AL_DA_GREAT
amour absinthe révolution
It is very immoral to rip the banks of money. It is baisically theft.
Is it wrong to walk away from your mortgage?
- Thread starter Little Raven
- Start date
Buying a home isn't something you do overnight. It takes a while. I believe ours was between three weeks and a month. That's plenty of time to research what your getting into. Plus, you sit down with your loan officer multiple times, so again, you know the terms they're using and have the time to research them to find out what it is. If you don't do it, than you're being foolish. Don't place your trust in someone who is making a profit off of you.
Stolen Rutters
Deity
Some people believe that ethical behavior includes paying off debts you owe no matter what. I believe if it's in the agreement, and it's your only choice, it can't be unethical or immoral. It's just reality. You can't hold your end of the promise.
Now, realize that walking away from an upside down house is still a losing proposition... one big dowside is that you still owe the IRS taxes on the difference between your principal balance and the amount the bank got for the house, assuming the bank writes off this balance. Some people ignore this part and end up owing close to what they THOUGHT they walked away from in the end, all garnished from their paycheck due to the tax settlement. The difference is that now you owe the IRS (interest AND penalties), not the bank... Knowing the down sides, very few people would actually want to walk away, if there was a chance that they would be able to recover by waiting a few years for the market to get through the slump.
Now, realize that walking away from an upside down house is still a losing proposition... one big dowside is that you still owe the IRS taxes on the difference between your principal balance and the amount the bank got for the house, assuming the bank writes off this balance. Some people ignore this part and end up owing close to what they THOUGHT they walked away from in the end, all garnished from their paycheck due to the tax settlement. The difference is that now you owe the IRS (interest AND penalties), not the bank... Knowing the down sides, very few people would actually want to walk away, if there was a chance that they would be able to recover by waiting a few years for the market to get through the slump.
skadistic
Caomhanach
A contract is a promise. I sign my name on contracts often. Each time I sign my name on the line it is a promise I will live up to my side of the contract. If I don't and I break my promise ( the contract) there are penalties set forth. Thats how contracts work.
I see what you're saying, and I do see some sort of difference between those two scenarios.
However, it seems to me that when a bank - or I - loan you money, it's in good faith that you are going to make good on that loan, even as a business arrangement. Effectively, I see it as a "As long as you keep your end of the bargain, I'll do everything in my power to keep my end as well". But that's not what happens when you walk away from your mortgage. What you're really saying in that circumstance is "I'm going to keep my end of the bargain for as long as I think it benefits me, but if it doesn't then I'm going to jump ship." That is certainly legally justifiable, as there are penalties built into the contract that allow you to leave like that. And it may make economic good sense to do so. It just strikes me as rather ethically sleazy.
I'm not going to condemn anyone for doing this. I'm not going to say that they're violating some sacred universal law. I'm just saying that it strikes me as at least somewhat dishonest.
(Again, note that I'm talking about people who choose to walk away from debts of this sort simply because they don't think it's in their best interest to pay them. I'm not at all talking about people who are financially unable to make ends meet, so they bail sooner rather than later)
Stolen Rutters
Deity
People who think walking away from a debt makes good economic sense is deluding themselves or is a criminal. If that is the restriction of the original poster's question then, yes that's unethical and immoral (and illegal if they are caught).
Living in Michigan, I only know of the people who are stuck with a house they can't get rid of, and can't afford to move to where there are jobs (i.e. out of state) because the new job, by definition, won't pay them enough for 2 mortages... i.e are financially unable to make ends meet.
Living in Michigan, I only know of the people who are stuck with a house they can't get rid of, and can't afford to move to where there are jobs (i.e. out of state) because the new job, by definition, won't pay them enough for 2 mortages... i.e are financially unable to make ends meet.
You should do everything you conceivably can to avoid just walking away from your obligation. Stop eating out. Get a cheaper car and free up some payments. Sell your 60" widescreen plasma and get a 19" CRT.
I have -zero- sympathy for people who rushed into these expensive homes and now are crying wolf. Buy within your means and this will not be a problem. Read what you sign and this will not be a problem. If you get foreclosed on or just "walk away", you should be banned from buying another home for...oh, 10 years.
I have -zero- sympathy for people who rushed into these expensive homes and now are crying wolf. Buy within your means and this will not be a problem. Read what you sign and this will not be a problem. If you get foreclosed on or just "walk away", you should be banned from buying another home for...oh, 10 years.
Including the bank, which knows that there a clauses available in the contract laying out its rights for nonpayment. Fail to see the lack of morality or ethics in pushing the contract to these clauses, which are typically drafted by the bank to begin with.
