Alright, University of Arizona Law School Professor Brent T White was not actually quoting the 1966 pop hit, Walk Away Renee, by the Left Banke but according to a Wall Street Journal article published on October 30th he is indeed an advocate of the Strategic Default, that I have previously reported on.
A strategic default is the decision to walk away from a home rather than continuing to pay for the home, despite the homeowners ability to pay. More often than not, the strategic defaulting homeowner will continue to play the ‘credit game' and keep all of their other bills paid, as agreed. The defaulting homeowner capitalizes on the opportunity to not pay the mortgage for a year or more and squirreling away a massive nest egg...an amount equivalent to the mortgage, property tax and maintenance on the property.
Conventional Wisdom is Challenged
The Conventional Wisdom of America has always been to accept our individual responsibilities in exchange for the individual liberties that we are afforded by the American Way of Life. Our individual responsibilities have always been to be law abiding citizens, work for a living and take care of those we are suppose to - be it elder parents, handicapped children and the weak of society.
In exchange for us doing our part as good Americans, we have been provided with the greatest nation the earth has ever seen. As much as I want to bring God into this discussion, to satisfy the masses today I'll just present my ideas without giving any of the glory to God Almighty. I'm sure many would agree that America has reached its position of prosperity in the world based strictly on the acts and deeds of mere mortal men.
So, what have we gotten in exchange for being good Americans? Prosperity jumps to mind of many. American have enjoyed the greatest life style in the world for decades, if not centuries now. Personal freedom has always been a uniquely American virtue, the envy of the world, everywhere since our conception in 1776. America has also remained a very safe land to live on. Until the attacks of 9/11 there has not been any foreign hostilities on American Soil since the war of 1812. Of course we haven't always been able to get along with our selves and Americans butchered over 620,000 Americans in the Civil War (makes the 5 or 6,000 lost in the Mid-East over 8 years seem like a day in the park, doesn't it?).
A key element to the American Dream has ALWAYS been to ACCEPT RESPONSIBILITY for our own actions and that means we have always prided ourselves on our personal responsibility to honor our word...honor our handshake...honor our signature and pay our bills.
THE LAND OF ENTITLEMENT
America certainly has been in a transition for the last 5 decades...and longer. Starting back in the 1960's the youth of the day (now those of us in our 50's and 60's who swore we would never get old) did challenge the conventional wisdom and started to bring about change. Perhaps the biggest change of the period was social change and really starting to change the way the black man was perceived and treated in this country.
Social Changes took place in the form of welfare, making certain that American Children had a support system when the parents could not provide. Subsidized housing, medical care and food stamps were all cutting edge social experiments of the day.
The American youth if the 1960's and 70's also had a very significant impact on how this country looks at war. No one can visualize the American Landscape of the 1960's without seeing a ‘hippy' flashing the ‘peace sign'. Well, it went much deeper than that. Because of the social awareness of the times, pressure was brought against the government to end the war in Viet Nam - even if it meant pulling out as the clear losers...the only war American has ever lost. The movement went so far as to have a significant role in the abolishment of the ‘draft'.
The America I see today has taken every social change that has ever been conceived of and magnified it by 1000%. It is as if every decision the government or industry makes is based on who they will offend or who will feel as if they have been taken advantage of. Certainly I do not see this as a political landscape that our founding fathers would be proud of...or even recognize as anything remotely similar to their great social experiment that became to be known as democracy.
The American I see today is not about the land of opportunity. Yes, opportunity exists like never before, but today if you go out and get something or do something that improves your life style, it just isn't fair anymore that you ‘got' and the rest of the population ‘doesn't have'. Its as the presidential candidate Obama told an Ohio plumber (Joe the Plumber) on the campaign trail that what America needs to do is "spread the wealth" because is "is good for everybody" (4:40 of video). This is something that State Senator Obama has been publicly advocating since 2001.
"WALK AWAY IN DROVES"
Brent T. White the University of Arizona Associate Law Professor published a 54 page ‘Discussion Paper' title "Underwater and Not Walking Away: Shame, Fear and Social Management of the Housing Crisis."
Please read the WSJ article and read through the discussion paper that Professor White wrote. I personally get a little outraged when I read the printed advise "Homeowners should be walking away in droves,"
Admittedly, I have not read every word, but I do spot inconsistency after inconsistency between Professor Whites position and reality.
For example on page 3 the professor says, "This includes underwater homeowners that live in "non-recourse states" such as California and Arizona, where lenders cannot pursue defaulting homeowners for a deficiency judgment."
This is just a half truth. While it is true that borrowers who did not take out cash from their homes in a refinance do not face the prospect of a deficiency judgment; however those who did refinance and take cash out most definitely are in the crosshairs of the collection industry just waiting to get a bite out of that apple...probably prepared to buy these defaulted and written off debts for mere pennies on the dollar.
The professor goes on to say that those who don't default don't do so because of "two emotional forces" and they are "1) the desire to avoid the shame or guilt associated with foreclosure; and 2) fear over the perceived consequences of foreclosure."
He speaks of the emotion of GUILT as if it were a bad thing. Come on people, the reason most of us don't do a lot of things is because of the moral fiber we were raised with that is strengthened by the fear of the negative consequences of our actions, should we stray from the socially acceptable norm.
Furthermore, the professor talks about the ‘perceived consequences of foreclosure' as if he has a crystal ball and knows exactly how this crisis is going to play out and how society will look upon those who manipulated they system and drove the economy further and deeper into the hole it is in now. After all, if everyone who could have stayed in their home, with a minor inconvenience or struggle had opted to stay...where would we be today? Even the professor calculates that only about 25% of the foreclosures are ‘strategic defaults'.
