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AlmiraGulch

Has anyone ever gone through a "strategic default" on their home?

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After receiving my latest tax assessment for my home and checking comparable homes in my area, I realize that I owe anywhere from $65 - 95K (depending on which assessment to believe) more on my home that what it's worth. This is home in which I had equity when I purchased it in 2006.

 

I really like my house and, generally speaking, my neighborhood (although it has gone down hill a bit as the home values have depreciated). That said, I cannot believe how much I pay every month and it seems like it may be the best business decision to stop throwing good money down the tubes after bad. I'm considering a "strategic default" (aka walking away) on my mortgage, but it goes against my being at the cellular level to stop paying when I can.

 

I've done a considerable amount of research and have an appointment with an attorney to discuss the implications, but here's how I see it.....if I stop paying now and it takes, say...8 months to complete the foreclosure, and if I live here the whole time so it remains my primary residence, I can use that money to pay off credit card debt and still have more than enough left over for first and last month deposit on a bigger and better place than what I have now. I don't care if I ever own another home again, so that's not a big deal to me. If, worst case scenario, I end up owing taxes, it's still a lot less money than what I'm losing by living here in the long run.

 

It all sounds very logical, but my stomach apparently isn't used to the idea because it goes into spasms when I think it through.

 

Has anyone actually done this, or know someone who has? What are your thoughts? What was it like? Would you do it again, or am I being completely ridiculous to even consider it?

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I know a couple that did this. They walked away from 2 places, they each owed money on their own place when they got married. They are fine and still making it. That being said, when you signed the loan you promised to pay it back. I couldn't walk away from something that I said I would pay for if I had any way of continuing to pay for it.

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If you like the house and the neighborhood why not continue to live there--paying the mortgage and all? In a few years the market will/may recover more than you imagine. All real estate is local, so every neighborhood is different.

 

I'll be interested to hear what your attorney suggests.

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it goes against my being at the cellular level to stop paying when I can.

 

It all sounds very logical, but my stomach apparently isn't used to the idea because it goes into spasms when I think it through.

 

am I being completely ridiculous to even consider it?

 

:( It just turns the screws tighter for those who are sticking it out.

 

If this violates your conscience, it can't be the right thing to do.

 

:iagree: Logic and morality do not always agree.

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If this violates your conscience, it can't be the right thing to do.

 

I tend to agree. It's one thing to take one of many bad choices when there are no good ones available, but it would be quite different, to me, to default on a promise because I no longer liked the ROI I was getting.

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I couldn't do it. It would be like buying anything else (shirt, toy) and then seeing it go on sale and deciding you paid too much and want to change your mind. You made a commitment and should stick to it if there is any way possible.

 

Also, there are long term implications that are really not worth it. Defaulting trashes your credit (which doesn't just affect a future home purchase but auto loans, parent college loans, employability, etc. Then there are the taxes you will have to pay on the difference between your loan amount and the value of the house when you default, etc.

 

Not worth it and not morally right.

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DH and I have been discussing this as well. We are in the same position. We are having a hard time deciding tho when we do have the ability to pay each month.

 

So I am all :bigear:

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We just read the story about Abraham Lincoln, when he walked three miles to return a small amount of money to a customer after he had accidently charged her too much.

I think I recall also reading about him having to pay back a considerable debt after his business partner abandoned him. He paid off his entire debt, a little bit at at time, even though it took him years.

 

I think it is much better to emulate people with good character like Abraham Lincoln than others who are defaulting on their mortgages just because they are upset that they made a bad investment.

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Hmmm...I wish banks had the same scruples when it comes to their borrowers. For a bank, it is allowed to be purely a business decision. For individuals, conscience must be part of the equation. One reason I avoid doing business with banks when I can!!

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I think people who have the ability to pay but walk away from mortgages simply because their house lost value should never be allowed to purchase a house again.

 

You made a deal with the lender to pay that mortgage, and if you can do it you should.

 

What if the reverse situation were to happen, and your house appreciated by 100% or more. Would you expect/allow the lender to take it back because they could sell it for a profit. Of course, you wouldn't.

