Burn Your Mortgage?

By
Real Estate Agent with Century 21 Adventure

Recently, I came across an article on AOL's Real Estate page highlighting an article in the blog DailyKos.  For those not familiar with the ‘Kos, it is devoted mainly to political and social commentary, along liberal lines.  In the article AOL cited, the ‘Kos urged those homeowners struggling with their mortgage to, walk away from their unpaid mortgages.  In their words:

"The real risk to the banks and investors is that the people in those homes might just decide to walk away. And that's what we must do. Doesn't have to be everybody, of course; but anyone who finds themselves seriously underwater with no hope of ever recouping their investment....just walk away Renee. Morality has nothing to do with it. You are a cog in the wheel of a machine that is killing this country and if you remain a cog you enable it. Remove your cog and the machine will not keep running. Remove millions of cogs and the machine gets replaced."

Underwater

In other words, the Kos is advocating mortgage debt anarchy; a revolution of sorts.  It then cites Realtors from across the U.S. who seemingly justify the action.  Why?  In the words of one agent, since the economic and housing recovery is projected to take perhaps as long as a decade, "Isn't it better to just cut the losses up front"? 

According to a recent report by First American CoreLogic, nearly one in four are underwater or upside down with their home mortgage.  In other words, they owe more for the property than it is worth.  According to the N.Y. Times, the housing collapse left 10.7 million families owing more than their homes are worth.  Is that a problem?  Of course it is.  Will walking away from a mortgage solve that problem?  Not hardly.  Have the Administration's loan modification measures worked as fast or as well as hoped?  No, they haven't.  Nonetheless, the programs were enacted for the affected homeowners to use.  I have yet to hear of a homeowner not being able to remain in their home as they attempt to modify their payments.

How about you?  If you know of a friend, relative, or client that has been forced out of their property despite the fact they've continued to make a payment, or partial payment, please let me know.

Is walking away from a mortgage debt justified?  While its track record isn't perfect, the short sale is getting its act together.  Perhaps, for both the lender and the those upside down, it is a better alternative than burning the mortgage.

 

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Comments (2)

Craig Richardson
National Realty - McLean, VA

Jim, there are consequences for our actions, and despite this liberal rag's suggestion that it's as easy as "walking away," as you know the reality is different.  In addition to the moral issues, there are also legal and financial reasons not to do this, many of which that have gotten a lot stricter since the downturn in the market.

Jan 26, 2010 10:44 PM
Jim Rake
Century 21 Adventure - Fredericksburg, VA

Craig,

You're exactly right.  You have to wonder where this "entitlement" mindset came from?  (Perhaps it has something to do with "liberal", although I hesitate to generalize.)

Jan 27, 2010 12:55 AM