Little Raven
On Walkabout
Ah. I guess I'm just more cynical that you. I see it as being all about mutual self-interest. It's always been that way - it's just that banks used to be smarter about enforcing it. Back when you had to put 10 or 20% down on a house, foreclosure was terrible, because you were forfeiting all that equity. Once banks stopped worrying about pesky details like that, they allowed the equation of mutual self-interest to get out of balance.
Bummer for them. And the rest of us, since they'll force us all to pay for their short-sightedness. But not really the fault of the individual homeowner. If someone is going to throw money at you without properly accounting for risk, why should you turn them down?
Is there no sense of caveat emptor for the banks? Many of the loans you are talking about are things that never should have been issued. Done by supposed professionals who should know better but were chasing a fast buck and most people turn their wrath on the home owner.
They will be losing their home and all the fees, and tax issues, and their credit, and it is hard to do many things w/o good credit. While the head of Countrywide I believe got 35 mill in compensation for driving the company to near bankrupcy. What exactly is your value system people?
They will be losing their home and all the fees, and tax issues, and their credit, and it is hard to do many things w/o good credit. While the head of Countrywide I believe got 35 mill in compensation for driving the company to near bankrupcy. What exactly is your value system people?
Unsecured debt is one thing, but with secured debt, there is an asset for the lender to end up with. The first option is with the borrower - to pay according to schedule or not. If the borrower chooses to not pay according to schedule, the next option is with the bank - whetherto take steps towards foreclosure or offer the borrower arestructuring that may avoid the foreclosure process.
skadistic
Caomhanach
Yes the banks know that when the people breach the contract they have a way to penalize them. But its not the banks breaking the contract is it? Unless they don't give out the loan.
skadistic
Caomhanach
Still doesn't change that a breach of contract has happened. Foreclosure is a penalty for breach of contract by the borrower. Breaching your contract or promise is unethical.
I have -zero- sympathy for banks who rushed into lending to risky borrowers on these expensive homes and now are crying wolf. Lend within your risk-tolerance means and this will not be a problem. Do due diligence on your potential borrowers and this will not be a problem. If you have to foreclose or renegotiate on a certain % of loans, you should be banned from lending on other homes for...oh, 10 years.
JerichoHill
Bedrock of Knowledge
You know, its not like those who walk away from their home get off scott-free. First they're going to get a tax hit, and their credit score is going to be hell for 7 years, making everything else more expensive for them to do. There are alot of penalties here.
Walking away is an act of desperation when you cannot afford the mortgage and you can't sell the house at its mortgage value. Sure,you could short-sell, but then you'll owe a ton of taxes on the write-off loss.
Not the person walking away or the bank getting the keys benefits. To make out either as the great evil smacks of ignorance of the process.
That said, I have little sympathy for those who knowingly defrauded the banks, and for banks who knowingly defrauded their lendees.
Walking away is an act of desperation when you cannot afford the mortgage and you can't sell the house at its mortgage value. Sure,you could short-sell, but then you'll owe a ton of taxes on the write-off loss.
Not the person walking away or the bank getting the keys benefits. To make out either as the great evil smacks of ignorance of the process.
That said, I have little sympathy for those who knowingly defrauded the banks, and for banks who knowingly defrauded their lendees.
The banks know that they have robust clauses to acquire the subject matter asset of the business arrangement should their borrower choose to take the arrangement to that section of the contract.
If it's a penalty for the borrower, the bank should be happy about it, right? It's just a contigency in the contract that the parties have agreed to in advance and that the borrower can choose to take. In fact, many contracts call for non-judicial foreclosure, which is easier on the banks than if they left the contract silent and nonpayment actually became a breach.
Little Raven
On Walkabout
You keep repeating this, as if saying it over and over will make it true.
Foreclosure is part of the contract. I've bought two houses now. Each time, I've signed a mountain of paper. One of the papers lays out in great detail the penalties for missing payments....including foreclosure. Going into foreclosure is not breaching the contract...it is built into the contract. When I sign the contract, I am agreeing to give the house to the bank (among other penalties) if I don't make the payments. Assuming I do so, I have committed no fraud, nor have I breached the contract in any way.
Little Raven
On Walkabout
JerichoHill
Bedrock of Knowledge
If it was an investment property, or you sold your home before that act was passed, definitely
skadistic
Caomhanach
Its the part of the contract that says what the penalty is for breaching the art where you promise to pay. And I underlined the part that backs up what I've been saying. If you say it and I say it does that make it true?
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