Back in February of 2008, I wrote a post titled Do You Think It Is OK To Walk Away From A Mortgage You Cannot Afford? that got a lot of attention and comments. In it, I said “I gotta say that I think it is kind of crappy ““ I mean, people should take some responsibility for what their financial decisions, right?” – and at the time I fully believed that. In fact, I still do – but not when the banks are taking advantage of us who have saved them from failure. And with our government telling banks to start working with homeowners facing foreclosure instead of taking people’s homes, what are the banks doing? Not much – the help is just not coming to people who need to refinance and/or restructure their mortgage…so homeowners are starting to walk away from mortgages in droves. And I don’t blame them anymore. From the NYT:
“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”
After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.
This isn’t about having your credit score ruined or not being able to get another mortgage for a few more years. It also isn’t about a moral choice anymore, as I thought it was back in 2008. This is about people who have gotten screwed over by the very banks that we have been paying to keep in existence. The banks get all the help they need while the people get nothing – it’s a messed up system right now. I fully believe in personal responsibility (I know, surprising for a liberal, right?) and doing the right thing, but in these cases where a home isn’t worth much of anything anymore and banks are not willing to work with borrowers to keep them in their homes, I tend to side with the regular folks. If the banks and Wall Street can be unethical in how they conduct business, well… so can the people.
Unless, of course, you directly caused the problems you are in like, say, credit card debt from too much shopping. Please do the responsible thing and pay them off without filing for bankruptcy.