Last week was quite a week with mortgages bouncing up and down in a matter of days while Wall Street and the financial community tried to decide if the FED move was good, bad or mediocre. All of us in the South Bay-Beach Cities were also trying to decide how this cut and further cuts would affect our local real estate market.
Amid all the breaking news there have been a couple of related stories that tell a lot about the current housing crisis and the mindset of many consumers. Peter Viles who writes the The LATimes real estate blog LALand posted an article about people who were just walking away from their homes. One comment from a person who labeled herself as Condoblue wound up as another post. It seems that Condoblue has a mortgage that is getting ready to go up and her property has lost value.. so instead of making her payment ( which she can do) she plans to buy another home and walk away from her current home because it's good business.
Meanwhile over at CBS ....60 Minutes offered a report Sunday titled House of Cards:The Mortgage Mess. After all the requisite chat about rotten loan brokers and poor helpless buyers Steve Kroft talked to Matt and Stephanie Valdez, who bought a condo that went down in value. Although they too can make the payments they are contemplating walking away from the property... because it doesn't make sense to them to make the payment when prices are going down.
To Condoblue and Mr and Mrs Valdez I have three words... Shame on you! Didn't your parents teach you anything about ethics and values. You made a deal with the bank.. they would give you the money and you would pay them back. I don't believe the bank held a gun to your head or threatened to break your kneecaps if you didn't sign on the dotted line. However Condoblue and Mr and Mrs Valdez believe that only means something if prices are going up. If prices go down it seems that all bets are off. It appears that the only time someone has to honor a commitment or a contract is when it suits them.
What I found even more appalling was the number of people who seem to agree with them. Of the 69 comments about Condoblue most didn't find anything wrong with her stance to skip out on the old lender while she lied to the new lender. On the 60 Minutes site there were over 200 responses to the story. Those who found walking away offensive and wrong are barely in the majority.
It may seem to many that walking away is a no- brainer.. like returning a shirt to Nordstrom or a TV to Costco. But while Nordstrom will still take just about anything back... Costco had to change their policy on electronic items as consumers took advantage of them.
Those of you who say Banks are rotten and justify not honoring a contract by saying the principle is different are not getting the big picture. If you can afford to make your payments and choose to walk away you are taking advantage of not only the lender but all of us. In the case of Condoblue you are also committing loan fraud on your future purchase. For those of you who agree with this I have one word... DUMB!
Do any of you really believe that banks are going to let a bunch of people who can afford their payments walk away from their obligations without a consequence. They may not pay that consequence but I guarantee you will. You think the liquidity problem is tough now.. just wait. Banks make loans and charge for them based on risk. As more people who are not in dire straights walk from their obligations the banks are going to charge those looking for a loan a hefty premium to make up for their losses.
In addition to the costs of borrowing there is another little matter that may have escaped all of you who think that massive foreclosures are peachy because you will be able to buy a house cheap. You might want to rethink that if you work as a teacher, civil servant or for any state or government agency because you like their retirement benefits. If you have a company pension plan or use your 401K to buy stocks it might be a good idea to not be so gleeful. Most pension funds and mutual stock funds have part of their portfolios in financial stocks. B of A and WAMU are publicly traded companies.. if they tank so does any of the stock held by investors. Your pension fund or mutual fund could be one of those investors. That just might affect your benefits.
It's one thing when a little kid does something bad and tries to blame his imaginary friend. It's quite another when an adult decides to take no responsibility for their actions and skip out on their obligations. Frankly I have zip, zero, nada sympathy for Condoblue, Mr and Mrs Valdez or any of the others who are financially capable of making their payments but believe that walking out on a contract is OK. Aside from the fact that you are incredibly immature... you are also twits.
I bought my current home in 1991 at the top of the market. I watched the price go down and down. Yet it never occurred to me to walk away from my home or stiff the lender. It was not an option for me or any of the rest of us who hung on to our homes during some very bad times. I signed a contract and made a commitment. I stuck to that commitment.
That's not to say I didn't believe that ultimately my home would be worth more then I had paid for it... I knew that even as the market was tanking. I knew values would come back. I had a down payment to protect and I wasn't going to walk away from that. Also my parents taught me to honor an obligation. If I gave my word I stood by that. I still believe that is the way to handle any situation business or personal.
So to all of you who are walking away from your homes because you think you only need to honor an obligation when it suits you... Bad behavior is bad behavior no matter how you try to justify it...
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This shows the lack of responsibility that people have in today's society. They don't learn from their mistakes, they dump them on someone else and move on.