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I don't understand why people have such difficulty realizing that walking away from a mortgage is a legal business decision and not a moral issue.
Because it is common sense.
Until I researched mortgages and how walking away from them works, I thought the same thing. It seems like a moral responsibility to pay back the person who was nice enough to lend you money.
However, you are correct in that the contract does stipulate what happens if you do not pay, indicating that not paying is an understood term of the contract.
Especially if you are paying PMI. The I in PMI stands for insurance, so the bank has taken out an insurance policy on you to pay the loan. I don't know exactly how it works, but I assume if you don't pay the loan, the bank files a claim with the PMI company. So in essence, you are simply collecting on a policy that you have been paying premiums for. If you don't have PMI, that means the bank figures getting your 20+% and your house is payment enough.
So really, walking away from a mortgage seems like it is not so much breaking a contract as it is exercising one of your optinons that is spelled out in the contract.
A mortgage involves a legal contract that includes reclamation of collateral (the house) in the event that the borrower does not make the payments as agreed. In other words, walking away is a right as defined by the contract, although the implications can depend on state law and the specific loan terms.
Your utilities bill is a bill for services already rendered to you. You have no right to not pay it.
I don't understand why people have such difficulty realizing that walking away from a mortgage is a legal business decision and not a moral issue. If you still believe that "my word is oak" trumps legal contracts, then you are gullible. It is an endearing thought that business transactions operate with a moral compass, but it is not true. Some individuals operate that way, and that's great, but the legal system itself depends on contracts.
Businesses break contracts all the time when the penalty clause is a better option than honoring the nominal contract terms. For example, take IBM's termination of the Blue Waters contract, which involved hundreds of millions of dollars in government funding:
Which is why I despise this behavior all the more. I don't think some caught my sarcasm on the uptick...I do realize that when people let the house go it is a legal process and yes, they can exercise that option (read: option, not right).
Is it legal? You bet. Is it moral in all cases? Probably not. To be clear, it is an option some need to make when there are no options, however, a contract is a contract and is supposed to upheld, not subjugated for convenience with the clear intent of dodging debt.....what happened to get a second job? Give up the vacations? The liquor? The cigarettes? The dining out? Do that, prove that and then your escape has merit and need. Short of that?
F them. Saddle the debt until re-paid...adjust the term, lower the interest BUT pay your debts!!! Otherwise, the eEst of US have to? Accountability...almost a novel idea....sigh....
The government should not be bailing anybody out. Everybody needs to take responsibility for themselves/their children. I worked hard to get to where I am without government support(yes I did have financial support from my mom in college & to start my business). I could have done it with loans but it would have been harder but still very possible. (if I was doing it that way I would have gone to a public university) I loved reading the Occupy peoples reason for why they are the 99% it was a bunch of crap. One person was complaining because the child support their mother gets for themselves was ending when they turned 21! They are lucky they get child support up until 21 in most states it is 18/graduate high school. Then another person who went to an expensive private university and became a teacher, and complained they had so much debt and no chance of advancement in their career. Well they could become a a principal or superintendant eventually. Also everybody knows about what you would make being a teacher so why would you go to an expensive private university if you needed loans? The person should have gone to a public university or a small private school that gives large scholarships.
I have many rental properties and my "companies" do rent to section eight because I get a guaranteed amount of money on time every month. Most of my section eight tenants are good tenants. In one house a section eight person left a marijuana plant in the basement!
Section eight is great for my income but I pay crazy taxes so I feel rewarded by getting some of my money back! For most welfare recipients welfare is a way of life.
Did you know the government did a report that the head start program does not make a difference by the time the children are in first grade and it does not change graduation rates! Look at the APS map of where they offer head start and they are all in the clusters with the lower/lowest graduation rates(and least/less desirable HS zones) in APS!
I am glad you made something of your life. I just think section 8 is too much of a feedbag. I understand why you use the program per my earlier comment. Guaranteed funds. However, those funds are our taxes. Yours and mine as well as those working while on section 8.
