If you think it's OK to walk out on a mortgage that you can afford

[Nobody]

In a couple of different threads a common argument for it being OK to walk out on a mortgage that you can afford but don’t want to pay because you owe more than the house is worth goes like this; It’s in the contract that if you don’t pay the mortgage then the bank gets to take back your house, therefore you have the option not to pay.

OK, let me do an analogy and tell me where I’m wrong. It’s not actually against the law for me to steal from you. According to the law I have two choices. I can choose not to steel from you and be free, or I can choose to steel from you and go to jail. Because it’s in the law that I go to jail if I steal that means that I have the option to steal and the law simply specifies what happens if I do.

[Valgard]

Your analogy is just wrong - under our criminal code you are not “allowed”, for example, to take my car so long as you don’t mind going to jail for a few years when caught. It is against the law to take my car - you never have any kind of legal possession or ownership of it and when the cops nab you I get my car back.

Would you argue that it is LEGAL to kill someone as long as you don’t mind going to jail afterwards?

A mortgage is a loan, and you put up the house as collateral on that loan. You sign a specific legal contract for that loan which says in effect “I agree to pay the bank $300K over the next 30 years according to the following schedule and if I do not, the bank may take ownership of the home.” By the terms of that contract you are free to walk away at any point and the bank recoups its loan by gaining legal ownership of the house.

[Euphonious_Polemic]

It’s a business contract, and any decision to walk away from a house is a business decision. If it is legal to do so (and I"m given to understand that it is), then an individual is free to walk away from his house if it makes sound business sense. Companies large and small make business decisions every day that may seem unfair to someone. That’s business Jake.

[Princhester]

Do loans secured by mortgage in the US waive the loan balance on foreclosure? They certainly don’t here.

[Nobody]

I’m sorry, but I see this “it’s in the contract” as rationalization. Or, in other words, the bank taking back the house isn’t simply one of two options, it’s meant to be a penalty, just like me going to jail from stealing from you is meant to be a penalty. And just because businesses do it doesn’t make it right. And two wrongs don’t make a right either.

[Simplicio]

@Nobody

I’m sorry, but I see this “it’s in the contract” as rationalization. Or, in other words, the bank taking back the house isn’t simply one of two options, it’s meant to be a penalty, just like me going to jail from stealing from you is meant to be a penalty.

But stealing a car isn’t immoral because there’s a penalty for it, its immoral because stealing is immoral. Not everything that provokes a penalty is automatically wrong.

[hansel]

@Nobody

I’m sorry, but I see this “it’s in the contract” as rationalization. Or, in other words, the bank taking back the house isn’t simply one of two options, it’s meant to be a penalty, just like me going to jail from stealing from you is meant to be a penalty. And just because businesses do it doesn’t make it right. And two wrongs don’t make a right either.

If Conan O’brien walks from the Tonight Show because Zucker moves it to 12:05, he’ll be violating the terms of his contract and subject to a financial penalty. Based on the OP’s analogy, Conan could continue, therefore he must continue, yes?

[rolandgunslinger]

@Princhester

Do loans secured by mortgage in the US waive the loan balance on foreclosure? They certainly don’t here.

I believe It’s different for each state.

[Nobody]

@hansel

If Conan O’brien walks from the Tonight Show because Zucker moves it to 12:05, he’ll be violating the terms of his contract and subject to a financial penalty. Based on the OP’s analogy, Conan could continue, therefore he must continue, yes?

From the news I’ve heard Conan’s been canned. And before that it was being reported that NBC would let him walk if he chose.

[Kobal2]

@Nobody

I’m sorry, but I see this “it’s in the contract” as rationalization. Or, in other words, the bank taking back the house isn’t simply one of two options, it’s meant to be a penalty

No it’s not. It’s meant to be an alternate resolution of the contract, one that both parties have agreed upon (unlike the car stealing scenario, where I sure as shit didn’t agree to let you drive away with my property).

