The morality of walking away from debt

NEW -> Contingent Buyer Assistance Program
"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."

Maybe two wrongs don't make a right, but this is an interesting way to put it.
 
You could also look at it as a slave revolt. All the debt slaves are breaking their bonds and revolting...

They aren't breaking anything. They're adding the monitoring ankle bracelet of a default or BK fueled 30% credit card rates to their credit fueled lifestyles. They will pay more, and more and more and get less, and less and less, while living in a not as nice place, working even harder and worrying about their purchases even more. All because they willingly chose to put on the velvet lined shackles of a new TIC planned home.
 
NSR, they no longer need to pay their backbreaking mortgages. Yes, they'll get a big ding on their credit report, but if they're doing this, the credit report hit is far less significant. Frequently we're talking about saving over a thousand per month by escaping homedebtors prison. In any case, if they stay, the resulting financial stress is going to put them in universal default soon anyway, if they aren't already there.
 
You can live without credit cards. These people might, after a period of adjustment, might actually be happier without the credit card noose around their necks. It might actually become fashionable to live without credit. Then the debt chains will truly be broken. Instead of bragging on expensive toys, they could brag that they owe nobody, and look down on people with unpaidfor toys.

Naahhh, never happen. . .
 
NSR, they no longer need to pay their backbreaking mortgages.

It doesn't matter, they're fully tapped out anyway. The key word is backbreaking. Even without the reset or the expiration of the Option ARM, they're stooped under the load of their debt. The foreclosure or BK will just add greater weight to their load.

They aren't sticking it to the 'man'. They aren't making the bank eat it. In the end, their own pension plan and the State will eat it. So they still get to pay for it in the end.
 
IR, maybe it's happening? I've been posting so much cause the hub and I have been felled by some sort of awful stomach thing.

Anyway, we went to the dr, and somehow the housing mkt came up with the nurse. After saying she knew at least 3 people losing their houses(in different areas of Brevard County), she said that her house had a mtg of only a few thou and was going to be paid off shortly. It's small, but we have no problem with the mtg. So we say we'd just paid ours off.

A reverse brag-fest.
 
After a homedebtor escapes, their monthly payments go down. Substantially. That makes life much easier. In most cases they then have the option of permanently escaping their debt by paying them off with the freed cash. Many won't take it, but that's a substantial improvement from before - most people in these insanely overpriced top-of-bubble homes have no realistic way to pay down substantial debt.

Yes, a default will impair their ability to get new credit. But that just isn't worth 1000-2000/month. They come out ahead.

It's not yet clear who's going to pay for all this. Might end up being the Bank of China. In any case, their personal default makes very little difference to their pension or their taxes. They will get the same hit whether they stay or leave.
 
I hope they all walk away and let the housing market burn to the ground...... why should joe blow be holding the bag when the realtard, apprishole, and loan whore can all walk away from it smelling like roses. the smart investor already took their money and ran. the fraud loan people already got their money and ran. so why shouldn't average american family get out too?
 
Debt madness contained?

Debt juggernaut rolls us into a madhouse

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/06/ccjeff106.xml
 
Troubled homeowners: Can't pay? Just walk away

More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020610
 
http://thehousingbubbleblog.com/?p=4164

Comment by Frank Giovinazzihttp://thehousingbubbleblog.com/?p=4164#comment-1224949

2008-02-17 07:51:09

We have direct dealing with three borrowers who refi’ed, built a house for themselves “down home” [2 in Georgia, 1 in W. Virginia] and are now in default.

All three refuse to sell new home to get current on mortgage.

All three would easily be candidates for a victim article [poor, uneducated, minority].

All three will walk away to a brand new, paid for home.

All three gamed the system, but if you were to look at them, you’d have to say, “yeah, crazy like a fox.”

While many middle class victims just spent the refi money on lifestyle, an unknown percentage are walking on sunshine.

>(Comments wont nest below this level)

briansthreadedcomments.php
Comment by richttp://thehousingbubbleblog.com/?p=4164#comment-1225003

2008-02-17 08:23:46

I just don’t understand this. Isn’t a refi a recourse loan and in that case, the lender can go after the new house down home? No?

briansthreadedcomments.php
Comment by Frank Giovinazzihttp://thehousingbubbleblog.com/?p=4164#comment-1225089

2008-02-17 09:09:49

ric, you’re probably correct, but right now they are getting away with it. Time is going to tell whether or not the lenders pursue collections on people who’ve walked away from $100k-$500k refi’s. For the most part the defaulters are going to be judgment-proof, due to the large size of the default.

But I’ll also bet that some deeds are already in other names. ie., spouses, offspring, etc.
 
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