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Let's all walk away from our obligations!

Old 01-14-2010, 10:11 AM
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Default Let's all walk away from our obligations!

Yahoo posted this.

http://finance.yahoo.com/tech-ticker...&asset=&ccode=

I say our world is in bad shape if we don't "do the right thing" because we don't have a moral obligation to do it. I know some will say that this was caused by the big banks and they do it all the time - but my answer to that is "Does it make it OK to do it because someone else did it" what does everyone think?
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Old 01-14-2010, 10:36 AM
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Its a contract with default terms. If the bank gets the house at less than their estimated valuation then maybe they also made a bad gamble... I see no moral problem per se if no laws are broken ..That article seemed very lender/industry slanted .......but even so they do say...

Fortunately, you don't have to fight about what happens next. The contract between you spells everything out: If you stop paying, the lender gets the house. That's it. Unless the contract specifically differentiates between a failure to pay based on hardship (involuntary) and a failure to pay based on a collapse in the value of the house (voluntary), there's no difference. If the lender thought at the beginning that you had a "moral obligation to pay," it would have specified that in the contract.

I don't see people doing it just because everyone else does - they are doing it because they have to. Even if it is just a pure business decision (move out of this and buy that cheaper) - what makes that immoral? Its business, isn't it - maybe capitalism is all immoral Or is Immorality in this case a subjective thing depending on which side you are on?

Look don't have that answer, but Frankly, I have no sympathy for the bankers, their stocks and such all seem to have recovered more than the little guy. And they seem to have been the far greater recipient of public monies.

Last edited by LI Sound Grunt; 01-14-2010 at 10:47 AM.
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Old 01-14-2010, 10:40 AM
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Well I think that article is complete garbage, but I do agree with the sentiment. Down here in S Florida they would give a $300k mortgage to anyone with a pulse whether or not they had any hope of actually repaying it. I am also pretty sure that with interest the bank would be raking in $600k+ on each of those loans - so I don't feel bad at all to hear that people are sticking it to their lender. I'm not even going to get into the condo projects with the realtor/lender office next to each other in the ground floor that would hustle you like it was a timeshare.

I have a number of friends in their late 20s-early 30s who bought property they could barely afford simply because the market pressured them into it and it seemed like the 'last chance' they would ever have to own a home. Their realtors, banks, and friends all told them it was the best investment they'd ever make. Most of these people weren't buying $700k McMansions - they were buying $300k townhouses or "starter homes" that they were assured they could quickly sell later as their lives progressed.

Sadly many of them make a decent living but now will be slaves to their house payments for another 27 years - meaning some may not be able to raise a family, can't leave their current job, can't take care of their parents as they age, etc. Is it morally wrong for them to consider giving the keys back to the bank?

I know a few who are wondering what to do. Personally I'm in the hole $20-30k and am pissed off about it, can't imagine being in the hole $200-300k like some are.

The big problem is, for those that DO have a real job, in a recourse state like florida the banks CAN go after you for what you owe them. That's the little detail that these articles leave out. If anyone knows how that plays out in the real world, I'm all ears.

Last edited by Flot; 01-14-2010 at 06:51 PM.
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Old 01-14-2010, 11:04 AM
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Sorry - I am not talking about the people who can not pay their motgage, I am talking about a movement behind people who "can" pay but feel that since they are "upside down" that there is no reason to pay. Clearly people with financial difiiculties have options here including bankruptcy, what I am talking about is some people who feel that it is no more than a risk to the bank and since it went bad - walk away. I have no love for the big banks, don't believe we should have bailed them out, (practices only ensures future risky behavior). I just have an issue with a "throw-away society that is now willing to throw away their homes if it doesn't go their way.
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Old 01-14-2010, 11:09 AM
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Originally Posted by Flot View Post
Well I think that article is complete garbage, but I do agree with the sentiment. Down here in S Florida they would give a $300k mortgage to anyone with a pulse whether or not they had any hope of actually repaying it. I am also pretty sure that with interest the bank would be raking in $600k+ on each of those loans - so I don't feel bad at all to hear that people are sticking it to their lender. I'm not even going to get into the condo projects with the realtor/lender office next to each other in the ground floor that would hustle you like it was a timeshare.

I have a number of friends in their late 20s-early 30s who bought property they could barely afford simply because the market pressured them into it and it seemed like the 'last chance' they would ever have to own a home. Their realtors, banks, and friends all told them it was the best investment they'd ever make. Most of these people weren't buying $700k McMansions - they were buying $300k townhouses or "starter homes" that they were assured they could quickly sell later.

