As Home Prices Fall, More Borrowers Walk Away
Guilt and morality are one side, and objective financial analysis are on the other side.
Palm Coast, FL – January 9, 2012
When David Martin and his wife bought their north Seattle condo five years ago, they figured they had plenty of time to downsize if they needed to before they retired.
Now, with the property worth roughly $60,000 less than the balance of their mortgage, Martin, 68, has been giving serious thought to just walking away, a process lenders call "strategic default."
"Guilt and morality are one side, and objective financial analysis are on the other side," Martin said. "They’re coming to two opposite conclusions. I wonder how many other people are struggling with the same question."
Strategic defaults like the one contemplated by Martin are on the rise.
Read more >>>> MSN
Toby’s Commentary: This article and many others like it are written on the premise that only the defaulting borrower should feel guilty and/or imoral. They fail to address the outright criminality of robo-signing and the imorality of:
- Forcing borrowers to send in mortgage modification information time after time because the lender keeps losing it and generally giving borrowers the runaround
- Telling borrowers that their modification is in progress while continuing the foreclosure process behind their back
- Breaking the chain of title through the implementation of the Mortgage Electronic Registration System (MERS)
- And more; much much more
Do you think the lenders feel any guilt?
What happened to personal responsibility?
A mortgage is a contractual agreement between the borrower and the lender. No harm comes to the borrower as long as payments are made as agreed upon within the mortgage contract (yes, there are isolated cases of incorrect foreclosure, but those are a tiny percentage of conventional mortgages). The real estate industry collapsed for many reasons including economics, political and corporate irresponsibility, but why should the lender, and ultimately stockholders, bondholders or taxpayers be penalized for decreased property value? I have signed many mortgage documents over the years and not one of those agreements did the lender promise me the property would increase in value, be a good investment or stay a nice neighborhood for as long as I owned the home or investment property. My experience includes being so upside down on a property in Flagler County my grandkids (not even born) may have to be the ones to enjoy it. However, I will continue to make payments until it can be sold or paid off. Until the country gets back to personal responsibility for agreements made, our best years are behind us.
Strategic Default – Protect Yourself
Toby – you are right on the "money".
It is purely a business decision. Nothing more. Nothing less.
Re: Modifications
I for one was able to get a modification on my home but it was not without it’s major problems. I had to submit paperwork constantly. I was denied 1st time and had to go back all over the paperwork again for the 2nd time. They kept telling me I was qualified but it took almost 9 months of constant paperwork duplicating things at least 3 or 4 times and then finally it was approved. People should not have to go through the indignity of this process. But all in all if a person is patient and gives them what they want, it is well worth the effort. I got out of the one mortgage which was crooked and got a fairly good deal with the modification. My heart goes out to all those who really need to stay in their homes but have financial institutions that are only looking to take their home away.
Same Story
I find myself in exactly the same situation as the family in the story. Time and time again I went to Wells Fargo seeking a modificatin and got the same run-around as the other comments. Finally I sought to give them a substantial cash amount to reduce my payment and I was turnd down for that as well. I had to go to Congressman Mica many times, and he had to send to letter to Wells Fargo to even get them to accept the cash. The even threatened me with listing my property for short sale even though I have never missed a payment or been late. I never got my modification. (Please withhold my name as I am still negotiating with Wells Fargo.)
Same story
I find myself in exactly the same situation as the family in the story. Time and time again I went to Wells Fargo seeking a modification and got the same run-around as the other comments. Finally I sought to give them a substantial cash amount to reduce my payment and I was turned down for that as well. I had to go to Congressman Mica many times, and he had to send to letter to Wells Fargo to even get them to accept the cash. The even threatened me with listing my property for short sale even though I have never missed a payment or been late. I never got my modification. (Please withhold my name as I am still negotiating with Wells Fargo.)
Contract obligations…
There is no doubt that we are embroiled in unprecedented times…casting blame and preaching ‘responsibility’ is a big waste of time…Everyone’s mortgage situation is unique and I’m sure that NO ONE WANTS to strategically default…But a person’s first responsibility is to HIS family…any ‘business’ contract, including a mortgage, should not threaten their well being! I have always felt that when a lender TEAMS with a borrower…obviously for the purpose of making GOOD money, then he should be EQUALLY liable for this joint BUSINESS VENTURE…Why should the borrower’s money (down payment) be the first to disappear? Wouldn’t it be the ‘responsible’ thing for the lender and the borrower to each share proportionately in any loss that results from unfortunate investment downturns?
SATISFACTION OF MORTGAGE
TOBY,
How can anyone obtain a Satisfaction of Mortgage upon paying off their mortgage when the mortgage was NOT recorded??
If 50% of homeowners with mortgages are in this situation, there appears to be NO answer.
To Toby and Bonnie
Toby–I’m not so sure you’re 100% correct. The release will be effectve in defending against the Bank, but until the Satisfaction of Mortgage is recorded Bonnie will not be able to give a subsequest purchaser clear title.
I question who will be creating, executing and recording the Satisfactions when the chain is no longer clear and does not reflect the ultimate holder of the mortgage.
Reply to Anonymous Fan
I agree with the concept of a contract is a contract. In fact, rather than walking away from my last investment property, I showed up at the closing with a check – payment in full for the underwater balance. It was painful, but I thought it was the right thing to do. I applaud you for being likewise committed to honor your contract.
To you other points – I too have signed several mortgage documents over the years. Not once did the lender inform me that they would break the chain of title by failing to endorse documents and by not recording transfers properly in public records. They did not inform me that by avoiding recordation, they knowingly bilked local governments out of billions in recordation fees. They did not tell me that I would be unable to find out who really owned my mortgage. They did not notify me that they would intentionally make it nearly impossible to secure a mortgage modification or negotiate with them in any way; that they would feed me misleading information, lose paperwork I had laboriously compiled and submitted, or return phone calls. They did not notify me that they would forge documents in order to fix the broken chain of title problem that they caused.
Yes, they did not guarantee that the value of the property would not go down. But they also didn’t tell me that their actions might precipitate and enhance such a decline in value.
When a lender decides at the last minute not to accept a short sale but rather include the property in an auction, probably fetching a lower price, are they justified in seeking the resulting larger default judgment?
Isolated cases and small percentages? I think not. Roughly half of the mortgages originated during the bubble made their way into MERS. Robo-signing was not a minor event. It was rampant.
Reply to Ken
You are right. Simply put; Can you repair your credit score more quickly than you property can regain its former value?
Reply to Ken
You are right. Simply put; Can you repair your credit score more quickly than your property can regain its former value?
Reply to Bonnie
It’s not as confusing as it seems. First, the MERS mortgages were typically recorded. Only the subsequent transfers were not recorded and usually not properly endorsed. Second, I believe that a release is valid whether or not it is recorded.