From the New York Times
“New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.
In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.”
You know, I am one of those guys that figures that when you sign a contract you are bound by the terms of the contract. We all seem to make bad financial decisions from time to time, but the new “American Way” seems to be a bit mercenary in terms of compliance. It goes something like this, “if this contract goes well for me, I’m all in, but if things don’t work out so well, I’m outta here.” I will grant that a great number of homeowners now find themselves underwater on their home valuations, and this may or may not be long term situation, but walking away from a home with a mortgage default is certainly a new method of viewing consumer responsibility. The general line of thinking is let someone else, a third party, eat the loss and you walk away without responsibility. Why even have a mortgage agreement to start with?
The New York Times Reporter continues,
““Since the beginning of December, I’ve advised 60 people to walk away,” said Steve Walsh, a mortgage broker in Scottsdale, Ariz. “Everyone has lost hope. They don’t qualify for modifications, and being on the hamster wheel of paying for a property that is not worth it gets so old.”
I can’t deny that walking away from a home where you are upside down solves the homeowners problems, but what sort of broker recommends defaulting on a home? It just defies the way we have done business in this country, contractual law, and moral responsibility. No one forced these homeowners to buy homes at skyhigh prices, they made the decision to buy of their own volition. It appears that most of these homeowners are still employed and just tired of overpaying for a home in which they misjudged the future price. Am I missing something here?
On the other hand, if a homeowner has lost his income and can not make his payments, well, that is another story. But if the homeowner is still employed and his payments are still part of the budget he calculated to pay for the house, I find it difficult to justify walking away from the home because you don’t like the mess in which you have put yourself. Prices go up and down, that is the nature of a market driven economy, and most of us have to live with the consequences of rising and falling prices. On the other hand, there seems to be a distinct group who doesn’t like the downside of the market driven economy and chooses not to participate. I’ve heard it all, I guess.
