools, police, fire, and other services, etc....

Right now research suggests that one out of four foreclosures is "strategic" (ie the home owner can afford to pay the mortgage but is choosing to walk away because the house is so under water). I think that these strategic foreclosures are a necessary reset of the housing market that is long overdue, but I also think that as the number of foreclosures pile up, the make up of middle class neighborhoods is going to change drastically, and that change will include a lower standard of living in at least the short and mid term, with reduced municipal services and conveniences.

[StartingOver08]

I love the phrase: negotiating an “orderly transfer”. Really, isn't that what we all are doing when we surrender our homes in bankruptcy? The emotional part is what we ourselves have attached to the transaction. So removing the emotion out of the transaction is entirely in our control. This article is a good reminder that the foreclosures, surrenders and strategic defaults is just business.

[Flamingo]

A few months ago, when all the talk of middle-class folks up to date on paying their mortgage and finding themselves owing more than their house's value, a great Letter to the Editor appeared on our newspaper. It was from a long-term mortgage holder, struggling to make those payments and put food on the table just like everyone else. Their home had also decreased in value but they were paying the same on their mortgage loan. Maybe they now had a few thousand now or so in equity or owe just slighty more than the house is now worth. The writer asked why can't our mortgages be reduced to accomodate the decrease in our property values? Why isn't anyone there to help those that want to keep their homes keep their homes that are employed and paying their bills when all the attention is going to foreclosures? After all, the poster indicated, we did not create this mess - we have long-term conventional, nonpredatory mortgages that we have been paying on consistently for years....

I love Letters to the Editor...some really good points come out...

[DeadManCrawling]

I suppose the reality is that an across the board writedown to market value would be as devastating as the alternative, which is allowing the nation's economy to crumble. Seems we may have two paths to the same conclusion. But the Fed is acting to delay the inevitable, I think, and underestimating the current anger of the average person.

Maybe I am wrong, and, in fact, am OVERestimating the anger, based on a statistically invalid sample of people and experiences, since I am in the middle of Florida. Perhaps it is too easy to be all doom and gloom when you reside in the midst of the mess.

But, scanning about some forums and blogs for stock brokers and investment brokers, some of the most respected people in both industries seem to fear the same exact scenarios. Some even postulate that it became too late to save our way of life in Sept 08 when we bailed out the industry. Now, many of them take the view that the end IS coming, and are positioning themselves to take advantage of the downward spiral by betting against the USA. I don't know what their plans are for after, since they are all New York investment people. Maybe catch a flight to Europe after the nation lies in ruins, with their future firmly encased in gold investments? No idea. Disturbing to see so many sectors seemingly thinking the same thing. But, then again, maybe it is just a bubble of doom and gloom, and will, itself collapse back to normalcy.

So hard to see how, but so many things have stopped making any sense at all.

Best,

-dmc

[florida]

Our final meeting is with our attorney tomorrow. We will be filing this month and we are also "just walking away". We can very well afford it - just don't want to!
The neighborhood is going down hill and I'm actually hoping we don't have to wait too long for the foreclosure to happen. But...being in Pinellas County, Florida - we are expecting a wait.
Moral decision? I don't think so - a sound financial decision!

[momisery]

Is it less or more immoral than say… gay marriage? Or what about flag burning? How does walking away from your mortgage compare with flag burning on the morality scale? If you’re even thinking about trying to answer that question… give it a rest.
I have to agree this is not a moral decision for these people this is a business one and I don't blame them. The banks, and big business have shown us the "light"... We can not be expected to act any better than they do, can we?

[OweTooMuch]

DeadManWalking - Excellent post. As always thanks for bringing this information to us.

[momisery]

My grandmother was born in 1894. Her father owned his own home, and it was his grandparents that came to this country on his side of the family. We also managed to "own" several others during the depression, enough so that he gave one to each child, and two to one child, farms that is, not just homes. People owned their own homes and paid taxes for many years here, so I would disagree that it is more recent. Many lost them because they could not pay the taxes on them when the depression hit. decades and decades ago we did not have the cost of plumbing, electricy, gas lines, and phones. But we did have the extra cost of acres. Many people owned and operated family farms, and they used those goods for themselves, some trading their goods for the doctor to give them care, the pastor for his services, the merchant for a bolt of cloth to sew with things like that. The real disaster in home ownship started when they decided that you needed a mortage instead of a "barn raising" and business needed the boys to leave the farm and come work for them. They offered huge incentives to leave their family farms and work shorter hours was the story for bigger pay. My father said after WWII and he is still alive and sound of mind, the boys came home to great jobs that were only increasing and started families. That did drive the economy, but so did the larger wages that were being paid in the factories. You came with the skills you learned on the family farm and the factories trained you to do the job. What is wrong is the costs of everything has gotten out of control. Part of that is the increase of taxes due to everyone climbing higher on the income brackets for their 1040A or 1040,s, but not earning any more in purchasing power. Greed is own downfall, same as it has been for every "great" civiliation.. greed of some sort, for power, or land, or lust, but greed is the destroyer.. jmho