 

If you default when you are able to pay, you are doing exactly the same thing in reverse. You're backing out on the deal because the terms no longer suit you. It's not the lender's fault your home has lost value, so why should you be allowed to stick them with the house?

 

Even if you're willing to take the hit to your credit and more importantly your reputation, you shouldn't be allowed to do it. I know if you were a friend or family member of mine, I would never look at you the same if you did this.

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Hmmm...I wish banks had the same scruples when it comes to their borrowers. For a bank, it is allowed to be purely a business decision. For individuals, conscience must be part of the equation. One reason I avoid doing business with banks when I can!!

 

Banks are in business to make money. People are choosing to use their services.

 

ETA: In response to your question regarding stories of people we know who have done this, I do know someone who has done it. They have the money to pay their mortgage but choose not to. They walked away. Their home is in foreclosure and they are currently renting it out. The poor renters will be out their cash (first and last) when the lender finally gets around to taking the house. It is immoral.

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I would only if I felt the long term results were worth it.

 

It's a standard business decision that companies have to make every day. Is X investment paying off or not? If it isn't, how can it best be either made profitable or loss reduced?

 

Have you considered asking them to forgive the deflated difference and refinances with you? Can't hurt to ask?

 

At the least, I would try to refinance if it is worth the cost.

 

I would even consider bankruptcy.

 

Otherwise, keeping a bad investment is just bad financial planning. That's money better used for your children's education or your retirement fund.

 

There is no moral imperative to keep a bad investment.

 

Talk to your lawyer about all your options and what the long term affect is likely to be for you.

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Contracts are renegotiated or walked away from all the time. That's why there are stipulations in the contract on how to go about doing those things.

 

Your agreement with the lender, if you even made it with that lender - most are sold without any say from the buyer, can be added to, subtracted from, completely redone, or walked away from.

 

Ideally, you would refinance or find some other way to either regain your losses or reduce them. For example, can you rent a room or above garage apartment out?

 

I'm holding my home because home ownership is important to us, we can afford it, the area is acceptable, and we are not upside down on the loan.

 

If however two or more of those factors changed? I would absolutely reconsider the wisdom of making it a moral stand that I make my entire family sink with the ship that would be our mortgage.

 

It'd be nice if we could afford to risk the financial cost of our home, but I'm not bitter that other people have that luxury and I don't.

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I would only if I felt the long term results were worth it.

 

It's a standard business decision that companies have to make every day. Is X investment paying off or not? If it isn't, how can it best be either made profitable or loss reduced?

 

Have you considered asking them to forgive the deflated difference and refinances with you? Can't hurt to ask?

 

At the least, I would try to refinance if it is worth the cost.

 

I would even consider bankruptcy.

 

Otherwise, keeping a bad investment is just bad financial planning. That's money better used for your children's education or your retirement fund.

 

There is no moral imperative to keep a bad investment.

 

Talk to your lawyer about all your options and what the long term affect is likely to be for you.

 

Although many view their house as an investment, a mortgage isn't an investment. It's a contract between the lender and you that allows you to live in the house when you can't afford to buy it outright.

 

If it were an investment, like a stock, you would sell it at the reduced price and realize the loss. In this case, you would be sticking someone else with the loss. Try doing that with an investment like stocks, bonds, or mutual funds. Good luck getting your broker to take over your losses on unsatisfactory investments.

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If however two or more of those factors changed? I would absolutely reconsider the wisdom of making it a moral stand that I make my entire family sink with the ship that would be our mortgage.

 

It'd be nice if we could afford to risk the financial cost of our home, but I'm not bitter that other people have that luxury and I don't.

 

OK, but the OP is saying she can afford to stick it out.

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We're going to have to, I think. We moved 2.5 yr ago and have faithfully paid on the old house which will. not. sell - not at any price. But expenses keep going up and wages are not, and we are so far underwater it is ridiculous. It is no longer sustainable.

 

But I didn't care that we were underwater when we lived there, just that we could afford it. My parents were underwater for a time, years ago, but now they've more than doubled their initial investment.