While most are good tenants, I often wonder what would happen if we reduced and/or eliminated that, head start, after school care, lunch programs, breakfast programs....oh that's right it's not only my job to raise my kids, but, raise theirs as well? Isn't that asking a bit much?
The reason head start and other programs don't work is because if they don't earn the money to pay for it, they can't begin to appreciate it. My wife and I are both working two jobs to support our family. We make jujutsu enough not to get aid but, not enough to cover our obligations on one job a piece. In short, we do what WE have to and SHOULD do to be accountable to our children and society. They go to school with kids that receive free breakfast, lunch, and other programs. I do notice those kids have enough for cell phones and nice clothes, dr dre beats, and other luxuries a person on assistance shouldn't receive? Am I asking too much?
Their parents show up in high end SUV's and use foodstamps.....explain why we, as a society, carry that burden? Why would anyone with a cell phone need for me to pay for their kids breakfast?
No worries. This same group has galvanized the quiet majority to the point that the numbers will ultimately work against them. Enjoy the ride for now...they are about to really learn what being disenfranchised really means. We use to be able to afford it...not now.....
Is it legal? You bet. Is it moral in all cases? Probably not. To be clear, it is an option some need to make when there are no options, however, a contract is a contract and is supposed to upheld, not subjugated for convenience with the clear intent of dodging debt.....
The contract was upheld. The foreclosure process is defined in the contract. Now, if you don't pay the mortgage and then refuse to vacate, then that does violate the contract.
Strategic foreclosures did not cause the financial crises. In fact, they are critical to the recovery because that is a key deleveraging mechanism. If we required everyone to sit in their house until it was paid off, then the deleveraging process would take decades and the economy would not improve any time soon. Take a look at Japan, which is apparently morally much more to your liking. They have been in recession since the late 80s after a property valuation bubble. The Nikkei 225 hit over 37,000 in 1990; today it is around 9,500. If the same thing happened here from 1990-2012, then the S&P 500 would be at 88 today instead of 1400.
Strategic foreclosures are actually bringing us closer to the point where the economy can recover. The economy will have trouble recovering before the housing market recovers and the housing market will have trouble recovering until the pending foreclosures are flushed through the system.
The financial system went off the rails in the 2000s. Loans were made that never should have been made and a lot of things happened that shouldn't have. We need to put it in the past and move on. We do not need to carry along the baggage for 30 years like Japan.
The contract was upheld. The foreclosure process is defined in the contract. Now, if you don't pay the mortgage and then refuse to vacate, then that does violate the contract.
Strategic foreclosures did not cause the financial crises. In fact, they are critical to the recovery because that is a key deleveraging mechanism. If we required everyone to sit in their house until it was paid off, then the deleveraging process would take decades and the economy would not improve any time soon. Take a look at Japan, which is apparently morally much more to your liking. They have been in recession since the late 80s after a property valuation bubble. The Nikkei 225 hit over 37,000 in 1990; today it is around 9,500. If the same thing happened here from 1990-2012, then the S&P 500 would be at 88 today instead of 1400.
Strategic foreclosures are actually bringing us closer to the point where the economy can recover. The economy will have trouble recovering before the housing market recovers and the housing market will have trouble recovering until the pending foreclosures are flushed through the system.
The financial system went off the rails in the 2000s. Loans were made that never should have been made and a lot of things happened that shouldn't have. We need to put it in the past and move on. We do not need to carry along the baggage for 30 years like Japan.
Had a great reply but, it got wiped out when submitted. Anyway, the readers digest version is, we are only pushing that debt to long term....not flushing anything away...and each dollar is carrying 40 percent interest. So each SUV and bad mortgage is costing us 1.4 times than the original?