If 25% of the homes lost to foreclosure had stayed, and continued to make their mortgage payments and paid their property taxes instead of shifting the burden onto the rest of the taxpayers...where would we be today, professor?Obvious your degree is not in economics. IF SOMEONE ELSE IS DOING IT - SHOULD I DO IT TOO?
This report is too outrageous. "Unlike lenders who follow market norms, individual homeowners are encouraged to behave in accordance with social norms of "personal responsibility" and "promise-keeping." And what do we have if we don't behave in accordance with the ‘Social Norms' and with ‘Personal Responsibility'?
I guess the answer is we let the government take over and we stand in line for our next bowl of soup - but that's OK, because we are entitle to it...even if we don't work for it.
Please read the report and spread the word...take the "Red Pill"...
The Matrix "The choice of the truth"
"This is your last chance, after this there is no turning back. You take the blue pill and the story ends. You wake up in your bed and you believe whatever you want to. You take the red pill; you stay in Wonderland and I show you how deep the Rabbit Hole Goes. Remember, All I'm offerin
Until Next Time, Have a Blessed Day,
John Occhi, ePRO & Five Star Certified REO REALTOR® www.JohnOcchi.Com Hemet - San Jacinto Valley, CA The Excellence in Real Estate Team @ Allison James Estates & Homes 2281 W. Esplande Ave, #102-B Next to "Starbucks" San Jacinto CA 92582 (951) 654-5550
This blog and the contents written here is the intellectual property of John Occhi, Hemet - San Jacinto Valley REALTOR® in the South West Riverside County region of the Inland Empire of Southern California. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.
This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.
I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.
If we can get people to quit overpopulating the Nation and the Earth, we might be able to get back to people taking care of people instead of the government having to take care of people. I don't think that's going to happen, though, not with Octomom and that midwest couple with 19 children leading the way.
David,
I started off with a simple post - the more I wrote the madder I got...most of the post was rather impulsive.
Thanks for reading, please come back.
John
I have an interesting theory about overpopulation...
I believe if we just left Gods plan alone we would be fine. But we meddel and we figure out how to cure diseases and treat ailigments that were meant to thin the herd, naturally.
Instead, we prolong life and thereby overpopulating and consuming more of the earths resources, at a more rapid rate than Mother Earth was designed to provide.
And the larger the population, the bigger the sence of entitlement...(my pet peeve)
"Walking away" must be put in perspective. . . . . . The American tax payer is propping up the financial industry. . . . . However, the American home owner (tax payer) has no Congress to bring any meaningful relief. . . . . In SELF DEFENSE, the American home owner who has no hope and no way of survival other than walking away, should do so without guilt. . . . . In fact, I recommend that they file bankruptcy and liquidate any debt whatsoever. . . . How much can the American home owners take and continue to prop up a financial industry populated with thieves protected by a Congress with their hands out???? . . . . . Enough is enough. . . . . If a home owner needs to sell and cannot, should they be a prisoner in their own home? . . . . Or, should they wipe everything out and start over?... . . . . If the American home owner must meet some moral judgment of others to survive, so to should the financial industry and the Congress. . .
Well said, Lenn. I have difficulty offering judgement on those that have the choice of a long, drawn out process as opposed to making a very hard choice, but having the decision behind them. We don't know what's going on in the lives of those making choices, whether they be to short sale, or default- what we do know is that they are immersed in a scenario of equity loss that can ruin lives. How they handle it for the good of themselves is how it will play out. It's not as though people are gaining- they are gaining NOTHING except huge stress, wrecked credit, but perhaps some pocket change to begin a new life with ramifications (wrecked credit) that they consider less important than peace of mind.
Doing the "right" thing is not always as clear as some would like to make it.
It should not take a homeonwer walking away for the lenders and the government to realize that the bailouts in place are not working. If a stratetgic default is the only way for someone to get our from under the burden of a upside down mortgage then walk they should. No one should be forced to ruin themselves financially to stay in a home just because someone else might want to pass moral judgement on them.
Powerful! I know someone frauding the sytem, and I told them what they are doing is Fraud, but they are still going through with it. it SUCKS that we have to carry the burden of those
I think they idea of a strategic default is absolutely stupid. I see three reasons a home owner would want to walk away from their home. The first is they can no longer afford the payments. The answer to this problem is obvious, do a short sale. The consquences to a consumer for a short sale is much less as aopposed to a foreclosure.
The second reason is that they can afford the payments, but have to move because of new job some place else or some other reason. If they are underwater, again the obvious choice is a short sale. The third reason is that they are underwater but still can afford the mortgage payments. To deliberately go into foreclosure is shortsided and foolish. As mentioned in other posts, the lender has a greater incentive to go after you for a deficiency judgment in this case. Secondly your credit is destroyed. Where would you live? If you want to rent a landlord will usually run a credit check on you. Guess what? Your forclosure shows up. Good luck finding a place. If you have no intention of moving and the value of your house has dropped below what you owe on it, so what? You have the same job, income, family and bank account. Your home value is only important if you want to sell it. The idea of strategic default comes from the notion that you should look at your home as an ATM machine. You can refinance and pull money out of it any time you want. When the ATM closes, walk away. This idea is incredibly stupid and economically foolish. All you are doing is hurting yourself.