 

Anyway, my dad offered the thought that many loan documents are basically "pay or we'll take the house back", and in that case stopping payment and letting them take the house is still fulfilling the terms of the contract.

 

Don't know that I'd do it if I had a choice - we kept on till we couldn't, and in fact are *still* procrastinating even though we can't afford it anymore. Dh is a pastor, and it is heavily frowned upon, although his ecclesiastical superior has given his blessing and will back us up, given our circumstances.

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Although many view their house as an investment, a mortgage isn't an investment. It's a contract between the lender and you that allows you to live in the house when you can't afford to buy it outright.

 

If it were an investment, like a stock, you would sell it at the reduced price and realize the loss. In this case, you would be sticking someone else with the loss. Try doing that with an investment like stocks, bonds, or mutual funds. Good luck getting your broker to take over your losses on unsatisfactory investments.

 

To the bank, it is an investment. They bank on you paying them a profit.

 

To the buyer, it's a debt until paid, then it becomes their asset.

 

And that's an option too. Sell the house at best price, get a loan for the remaining balance and pay that portion.

 

And absolutely it is better to hold if there is any hope of it regaining it's value. I would have to be 10k or more upside down to even consider it. Even very slow regain would be possible if I planned to live there 10 years or more.

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Well, if you plan on renting anyways.....why not just stay there since you can afford it? You at least get a bit off you taxes for the motgage interest, and it is your place to do what you want with it! I can not imagine going back into a rental after owning my home for so many years.

 

I do not understand why it would be better to walk away, ruin your credit, just to turn around and pay a landlord instead.

 

The house at least has a chance of coming back up to similar to what you paid (even if it is in 10-20 years) for it...a rental does not.

 

Don't forget that bad credit hurts you in many ways including interest rates on loans and car insurance. It can cost you for many years to ruin your credit.

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OK, but the OP is saying she can afford to stick it out.

 

There is more to being able to afford something than having the money. For example, being able to afford the mortgage but bc of that not being able to eat decent or help kids with college or or... There are many people just scraping by that could seriously better their own and their children's future if they were ale to create some breathing room in their finances.

 

We're going to have to, I think. We moved 2.5 yr ago and have faithfully paid on the old house which will. not. sell - not at any price. But expenses keep going up and wages are not, and we are so far underwater it is ridiculous. It is no longer sustainable.

 

But I didn't care that we were underwater when we lived there, just that we could afford it. My parents were underwater for a time, years ago, but now they've more than doubled their initial investment.

 

Anyway, my dad offered the thought that many loan documents are basically "pay or we'll take the house back", and in that case stopping payment and letting them take the house is still fulfilling the terms of the contract.

 

Don't know that I'd do it if I had a choice - we kept on till we couldn't, and in fact are *still* procrastinating even though we can't afford it anymore. Dh is a pastor, and it is heavily frowned upon, although his ecclesiastical superior has given his blessing and will back us up, given our circumstances.

 

Yes. Walking away in some form or another is part of every contract.

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Hmmm...I wish banks had the same scruples when it comes to their borrowers. For a bank, it is allowed to be purely a business decision. For individuals, conscience must be part of the equation. One reason I avoid doing business with banks when I can!!

:iagree:

 

I wish I could appeal the the bank's conscience when they assured my dear friends they qualified for a refinancing, then assured them they had it and in the 11th hour, after following all of the rules, they told them No, they didn't qualify and we need all that $ (that we told you not to pay) back now or you'll go into foreclosure.

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Hmmm...I wish banks had the same scruples when it comes to their borrowers. For a bank, it is allowed to be purely a business decision. For individuals, conscience must be part of the equation. One reason I avoid doing business with banks when I can!!

 

Yeah, this. I'm tending toward looking at it as a business decision and not a moral one. I'm responsible for my life and my retirement and my children's education. The banks also took a risk when they loaned me the money. I guess there are responsibilities on both ends. If the entire system hadn't failed the US public at large so dramatically, I would agree with those who are saying I have a "moral" obligation to pay back the loan. Sort of. It's a business transaction at the end of the day, and right now I'm on the really bad end of it with no end in sight. There would be repercussions, and I would be prepared to deal with those should I decide to go through with this.

