Wall Street (and the Wall Street cronies in Washington) think you should pay your mortgage, even if, in purely financial terms, it's a bad investment.
Fuck. That. Shit.
Feel free to be smarter than that and walk away from your house if it's not a good deal. (I did.)
The NYT Magazine makes a compelling case for making a sound financial decision, and outlines the hypocrisy coming out of Wall Street and Washington (courtesy regular reader Brian):
http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?hp
And given that nearly a quarter of mortgages are underwater, and that 10 percent of mortgages are delinquent, White, of the University of Arizona, is surprised that more people haven’t walked. He thinks the desire to avoid shame is a factor, as are overblown fears of harm to credit ratings. Probably, mortgagees also labor under a delusion that their homes will quickly return to value. White has argued that the government should stop perpetuating default “scare stories” and, indeed, should encourage borrowers to default when it’s in their economic interest. This would correct a prevailing imbalance: homeowners operate under a “powerful moral constraint” while lenders are busily trying to maximize profits. More important, it might get the system unstuck. If lenders feared an avalanche of strategic defaults, they would have an incentive to renegotiate loan terms. In theory, this could produce a wave of loan modifications — the very goal the Treasury has been pursuing to end the crisis.
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3 comments:
The article says "In some states, lenders also have recourse to the borrowers’ unmortgaged assets"... how do I know if I'm in one of those states?
Housing loans are either 'recourse' or 'non-recourse'. Recourse loans are not as good, because the bank can come after your other assets (if you haven't hidden them effectively).
It's best to consult an attorney, but if you're going through foreclosure you might not have the money.
Some links: http://banking.about.com/od/loans/a/recourseloan.htm
http://banking.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=banking&cdn=money&tm=34&f=00&su=p649.3.336.ip_&tt=2&bt=0&bts=0&zu=http%3A//www.forecloseddreams.com/state_by_state_foreclosure_guide
I ended up not consulting an attorney because I couldn't find one I trusted. We'll see how that works out.
Thanks. I also found this helpful...
http://www.practicalchic.org/?p=155
I'm not currently in foreclosure, can actually pay my mortgage. But the place is worth 150k less than I bought it in 2006 for.
Wondering if I walk into their office and say.. "you have have the house and eat that 150k loss... or you can refinance with me (lower loan amount 100k)"... would they agree.
Sorta gives you a strong place to negotiate from.
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