Many people are finding themselves in the position of having to make difficult choices these days. The depreciation in home values has brought some home owners to the brink and many have found themselves entering the ranks of the unemployed. I would not want to judge someone for doing what they have to do right now to survive.
Not cure diseases? Thin out the herd? You, clearly, are not talking about the same God that I have read about.
John, WOW that was powerful. I'm going to side with the defaulters here. I don't think anyone would just walk away from the home they have lovingly nourished, just to stock pile money in the bank. I believe that people do that because they have no choice. As for short sales, good luck. I know someone who was foreclosed upon that spent an entire year trying to buy short sale properties. Everytime they made an offer for asking price, the bank upped it by 20k. So, if you can't make your mortgage payments, and you put your house up for short sale, be prepared to sit on it for a good long time. In the meantime, forclosure proceedings probably have begun.
No matter that I think what you say is all nonsense, Its well written nonsense full of non-sequitors and tangential thinking and (I think) immoral discrimination....but its fun to read
Mortgages not only provide that a borrower must make payments to continue using the property as their own; mortgages also specify that if the borrower dosent pay, the lender may foreclose. Neither of those two possibilities is morally superior to the other. They are just two provisions of the same agreement. and the borrower has a choice to do one or the other ie pay and stay, or dont pay and leave. Chosing one over the other does not have moral implications
Interesting post with great discussion. No matter what side you are on, I would rather be talking about the great sales that we are making and how we are able to find "homes" for buyers where they can raise up their family to enjoy the American dream. Not about how they are losing their dreams and many times splitting the family over the tough economic circumstances.
"Judge not, that ye be not judged"...is that the God you're talking about?
"God's Plan" includes "thinning the herd"..."Instead, we prolong life and thereby overpopulating and consuming more of the earths resources, at a more rapid rate than Mother Earth was designed to provide."
I assume you've never had any ailment that could have been life threatening unless treated...or do you really mean to exclude yourself from "the herd", keeping more of the earth's resources for yourself, since you can afford it?
talk about a "sence" of entitlement!...and there you sit, judging the "morality" of others.
well, don't agree with the "walk away" mentality being championed by the law professor, or, the rest of your right wing rant with the dismissal of GOD. Your failure to admit that you have received much from unions, governmental and other social institues along with that which GOD has provided you for such a wonderful life is very typical. Hail, Hail the great individual who has made it all on his own hard work. None are as blind as those who refuse to see. Gimme a Break.
John - We all have options and must be prepared to face the consequences of the options we choose. It is not for me to judge what others do or why they do it ... someone else has that job!
During the Bush years wealth like with all administrations was redistributed. 50% of income growth during this period was taken in by people making over $400,000. Is that fair? Depends on whether you think that they deserve the breaks. At some point there will be a Republican adminsistration again, and wealth will be redistributed, then a Democrat, etc. As someone who has worked for the US Senate, I can tell you that in politics, money is power and until we can figure out how to make a better system, members of both parties will spend the same amount and the only choice will be where it goes. people need to make there own choices and I don't see this as a moral question. For those of you out there in trouble, do what is best for your family.
Great post John. The strategic default bothers me. I've spoken to several accountants who actually RECOMMEND this to their clients. It's sad really because it diminishes the severity of the problem some people ACTUALLY do have in paying their mortgages due to real hardship situations. Great post and best of luck to you.
The post is about "strategic default", not default due to hardships. I'm sure everyone has empathy for those who walk away as a last resort but the moral issue here is about those who walk away only as a financial planning technique.
I don't like the thought of making a strategic default as a logical course of action that everyone should consider. I think it will eventually lead to much higher credit standards to get a loan and much higher interest rates to cover the added risk. Who's going to keep lending money at low rates when the standard norm is that it's a smart thing to walk away even though you can pay. That sort of mentality slowly works through society and before you know it no one seems to trust anyone anymore. When trust goes down, business goes down or at least people build in a bigger cushion(higher prices) to counter the higher probability of someone not doing what they said they would.
Your "thinning the herd" comment is very troubling. I guess it's great until you or a loved one gets sick and it's you who is being thinned out. That's why I'm very concerned about government healthcare. Government bureaucrats are going to be deciding how and who gets thinned out. Maybe some environmental zealot will get in charge and think that it's a good thing that the swine flu thins the herd out a little. Have you read anything about our new "science czar" John Holdren? He coauthored a book in the 70s that proposed forced sterilization to control the population. It's not a big step past that to intentionally control the population by restricting certain medical care.
I have personally lost respect and have nothing to do with anymore a few people I know who have walked away on purpose without a hint of no ability to pay (they just didn't want to any longer). I have also lost respect for many of those advocating this type of selfishness, greed, refusal to admit a mistake, and refusal to make right on your obligations at the expense of someone else. Obviously, there are exceptions and those who truly have no choice, but you know the ones I am speaking of and I have no time for some of these people in the business setting anymore.
Someone is going to have to pay for all of this irresponsibility and we all know who it will be. I will not try to rationalize this mess and generalize it as being ok. We as a country are becoming weaker and weaker and losing our strength and our backbone. Put it into perspective. Imagine the World War II Generation acting like this? They wouldn't and they didn't. They took responsibility for their actions at every turn. We can't hold a candle to that generation and I believe many of them are ashamed of how the generations after them in power are now behaving.
Strategic Default is just another name for refusing to take responsibility. What makes me want to vomit is that many of these people doing this wear it around like a badge of honor and think they're some Wharton School of Business grad with gifted business acumen.
These people belong to the mentality that it's ok for them to privatize their profits, yet they certainly want to socialize their losses.