And one that the bank’s whole job is to consider, I should add. If they’re left with bubpkis because they accepted bubkis as collateral for a substantial loan, they’re just bad bankers.

[Nobody]

@Kobal2

No it’s not. It’s meant to be an alternate resolution of the contract, one that both parties have agreed upon (unlike the car stealing scenario, where I sure as shit didn’t agree to let you drive away with my property).

And one that the bank’s whole job is to consider, I should add. If they’re left with bubpkis because they accepted bubkis as collateral for a substantial loan, they’re just bad bankers.

I didn’t realize that taking back the house was something that could be negotiated.

[The_Second_Stone]

@Princhester

Do loans secured by mortgage in the US waive the loan balance on foreclosure? They certainly don’t here.

Many states, such as California, The Golden State, have anti-deficiency laws, which prevent seeking the balance for purchase loans, not refinance loans. They also prohibit seeking the balance for non-judicial foreclosures: trustee sales that do not involve the court system.

Steel is iron and carbon, nothing more.

Stealing is the unauthorized exercise over the control over someone else’s property.

Breaching a mortgage contract “default” does not involve stealing absent some proof that fraud was committed in making the loan or other bizarre circumstances.

“Breach”, “Default”, “larceny”, “larceny by trick”, “fraud” etc. all have very specific meaning under the law. The law does not attach moral condemnation to breach or default, whereas it does various forms of larceny.

Contracts provide remedies for defaults/breaches. In instances, they also allow one party to change the interest rate at it’s whim, such as credit cards, or an adjustable mortgage depending on the interest rates set by bankers, such as the LIBOR rate.

Now if I want to go around feeling superior to others, I might adopt the OP’s attitude. But not being GM or Goldman/Sachs or AIG, I am well aware that if the shit hits the fan, the federal government is not going to loan me billions at virtually zero interest. It might be best for me to feed my children and let the property go and keep the car to live in other otherwise.

Personally, I feel terribly sorry for anybody who has to ruin their credit and walk away from a deed of trust. It is far less wrong to do this than for credit card companies to unilaterally double their interest rates or cut lines of credit suddenly. That is a wrong far greater and crueler than having to tell a bank that I cannot pay for my home and kick me out.

The opinion of the OP is often held by people who have never faced and never will face adversity in their lives. It is a sign of immaturity and to be pitied. Frankly it is no different than the bile spewed by Pat Robertson about Haiti.

If someone wants to look down on Donald Trump as a result of his various corporate bankruptcies, go right ahead, The Donald is big enough to take it. Someone who wants to look down on the guy down the street who is losing two investment houses, his own house and his SUVs is immature and shouldn’t be allowed into adult conversations.

[The_Second_Stone]

I’ve gotta say, I’m pretty offended by the attitude presented in the OP. It smacks of an arrogance that “nothing bad will ever happen to me, I’m John Galt, and I will rise above all adversity.” For every Ross Perot who has made it big in this world, there are a 100,000 people just as hard working and deserving who will live and die in poverty, and that ratio is higher outside industrialize countries. But more telling is that every single one of us will one day be worm food. A sense of moral superiority is not the sort of flavor enhancement that a worm will have any appreciation for. Treat your fellow human beings well, and without haughty judgments, and maybe you will make the world a slightly better place while you are in it. That is the Kingdom of Heaven. A haughty judgmental person is hell to be around and hell to be.

[Nobody]

@The_Second_Stone

Now if I want to go around feeling superior to others, I might adopt the OP’s attitude. But not being GM or Goldman/Sachs or AIG, I am well aware that if the shit hits the fan, the federal government is not going to loan me billions at virtually zero interest. It might be best for me to feed my children and let the property go and keep the car to live in other otherwise.

You don’t know me, so don’t assume that I’m going around feeling superior to anybody. Second, I’m not talking about those who can’t afford to make the mortgage payment. Only those who can afford to, but walk away anyway.