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And that's an option too. Sell the house at best price, get a loan for the remaining balance and pay that portion.

We tried to do that - lender was awesome, totally willing to work with us - but it will. not. sell.

 

And absolutely it is better to hold if there is any hope of it regaining it's value. I would have to be 10k or more upside down to even consider it. Even very slow regain would be possible if I planned to live there 10 years or more.
Heh - to *only* be 10K upside down. We are more upside down than it's even *worth*, now. Twice what it's worth, actually. I sort of want to cry now (mostly I don't think about it).

 

Sorry for venting all over this thread.

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I think people who have the ability to pay but walk away from mortgages simply because their house lost value should never be allowed to purchase a house again.

 

You made a deal with the lender to pay that mortgage, and if you can do it you should.

 

What if the reverse situation were to happen, and your house appreciated by 100% or more. Would you expect/allow the lender to take it back because they could sell it for a profit. Of course, you wouldn't.

 

If you default when you are able to pay, you are doing exactly the same thing in reverse. You're backing out on the deal because the terms no longer suit you. It's not the lender's fault your home has lost value, so why should you be allowed to stick them with the house?

 

Even if you're willing to take the hit to your credit and more importantly your reputation, you shouldn't be allowed to do it. I know if you were a friend or family member of mine, I would never look at you the same if you did this.

 

I certainly understand this point of view. I've actually shared it, for quite some time. I think I might be changing my mind.

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Banks are in business to make money. People are choosing to use their services.

 

ETA: In response to your question regarding stories of people we know who have done this, I do know someone who has done it. They have the money to pay their mortgage but choose not to. They walked away. Their home is in foreclosure and they are currently renting it out. The poor renters will be out their cash (first and last) when the lender finally gets around to taking the house. It is immoral.

 

Yes, the banks are in business to make money. If I decide to do this, they actually still will be making about $70,000 on me (give or take a few thousand) if they get it back and sell it at market value because they bought the mortgage from Countrywide for about .40 on the dollar.

 

And I would never burn a renter that way. Actually, that's my biggest concern about this whole thing. I have no way of knowing if the house i would be renting could be in foreclosure and I would be out on my bum in a few months.

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I certainly understand this point of view. I've actually shared it, for quite some time. I think I might be changing my mind.

 

Funny how that happens, no? :001_smile:

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I certainly understand this point of view. I've actually shared it, for quite some time. I think I might be changing my mind.

 

Yeah. Amazing how actually living the reality others only speculate about can do that for a person.

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Yeah, this. I'm tending toward looking at it as a business decision and not a moral one. I'm responsible for my life and my retirement and my children's education. The banks also took a risk when they loaned me the money. I guess there are responsibilities on both ends. If the entire system hadn't failed the US public at large so dramatically, I would agree with those who are saying I have a "moral" obligation to pay back the loan. Sort of. It's a business transaction at the end of the day, and right now I'm on the really bad end of it with no end in sight. There would be repercussions, and I would be prepared to deal with those should I decide to go through with this.

In our case it was joint stupidity fueled by a booming market. And our lender was basically willing to meet us halfway on the short sale. They've been great and I don't want to screw them over. If they were willing to screw us over when it was joint stupidity I might have a different view. But as it is, I don't want to leave them entirely holding the bag.

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I am certainly not an expert on banking nor real estate, but in IME, an assessment value can be very different than an appraisal. Where I live, the homes are assessed at a lower value at times than what you have paid, which for the taxpayer, is a good thing! You don't want to pay more in taxes than you have to. Maybe you are getting the terms assessment and appraisal mixed up?

 

Have you looked at refinancing at a lower rate, if possible? We have done this several times (on several different homes), and have saved a lot of money.

 

I would focus on how to pay off your credit card debt before letting your home foreclose. That is not a wise decision, unless you truly have no other choice left. A relative of mine took out a small personal loan to pay off CC's at a lower interest rate than the CC's themselves. Perhaps you can look into that as an option.

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I would only if I felt the long term results were worth it.