This is a very thoughtful and insightful post just when we need it. I agree with Lenn. We have too many people living in terrible stress due to an economic situation that is just not their fault. They should walk away, do what they can to salvage their lives and be able to move on. Nobody should have to be a prisoner in their own home.
I agree completely with everything that you have shared. I am not against people walking away from their homes - it is going to happen.
What bothers me is that now we have law professors publishing papers not only encouraging the practice but giving hands on training on how to commit these acts. When those who can genuinely afford to walk away from their homes - which have been referred to as THE AMERICAN DREAM for decades and decades is now reduced to a flippant decision that allows the homeowner to profit at the expense of the taxpayer...this is what I find wrong.
This has nothing to do with those who are losing their homes because they have no option - this is about those who excersise the option, at the expence and by profiteering from the American Tax payer.
John, my take is that Brent White is an irresponsible idiot.
A home's underwater value is no excuse for an owner to "Walk Away". The owners signed a legal contract to repay their lender, which is a moral and legal obligation. That said. when owners are unable to repay their loans they should make every attempt to renegotiate their loan to save their home and credit.
White advocating that home loans should not be reported to credit bureaus reflects his ignorance.
Loan rates are based on fair evaluation of risk. If credit cannot be fairly evaluated lenders cannot properly access risk and the rate goes up. So, a loan that today would cost 4.75% with the ability to evaluate credit; without that ability would cost maybe 7.00%.
With your comment riding on the tails of Lenn I defer back to my response to her, #33 above.
The report I am referring to by the professor is not about those who are buried with the problems of a run-away mortgage payment, the loss of a job, or other tragic event that may be responsible for a family losing their home.
The report is telling the financially sound individual how to manipulate the system for their own benefit. It is giving them permission to unravel the American Dream and commit an act that borders on fraud, in my opinion.
How is staying in a home that someone can afford as agreed ruining them financially? If you bought a home for $500,000 with a $3,000 mortgage that you can afford then you keep paying right.
If the value drops to $300,000 and your mortgage remains the same - how is that ruining anyone financially? It's when this homeowner decides that it doesn't make sense to keep paying for the home since they could buy a bigger one for less than they bought this one for. So they live in the house for a year - don't pay the mortgage...don't pay the taxes, bankroll the money and wait for the foreclosure and the CASH FOR KEYS before they move out with their nest egg, because that makes more sense.
This is the scenario that the professor is advocating - not the guy who lost his job, his wife was diagnosed with cancer and ther mortgage went up over $500 when it reset...
I just say as a society...we should pass judgment, after all that is what makes us a society!
Thanks for the acknowledgment that gaming the system is FRAUD - even if the code has not been written for this specific set of circumstances - we all know it is when they know they are gaming.
Ahhhh, great minds think a like. Nothing to add, all you did was reinforce the position of this blog - this is not about the hardship, this is about the manipulations of the system, at the expense of the taxpayer.
John - very thoughtful post and something I have been struggling in my mind over recently. I do not agree at all with the law professor...the mentality of the American people needs to be to take responsbility. Someone has to one way or another. Unfortunately, not everyone sees it this way. There are often times other options for homeowners than simply walking away and they really need to explore those first. I believe walking away should be the last option.
Only in America can we live such irresponsible lives. Our problems seem to be to pay or not to pay where in other parts of the world their problems are to eat or not to eat. We need to start becoming more responsible for ourselves before we take on the world's problems.
First thank you for taking the time to read and add your comments.
This post is not about the segment you describe - it is about those who can stay, but decide against it and would rather manipulate the system for their personal benefit and society and the American Taxpayer be damned. Please see my comment in #36, above.
More troubling is the misconception of my comment about 'thinning the herd''. Let this be a lesson to all of us to be careful of what we write publish @ 2:16 in the morning.
And yes, the God I refer to I believe is the same one you know, as well. The same God we are first introduced to in the Book of Genesis of the Old Testament in the Holy Bible. A loving and caring God, no doubt - one who loved the world so much that he gave us his Son, Jesus Christ who died for our sins. Is this the same God we are both talking about?
Well, my God, as loving as he is has a very perfect sense of vengeance - whether I understand what He does or doesn't do - this is not my place.
My theory on 'the thinning of the herd' is based on the premises that God created the earth, with all of its natural resources and God created man with all of our imperfections. Early in the cycle man lived for hundreds of years. The life expectancy cycle changed dramatically, at some point post-flood.
Again, this is His plan...not mine.
Man continued to evolve the thinking process and eventually became masters of the body, training very smart people to be physicians...who are often referred to as gods themselves, since it appears to many that they alone have the ability to save lives. It seems the more skilled and educated our society has become the further away we have moved from God.
We are now at the point where 80% of all married couples will have at least one spouse live into their 80's (accoding to Social Security and financial planners). I do not believe that was Gods plan - I believe that is mans plan and the doctors who have god-complexes.
I also do not buy into all of the 'green' issues. I believe that much of it is a diversion. With that being said, I do believe in being ecologically responsible - so lets not turn this into an ecological battle on top of everything else going on.
To draw the two together, if we had left the population alone and lived according to His design then we would not be overpopulated, now would we? If we were not overpopulated, we would not have the same demands on the earth and ecological issues would be much less of an issue.
This is what I meant - this is my philosophy. I alwaysstrive to look to God, Jesus and the Bible for guidance in what I do, but just like everyone who reads this - I am just a human being - far from perfect and He reminds me of this everyday.
