Friday, August 27, 2010

It's Okay To Walk Away: Let's End The "Morality" Double-Standard On Mortgage Defaults


More and more commercial real-estate companies are doing what many indebted homeowners would like to do: Walk away from mortgages on properties that are now worth a lot less than they paid for them.
Today's Wall Street Journal highlights three major developers - Macerich,Vornado Realty Trust and Simon Property Group - that have recently decided to default on mortgages.
When companies do this, no one bats an eye--it's just "smart business."
When ordinary homeowners think about doing it, meanwhile, the mortgage industry and government begin moaning that a mortgage is more than a business contract. It's a social contract, in which homeowners have a "moral obligation" to pay.
That's bunk. An individual mortgage is no different than a corporate mortgage. If corporations are allowed to walk away from mortgage obligations without feeling shame and guilt, then individuals should be able to do so, too.
The contract homeowners sign when they take out a mortgage spells out exactly what happens if the homeowner stops making payments on the loan.  The lender has the right to foreclose on the house, taking the homeowner's downpayment with it.  In addition, the borrower's credit rating will usually get destroyed, and, in some states, the lender can come after his or her other assets to recoup the capital the lender has lost.

38 comments:

  1. the banks already got taxpayers' monies from the bailouts. mortgages already paid. u can send in your keys to the banks.

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  2. It's not wise to encourage people to "walk away" unless you've counseled them to discuss said action with an attorney.

    Each state has various laws dealing with the ramification of said "walking away". Depending upon the state, walking away may still not solve your problem!

    A highly irresponsible post you've just put up.

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  3. two wrongs do not make a right. If we embrace the walkaways the way of life many of us have known will be gone.

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  4. That's a major problem for America. When the rules of law are not enforced by the Gov't, such as allowing illegal immigration which is against our Constitution, the Gov't bailing out specific banks with taxpayer money, again breaking the laws of the Constitution as to disproportionate dispersal of tax monies, when Commercial properties are not held to accountability on their 'walk away' debts, then what makes the average citizen have any respect for any laws? We are becoming a Nation of lawlessness where laws only apply when convenient. In other words, a Nation ruled by men, not by the rule of laws. Sorry state of affairs for the country but predictable.

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  5. I completely agree with 8:57. it is a sorry state of affairs but further undermining the rule of law is no the way out. There needs to be other programs or relief...

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  6. Actually, legally, the official stance is we want "efficient" breaches of contract because it is better for both parties. That is what they teach you in B-school and Law school.

    Of course, where it does not benefit a normal person, it becomes iron clad and a moral obligation. Flip it around and the corporations are quick to break their contracts. If it loses money, they'll break their contracts instantly. They'll just force you to come after them in court, which most people won't do, so they get off scott free.

    If you do take them to court, you'll quickly find that you don't get the full benefit of the deal even when you try to enforce it, as courts are unwilling to force corporations or banks to do so.

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  7. You may justify your actions and live with it, but know someday you will face your lord. He will not be amused with your transgression and your justification that everyone else is doing it.

    Do not fall into that trap. Time to gut up and be a man of your word. Without it you are a piece of human garbage just like the bankers and politicians that created this mess.

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  8. The minions here just don't get it. Fiat money is FAKE. Cost .06 to make a $100 bill. The rest is created by AIR. ARE YOU WILLING TO pay back air 100 times fold to your "LORD" the Banker? Religion and Bankers have created this scam for hundreds of years and you all fell for it, hook line and sinker.

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  9. At fault is extravagance, gluttony, greed, envy and pride. Along comes 9:42 to cover the remaining 2 of the 7 deadly sins: wrath & discouragement.

    You are part of the problem, not the solution friend.

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  10. 9:56 another religious fanatical terrorist, hoodwinked and trained to obey the bankers and his religious leaders. SUCKER. You're the problem, you just keep the spinning lying scam going.

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  11. 10:07, another delusional bigot that evolved from a monkey. Eating his own excrement in his self imposed cage.

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  12. 10:38 another misfit mindless religious junkie evolved from Benny Hinn. As he sends his cash to the religious scammers to finance his houses, cars, vacations and mistresses. Stupid apostle,

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  13. Look what eating monkey crap did to your brain. So sad 10:46. Now run along little monkey and find another of your kind to clean off their lice.

