Strategic Mortgage Defaults - Beyond A Contractual Decision

Reblogger
Home Stager with from Alexandria

Loved reading your comments-I also had a very strong reaction to that show. You are darn right we wouldn't be sharing any profits on the sale of any house with the bank. The idea of walking away just does't feel or sound right-business doesn't work that way.

We all need to be responsible for our choices, be it to buying a home or running a huge conglomerate. To walk away just seems to perpetute that "not my responsibiltiy" attitude that so many people are choosing today. What lessons are you teaching your children? Our word must be our bond in society or we are lost!

Original content by Sara Bonert

The 60 Minutes segment last night has created many discussions on whether strategic defaults are right or wrong.  

Some say is it simply a business decision.  If you take emotion out of it and look at the black and white facts on paper, strategic defaults can be the right thing to do from a financial position. And haven't businesses been doing this for years?

Those that are against say you are morally obligated to pay your debts when you are in a position of being able to do so.  If everyone defaulted, what would that do to the economy?  What does the action of walking away do to your neighbors and the neighborhood? 

To make a blanket statement of being for or against something is hard, as there are so many unique situations.

For me, this topic is especially hard.  I have a property I bought in Florida in 2005, with 20% down.  The property is today worth about half of what we paid.  There has been drama after drama with the home (termites, bees, squirrels, insurance nightmares, and of course, tenants from hell).  Money pours out of this home every year, in amounts we never dreamed possible. Insurance payments on the home have increased over 100% since we purchased it, taxes have gone up significantly, and rent rates have declined.  I can't even begin to describe the stress and tears this home has caused my husband and me. 

From a financial position, we should have walked away years ago. 

From an ethical position, we can't. 

Do I have a moral contact to pay US Bank every month?  No, there is no moral clause in our mortgage contract.  But there is a moral clause between me and the person I have to look in the mirror at every day.  So I keep paying. If the home has increased in value, I certainly wouldn't expect to share my profits with the bank.  This was a risk I knowlingly took. 

My husband and I are blessed to be employed with good jobs.  It absolutely sucks to get the bills for this home every month, but we are fortunate that we can cover them.  If paying them keeps one more foreclosed house off the market, then we will continue to pay them.  And when the day comes that we actually sell the home, I am sure we'll be bringing money to the table.  That will suck too.  And while we may be a little poorer, we will at least feel good about ourselves that we acted as ethical as our financial position allowed us to be. 

 

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