Sadly many of them make a decent living but now will be slaves to their house payments for another 27 years - meaning some may not be able to raise a family, can't leave their current job, can't take care of their parents as they age, etc. Is it morally wrong for them to consider giving the keys back to the bank?

I know a few who are wondering what to do. Personally I'm in the hole $20-30k and am pissed off about it, can't imagine being in the hole $200-300k like some are.

The big problem is, for those that DO have a real job, in a recourse state like florida the banks CAN go after you for what you owe them. That's the little detail that these articles leave out. If anyone knows how that plays out in the real world, I'm all ears.
Giving the keyes back to the bank is one thing - foreclosing is another. Do these people not owe any obligation "moral or otherwise" to the neighborhood that they were in? If someone next to me abandons their house because they are upsdie I suffer with a more of a reduction to my house value and I did nothing wrong. What I am talking about is that people are assuming risk and then when it goes against them want to leave. No personal responsibility to anyone or anything but themselves. (someone will say the banks do it all the time - and while I understand they do and I agree that they do - I am talking about individual responsibility - the "do the right thing even when no one is looking thing - responsibility.
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Old 01-14-2010, 11:24 AM
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Its a bad situation and the banks got them selves into it. I really feel bad for people like my parents that have always worked hard and never missed a payment in their life and put a large amount of savings into a retirement property that has lost about 50% of its value. They are the ones who really lose out. The banks will get bailed out and the investors that got loans with no money down aren't out anything.
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Old 01-14-2010, 11:27 AM
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Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
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Old 01-14-2010, 11:41 AM
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Originally Posted by bsmit24 View Post
Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
Well said.

Somehow almost nothing is immoral if its - "well, hey , that's business....."
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Old 01-14-2010, 11:45 AM
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Originally Posted by bsmit24 View Post
Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
I don't think business should do it either. The whole point is just about personal responsibility.

also - before everyone thinks I am ruthless - (or a shill for a bank) - I really do feel badly for the people who due to no fault of their own - (lost a job - medical bills, etc) wind up in this position. I am only discussing individuals who merely look at it as a financial transaction and decide they have no obligation because it is against them. I don't agree when business does it and I don't like it when individuals walk away from their responsibility either.
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Old 01-14-2010, 11:47 AM
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We discussed this very same topic last week on the Subaru forum that I also read regularly. Needless to say, it sparked passionate debate.
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Old 01-14-2010, 11:55 AM
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Originally Posted by bsmit24 View Post
Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
Agreed 100% sir.
We have a different scenario.
My fiancee co-signed on a $38K small business loan a few years ago for her daughter and SIL. Her credit score was in the 800's. Mine is also.
We'll skip the gory details but SIL is gone and she was left holding the proverbial bag for the amount owed. At 27% interest.
I took it upon myself to contact the bank and we've reached an agreement to close out this mess for 10K.
Done deal.
Here's one example of a good person trying to help family and getting totally screwed.
Her credit score is now down in the 500's.
We're in our late 50's and this hurts, but we will persevere.
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Old 01-14-2010, 12:01 PM
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I am just curious when people are going to quit blaming everything on someone else and take some personal responsibility. Yes, big banks did a lot of things wrong, however, when these people went out and decided to take out a 350k loan on a salary of 40k a year, they made a decision to live beyond their means. I personally have no sympathy for someone who does that. I pay my bills, I don't overextend myself, and I'm just sick of hearing everyone say that someone else should help these people when they should have never taken out a loan to begin with. I do understand that people lost their jobs in a lot of cases, and I am not talking about them. I am talking about those people that just wanted to keep up with the "Jones's."
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Old 01-14-2010, 12:04 PM
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Originally Posted by Traderdave View Post
Sorry - I am not talking about the people who can not pay their motgage, I am talking about a movement behind people who "can" pay but feel that since they are "upside down" that there is no reason to pay. Clearly people with financial difiiculties have options here including bankruptcy, what I am talking about is some people who feel that it is no more than a risk to the bank and since it went bad - walk away.
Did you read my post? I know a number of people who can technically afford the house they bought. Maybe it's a stretch but there is nothing stopping them from making the payments. A lot of them were recent college grads or others just starting their careers with good jobs, good credit scores, etc. Buying a home was NOT presented to them as a risky financial transaction - even the friendly corner banker (allegedly an expert) was telling all of them to buy as much as they could afford, the market was only going up, etc. Nobody saw the housing market as "risk."

