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    Would You Be Morally Conflicted About Walking Away From Your Bank Loan?

    Mac Slavo
    August 31st, 2010
    SHTFplan.com
    Comments (75)
    Read by 121 people

    Mike Shedlock, presents an email from a reader who chose to walk away from his house.

    After over a year of back and forth with the bank, the bank finally repossessed the home and foreclosed on the homeowner, but by all accounts, it seems the former homeowner made the right decision:

    Hello Mish,

    It’s been over a year since I asked for your opinion about how long it would take for the housing market to “recover,” which was about the same time that I stopped paying my mortgage and decided to walk away.

    Well, the game is finally over. I moved out last week, and the trustee’s sale occurred last Thursday.

    After thinking repeatedly about it recently, the end results look something like this:

    After purchasing the house in 2005 for about $740K with only $40K down, if you count my mortgage payments as “rent,” in a sense, I recovered my down payment over the past year by living “rent” free over the past year.

    The current value of the house is most likely around $400K. Thus, I was able to “get out from under” a $300K loss by walking away.

    After a bit of looking over the past couple of months, found a two-bedroom house I can rent for $1200/month. The rental is in Scottsdale, just a few miles from my old house. It’s definitely smaller and not as nice, but it’s more than adequate.

    Given my new rent payment, I am estimating that I will be saving at least $1500/month by renting the new house vs. staying in the old house, even with a modified payment (and yes, I am accounting for the tax break on my old property.

    Therefore, as things currently stand, I believe I will “save” $150K over the next 100 months – assuming of course that my rent doesn’t change and/or I don’t move again.

    Thus, I believe I can conservatively estimate that my decision to walk on the house will essentially increase my net worth by approximately $300K over the next 100 months had I struggled in the existing loan. Moreover, that assumes the old house increases in value in that timeframe. If not, the number may be more like $450K.

    On top of everything, just this week, I was contacted by the real estate agency that will be selling the house for the new owner (i.e., the bank – it looks like they bought the house “from themselves” at the trustee’s sale), and I am being offered $2500 to leave the appliances, etc., in the old house.

    The only real downside I see at this point is that my credit is shot. I guess I’ll have a foreclosure on my “record” for the rest of my life.

    However, the irony is that if there has ever been a time in my life when I do not want to borrow any money for anything, it is now.

    I’m not trying to make light of the situation. This is not something that I’m proud of. However, it does feel good to have it over with, and looking at the math, it really seems like the right thing to do. Sure, I “could” have been paying my mortgage over the past year, but given the hit my income took last year and the first part of this year, I would essentially be living paycheck to paycheck right now.

    As always, I appreciate your work. Please keep it up.

    Thank you,
    Morally Conflicted in AZ

    P.S. I did consult with an attorney before making the final decision to walk away.

    Morally conflicted, in our view, made the right decision.

    When bankrupt governments and banks across the world can seize taxpayer funds through the mandates of out of control legislatures, essentially changing the rules in the middle of the game, then it is our view that the people, who are left out to dry, have the right to do the same.

    Incidentally, the former homeowner indicated that he remained in the house for quite some time while he negotiated with the bank. This, of course, means that this property remained on the bank’s book as a paying asset for a year, probably marked-to-model, indicating the value of the asset was still $740,000. The mark-to-market value, which considered the real estate market’s fair price, was actually $400,000. But, the fact that there were no other buyers but the bank, suggests that the property was likely worth closer to $0.00 (theoretically). Yet, the bank will still likely mark this asset based on a perverted pricing model so as to boost their numbers. All large banks engage in these same machinations, yet they don’t seem morally conflicted in any way, though they know full well that they are lying to shareholders and regulators.

    This former homeowner did not make a morally “wrong” decision. If there’s anyone that should be morally conflicted by their actions leading up to and during this economic crisis, it’s our politicians, banking conglomerates, and heads of central banks.