Personally, I feel terribly sorry for anybody who has to ruin their credit and walk away from a deed of trust. It is far less wrong to do this than for credit card companies to unilaterally double their interest rates or cut lines of credit suddenly. That is a wrong far greater and crueler than having to tell a bank that I cannot pay for my home and kick me out.

Again, if you cannot pay, then you’re in a different situation than I mentioned in the OP.

The opinion of the OP is often held by people who have never faced and never will face adversity in their lives. It is a sign of immaturity and to be pitied. Frankly it is no different than the bile spewed by Pat Robertson about Haiti.

You’re misrepresenting what I’m saying, and further more you’re insulting me outside of the pit. And further more, I have no idea how this compares to the situation in Haiti.

If someone wants to look down on Donald Trump as a result of his various corporate bankruptcies, go right ahead, The Donald is big enough to take it. Someone who wants to look down on the guy down the street who is losing two investment houses, his own house and his SUVs is immature and shouldn’t be allowed into adult conversations.

I’m not looking down on people who can’t afford it. I’ve been unemployed for a long time and unemployment runs out in 5 weeks unless there’s an extension. If not, I’m not sure what I’m going to do, so stop pretending that you know me and my situation, and stop misrepresenting me.

[Kobal2]

@Nobody

I didn’t realize that taking back the house was something that could be negotiated.

I’m not sure what you’re talking about. Negociated by whom, and when ?

If you mean at the time of signing the contract, then the negociation is pretty short : they have the money you want, they dictate the terms, you accept or you don’t. The terms they offer you is what they commit themselves to sticking to, and what you yourself are committing to stick to from the signing onwards.

If you mean when you stop paying your mortgage, what’s there to negociate ? Everything has already been negociated back then. You want to keep the house, you pay up. You stop paying, they get the house. They’d rather you keep paying, tough cookies - they shouldn’t have agreed, of their own free will and without coercion whatsoever, to give you such an easy out.

[Nobody]

@The_Second_Stone

I’ve gotta say, I’m pretty offended by the attitude presented in the OP. It smacks of an arrogance that “nothing bad will ever happen to me, I’m John Galt, and I will rise above all adversity.” For every Ross Perot who has made it big in this world, there are a 100,000 people just as hard working and deserving who will live and die in poverty, and that ratio is higher outside industrialize countries. But more telling is that every single one of us will one day be worm food. A sense of moral superiority is not the sort of flavor enhancement that a worm will have any appreciation for. Treat your fellow human beings well, and without haughty judgments, and maybe you will make the world a slightly better place while you are in it. That is the Kingdom of Heaven. A haughty judgmental person is hell to be around and hell to be.

I’m unemployed and my wife is on Social Security Disability for the rest of her life. Again, stop pretending you know me and my situation.

[Nobody]

@Kobal2

I’m not sure what you’re talking about. Negociated by whom, and when ?

If you mean at the time of signing the contract, then the negociation is pretty short : they have the money you want, they dictate the terms, you accept or you don’t. The terms they offer you is what they commit themselves to sticking to, and what you yourself are committing to stick to from the signing onwards.

If you mean when you stop paying your mortgage, what’s there to negociate ? Everything has already been negociated back then. You want to keep the house, you pay up. You stop paying, they get the house. They’d rather you keep paying, tough cookies - they shouldn’t have agreed, of their own free will and without coercion whatsoever, to give you such an easy out.

You said

No it’s not. It’s meant to be an alternate resolution of the contract, one that both parties have agreed upon

The borrower has to agree to letting the bank take their house back if they want the loan is what I was getting at.

Anyway, I see I’m alone in my thinking. No problem. On an emotional level if a business that screws over others gets screwed it makes me feel good, but on a rational level I can’t condone signing a document where the intent is that you’ll pay them back, but then, even though you still can afford it, you choose not to anyway.

[Kobal2]

@Nobody

You said

The borrower has to agree to letting the bank take their house back if they want the loan is what I was getting at.

