bostonbubble.com

[Shoeshine.]

This could be a thriving business

Link below:


http://www.youwalkaway.com/

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[Hank]

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020610

Scariest thing I've seen yet- the CNN story goes into some depth on it.

[admin]

You want something scarier? How about people who can still afford their mortgage payments but who are walking away because they aren't growing rich off their house like they expected?:

http://www.youtube.com/ ...truncated...

While they are probably being a lot more honest about their current situation than those pleading "predatory lending," asset depreciation is not a legitimate reason to walk away from the agreement they made to repay the money they borrowed. People frequently owe more on their car than it is actually worth, but they don't use that as justification to walk away. I hope this behavior does not become socially acceptable. (Now, if you actually can't afford the payments with an extra job or two, that's a totally different story.)

- admin

[JCK]

Haven't watched the video, but I think you're going to see a lot more of this.

I also think you may not be right re walking away due to asset depreciation. Keep in mind that when these contracts were signed, both parties were assuming appreciation.

As distasteful as it may be, a mortgage is a legal contract, and when it becomes economically advantageous for a party to breach the contract, rather than perform, breach is the correct choice. Under the law, this is considered normal, rational economic behavior. There is simply no presumption of "you signed it, therefore you must stick to it no matter what."

And as a practical matter, it's not going to be economically feasible for mortgage companies to sue individual homeowners (especially ones without any equity).

My take is that these mortgages never should have been originated in the first place, and if buyers are walking away, the lenders are partly to blame. The lenders are generally far more sophisticated than buyers. They know all the tricks, they know what they need to do in order to make money, etc. They're in no position to claim that they've been hoodwinked by buyers, quite frankly.

If I send my money to Nigeria become some email tells me to do, you'd say I was an idiot, and probably you'd have little sympathy for me. Likewise with the mortgage companies, loaning to people without properly documenting income, based on inflated appraisals, with little or no money down, or putting people into loans that only work if the market is inflating at 10%+ a year is/was equally stupid, and the mortgage companies should be expected to bear at least some of that cost of their own greed and stupidity.

[admin]

[JCK]

[admin]

[JCK]

And I understand that. But I don't think breaking contracts, per se, is inherently unethical. There are lots of good reasons to keep your promises, which go beyond simple economic considerations.

And a lot depends on circumstances. For example, is breaking contracts part of the standard business practice? In some businesses, it's common, and even expected. In others, not so much. In these latter cases, it may be unethical, if there is a real expectation you will keep your promise.

With these mortgages, I'd say things fall somewhere in between. People bought expensive houses with risky mortgages, on the assumption of appreciation. Lenders provided such mortgages, again with the assumption of appreciation. Now that the appreciation is out of the picture, why should the financial burden fall exclusively on the borrower?

[admin]

[JCK]

[quote="admin"]

[admin]

[Booba]

If somebody walked away from the property you are not gong to do too much about it.
Idiots that took too much and now drop the contract must be punished in the hard way. Modern American bancrupcy laws are way too liberal to irresponsible borrowers, so they are not really scared to repeat their stupid behaviour.
As of lenders, they deserve to be punished also!
Look at all of those signs on dealerships: "No credit? Bad credit? No problem!"
Don't you still see similar mortagage ads in Internet, even NOW?
If those guys will loose their money after lending them to a shmuck that notorous for not paying his/her debt, this is their problem!

[admin]

Here's an interesting article on the "You Walk Away" website that Shoeshine originally linked to, including an interview with one of the founders:

http://www.voiceofsandiego.org/articles/2008/02/06/news/walkaway020608.txt

- admin

[JCK]

[Hank]