    Please Spread The Word And Share This Post
        name:     email:        details

    Author: Mac Slavo
    Views: Read by 121 people
    Date: August 31st, 2010
    Website: www.SHTFplan.com

    Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

     

    75 Comments...

    Vote: Click here to vote for SHTF Plan as a Top Prepper Web Site
    1. stormbringer says:

      NO

      Rate This Comment: Thumb up 0 Thumb down 0

    2. ken zlager says:

      is it wrong to steal from a thief?

      jesus overturned the tables on the shysters.

      why shouldn’t we all honor his memory…

      Rate This Comment: Thumb up 0 Thumb down 0

    3. Jonny V says:

      I agree, “Morally Conflicted” should have referred to himself as “Morally Justified”.  That bank will cook it’s books one more time and if they “lost” any money at all (not likely), that loss will be gone with a few keystrokes on the computer.  They also have no compunction about savaging MC for years down the road by grenading his credit.  The only one in this scenario that will suffer is MC, and he will suffer mightily and far longer than the bank.

      Anyone harboring these old school ideas about “morality” in relation to their financial dealings is only fooling themselves.  You’ve been had by a sales pitch.  Similar sales pitches make you think that diamonds have value, republicans are for fiscal responsibility, democrats are for social justice, factory farmed food is healthy to eat, the police are on your side, flouridated water is good, etc.  This is why America is going down to defeat, it’s because we believe in lie after lie after lie after lie.

      Rate This Comment: Thumb up 0 Thumb down 0

    4. Lee says:

      Why do I get the feeling that the homeowner did not put this much thought in to buying a house at the top of the bubble.

      I don’t care who’s dogma you follow, sinning against a sinner is still sinning.  Jesus did not squat in the home of the shysters before he overturned their tables.  The idea that it’s OK to do something bad towards someone you consider to be bad it morally bankrupt.  It is completely relativistic in nature and one of the major reasons our country is in the mess it’s in today.

      The housing market is still relatively stable in my neck of the woods, but I pray to God that had it gone the way it did on the left coast that I would have had the brains to stay put and pay off my house at it’s low cost.

      Rate This Comment: Thumb up 0 Thumb down 0

    5. Tom says:

      Bubbles are not hard to see if you look for them. 

      Rate This Comment: Thumb up 0 Thumb down 0

    6. Jonny V says:

      These banksters are not simple minded, misguided sinners.  To put it in religious terms for you, they are the spawn of Hell, the children and sex partners of Satan.  Inflicting harm on a vampire is not a sin, it’s a public service.  MC is the paragon of virtue in the above article.  The bankers are the ones who’s hands are covered in blood.

      Rate This Comment: Thumb up 0 Thumb down 0

    7. Lan says:

      For a Flim-Flam con to work you must have greedy suckers.  Why is anyone surprised…the typical American is an uneducated fool.

      Rate This Comment: Thumb up 0 Thumb down 0

    8. sjdude says:

      @Lee: Would it affect your opinion at all to recall that the banksters successfully lobbied Congress in 2006, two years before the SHTF, to make it virtually impossible for individuals to declare bankruptcy? They knew very well they were loaning money to people who would be unable to repay it, and they made sure that once those people were on the hook, they would find it impossible to get off. This is a case of malice of forethought, for certain, and we’re talking both the banksters and the Congress critters they bought.

      Rate This Comment: Thumb up 0 Thumb down 0

    9. The banks are not morally conflicted about extending credit to unqualified borrowers. The banks are not morally conflicted about selling negative amortization loans to people who could only make the minimum payments. The banks are not morally conflicted about then foreclosing on those sme people when they cannot pay the mortgage when it adjusts higher. The banks are not morally conflicted about receiving bailouts from the taxes paid by the very people they are foreclosing on. The banks are not morally conflicted about hiding in their books that they are getting crushed by losses in commerical real estate just so their stock price remains high. And the banks will not be morally conflicted when they get more bailouts in the future.

      So, the short answer is no. I would not be morally conflicted about squatting in my home for as long as I could until the bank forced me out if I was in a situation where I couldn’t pay my mortgage.

      Rate This Comment: Thumb up 0 Thumb down 0

    10. The bank came out ahead, believe me.

      He put $40,000 into it to start with. That allowed these crooks to create $400,000 in loans. ($390,000 of it in counterfeit!)