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  14. 10:51 fantastic rebuttal! Go chew on Adam's Rib.

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  15. This comment has been removed by a blog administrator.

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  16. I can't come to this site any more. Too much of

    11:14

    here for me to visit here any more.

    Bye~! :/

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  17. Kids Kids!

    Don't make me come in there and put you both on time outs!

    You Jesus Freak in that corner and just shush and listen to your DC Talk Cd...You angry atheist guy sit in the other corner and listen to your Bill Hicks cd.

    If I hear one more word it's no American Idol and no overprocessed, artificially flavored, chemically spiked Chef Boyardee ravioli's for dinner!

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  18. This website has become the unofficial home for the 99-weekers, and just about as useless.

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  19. QUESTION FOR EVERYONE....when an individual who for whatever reason (illness /loss of income ) has lost their home in the past and had a sizable amount of equity but couldn't sell before the banks foreclosed .....did they have a chance to get their equity? ???? Before the banks took the home? ???

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  20. The laws vary from state to state and not everyone will benefit from "walking away". Talk to a lawyer before you do this.

    If you walk away from a home and you have a large equity in theory you could get some of that back but in practice you probably won't. If the equity is so large that you feel it is worth hiring a lawyer to fight for you then maybe you will succeed.

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  21. Anarchy is the new rule of law. Makes you proud to be an legal American.

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  22. Outside of Judaism, the major religions ban interest and usury. They actually had banned banking entirely, that is why only Jews were bankers historically.

    So if you pray to a Christian or Moslem lord, he already will damn you to hellfire by being a usurer and using banks to begin with. If anybody actually had any idea what religion actually required they would not make such a dumb argument.

    Religiously I have never heard of paying back loans with interest, or even owning businesses, because that stuff really isn't in there. Religion has nothing to say about it because the current economic system would never have been created in a religious nation.

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  23. Some are getting away with stealing...Some are doing it because there is no way for them to pay.

    If the bank gets the $ from the government at .25% or so why not drop the rate to 2% on the homeowners?

    Banks would make steady money...So many would stay...So many would be able to afford the repairs and maintenance that they been lagging on...So many industries would be able to grow again and hire...Property taxes would be smaller but paid...Crime would fall and there would be a stabilization.

    Maybe temporarily if the spending habits haven't changed and government doesn't make the cuts but I could see it floating the economy for at least 2-4 years of steady growth.

    Sadly I think we went past the point of no return as most people barely hanging on have no resources or funds left.

    But for millions it would be cheaper to pay $400-$1200 a month for a small house then rent at $600-1400 for a crappy apartment.

    The problem has and will always be GREED and GLUTTONY.

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  24. i would default in a ny minute
    but the sheep need to be sheered
    you pay and we party

    right what is right?

    inflation the deflation and debasement of your money

    the bankers are to blame no convictions!

    only a fool wouldnt default on some kind of honour beleif
    save yourselfs because you are already doomed
    by a out of control goverment

    but many will lose it soon
    suckers !! for the bankers
    fools dont deserve money
    sheered like sheep

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  25. :( I just checked zillow my,I'm underwater, my house DROPPED 20% IN VALUE sinced I purchased it a little over a year ago!!!!! WTF was I thinking?!?!?!?! DAMMIT!!!!!!!!! Anybody know if Nevada is a recourse state?

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  26. You must live somewhere and you made that choice when you bought. A deflated home value only matters if you are a flipper or forced to sell for personal matters. Most of you should take a chill pill and relax. Home values will return - real estate is a finite commodity.

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  27. I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

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  28. @7:14: Yep, great quote. Jefferson hated banks and even corporations. Many of the founding fathers did actually.

    There was a reason why our forefathers got on a ship and left home and came to the untamed wilderness of the US. Because in the UK there just wasn't enough opportunity.

    We kept the illusion of opportunity by exploiting others and creating credit, but opportunities are ALWAYS limited, and eventually groups of people have to move on as the older generations become entrenched and limit people from rising up beneath them.

    That's why people left UK, that's why people went westwards in the US. Time and time again this has held true throughout history.