Now, because of their decision to buy - some will literally be trapped for 10-20 years in their first homes which will substantially alter their lives. If you bought a 1 bedroom bachelor pad at 27, wtf are you going to do when you are 37 and are $100k underwater on it? Do you know how long it takes most people to "save up" $100,000?

Also, you talk about "giving back the keys" like there is an address at the bank that you just mail them to and everything goes away. That is not the case in most states. You are almost certainly forclosed on, and you are almost certainly going to have to declare bankrupcy when it's all done.

Don't get me wrong - I am bitter too - I made the "poor" choice to live within my means - but I have no issues with the banks getting stuck with the problem they created.
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Old 01-14-2010, 12:04 PM
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Originally Posted by bsmit24 View Post
Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
It's different because once a business chapters out they can change their name and start building credit again from scratch....not so for an individual.
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Old 01-14-2010, 12:10 PM
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One important factor that hasn't been addressed yet is the hit you will take on your credit score for doing this. If you give the keys to the bank, or default, you'll likely not get another loan for another house, especially with the credit crunch going on now.
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Old 01-14-2010, 12:11 PM
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Originally Posted by bsmit24 View Post
Although I am not advocating anyone walking away from their obligations, why is this any different than business that default on loans?
Originally Posted by fishnutz View Post
It's different because once a business chapters out they can change their name and start building credit again from scratch....not so for an individual.
Although I did not post that, that is partly what I was think of. With an individual the foreclosure or deed in lieu or or other will plague them for some time to come but when you classify it as a business it seems to be acceptable to some degree and you can start another business at any time, even start another business and do an asset transfer to keep certain things without any personal responsibility for the previous business. If it is not to avoid personal responsibility, what else is incorporation for?
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Old 01-14-2010, 12:13 PM
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Originally Posted by gingersnap View Post
Agreed 100% sir.
We have a different scenario.
My fiancee co-signed on a $38K small business loan a few years ago for her daughter and SIL. Her credit score was in the 800's. Mine is also.
We'll skip the gory details but SIL is gone and she was left holding the proverbial bag for the amount owed. At 27% interest.
I took it upon myself to contact the bank and we've reached an agreement to close out this mess for 10K.
Done deal.
Here's one example of a good person trying to help family and getting totally screwed.
Her credit score is now down in the 500's.
We're in our late 50's and this hurts, but we will persevere.
Agrred this must hurt but I commend you and your fiance for doing the right thing - you took a risk, (even though at the time probably didn't perceive that SIL would split) - it went bad - but you worked out something. I am sorry for the credit score taking a big hi - but you can certainly hold your head up high
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Old 01-14-2010, 12:18 PM
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This just in: Lane Kiffin says you should always live up to your oblgations.
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Old 01-14-2010, 12:33 PM
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"Buying a home was NOT presented to them as a risky financial transaction - even the friendly corner banker (allegedly an expert) was telling all of them to buy as much as they could afford, the market was only going up, etc. Nobody saw the housing market as "risk.""

With all due respect I disagree with this entirely. If the individual does not recognize the risk of a $300k transaction then there is no hope for society today.
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Old 01-14-2010, 12:47 PM
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Originally Posted by starmonk View Post
With all due respect I disagree with this entirely. If the individual does not recognize the risk of a $300k transaction then there is no hope for society today.
From say 2002-2006 you had media pundits, bankers, real estate agents, etc telling you that it was the absolute best thing you could ever do with your money. "Real Estate doesn't go down in value" was more or less the mantra. Foolish? Clearly. But that's why we had a bubble.

The difference in losing $300k on a house and losing $300k on any other investment - is that with ANY other investment, you would have to have the money, or at least a good chunk of it, to lose it. When you are underwater $300k on a house - it does not just impact you in the NOW, it impacts you for the rest of your life.

Your house was "secured" and the bank did "research" on both you and the property to make sure their investment was sound. You had inspections, checks into your credit history and employement, maybe a note from your mother vouching for your character. If you're not the brightest bulb in the box and now there are 6-10 finance professionals/accountants/MBAs/lawyers who have their hands all over the transaction are all patting you on the back, congraduating you on your purchase, telling you it is a great move for you - surely you can see how this happened.

In all honesty I believe many banks should have been served with malpractice suits for their behavior. If you didn't see the bubble firsthand, you wouldn't believe it.

Last edited by Flot; 01-14-2010 at 06:49 PM.
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