      Here is the deal, its a corporation. Can you steal from a bear? Can you steal from a mountain? You can steal from a neighbor or a friend. People need to study morality a bit. While you may violate rules and statutes, you do not violate any “laws”. Laws have to do with flesh and blood individuals. A corporation is a “fiction” or more distinctly a “corporate fiction”. It is a “thing” and there for cannot be either murdered or stolen from. My conscience would be clear. Some would say you broke your word. However, since your word was to a “thing” it doesn’t matter. Common Law has to do with words, deeds, actions and contracts with other humans. You broke no laws and you harmed no persons. Corporations is the social methods of dodging moral and personal responsibility FOR BOTH PARTIES!

      Walk away if you need to. The commandment of “Thou shall not steal.” and “Thou shall not bear false witness.” is about those actions toward other humans. Evil people have sought ways around those two commandments since they were written. …and they found it! Its called “incorporation”.  When a corporation lies to you, its not a sin because the corporation is a “thing”. If the clouds look like rain and then it doesn’t, were you lied to? They are things. They can’t lie. Neither can a corporation. …or their agents.

      …and this is why our government needed to incorporate back in the 30s. We are not ruled by a “government”. We are ruled by the United States Federal Corporation. It was renamed “The United States Of America” back in the 30s. It lies and it cheats and its all sinless because it is a thing, not morally bound to any code or Constitutional laws. Read about it:

      http://usavsus.info
      http://americandreampreservation.com/node/5

      Rate This Comment: Thumb up 0 Thumb down 0

    11. Scott says:

      Shame on you Mac.

      “This former homeowner did not make a morally “wrong” decision. If there’s anyone that should be morally conflicted by their actions leading up to and during this economic crisis, it’s our politicians, banking conglomerates, and heads of central banks.”

      Buyer beware. MC entered into a contract, and then when things turned out to be not to their liking (MC seemed to like getting into a 3/4 of a million dollar home for a  mere 40 grand), they pick up their toys and go home. There was plenty of info out there that this was a huge bubble and things with the banksters were not on the up and up.

      Bottom Line: Morally “wrong” decision. MC is no better than the “politicians, banking conglomerates, and heads of central banks.”

      I expected better moral clarity from you than that.

      Rate This Comment: Thumb up 0 Thumb down 0

    12. Schaef says:

      This guy has an interesting take on this scenario.

      http://www.youtube.com/watch?v=Q7IiPmrJL44

      Rate This Comment: Thumb up 0 Thumb down 0

    13. greaseman says:

      Comments…..  everyone needs to remember, the banks aren’t going to lose anything. The American taxpayer has already bailed them out. Now, the very people who caused most of our economic problems, are sitting fat and sassy, as the US taxpayer gets screwed. They are laughing at Americans every day, and our congress has let them get away with it.  They are just as guilty. No, I would have no problem walking away from one of those ridiculous mortgages. The banks knew they would never be paid back anyway.
           Now, I’m just waiting for a system reset.  it’s coming to a town near you very soon. everything will start over, and hopefully some of these thieving bankers that got my tax dollars will be strung up by that time.  There is no way out of this.

      Rate This Comment: Thumb up 0 Thumb down 0

    14. Charlie says:

      This action is referred to as a “strategic foreclosure” and there is nothing wrong with it.  Happens in the business world all the time.  Your mortgage is a contract for you to pay an agreed upon sum of money or the lender gets the house.  One or the other.  In this case it was the latter.  Contract fulfilled.  In these types of cases I don’t think one’s credit rated should be downgraded since the contract was completed according to terms.

      Rate This Comment: Thumb up 0 Thumb down 0

    15. Bill says:

      I think MC should have thought about what he was doing years ago.  I’ll bet he had the latest cars, the biggest flat screen tv’s and all the other worthless crap that all the idiots had to have to make themselves feel good about themselves.  Two wrongs don’t make it right.  I agree the banksters are all of the above but everyone needs to be responsible for their own actions and stupid mistakes.   What did he learn from this?  Probably not a thing.  Just another stupid sheeple.

