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127 Comments on Has the old adage “you don’t pay, you don’t stay” become obsolete?
Keeping your word is definitely not being stupid.
However, with regard to staying... I have had people who could no longer make their mortgage payments come to me asking for help to find a rental. I asked them where they were in the foreclosure process. Sometimes they had just stopped making payments, sometimes they had gotten a notice of default.
Because of where we are, I always told them to stay put and take care of the house until they got notice that the foreclosure was finished.
Why? Because more often than not it was late summer or early fall. If they moved out, winter would come and the water pipes would freeze long before anyone from the bank's asset care department arrived.
I used to handle Fannie Mae listings and I can't tell you how many of them were either flooded because Spring arrived and the broken pipes thawed, or just needed new pipes, toilets, and water heaters because the house had been left to freeze.
Richard - I agree with you in many ways. Bad mortgage decision when money is easy stunned the market and banks. The fallout though that put some people upside down was the loss of their jobs. I know people who have been unemployed for over a year. Not dead beats. I am talking about people sending out resumes, filling out applications and hoping for an interview. I have also seen businesses taking advantage of the situation low balling what was once good paying jobs knowing people out of work will take less for a job. I would say some empathy for those type home owners is deserved.
A "one size fits all" position is not appropriate here. Each of us does what we feel is in our own best interest, and that includes the lenders, the mortgagees, the mortgagors, the loan servicers, the home sellers, the home buyers, the politicians, the insurance companies and many many others.
Insurance companies "give their word" that they will pay claims, and we all know how that goes. Corporations borrow money all the time and think nothing of defaulting when it becomes clear that the original plan did not work out.
Why is it that only the homeowner who is faced with conditions beyond his control is the only one who is expected to live with what turned out to be a bad decision?
As has been said many times, there is no "morals clause" in a loan or mortgage document.
Homeowners have responsibilities to their families as well as to mortgagees, government and society. Sometimes those responsibilities conflict with each other.
Richard I agree with you to a large extent. In the larger context a number of social contracts have gone out the window. Government should not have dictated bad loans be made. Banks should have been allowed to go out of business, Friends of Angelo should have been locked in a cell with him. I could go on but I think you get the point. That does not mean people should expect to keep a home they are not paying on. However, I do not think the problem started with them.
Richard,
I think you are one of the few people who would move out as soon as possible, out of a sense of duty, in case of mortgage default. It would be the right thing to do. It might happen more if the lenders were more organized in getting on with the foreclosure process, especially when the homeowner tells them to proceed. But given the state of affairs in the foreclosure world, it takes months and on occasion years for the lender to finish the foreclosure. If the borrower moves out, there is a vacant home in the neighborhood. Stuff happens to vacant homes. It is my belief, therefore, that the borrower should act as a dutiful and careful custodian of the property. That is, not willfully destroy or neglect it and paying the property taxes while the lender gets their ducks in a row.
Does anybody have any thoughts regarding this logic?
Richard, Here in Washington State, the Legislature just passed a bill requiring that before the non-judicial foreclosure process can begin, the home buyer has to be sent a notice by the lender offering a mediation meeting. For any who take the mediation process, it will basically just add 90 more days to the foreclosure process, and thus the time before they have to get out of the house.
Richard you post raises the question. Are making payments on legal obligations only a quaint notion from the past ?
Wishing for the "good old days", when a person's word and a handshake was all it took, no matter what type of agreement was involved!
These are certainly different times! Most people are really struck with difficulties ... some are working the system.
Hello Richard,
It is amazes me how some people can do that...
Thanks.
Hi Sylvia #114,
I agree. It helps if the homeowner can maintain the home, the bank, the neighborhood and the new owner,too.
Richard, thanks for your thought-provoking post...it gave me the inspiration to write one of my own! :)
Sylvia, I like your point in comment #114...I mentioned it in my blog post as well. :)
Richard,
I think it goes both ways. Banks and mortgage companies should have been responsible in lending only to those who could afford the mortgage.
Buyers should have known what they could afford to pay monthly regardless of what they were approved for.
It is a big mess, and every situation is different. I would not want to see more vacant homes. I think the homeowners should stay in the home and care for the home while they occupy it. It bothers me to see homes "trashed" or left to have mold grow in them. The banks should be more timely and shorten the foreclosure process.
I think it is unaccpetable that banks "loose" loan documents. Where is their responsibilty?
Great conversation.
What's the other option..... Don't pay - don't stay.....hmm so if I borrowed the money, decided I didn't want the house anymore, should't I be able to give it back?
Why is the consumer the "bad" guy? Ok, now before everyone get's their panties in a twist, I'm not advocating borrowers walk away - I'm just saying aren't they still upholding their end of the deal?
HI Richard, I am like you, my word is my bond. Do younger people know what that means anymore? Seems some do not. I use an expression when people do these types of things. It's called "bad form". I don't think too many people know what that means either. What you say and do is part of what forms your character. If you don't pay, you don't stay.
Why can businesses fail and no one thinks anything of it. Why can the banks get bailouts and we pay for it. Why shouldn't people act the same way. Why can government steal our money and all we do is wring our hands. Get with it people, this is nothing compared to the future of real estate, and it will be because of the governments and banks actions.
While I agree with the premise that we should honor our word and our commitments, and I certainly do so on a daily basis, we also have to consider that many homeowners are facing legitimate hardships from a job loss, death of spouse, etc. The bank has every legal remedy to take the house when they decide to, and the homeowner has every legal right to stay there until they do.
What I see is two types of default. Unfortunately, Type One is based on "no other choice." They are losing the house through no fault of their own . . .sometimes, bad things happen to good people. Type Two is the strategic default . . . letting the house go because it is a wise financial decision. I don't think anyone can condemn the Type One's. The Type Two's are where the arguments arise. My feelings on that one? If you are going to require one party to an agreement to have high morals and live by some ethical standards, then you must require the same of the other side. That worked pretty well when people dealt with small community banks. The bankers were held to a certain standard by the community. They lived in that community. Unfortunately, the big banks that have taken over this country today have no morals, ethics, or accountability to anyone. If corporations want to be people, they need to acquire some humanity.