God Bless,
John
PS - I should put this pout there now, since it is brought up in subsequent comments.
My own personal life is full of tragedy - please read my profile of any of the blogs about my wife - keyword SHERRI.
Sherri has been a cancer patient since 1995 - when she was given 5 years to live. In April 2007, after she stopped her 6th round of chemo, the doctors did not think she had more than 6 months, without the additional chemo. Well, she is still here 31 months later.
Would I trade this time - to be ecologically conscience - not a chance...but this is the imperfect man talking. Does God have a plan? I believe so and if he allowed her to become diseased, then his plan is for her to come home to Him...yet we fought that plan with every once of our being...while deep in prayer. Has God answered our prayers or tolerated mans way of doing things...I guess we'll never know. But when we pray and we ask for life and receive it, how arrogant are we then to ask for less pain and more comfort? Remember, I'm just a man...a sinner like you but I want my wife here with me. I'll be lost when she is gone. However, at what cost has my wife's survival been to this earth? What resources has she consumed (or been consumed in an effort to keep her alive and comfortable) that the earth would still have, had she gone home to the Lord when He first called?
So, there is a conflict with my position - which is why I have the position. I have lived with this question for years as a personal demon. Are we worthy of all we have or are we entitled to it? And if we are entitled then why us and not the billions of souls living in 3rd world countries? What makes us so special?
Always looking for answers...if you have them, please let me know what they are.
Lenn Harley is absolutely right (once again one of the few Realtors that adds actual insights to AR the ActiveRain community instead of taking part in group-think). Lenders knew going in that in non-recourse states the home was the only colateral. The fact that people can walk away should have been factored into the interest rates on the loans.
What is depressing is that as more people walk away, a rational decision on an individual basis, it will lead to more bank failures and ultimately more taxpayer dollars propping up the financial industry.
That's the price we pay for insured deposits. Deal with it.
At least Realtors can make some commissions on the sale of these soon to be foreclosed homes.
Of course you disagree with me...:-) Wouldn't have it any other way!
Do me a favor and read my response above (36) then reread my post and then tell me if you think these manipulators of society really should be rewarded?
Well glad to oblige on the rant side of things - it does feel good to get things off my chest :-)
As far as the immoral thinking - I'm sure you are referring to the Professors publication, aren't you? Have you read his work?
As far as contract law - great argument - but the real spine of this post is the moral fiber of America and where we have come from and where we are now. For me, it is very scary to contemplate what we may become if our course is left unaltered.
I am with you - this is a great time for opportunity. As an REO Listing agent I definitely am enjoying the benefits of the current economic condition of our country - and truth be told, the more who walk-a-way from their homes the better it is for the real estate industry - because now we have affordable inventory.
This post is not about the self-serving side of my business - it is the outrage of what amounts to a "How to Screw the Bank and The Government" guide.
Please read my other posts for some good local real estate news.
Points well taken and please, I don't mean to minimize my response to you, but I went into great detail on this topic in my response above in comment #42 - please take a look.
As far as the losses in my life - I live with cancer. My wife was diagnosed in 1995 and given 5 years...anyway, read above for more detail, but yes I do write from a point of understanding the topic.
Come on, you don't miss our former president? Not one bit? Ok, top each their own...
The 'walk away' mentality I thought was left wing entitlement thinking, not right wing capitalism. Granted, I am definitely on the right and sorry to say I did not dismiss God, I just did not want that to be the focus...which it turned into if you read #42 above.
As far as unions - yes, they did and do continue to provide me with much. I was raised in a union house. My step dad was a Lockheed Machinist and shop steward...so I know all about Unions and strikes and so on. I lived it. As a matter of fact, I am in a Union - a caregiver for my wife - I had to join the union and still belong - I pay my dues to support the union, even though I have not collected any funds as a caretaker for about 3 years now.
And the Government - I love our Government - I served 10 years as a Cold War Warrior on the Iron Curtain for 6, in the 1970's. I have never missed an election and even threaten myself with running for office as a voice to be heard. So I know what our government has done for me and I still believe we have the greatest government that has ever existed in the history of the world.
Before you go casting stones about me proclaiming to be a self-mad man due to all of my hard work, you should get to know me a little bit better - search for the TAG of God on my blog and you will know who I give all the credit to. Don't I wish every reader to "have a Blessed Day"?
I have over 550 article published on this ActiveRain blog - my life is very transparant after nearly 3 years of active blogging - and I am not the man you describe. Sorry...
This is not about me - it is about the entitlement that society has taken on and that makes me want to puke, sorry.
Very well said, John. As to strategic defaults: I agree an entitlement mentality is driving the trend. Don't get me wrong, I feel for those who are upside down in their mortgages but when we sign on the dotted line, it doesn't say we'll agree to meet our obligations unless values decline. At least it didn't in our Deed of Trust.
It would seem White is suggesting that the only loser in a strategic default is the lender and borrower. Wrong. Indirectly we all pay when folks do this. I also had to laugh at his comment of amending the "Fair Credit Reporting Act to bar lenders from reporting mortgage defaults to credit bureaus." And why exactly would we do that? What's next? Auto loan defaults? Isn't a car a depreciating asset?
Sorry folks. I don't necessarily like that my house is worth $100,000 less than it was a few years ago anymore than the next fellow, but I borrowed X against an asset that was in no way guaranteed to go up in value. Value is a fluid number... and as we see it's not always on an uphill march.
John. Regarding your comment #36. . . . . The home owner who is upside down yet keeps paying because he has the income to do so, is paying for an asset that has negative value. If it were stock, he could easily sell, take a loss on his taxes and get on with his life. . . . . .