      Rate This Comment: Thumb up 0 Thumb down 0

    16. Goldenfoxx says:

      Comments….. It’s too sad that society has made it morally acceptable to walk away from your debt.  The author of the letter to Mish said over and over again how much money he was going save in 100 months which is 8.3 years.  So now he is going to have a chunk of change to go out and probably pay cash for a house in AZ, while the taxpayer is left holding the bag.  I say this guy is immoral. He rode the gravy train figuring that real estate had only one way to go and that was up.

      A guy who lived down the road here, bought his place for $250,000.  He put $100,000 worth of work into it.  It then appraised at $700,000 which he promptly took as much money out of it as he could (over $300,000).  One month later the SHTF, he couldn’t make the payments, but he was sitting on a boat load of cash.   Was what he did immoral?  Yes, because he walked away with cash and  Washington Mutual ate it..I mean the taxpayer.

      We have very little morals left in this country.  It’s gimme, gimme, gimme, mine, mine, mine, screw, screw, screw you.  And so this is how it will be in the future, run up big fat bills and then walk away.  Too many Peggy Joesph’s walking around.

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    17. He did not do the “right ” thing. He did the easy thing. He bought the house. It is his responsibility to make it work not ours.  And when he walked away he put that cost back into our laps because it WILL be passed onto us. He stole from the bank and every one of us.

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    18. egore says:

      The banks are to supposed to get enough collateral when they write a mortgage to cover the case that the borrower can’t repay.  The fact that they didn’t is their problem.  Which brings us to the real problem, that the taxpayer should have to make the banks whole for their mistakes.   That is a perversion that makes the whole thing stink.

      Rate This Comment: Thumb up 0 Thumb down 0

    19. Bill says:

      @ egore

      Where does the responsibility end ?   I see your point about the banks making stupid loans but he signed the papers.  I’m sure they didn’t hold a knife to his throat.  One of the problems that I see is that NO ONE wants to be held accountable any more.   I gotta agree with Goldenfoxx, gimme, gimme, gimme has helped mess up our country.  This dude will be the one coming to your door looking for handouts.   Or taking them!

      Rate This Comment: Thumb up 0 Thumb down 0

    20. MadMarkie says:

      @ Morally Conflicted

      Screw the banksters just like they have been screwing us for
      years.

      Check with a good bankruptcy attorney. Most folks are still able to file and take full advantage of this situation. It will keep the banksters from attempting to collect the difference between what you owed and what they were able to sell your house for.

      You will start getting credit card offers from the same banks that you drop in the dirt about thirty days after your bankruptcy becomes final. That’s because you can still only file bankruptcy once every seven years. Check it out.

      Good luck with your future

      Rate This Comment: Thumb up 0 Thumb down 0

    21. wheedle says:

      Morality and honesty need to return to Washington DC and Wall Street before anyone condemns homeowners who walk away from properties they were told would increase in value. The housing bubble snowball still needs to crash and burn before real asset values return. A condo community in my area that sold units for $275,000 now sell them for $109,000. There’s every reason to believe the prices will go lower next year as the economy continues to decline. People are tired of that  ” do what I say, not what I do “  mentality that is constantly shoved down their throats. Politicians and bankers created this sh*t sandwich, let them eat it.

      Rate This Comment: Thumb up 0 Thumb down 0

    22. oneshotkill says:

      I borrow it I pay it back. I think it says a lot about a person who thinks screw the other guy even if it is a bank. I have morals most American’s don’t. Hopefully all that walked away can live in the slum’s considering they don’t pay their bill’s any way.

      Rate This Comment: Thumb up 0 Thumb down 0

    23. bruno says:

      Lee,
      2 wrongs don’t make a right.  pretty simple.

      Rate This Comment: Thumb up 0 Thumb down 0

    24. Durango Kidd says:

      All of the points made here are valid, but as long as he had the ability to pay for what he contracted for, he has a moral obligation to pay. He did. He just didn’t want too and is now trying to justify his action. He should be morally conflicted.

      If he had lost his job or his ability to pay thats one thing. If he just decided that the asset he had purchased was no longer worth it and a big mistake, and then refused to pay, then he is no better or smarter than the banksters that made the loan.