 

It's a standard business decision that companies have to make every day. Is X investment paying off or not? If it isn't, how can it best be either made profitable or loss reduced?

 

Have you considered asking them to forgive the deflated difference and refinances with you? Can't hurt to ask?

 

At the least, I would try to refinance if it is worth the cost.

 

I would even consider bankruptcy.

 

Otherwise, keeping a bad investment is just bad financial planning. That's money better used for your children's education or your retirement fund.

 

There is no moral imperative to keep a bad investment.

 

Talk to your lawyer about all your options and what the long term affect is likely to be for you.

 

I have spoken with the bank about a loan modification and they won't even discuss it. I can't file bankruptcy because...well....I'm not bankrupt. And your statement about there being no moral imperative to keep a bad investment is pretty much where I'm trying to get my head to be. There will be penalties and other repercussions, but on paper I'd still be coming out ahead even with those.

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I think people who have the ability to pay but walk away from mortgages simply because their house lost value should never be allowed to purchase a house again.

 

You made a deal with the lender to pay that mortgage, and if you can do it you should.

 

What if the reverse situation were to happen, and your house appreciated by 100% or more. Would you expect/allow the lender to take it back because they could sell it for a profit. Of course, you wouldn't.

 

If you default when you are able to pay, you are doing exactly the same thing in reverse. You're backing out on the deal because the terms no longer suit you. It's not the lender's fault your home has lost value, so why should you be allowed to stick them with the house?

Even if you're willing to take the hit to your credit and more importantly your reputation, you shouldn't be allowed to do it. I know if you were a friend or family member of mine, I would never look at you the same if you did this.

 

Here is where I completely disagree. The banks are indeed responsible for much of the lost value in the housing market.

 

I think that the decision is unique to each case. Some are still able to easily pay their mortgages. Some struggle, and as Martha mentioned make bad financial decisions like forgoing financing their dc college to continue to support a bad financial situation. Some houses are slightly underwater and it might be prudent for the owner to wait out the market. Some, like in CA, NV and FL have lost over 1/2 their value, and I do not believe will ever fully recover. Each family needs to do what is best for their situation.

 

It is not a black and white "moral" question.

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To the bank, it is an investment. They bank on you paying them a profit.

 

To the buyer, it's a debt until paid, then it becomes their asset.

 

And that's an option too. Sell the house at best price, get a loan for the remaining balance and pay that portion.

 

And absolutely it is better to hold if there is any hope of it regaining it's value. I would have to be 10k or more upside down to even consider it. Even very slow regain would be possible if I planned to live there 10 years or more.

 

I'm so far underwater it could be decades, literally, before it turns around. I could deal with being $10K under, but the current assessed value (for tax purposes anyway) is $94k less than what I owe. That's just ridiculous. And again....I had equity when I purchased.

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I'm so far underwater it could be decades, literally, before it turns around. I could deal with being $10K under, but the current assessed value (for tax purposes anyway) is $94k less than what I owe. That's just ridiculous. And again....I had equity when I purchased.

 

Tax value and market value are two different things. Tax values don't change at the same rate as market value. The tax value of our house has always been under market value, and has never been used in valuing it for the purpose of financing.

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Well, if you plan on renting anyways.....why not just stay there since you can afford it? You at least get a bit off you taxes for the motgage interest, and it is your place to do what you want with it! I can not imagine going back into a rental after owning my home for so many years.

 

I do not understand why it would be better to walk away, ruin your credit, just to turn around and pay a landlord instead.

 

The house at least has a chance of coming back up to similar to what you paid (even if it is in 10-20 years) for it...a rental does not.

 

Don't forget that bad credit hurts you in many ways including interest rates on loans and car insurance. It can cost you for many years to ruin your credit.

 

This is the same argument I'm having in my own head, sort of. I would have to pay a landlord, but for what I could pay them I could have much more space (which I desperately need), and no burden of repairs. I really had no intention of living here for 20 more years, although I suppose I could. I'm not so worried about the credit. I have plenty of credit. If I could refinance to lower my payment, I would. But since I'm so under water that's not even an option.