If he has an auto that has depreciated, he can trade it in and use the ramaining value towards another auto. .. . . . . Only residential real estate traps a consumer into an asset for which they must spend more of their gross income than the value of the property, if sold today, would cost on a monthly basis. . . . . . That home owner is being slowly drained of his disposal income by paying an inflated price for the asset. . . . . . . He and his family are seriously disadvantaged with respect to his purchasing power compared to buyers who purchased a similar property today. . . . . . It goes on and on. . . . The bankruptcy judge should have the power to modify and reduce the principle balance of what they owe to the mortgage company, but that isn't permitted for residential primary residence owners. . . . . The bank continues to collect the payment for the property and collect TARP money to compensate the bank for any losses, even if they have none. . . . The bank's losses were in securities for which they have been compensated. . . . . BTW, there is an ActiveRain technical glitch from time to time when I comment. . . . . I have no ability to paragraph or edit. Sorry, but I try to make the comments easy to read.
John, I have read your response to my comment. You sound like a very rational, insightful person. The blog you wrote does not reflect that in you. Sorry. I found it an offensive slam against those of us who lean to the left of center. Why? Because it takes a very complex issue, tags it to an extremist (the kind of opposing views that make the 24 hour news shows) view point. It is this type of sensationalism that has divided our country. No longer are we able to discuss a plan of action with the many facets of its effect it has on ALL the people without painting one side black and the other side white. We live in a gray world. I may be more conservative than you in many areas and on many of the housing topics that are part of our real estate business such as the tax credit - I'm against it. I appreciate the opportunity to let you know that we may have much common ground between us.
Well done John, your blogs are thoughtful and always a pleasure to read. Keep up the good work!
Oh, and don't fret about everybody just walking away... the government will just fire up the printing presses and make a new batch of money and that should fix all of our problems.... again.
"If we can get people to quit overpopulating the Nation and the Earth, we might be able to get back to people taking care of people instead of the government having to take care of people. I don't think that's going to happen, though, not with Octomom and that midwest couple with 19 children leading the way."
Jim,
My wife and I have 7 children, how many should we give back... 3, or 4? :)
If there were consequences to "walking away", not as many would do it. Darn morals and ethics. When a system can be gamed and a society (that is having rough economic times) can figure it out, they will go for it, survival of the fittest.
This knows NO political or religious or racial boundaries. Conservatives are doing it. Liberals are doing it. Republicans are doing it. Democrats are doing it. Christians are doing it. Athiests are doing it. Everyone is doing it.
True story, I have a tenant in one of my listings. Let her house go back to the bank because she could. She has 4 dogs and a daycare and is whining how wrong it is that she cannot get a rental home. She's a victim. Guess what, if you would have remained a homeowner, you wouldn't have to worry about that now, would you?
Great Blog, this happened to be one of my favorite songs of the 1960's. How times have changed. You only have to remember the Vietnam era draft and all the young guys who never came back. Just think if that were today!!!!!!!!!
You know you hit the nail on the head - money is the power in this country and it is controlled by nameless, faceless individuals. I actually buy into the conspiracy theory of the Fed controlling our government...it all make too much sense
Thanks for your comment - a fresh prospective. I too have heard of professionals form other fields recommending to their clients the benefits of a strategic default...sad, but true and yes you are right those who are doing this by design are actually stealing the thunder from those who need these programs.
I do appreciate you stopping by and taking the time to write such a detailed response.
First, I'll address the 'thinning of the herd' comment and will reiterate that this is a great lesson for all to be careful about what they publish at 2:00 in the morning.... I hope you have had the opportunity to read my comments in #42 above. There is not much more than I can add to the subject...except for when I respond to comment #59 above.
I have obviously had all day to contemplate just what I was trying to say and to define my personal beliefs. In looking at the scenario of world population I believe it was never Gods plan to control births - every life is to be celebrated. My belief is that the herd should be thinned at the other end...the end that I am rapidly approaching (I'm 55). Look at the resources that I may consume if society can keep me alive for another 20 years...what if I last another 30? Any meaningful contribution I have for society should have already been made by now...I know, Col Sanders didn't start selling his Kentucky Fried Chicken until he was 76 or something....but let's be honest, there will come a time that I will be let out to pasture and no longer be productive. Don't get me wrong, I love life and want to live a long healthy life.
Then there are the diseased...and yes I understand disease, I lost my mom to cancer in 2002 and my wife was diagnosed with cancer in 1995 and given 5 years to live. In April 2007, when she pulled herself from Chemo, she was given 6 months...so I understand about the drain of disease and what impact she has had. Now, please don't misinterpret me - I love my wife and live my life to make and keep her comfortable and there is no one who knows me who thinks any differently. But WE - the aged and the ill are the part of the herd that God did not account for when He designed the Earth, rich with natural resources. But hey, this is just my opinion and I have never been accused of shying away from saying whats on my mind. What was it that Jesus said, "deny me before man and I will deny you before My Father"...or words to that effect.
Moving On...youare right on the money, the post has nothing to do with hardships but the structured strategic default that is becoming more and more common place as a financial planning tool. For those who decide to walk, how can they ever be trusted again? If these leaders of our society who had such good credit in the first place walk away from a loan, then how can they ever be trusted again? And if they can't be trusted, as a group, then how can those with lower credit scores be trusted? I don't pretend to understand all of the pieces or have a clear focus on the moving targets...but this cannot be good for our American Society. It just can't be.