      Top brass in the banking industry make their big bonuses based upon the total amount of loans they make every year, not on how good those loans are, or how profitable the bank is, or not.

      A pox on both their houses.

      Rate This Comment: Thumb up 0 Thumb down 0

    25. Lan says:

      Disposable marriages are vogue, why not mortgages?

      Rate This Comment: Thumb up 0 Thumb down 0

    26. Hungry DJ says:

      I agree with Goldenfoxx.  It is immoral to walk away from a debt.

      Morally Conflicted invested in a house.  He should suffer the loss just as much as enjoy the gains of his investment.

      Rate This Comment: Thumb up 0 Thumb down 0

    27. greaseman says:

      Comments…..  it’s interesting to see the different points of view concerning paying back a mortgage.  By the way, I paid my mortgage off a couple years ago.  free and clear.  I believe in paying back money I borrow.  That being said, the mortgage I signed up for was much harder  to obtain than the sub prime garbage they have been giving away.  The banks that give away these sub prime loans do so knowing the customer can’t pay it back.  The banks were acting immoral full well knowing they were taking advantage of these idiots who took the loans. It wasn’t illegal, but it was immoral.
          Fast foward in time till now. The too big to fails knew they had nothing to lose, as they would get bailed out. if they got paid back from the customer, fine, if they didn’t, the same customers and millions of other taxpayers would bail these scum sucking leeches out anyway.
             The natural course of event’s has been set in motion. The banking system will collapse.  There is no way for Americans to ever pay back all the debt that has been borrowed.  In the end, the taxpayer loses everything to the bankers, and nothing changes in Washington. Do you get the feeling the system is rigged??? Duhhh.
           This whole moral issue isn’t all black and white.  it’s easy to throw a guilt trip on John Q. Public for walking away from a bad decision on an easily available loan, but give on the same hand, say nothing about the scum bag bankers who knew exactly what they were doing.  Many homeowners have made an effort to re-finance the loan, but the banks just say no.  If I had pne of those loans, and I made an effort to repay through a re-finance deal, and they wouldn’t take it.  I’d walk away too.
            There’s plenty of guilt to go around. The decision to pay the mortgage back is an individual call, and I can’t really blame some for walking away.  But the system now is on auto pilot.  There are so many bad loans, and defaults, the system can’t correct without a reset–a massive failure that will restart the system over. The bad loans have to be dealt with one way or the other. it’s coming one way or the other. That will truly be some hard times coming.

      Rate This Comment: Thumb up 0 Thumb down 0

    28. Anonymous says:

      I say let Barney F. eat a sh$t sandwich without the bread.  Nothing will bail out the derivatives’.  Nothing!  It’s all about the math…..

      Rate This Comment: Thumb up 0 Thumb down 0

    29. Mike says:

      Comments…..This not a sinner or a immoral persons this is a person that made a business decision in the current economy and personal situations. Just like the bank made a business decision to make the loan. Which the agreement was pay the payments or we (The Bank) Get the house, well the bank got the house as the contract stated. How does this make him immoral or a “Bad” person. He did as the agreement was written.

      Rate This Comment: Thumb up 0 Thumb down 0

    30. pat sarte' says:

      No point wasting time assigning blame on either the banks or the people.   The banks offered a “too-good-to-resist” soft loan with little or no collateral.  The person too it up because at the time it felt like a good deal.   Note that the mortgage contract stipulates consequences for either party if they back out.    So, as long as one party is ready to accept the consequences, it should be fine.    Either walking away from a deal which went lousy or staying in it is purely a business decision.   No need to talk about morals here.

      Rate This Comment: Thumb up 0 Thumb down 0

    31. People! The banks are “things”. It is immoral for a tree to fall on your 3 year old and killer her? Was the tree a “murderer”?

      Clean the crap from your brains! These corporations are financial “machines” they have neither morality nor immorality. They are truly inanimate financial machines. It is immoral to intentionally run your car into a tree if you own the tree and you own the car? The tree and the car are both damaged.