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I am certainly not an expert on banking nor real estate, but in IME, an assessment value can be very different than an appraisal. Where I live, the homes are assessed at a lower value at times than what you have paid, which for the taxpayer, is a good thing! You don't want to pay more in taxes than you have to. Maybe you are getting the terms assessment and appraisal mixed up?

 

Have you looked at refinancing at a lower rate, if possible? We have done this several times (on several different homes), and have saved a lot of money.

 

I would focus on how to pay off your credit card debt before letting your home foreclose. That is not a wise decision, unless you truly have no other choice left. A relative of mine took out a small personal loan to pay off CC's at a lower interest rate than the CC's themselves. Perhaps you can look into that as an option.

 

I hear what you're saying about the difference between a tax assessment and a market value appraisal. That's why I said that I'm upside down somewhere between $65 - $95K (or whatever the numbers were in my original post). The tax assessment would put it at the higher amount, and comps in my area would put it at the lower, but either way it's a considerable gap between what it's worth and what I owe.

 

I do have choices here. I'm not struggling to pay my debts (mortgage or otherwise). I'm just trying to figure out the best financial decision for myself and my family in the long run.

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Thanks for all of the feedback, even from those who decided to tell my how incredibly immoral I am for even considering backing out of a business deal that no longer suits my needs. :glare:

 

Most of the advice has been very good food for thought, and I appreciate it. I'd still love to know if anyone has actually done this, or gone through a short sale, or is in the same situation (VERY far under water on the mortgage) and made the decision to stay (and why).

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Tax value and market value are two different things. Tax values don't change at the same rate as market value. The tax value of our house has always been under market value, and has never been used in valuing it for the purpose of financing.

 

Yes, tax assessment value is just a percentage of the actual market value. You can't use the tax value as a selling or financing price.

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Thanks for all of the feedback, even from those who decided to tell my how incredibly immoral I am for even considering backing out of a business deal that no longer suits my needs. :glare:

 

You know, I don't think the :glare: is fair when you yourself write things like...

 

it goes against my being at the cellular level to stop paying when I can.

 

And I think it's pretty snarky to say things like...

 

Yeah. Amazing how actually living the reality others only speculate about can do that for a person.

 

when no one knows the shoes others among us have walked in before, the challenges that have been faced, the decisions that have been made, the losses that have been experienced. Some of us don't change our feelings on moral issues when "actually living the reality." Just because it is hard to do the right thing doesn't mean some of us don't do it anyway.

 

The argument about the banks having a hand in it just goes to prove the adage that two wrongs don't make a right. I am responsible for my own behavior and decisions, period. Trying to identify a scapegoat so I can act counter to my conscience? No.

 

To be clear, I'm not talking about people who truly have no choice due to lay-offs, health care problems/bills, etc.

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It is easy to think of "the banks" as some faceless entity which is not going to be hurt by practices like this.

Actually, there are people just like the people on this board who entrust the bank with their savings to invest and grow. It is these people whose money paid for your house. It is these people who are going to be hurt because the bank can not return their promised investments. Not some institution. People who invested for retirement or for college.

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This is what stood out to me in all the posts you have made....

 

if I stop paying now and it takes, say...8 months to complete the foreclosure, and if I live here the whole time so it remains my primary residence, I can use that money to pay off credit card debt and still have more than enough left over for first and last month deposit on a bigger and better place than what I have now.

 

Wouldn't we all like to do that? I think everyone should just walk away from their homes and use the extra money to take a long overdue vacation, or how about a new car?

 

Come to think to think of it I am tired of my old bathroom and kitchen but don't have the money to remodel. I think I shall just mail the keys to the bank. Plus I'll have lots of money leftover to sign my kids up for all those classes we could never afford.

 

Brilliant!

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This is what stood out to me in all the posts you have made....

 

if I stop paying now and it takes, say...8 months to complete the foreclosure, and if I live here the whole time so it remains my primary residence, I can use that money to pay off credit card debt and still have more than enough left over for first and last month deposit on a bigger and better place than what I have now.

 

Wouldn't we all like to do that? I think everyone should just walk away from their homes and use the extra money to take a long overdue vacation, or how about a new car?

