Tell me what you think

HokieLaw · April 2010

First, read this article:

http://newsbusters.org/blogs/anthony-kang/2010/04/20/nbc-screw-your-neighbors-walking-away-you-mortgage-ethical-good-busine

Then tell me how you feel about people who strategically default on their mortgages.

(Strategic default does not mean that they lose their job and therefore can't make their payment - it means they can make their payment but they choose not to because their house is no longer worth as much as they paid for it).

HokieLaw · April 2010

I think strategic default is wrong on many levels.

First off, you entered into a contract and, sure, there are ways out of a contract but if you can afford your payment, why would you let your credit score tank and leave your family homeless?

Second, sure, the bank loaned you more money than the house was worth, and that was wrong, but appraisals are technically based on market price - what the house is worth in the current market. Appraisers cannot see in the future to see that although the three houses closest to yours sold for $400k this year they will only be worth $300k in two years, therefore you should only pay $300k. No, they look at what information they have and they make a decision based on that. I do know that banks tell the appraiser what they "need" the appraisal to be, but I've seen many appraisals come back lower than the purchase price (and many come back much higher than it).

Third, you ruin the property value of your neighbors if you do this. An example. In my neighborhood houses were valued (appraisal prices) anywhere from 300k to 800k (I realize, that's a huge difference but it is what it is) when we bought in 2009. A house was foreclosed on in February for 135k. A neighbor who's house was listed on my appraisal for being worth 310k went to refinance and showed me his recent appraisal. Now, his home is appraising for 180k. He can't refi. (the foreclosure was not exactly strategic in my neighborhood - they decided to spend their money on drugs instead of their house payment).

Mrs.Graves51907 · April 2010

I think they are dumb not just because they are completely dumping their credit scores but because they don't see how much they are really losing. Ok so your home isn't worth as much as you now but the market will bounce back and when it does the value will rise quickly. That could be a year or 5 years but the fact is that it will rebound! Now they are going to ruin their credit which will make things difficult or even impossible to purchase another home when they feel like things have improved but it will also effect other purchases they may want to make, getting new jobs, and everything else that your credit score is dependant on. They should be thankful for what they still have compared to those who have lost everything and would give anything to be in their shoes. Makes me sick!

flyer1982 · April 2010

I think walking away from your home when you can still make the payments is very irresponsible! Believe me I know how it feels to take a hit on your home because the value is down.

I agree with Elizabeth that these people should be thankful for what they have and are able to walk away from...there are so many people in a situation where they would never ever dream of walking away from their home no matter how much money they've lost.

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