Many great points here - I really like your closing summary statement - very well said..."These people belong to the mentality that it's ok for them to privatize their profits, yet they certainly want to socialize their losses."
I too agree with Lenn with the people that she is addressing. This post has nothing to do with genuine hardship - this report that the professor published is all about those who have the resources strategically manipulating the system to meet their financial goals and objectives at the expense of you and me...the American Taxpayer.
What will happen to these guys if those who lose their home by strategic default receive some sort of permanent black mark on their credit report while those who struggles are given a mulligan and get a second bite at the apple? Boy, won't they be ticked off...and then how will the figure out how to blame society?
For many Americans the walk-away is the last option. However, the professor is advocating those who have negative equity but have the ability to pay, should walk away...and bankroll the mortgage, tax and maintenance dollars for a year or more...because it makes economic sense.
This has nothing to do with hardship - this is greed.
While I agree that Lenn Harley bring an insightful approach to her posts (by the way, do you realize that she has the second highest ActiveRain point score with over 817,000 - yikes!) I think that proclaiming her as one of the few that "adds actual insights to AR the ActiveRain community instead of taking part in group-think" sounds a bit like hero worship to me and that you are probably one of the people that you point fingers at by being part of the "group-think".
I believe the fact that you are commenting on this blog is proof positive that there are others who can add an actual insight to AR
Deal with it...like I have a choice, but I will continue to "Deal With It" by using my voice and my written word...so if this is the country you want for your children and their children then so be it...but me, I'd rather get back to some good old fashioned American Values.
Oh and yeah you are right, some of us are making a very nice living selling these homes that people are waiting for the Cash For Keys before they decide to move...I'm having the best year of my career...and I said the exact same thing last year...so deal with that.
Thank you for coming back and reading what else I had to add to your comments - you did a pretty good job of heating up this discussion which is why I doubt that you don't at least have opinions to those 'larger than life' questions and I, for one would love to hear what you have to say on the topic.
Most importantly, thank you for the kind heartfelt well wished for my wife - them mean a lot to both of us.
Thank you for coming back and keeping the discussion alive.
I understand that there are inequities in our system and that changes should be made and to be honest, most of what you propose makes perfect sense. I'm sure if I got into it, line by line we would find opportunity to debate and even disagree...but you are headed in the right direction.
However, more often than not, buying a home has been the American Dream...not because we can earn 5%, 10% or even 20% or more equity in a year....year after yaer, but because of what home ownership has always represented in this country.
The errosion of the American Dream and turning it into an investment commoditiy, like a precious metal or a stock does not sit well. Think about what is BEST for America - I'm not talking politicians...they all work for the FED. I'm talking about a society that we live in, raise our children in, work in and call our neighbors our friends.
Just because the value drops, does not mean it won't rebound, does it? well it may not happen fast enough...well, according to whose time line? There are cycles in this industry...heck there are cycles in life...life is a cycle.
Now, if you want to talk revolution and have a political coup and reinvent America from the grass roots, that's a whole different story. But the defiance of one homeowner after another who is not being defiant but greedy and manipulative, these are not the type of people that I want to affiliate myself with. Again, I AM NOT DISCUSSING HARDSHIP CASES HERE.
This current wave of financial manipulation, I feel, is an insult to everything that America stands for. It is a by product of the "ME GENERATION" that really started back in the 1970's and has continued to evolve until it has reached it's current state of perfection...The ME GENERATION is not the Generation of ENTITLEMENT!
Glad you took the time to dive a little deeper into who I am. For the most part I do consider myself to be fairly rational and insightful, so thanks for noticing.
As far as my blog article...well what can I say, I can't tell my whole life in one post - I have over 550 articles archived here to do that for me. I am very transparent - so if anyone really wants to get to know me and how I think and what I stand for...it's all right here.
To be honest, I'm not sure why you think this post is a slam against the left. It is a slam against then entitlement mentality that dominates our society right now. If anything the strategic defaulters I profile are anything but on the left - they are more than likely on the right and consider themselves to be savvy capitalists taking the most they can while having the least amount of skin in the game.
As far as political views, I have definitely shifted from my extreme left radical youth (I marched on the Pentagon in 1972 in a Viet Nam War Protest) to my more conservative right wing approach to thinking about society. Does this mean I am a Republican - no, truth is I don't trust any of them and really am ready to buy into the whole FED controls the world conspiracy theory, and the "New World Order". Look hard at it - it all makes sense.
Gregory, the truth is we all have a lot more in common with one another if we allow ourselves the opportunity to get to know one another...so please come back.
First let me address your comment about the size of your family. When I read that on my Blackberry this afternoon, I busted out laughing...I'm just wondering, if you had to give any of them back, do you have one or tow at the top of your list? (that was a joke)
I address the thinning of the heard comment further in #42 & #66 above. You probably already read 42 - but 66 address your comments here.
As far as worrying - I guess I can take the I don't care attitude...cause I am an REO Listing agent and I get to sell them and make my money...fresh from the government printing presses!
Glad you guys stopped by - I'll look for you again, soon.
I was wondering if you were going to find this or not...
Well if you were named for this song, you must have enjoyed the video...how different music was back then.
I remember the song. There was this really hot girl in my homeroom, Renee Something-or-other. Never gave me the time of day...and always associated this with her, because I never got anywhere with her...no matter how hard I tried.
You are tight - this story has no one group that it dominates -everyone with half a gumption is giving it a shot and society will have to shut it down to control it because those pesky morals and ethics are being eroded day after day.