Although Japan has been sluggish they weathered their financial condition quite well. No one here should have to pay for the reckless spending of others. If you bought it, you bought it. Period. Take a 40 year mortgage. I don't care. Trying to jump start the us bubble liking economy by expunging consumer debt
By raising the us debt ceiling at 40 percent interest is as sad as watching some schlub in Vegas down 10 grand telling you he can win it back...
Come to think of it, he might have better odds. Because no one is going to win it all back with 16 trillion owed to the house....at 40 percent.....it just ain't gonna happen my friend. To try is just another shell game......
No, hold those who bought the baubles pay for them.....every stinking dime. Let america right size. Don't let them out of their debt....refi them sure, even lower the interest and extend terms but, to flush all that paper and stick the rest of us with the tab is wrong.....and then tell us its good for us because it will move the economy???
There's a saying for that.....don't pi$$ on my leg and tell me that it's raining.....there are better ways to move growth....cut entitlements, lower corporate taxes, kill most social programs outside of Medicaid, care, and ss.....lower defense spending by 7 to 8 percent for 5 years......and I am a hawk! We just don't need another fighter or missile system when no one can really kick our assets today short of nuclear....and we have VX! The chemical that keeps on killing......covered on our end Bob.
No, stop the flushing/movement of debt to the deficit spending side of the house.
It's time America lived within their means. No better time than now. We don't need all those strip malls anyway. God knows, we shouldn't have to pay for everyone's house selection ether.
The bigger question is why did we encourage home ownership to begin with? It's not economically feasible for a large portion of the population, and you know something's wrong when people would rather go subprime than just rent a bit longer while they keep their finances in order. I'm not directing this at you personally because I don't know your financial situation, but in general I feel that those who own homes should have the assets to cover themselves in the long run. A smaller housing market would reduce issues of oversupply that we're seeing now.
The bigger question is why did we encourage home ownership to begin with? It's not economically feasible for a large portion of the population, and you know something's wrong when people would rather go subprime than just rent a bit longer while they keep their finances in order. I'm not directing this at you personally because I don't know your financial situation, but in general I feel that those who own homes should have the assets to cover themselves in the long run. A smaller housing market would reduce issues of oversupply that we're seeing now.
Amen.....live within your means and you will have less sweat filled nights ahead?
It was encouraged because it fueled real estate and consumer confidence. Consumer confidence is 2/3 of the us economy.....stick some family in a dream home, two new SUVs and give generous terms and the trickle effect is on! Kind of a ponzi scheme as you now see.
These folks jumped in then headed to home depot for starters, bed bath and beyond their means next and so on and so on....the first warning was the endless debt consolidation commercials, Re-fi's, followed by Troy Aikman and hulk hogan pimping rental furniture....then tax masters and their stiff telling folks how to settle with the IRS and finally, a sitting president who spent 7 trillion more in debt than when he arrived to "fix" things...at 40 percent ( worse than a credit card folks) only to land with unemployment HIGHER than when he arrived.....amazing
Then the blame game. Apparently, the wannabes were held at gunpoint by a chick in a pants suit at the mortgage company and forced to sign bad paper. Apparently, her uncle worked them over at the car dealer and shoved them into car loans that were upside down before they left the lot......when the dolt/American consumer woke up the next month with this credit hangover, they blamed the banks!
It was the banks fault for not saving the rubes from themselves apparently. I never knew how skilled bank and mortgage professionals were supposed to be until someone said it was their fault. I guess the next time I go and buy a car, I'll ask if the loan officer is going to point a gun at me and force me to sign or, can I still sign the old fashioned way, of my own free will? Just curious...anyone know of any loan officers who won't force me to sign a loan under duress? Might make for a more pleasant buying experience.
For all those that were allegedly forced to buy the things you couldn't possibly afford, try to remember, it's about more than just your "paymit". Stay away from shiny objects...don't be like a moth to a flame and for gods sake, just because someone says you can afford it doesn't necessarily make it so.....also, don't believe the words "get the credit you deserve" because frankly, you deserve a seat in kindergarten or at staples in line to buy a $4 calculator". In short the LAST thing you deserve is credit.
