In February I highlighted a CBS video that suggested, under certain circumstances, people should walk away from their mortgage. It generated some passionate commentary including:
“I noticed there was no mention of moral obligation or the additional stress to the already devastated financial market caused by people who choose to walk away from the[ir] mortgage simply because it’s better for them. Why worry about other people? As usual, this approach is short sighted and self centered. Just the kind of lunacy that caused this mess in the first place.”
and:
“Who is this nut bag? Please – walk away. The Gov’t has HAMP and now HAFA. No mention of other options, like short sales? Did i miss something or is this woman not fully educated about avoiding foreclosure.”
It seems that more and more people are walking away and the conversation continues. On Sunday Morley Safer on the CBS show 60 Minutes discussed the question, with far more focus on the moral obligations of home ownership.
Part of this is certainly generational. My own father was always proud that over many decades his bank account never went overdrawn. Today’s generation (whatever that means) doesn’t see things that way and are far more comfortable with debt. Add new companies like YouWalkAway.com to the mix and the decision about staying or walking away from a mortgage becomes a lot easier for many to make. It certainly seems easier for people born after 1950.
Is it the right thing to do? I more I think about it, the more I see things from both sides but I’m not a Realtor. That said, in trying to answer the question, does it matter if you are a Realtor or is this a question for ‘the people’? Separately, what role (if any) does/should a Realtor play in this?
Stephen, on the investment side, I spend most of my day swimming in seas of foreclosures. There certainly is no shortage.
Walking away from a mortgage would be decision of last resort. However I’m hearing many people simply say it is a “business decision”.
I’m not so sure that Realtors should be involved in the decision-making process for folks. People should get multiple opinions preferably from CPA, Banker, or family attorney. A Realtor could provide input into the aspect of saleability in case of short sale as an alternative or help them find a lease-purchase home post foreclosure.
Ryan, you’re exactly right.
Realtors should not be involved in the decision making process other than to explain the market information and tell them what options there are. From there, I believe Realtors need to have their customers talk with an Attorney for legal advice, a CPA for tax advice, and a Credit Counselor to fully understand what each option looks like for them now and in the future. The decision needs to be the customer’s after they have been given all of the information by the appropriate professionals.
For those that say they’re making a “business decision” by walking away, I hope they have researched it fully to come to that decision.
I suspect that for some it’s less like a business decision and more like an impulsive decision for an easy short term solution.
I work with would-be-sellers who either can not or will not sell in this market to help them rent out their homes that are subject to today’s pricing issues. Some of those folks choose to make payments on top of the rents they receive monthly to keep current on their mortgages while they themselves are renting at a more affordable payment.
Besides the “stay in your home” efforts offered by the government, there are other options for some people if they choose to seek them out.
Heather,
GREAT solid comments/advice from a fellow Keller Williams agent! Regards, Steve Scott
Where was the moral obligation when the banks let the fox in the henhouse starting in 98 or so? That’s when the ‘moral obligation’ ended, when the game changed. Everything since then is a shell game and it still is (tax incentives, this gimme, that low down assistance). So tell me again, what moral obligation?
Whether it is a moral obligation or business decision has little to do with it. The minute I drove my brand new Mercedes off the lot it dropped $10k in value. After a year it was worth $20k less. Should I walk away now and let the bank take it back? How many people are willing to walk away from their cars just because they have gone down in value?