 

Come to think to think of it I am tired of my old bathroom and kitchen but don't have the money to remodel. I think I shall just mail the keys to the bank. Plus I'll have lots of money leftover to sign my kids up for all those classes we could never afford.

 

Brilliant!

 

That's similar to the people in my area taking out HELOC's and spending it on Hummer's and boats. Ugh!!! They were the first to get foreclosed on. Just about every house in my neighborhood has been foreclosed. We've even had houses that were foreclosed on, bought, then foreclosed again. :001_huh: Talk about driving down prices. I feel like we're never going to recover.

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The consequences for not paying your mortgage are clearly spelled out in your loan agreement and, as far as I know, they don't include having to get "I am a bad person" tattooed on your forehead.

 

Also:

 

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

 

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

 

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

 

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

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It is stories like justamouse's that reveal the agenda of the banks. They make more on a foreclosure than on an agreement with their own customers to a period of reduced payments, so they rarely agree to arrangements that serve the needs of homeowners. Given that reality, it's hard to see why any homeowner would ever continue to perceive their relationship to a bank as having a moral dimension.

 

If I owed money to an individual, I'd absolutely see it as a moral obligation to pay it back. It's so much harder for me to perceive banks the same way because the needs of real individuals are not supposed to be a part of their business equation. Why then should individuals accord them the moral status of an individual?

 

As long as organizations operate in a moral vacuum, it seems wrong that people should be bound by moral arguments to treat them as they would another person.

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If I owed money to an individual, I'd absolutely see it as a moral obligation to pay it back. It's so much harder for me to perceive banks the same way because the needs of real individuals are not supposed to be a part of their business equation. Why then should individuals accord them the moral status of an individual?

 

As long as organizations operate in a moral vacuum, it seems wrong that people should be bound by moral arguments to treat them as they would another person.

 

If people stop treating paying back their debt to a house as a moral imperative, then the banks will become more and more hesitant to loan out money on such favorable terms. Eventually it will get to the point where you must have cash to buy a house and either the values of all homes will crash down to levels where folks might feasibly have cash to buy them -- or more and more houses will be owned by fewer and fewer folk.

 

This same result could also happen by government regulation.

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It is stories like justamouse's that reveal the agenda of the banks. They make more on a foreclosure than on an agreement with their own customers to a period of reduced payments, so they rarely agree to arrangements that serve the needs of homeowners. Given that reality, it's hard to see why any homeowner would ever continue to perceive their relationship to a bank as having a moral dimension.

 

If I owed money to an individual, I'd absolutely see it as a moral obligation to pay it back. It's so much harder for me to perceive banks the same way because the needs of real individuals are not supposed to be a part of their business equation. Why then should individuals accord them the moral status of an individual?

 

As long as organizations operate in a moral vacuum, it seems wrong that people should be bound by moral arguments to treat them as they would another person.

 

"As long as organizations operate in a moral vacuum," it's OK if we as individuals operate in a moral vacuum?

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If people stop treating paying back their debt to a house as a moral imperative, then the banks will become more and more hesitant to loan out money on such favorable terms. Eventually it will get to the point where you must have cash to buy a house and either the values of all homes will crash down to levels where folks might feasibly have cash to buy them -- or more and more houses will be owned by fewer and fewer folk.

 

This same result could also happen by government regulation.

 

I'm not so sure that's an entirely bad thing..

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The consequences for not paying your mortgage are clearly spelled out in your loan agreement and, as far as I know, they don't include having to get "I am a bad person" tattooed on your forehead.

 

Also:

 

 

 

Indeed. :glare:

 

Every contract has terms for what happens if you don't fulfill any aspect of it.

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I'm not so sure that's an entirely bad thing..

 

It would be a bad thing for the country to have that much value go up in smoke and end up affecting quite a bit up and down the line. Companies choosing to expand (and thus hire) or stay put, or even go bankrupt due to their inability to get a loan. Folks with retirement funds that collapse. The government even has money in the stock market that would make them even more unable to pay current commitments than now. The retirement funds of every company, city, state out there...

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