No, you should buy a ball jar and stuff money in it every payday or whenever your inconsistent calendars remind you and count it each month....s l o w l y and when you think you have enough, wait 12 more months to help offset your wishful thinking and invariably other stupid purchasing decisions you will make along the way...again...and THEN go buy some depreciating asset your savings will allow.....start with used fords and work your way up from there Gordon Gekko....
I think we'll just have to agree to disagree on some of these points. I agree that we need to draw down government spending over the long term, but I don't expect that to lead to growth in the short term. In fact, austerity measures in Europe have basically proven that it will generate economic contraction in the short term, not growth.
You seem to think that I am defending homeowners (well, home borrowers) who over-extended themselves by buying homes they could not afford. I'm not. I am also not defending the banks who knew the buyers could not afford the homes, but made the loans anyway because the banks could then sell them to investors or Fannie Mae / Freddie Mac (aka, taxpayers). I have lost interest in finding someone to punish for the financial crisis and would now rather follow a path that restores the economy.
For the record, I rent, have no debt, pay off my credit cards every month, and save a considerable portion of my gross income. I don't know how people sleep at night with such high debt loads. I could afford to buy now, but rent instead because I don't know where I will be in 3-5 years and need to maintain mobility. I have relocated significant distances (800+ miles) a couple times for better work opportunities and the increased flexibility of renting is worth quite a bit to me.
I could afford to buy now, but rent instead because I don't know where I will be in 3-5 years and need to maintain mobility. I have relocated significant distances (800+ miles) a couple times for better work opportunities and the increased flexibility of renting is worth quite a bit to me.
This is what most of Atlanta should be doing. There are so many transient people here that are just being transfered here for work for 5 years until they move on. Buying in that scenario only works if there is 5% appreciation per yaer (or whatever) within the housing market. But there is a social stigma on renting, even though it is a bad deal to buy for only 5 years. You really shouldn't buy unless you know you are going to be in that location for the long term.
Just wanted to note to the OP who may not be here since this thread is so old, that she can always report the unwed mother of 4 kids to the housing authority as having a live in boyfriend and then the unwed mother may be booted out of the program or have her assistance allowance lowered. I also don't believe that she sits on her butt all day since working and/or school is a part of the program unless the person is on disability.
I also agree with the above poster in regards to transient workers coming here. One should rent, not buy unless you think you are going to be here for 10 years or more.
And just wanted to state my personal opinion in regards to government programs like Head Start and foodstamps. I do believe that Head Start benefits many children who at least get to go somewhere and socialize in a structured program versus sitting at home and watching TV all day and eating crap. I personally don't have any issue with any program that educates children, especially young children. Even though statistics do show that Head Start doesn't really give any huge gains academically in children, you have to balance that with the fact that statistics also show that children who don't do any formal preschool versus those that did usually catch up to the preschool group anyway by the end of kindergarten. I really do feel that we should have "play based" schools like head start for children so that they can grow in a natural way and we aren't shoving letters and numbers down their throats. But that is just my personal opinion.
Foodstamps, I also don't have a problem with but I do think that they should have a limit to how long a family can use them, just like I feel that people should have a limit on Section 8 and other housing assistance programs. Five years would be enough IMO as one can find a decent paying job or finish their education during that time span.
I also feel that people fail to realize that these social programs - welfare (TANF/SNAP), Section 8/public housing, Head Start, foodstamps and the like, really do not make up that big of a portion of our tax dollars. We should be more concerned with things like military spending and social security, medicaid and medicare, which take up the majority. There is a lot of abuse of Social Security benefits, especially by those who claim to be disabled or claim their children are disabled and also by immigrants who bring their elderly parents over here and those parents collect Social Security without ever having worked in the USA. That angers me more than some foodstamps and especially more than Head Start.
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