      What you people need to understand is that these banks cannot commit a crime. Oh, they can break statues and administrative rules but they cannot be criminals. They are *THINGS*.

      Now, if they hurt you, that would be immoral, right? Well, they don’t hurt you or screw you. Look at your documents. Its not spelled “John Q. Public”, now is it? Its spelled “JOHN Q PUBLIC”. Understand they are now treating YOU like a corporation.

      Ignorance abounds. You play by a set of rules and they play by another set that intertwine the rules you use. But, in the process, JOHN Q PUBLIC gets screwed. Its one financial machination (corporation) screwing another financial machination. 

      You’ll never be free until you understand how they do it.

      Birth certificates and SSNs. They have you, by contract, as a subcorp. Its all here.

      We cannot reclaim this country until you people understand this. We can keep voting and keep screwing around but until you people understand what has been down and how its being done, we will NEVER get our Common Law rights recognized again, in general.

      Stop putting morality where it won’t fit.

      http://usavsus.info

      http://americandreampreservation.com/node/5

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    32. Banks still getting paid says:

      Well, the banks are still getting paid due to the foreclosure insurance they had for those subprimes especially.This means if there is a foreclosure where the homeowner was unable to pay the 20% plus down payment,the banks required an insurance policy on the mortgage. yes, they are collecting now from the insurance companies.

      My thoughts are that if the market has been and still is being controlled by the banks, then YES i would default on my loan intentionally,especially if my palace was valued above 500,000 dollars.I understand higher end homes are no where close to be sold in this environment so, one could squat without paying for a very long time because it’s better to have someone in the home or else it falls apart faster.

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    33. Sheldon Plankton says:

      Yeah, what NetRanger said.  Just because the Supreme Court says that corporations are people doesn’t make them people — they are a bureaucratic fiction created to evade liability.  Corporations operate under one moral edict: maximize profit.  ALL other considerations are secondary to that.  A corporation will treat you fairly only so long as it makes good business sense to do so.  As soon as that starts costing them profits, they’ll screw you.  If they can get away with it, they’ll kill you to increase marginal profit.  Corporations LOVE IT when they are treated like human beings by their naive victims.  

      By relinquishing the house, Mr. Morally Conflicted fulfilled the terms of his contract and did nothing wrong.

      Rate This Comment: Thumb up 0 Thumb down 0

    34. Bill says:

      Great comments.  It’s a tough call.  I can see both sides but for me my morality stops with myself. 

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    35. Paul Revere says:

      Just because Obama is the banker’s favorite bitch does not mean that the rest of us have to be.   

      Fuck the banks, fuck Obama, fuck the federal government tyranny, fuck em’ all.  They are all thieves out to destroy the white middle class in America.

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    36. Dave says:

      I know of two people close to me that haven’t made a payment on their respective mortgages  for over 9 months.
      It looks like they are getting close to being evicted now,but imagine the money they could have saved by not writing those checks each month and now imagine that they can probably make an offer on a much cheaper home across the street.
      Sure,their credit score will be affected,but with a sizeable down payment & a motivated bank who holds too many vacant homes on their books, they can get it & shed 150 grand off their debt with this tactic.

      This is happening on a national basis and there’s not a thing the banks or Washington can do about it.

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    37. ken zlager says:

      …..i’m beginning to understand why europe in the 1930′s had such hatred for a certain religious group…

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    38. Willie Wonka says:

      Normally I would say MC is wrong, and in this specific case, he still kinda is, its not like he was Blue Collar Bob just trying to get by in a modest house but lost everything.

      The problem I have with this whole thing, besides the loose moral definitions, is that the big banks STOLE from us all via the Bank Bailout bill. They took our  money (well actually our childrens future earnings) to save themselves, and we got NOTHING in return, we all still owe every penny from pre bailout so they double dipped us.

      In this one scenario, which was essentially the worlds largest theft in History,  I say as long as you didn’t borrow like a drunken sailor or with the intent of scamming,  SCREW EM!!  They already got their money back, we already paid off our mortgages…..

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    39. goner says:

      What Katie Couric won’t tell you is:

      Soon it will be mathematically impossible to sell the inventory of forecloses.

