Skip to comments.Faced with an underwater mortgage: the moral choice to pay
Posted on 03/03/2010 5:39:05 AM PST by EBH
To walk, or not to walk?
That is the question for nearly a quarter of US homeowners who can still make their mortgage payments but are underwater, or living in a house worth less than the amount they owe on the mortgage.
Should such homeowners with negative equity simply pack up and leave, mailing the house keys to their lender in a desperate act known as jingle mail?
Or should they honor the promise to pay in their loan contract and keep up with monthly payments, hoping for steady growth in home prices?
...But by and large, many underwater Americans need help to think through the difficult moral reasoning of whether to default and to understand that society can only thrive on the integrity of each individual honoring a debt obligation.
(Excerpt) Read more at csmonitor.com ...
Are these homes simply a business deal gone bad or is there more to it? I contend there is more to it.
From greedy consumers who bought more house than they could afford, to greedy consumers who once they bought the house had to keep up "appearances," to in some very real cases fraud committed on an unwitting consumer by the bank, broker, or appraisers.
There is only one time I might agree to walk away, but there would be legal consequences for those who committed fraud.
And that raises another question. If you can afford to pay on your upside down mortgage, is it not fraud to jingle mail out of it?
People still make their car payments even though virtually every car on the road is “underwater”.
Wonder if Kennedy’s car was paid off.
Tell your kids: A home is a bad “investment.” Many of these people thought that buying a home that was “worth more” would simply continue to rise in value at double digit rates. Your home is your home. As you pay it down, you build equity and eventually you can walk away with a lump of money. But, the rate of return is never that great over 30 years. Buy stocks or gold for a return. Not your home.
The deal has two parts, if you don't pay the lender takes it. The lender took a risk also. Both the lender and the borrower were screwed by the government that played games with the rules that eventually led to the implosion. Of course, Barney Frank will never admit that. Then, of course, the major lenders get bailed out by the Government taking out additional loans, which we will all owe on, even if you walk away from your home. The Keynesian cycle never ends pretty.
Sending back the keys does not release you from the debt.
If that house is resold you still owe the difference between what it sells for and what you agreed to pay.
I agree but I also think the banks have a moral responsibility (and it makes good business sense) to renegotiate the loan contracts in these cases.
Whether or not the bank gets the property, collateral, or whatever you want to call it, the intent for the contract is for the lendee to make a good faith effort to honor the "promise to pay".
Objectively speaking, the lendee is morally obligated to pay and the lender is morally obligated to abide by the contract.
This is biting a co-worker in the ass. He was all pissed that he was underwater, so he walked away and moved the fam to an apartment. I told him not to that no matter who told him otherwise morally you owe that money.
I haven’t talked to him outside of our professional relationship since. He’s been going to a lawyer lately, something I recommended he do prior to even considering such a thing.
Poor guy never used to work overtime, now he’s signing up for anything he can. Shame
Sooner or later you have to wise up and realize if others aren’t playing by the rules (indeed, if the rules have been done away with altogether), then you’d be a fool to stick with a loser. If I were in that situation, I’d do what the Big Boys did: Look out for me and mine. Period.
And credit card companies also have a moral obligation to renegotiate if the dinner you bought six months ago on the card is no longer worth $75...
There is no moral obligation. In fact, the lawas are in place as is a system to walk away strictly to prevent this type of unregulated behavior of lenders. The lendee is a risk b/c they can walk and default without too many reprecussion other than bad credit. In fact, in California 580B was put in place to prevent deficiency judgements on lendees who home face forclosure to prevent extended abuses from lenders.
As a lendee, in this economy, you are a second or third party negotiator to the loan. If the bank does not want to negotiate, let them have their parcel of land they appraised at twice the amount. Walk away and start again.
That is an option.
Not the least bit analogous.
“Sending back the keys does not release you from the debt.
If that house is resold you still owe the difference between what it sells for and what you agreed to pay.”
Only in a few states and only on second mortgages and only if they are recourse loans.
If it is a second and rent covers mortgage it is a fine investment.
You are confusing state law with morals. They many times not the same thing.
No, no I’m not confusing state laws with morals. Your confusing being a mark or a patsy with business decisions.
It is nothing personal, it is just business.
Now that was funny!!!!
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