Well, yes. That’s where the cops come in - if he doesn’t agree to give back his house when he agreed to do so in contract (again, of his own free will and with no coercion whatsoever), *then *there’s a crime for ya, because at that point, he’s in effect stealing the bank’s property.

but on a rational level I can’t condone signing a document where the intent is that you’ll pay them back, but then, even though you still can afford it, you choose not to anyway.

We’re running in circles here. “Giving” them your house IS paying them back.

It’s not rocket surgery : the bank evaluates your house to be worth 100.000 dollars. Based on this information, they agree to lend you 10.000 dollars right now, on the agreement that you’ll pay them back 100.000 dollars over 50 years, and if you don’t then they’ll take your house because it’s worth what you owe them (and they won’t pay you back whatever part of the 100.000 payment you already made, either).

The fact that in the meantime the value of your house might’ve dropped like a stone is immaterial to the original agreement - it’s a known risk that the bank has (or is supposed to have) considered when they assessed it was worth 100.000 dollars over 50 years. As noted upthread, it’s not even a risk at all in some legislatures where you’ll still owe them the balance of the loan payments post foreclosure.

[Nobody]

I lend you $600 for a laptop. After paying back $300 you say that the same model that you have sells in stores for $300, so you give me the laptop back saying you don’t want to pay $600 for a $300 laptop. I’m out $300. Fat bit of good getting back my laptop is. Now, if the law is that after selling the used laptop for whatever you still have to pay the difference so that I get my $600 back that’s one thing, but if you return the laptop with no intention of paying the remaining $300, or whatever the balance is after I resell the laptop then that’s something different.

[The_Second_Stone]

@Nobody

I’m unemployed and my wife is on Social Security Disability for the rest of her life. Again, stop pretending you know me and my situation.

Why don’t you stop pretending to know these fictional people who can afford to pay but don’t? That is exactly what you are doing.

I’m pretty sure that in real life you don’t know anything about anybody who has ever been foreclosed upon, much less closely examined their financial records to see if they can really afford to pay but are “walking away”. I’m not interested in what you hear on Fox news. I’m not interested in what your cousin’s neighbor said about being able to afford so he could save face. You don’t know shit. You haven’t walked in the shoes of anybody devastated by the financial meltdown. Every one of them has a story as sorry as yours or worse. I’ve worked with dozens of them. None of these cases are pleasant to hear. Some people who look like they have it all together are in an emotional hell.

Talk about a real case. How about T. Boone Pickens, who ordered $2 billion dollars worth of wind turbines and has now canceled half his order because of the dip in natural gas prices. He is changing his contract. Is he breaching? Is he exercising an option? Does it depend what he calls it? Unless you investigate all the facts thoroughly like an IRS auditor, you are engaging in recreational outrage. You and I and everybody else is no better or worse than T. Boone Pickens, or Donald Trump or people who have lost their homes, for whatever reason.

I know your situation. You’ve described your situation. You are unemployed and your wife is on Social Security Disability for the rest of her life. It’s not pleasant, I’m sorry. By your own moral standard, I’m entitled to jump to all sorts of stereotyped conclusions about you based on idiotic and undefined and unregulated notions of morality that float around the internet.

And does this petty moralizing about how it is wrong to default make you feel better about yourself? I doubt it. About these fictitious people who have lost their homes and can afford it? No. It doesn’t. It is a pool of bitterness you are wallowing in. You aren’t helping anyone by posting bitter judgmental crap about hypothetical people some gossip thinks might exist.

These people are down on their luck. Don’t go thinking you are any better than they are. You aren’t, I’m not. Life is tough, and then you die. For a statistically irrelevant few, life isn’t tough, but they wind up just as dead. My recommendation is that you stop being so mean to these people Fox News is making up (or the local Iago is making up) and get the best revenge on the universe and simile about what you do have. Poor people all over the world do it every day. They treasure friends and family while they can.