    Except now. Because there is nowhere left to go. This is the final breakdown of society, with an entire generation screwed over for the few greedy, established elite and their ilk.

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  29. Jefferson favored farming based economy while Hamilton favored manufacturing based economy. Right after WWII we had both and we rebuilt the world from Japan to Germany. Today we have little of both.

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  30. You may justify your actions and live with it, but know someday you will face your lord. He will not be amused with your transgression and your justification that everyone else is doing it.”

    What "Lord" is that?
    The Christian one?

    The one that justified tax tribute to the biggest slave owning empire of the ancient world .
    Rome?
    “Render unto Caesar”
    Whats he gonna do now act as debt morality enforce for usury capital.

    Send you to burn in hell so the unpaid debt remains in the next world too?

    What about jubilee year laws?
    Are you picking and choosing selectively amongst religious laws here?
    By the way:
    ' Nation ruled by men, not by the rule of laws."
    Even the US constitution set up the rule of man made laws ,serving the social morality standards of real world mankind ,suitable for justice that served that times conditions to enforce the property titles rights .
    If you was not a black slave or indian.

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  31. Outside of Judaism, the major religions ban interest and usury. They actually had banned banking entirely, that is why only Jews were bankers historically.

    But first of all they had to ignore the laws of the Torah and rewrite the book -sort of like their own Rabbinic new testament- version.

    So just who were the religious sects that Jesus ranted against .

    The Usurers?

    Or was Jesus a Usury morality supporting man?

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  32. Marx said there were three ,not two main economic classes in capitalist industrial societies of his day.
    The workers ,the capitalists ,
    AND
    the landlords .

    The landlords being that class that parasitically extracted free rents from society because of property titles to portions of the earth in agriculture or like mine owners because of the rights of capital invested .Bankers are rent interest collectors.
    Each class had their own standards of morality based on their own classes interests.

    Marx expected a class struggle between the exploited working class in industry and agriculture and capitalists that would also end rent tribute to landlords and usury finance capitalists demanding rent on money..
    To create a new world
    It hasn’t happened yet although there have been a few attempts..
    Nowadays the exploited working class is mostly in the third world and the third world is fighting against the dollar hegemony imperialist system
    While in the First world the former working class has been integrated into the capitalist class and have become rabid supporters of wars of empire against third world resistance. Sometimes that is disguised as expensive war against ‘terrorists” seeking national independence .
    But the interests and once comfortable lifestyles of the labor aristocracy are being threatened by the predatory financial elite turning that middle class and its future generations into debt Peons as the elite claims its own interest and its own morality as legal interest debt standard rights .
    The way of life of one part , millions of Rich capitalist society is threatened as they cannot afford their debt payment contracts .
    Religion ,is coming out here on the side of property right and usury.
    It claims that poverty and austerity for of the people is best future "morality" for society according to "religion".
    Will those problems in society be resolved in prayers ,class struggle ,or by violent anarchy?

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  33. @ 2 am Although I do not profess any particular religion, "I gave it up permently for Lent" I have come to understand the quote Render Unto Ceasar__________" to be with the understanding the followers did not believe that anything was Ceasars, but Gods only, and so saying that was entirely for Romes tax collectors ears, and the followers would not render unto Ceasar, anything, due to their belief that it wasnt Ceasars to begin with. So chill dude.

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  34. the contract between individual and state as articulated by Hobbes is under immense strain and is being held together by a perception of nationhood and common values, not actual socio-economic policy.

    When the perception is sufficiently eroded, the individual will be liberated and at the same time practically constrained by their situation; this will be the inevitable flashpoint so my question is, what is the exit strategy at this point..

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  35. How is it immoral to walk away from your mortgage? If you are making your house payment, you are fulfilling your obligation. If you walk away and the bank gets the house back, you are still fulfilling your contractual obligation. It's not like you get to steal the house. You give the house back if you can't pay for it. That's exactly what it says in your mortgage agreement.

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  36. 4:40PM:

    Home values will not return to anything like 2005-2006 levels. Not in your lifetime.

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  37. This is a wonderful post. The things given are unanimous and needs to be appreciated by everyone.
    --------
    johndouglas

    Mortgages

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  38. This comment has been removed by the author.

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