Love your tenant story - you don't have aplace for her though? Maybe you can refer her to be a caregiver for some local kids so she can further impact our society by manipulating the minds of our youth.
Glad you hit on this aspect of my blog post. The military is very near and dear to my heart. Any loss of life is of course tragic on an individual level. However to put the current war in perspective, it is safer on the streets of Baghdad than American roads with drunk drivers - In 2008, an estimated 11,773 people died in drunk driving related crashes while American troops who have died in the war on terrorism is only slightly higher since the war began than died on 9/11.
Society today could not handle the loss of over 60,000 young men and women.
Most of the sellers I come across have very legitimate hardships. Of course, I live in Florida.
But the manipulation thing, who is the real source of this manipulation? What it the governement who changed the rules and thought everyone should be a homeowner? And why? Was it for wealth on wall street with the cdo's and derivitaves that made so many wall streeters fat?
Are most of the owners struggling now the Kool-Aid drinkers? Who made the kool-aid? Was it the predatory lenders? The builders, the Realtors who went to shows and sold homes to owners that never saw them and were sold an idea that would make them easy money in the form of a flip?
You ask some great questions...many have been debated elsewhere. To address them here and now would be a further distraction of what this post is really all about...the evaporation of "The American Dream".
A successful society is composed of many different elements. Yes there is corruption at the top, there is corruption in the middle and now homeowners at the bottom of the formula instead of demanding justice are taking a 'me too' approach and feeling entitled to as much as they can scam from the 'system'. The problem is the system that is being hurt is not the fat cats from wall street (heck, this could even be their design) but it is the citizens of our communities...and these are the people that America is really all about.
By the way, thanks for the video of The Left Banke that you posted. It's so cool when I can finally put faces to a song from my childhood. That is a classic song and I have never seen this video or this band, for that matter... ever. The lead singer looks like he's 15. Thanks again John. -Cory
No problem - the whole band was in their teens. It was fun to go back. I do this thing in my head whenever I'm in any conversation...or whatever, when something registers with me I often, subconsciously, relate it to an old song. When I was in Jr. High, writing for the school paper, I had a column where I would tell a stroy using the names of varius songs and or group names - it was fun...and I still do it, so when I saw the WSJ Headline with "Walk Away" I instictivly thought of the song. It took 10 minutes of Googling to get it right...but I got it. You know lots of artists did this song, too.
No problem - the whole band was in their teens. It was fun to go back. I do this thing in my head whenever I'm in any conversation...or whatever, when something registers with me I often, subconsciously, relate it to an old song. When I was in Jr. High, writing for the school paper, I had a column where I would tell a stroy using the names of varius songs and or group names - it was fun...and I still do it, so when I saw the WSJ Headline with "Walk Away" I instictivly thought of the song. It took 10 minutes of Googling to get it right...but I got it. You know lots of artists did this song, too.
I think we are seeing a lot of this because after two years they can buy again and maybe at 2/3 the price they paid before the the same house. I think the banks are not helping themselves by taking so long on short sales and foreclosure, it makes people just want to do it more.
People should be walking in droves, we all bailed out the banks, they walked away from their responsibilities, they should also move on.
The consumer needs to look at this as a financial transaction, what will garner them the highest net worth over time, walking or staying. That is exactly what the banks did when they sold out all of us mortgage holders.
FICO is a number, wealth is security for your family, it is an easy trade of for me.
Great post!
Robert Huntsinger
Empire Realty
Upland
This is one great can of worms to open.....frankly, the drive to be politically correct has fueled much of the issues that we experience today. So much has become 'relative' that we've ignored the very values that should be taught to our children, as they were taught to us.
Sadly, the Strategic Default, Buy and Bail, or any other financial decision absent of a legitimate financial, medical, or employment hardship, is nothing more than pure BS! This is not what this law professor is addressing. That was crystal clear to me. What he is encouraging and advising is that people who 'got into' their respective markets at the peak of the market, should be able to now effectively walk away. Funny how if they had made a profit, they wouldn't be thinking the same thing. I am certain of that.
Now I too have benefited greatly from this current market, and will continue to do so. However, I do not participate, encourage, or advise anybody who asks me to assist them in facilitating this type of fraud. If they have a legitimate reason, which we will discuss, they are referred to an attorney or other entity that can address their specific situation.
Having authored my book, I can tell you that as part of my media participation, this has been an ongoing topic of discussion.
I appreciate that you've written this. I may officially come back to AR.....
John: that tenant is officially getting the boot now. She is delaying her move out another week. (she was told to vacate the 15th of october) Victim victim victim. If you want to be in control of your own life and not be a victim, sometimes it hurts to do the responsible thing - like buy your own house and stay in it - even if it loses value!
As for the song - it is my theme song. It runs through my head everytime I feel like picking a fight (I am hot headed yet a libra.) I try to live by balance over emotions but that song turns on when I am ready to blow a gasket, LOL
When I heard about this professor's paper, I, along with other people who were in a seminar with Steve Harney, were filled with disgust tha an academic would write such drivel. As you said --- this espouses the wrong ideas: entitlement, irresponsibility, lack of accountability. To suggest that the homeowners first buy more things like a new car before walking away from their home? Wow!
There are decent people who are doing their best to salvage their home, their credit....and now here comes this jerk who bssically tells them to not just to throw in the towel but to scam the system?
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Posted by 
Christopher J. Horlacher, Esq.
;)
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Thank you for a very insightful article. It is a complicated world we are living in.