      The number of people with good enough credit ratings and sufficient income to purchase a home has dipped below 50% of all American adults for the first time since those stats have been kept.

      Why is Brian Williams’ tongue all brown after interviewing Obama?

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    40. Prairie Dog says:

      Why do so many people try to make this into a moral issue? When you sign your mortgage papers, you don’t make a “moral” promise to pay, you make an “agreement” to pay and give your house as collateral if you don’t.

      When I’m late on a credit card payment, am I being “immoral”?
      I’m not trying to be immoral. Sometimes that’s just the way things turn out. I also agreed to pay a penalty if I am late and that’s that. If things don’t turn out well with the house purchase, it is just a prearranged agreement that the bank gets the house and you move on. What happens when you don’t pay? The contract (=”agreement”) is still followed and the bank gets your house. Banks play by these same rules and only talk “morality” because they are “talking their book.” Banks know this is part of their original “agreement” in both the “legal” AND “moral” sense of things.

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    41. goner says:

      Is it wrong for people to obtain as many credit cards as possible, max them all out on purpose and then file for bankruptcy — often owing over $100,000.  in credit cards, unpaid bills and court judgments.  In some states, you may still keep all your autos and your home, even after filing a massive bankruptcy.

      In the good old days there were the Debtor Prisons and County Work Farms.

      Being a deadbeat was once dishonorable shamefulness, but is now considered a smart victory. 

      I know of several people that screwed FEMA for five figures each and screws social security for a  living for years… one of them spends all his time on the golf course all year long, he is 42 and refuses to work… but man what a low golf handicap he now has.

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    42. yourdaddy says:

      A little fact checking…
      This buyer didn’t disclose the terms of his mortgage, but he did mention 2005.  In checking, the range of rates during 2005 were as low as 4.5% on a 1yr ARM, up to 6.5% on a 30yr Fixed.  Just running the numbers on $700k at 4.5% leaves us with a monthly P&I payment of $4275.  Not to mention the PMI that would come with that for only putting up 5% (another $297/month), then you have the property taxes (undisclosed) but at a rate of 2% and assuming this home was “undervalued” by the local municpality by 20% (at $592k) his property tax bill would add another $986/month.  Thus, his payment was somewhere in the $5558 range/month. 

      Clearly, this guy was a gambler…This payment alone would require an after tax net income of $70k just to support the mortgage.  So that means he had to earn $100k/yr to pay his “rent.”  

      Now that reality has hit, he has found an “adequate” living situation that is only $1200/month…Fancy that!!  Give me a break please.  Guy was rolling the dice.  Probably watched a few cable shows like, “Flip this house” and figured he could put 5% down in this “investment” sit back, bite the bullet on these massive mortgage payments, watch as the house appreciated by 25% in a year, sell the house for $1M, and pocket a cool $250k on an “investment” of $40k (500% return)…blah, blah, blah…
      He went into this thing knowing he couldn’t handle the nut, and when the tables turned, he walked away.  

      I’m not advocating brillance by either party, as the bank clearly has motive issues of their own, but let us not celebrate this guys “morality.”  

      BTW, once the topic of this string had to do with “morality” it most certainly opens the door for religious banter, as we all gain our sense of morality from our faith.  To that end, allow me to comment on some of the comments above:

      Ken Zlager:  To insinuate that Jesus’s righteous anger displayed against the merchants was because they may or may not have been unscrupulous is a deviation of the truth.  He overturned their tables solely because they set up their booths in the Temple…a Holy place reserved for worship (not for personal profit).  By using the Temple as the location for their vendor booth, they were demeaning the Holiness of the Temple, and displaying their disdain for God.  Misquoting scripture to further an argument in a blog…c’mon brother.

      Bruno: Bravo.  Properly quoting scripture here.

      Lan:  You raise another grave moral issue (divorce) in a rhetorical attempt to support this one.  Wow!

      HungryDJ & GoldenFox:  Exactly right.  When you borrow something (whether it be from a “person” or a “company” you give your word that you will re-pay the debt under the terms of the loan.  Period.  If something changes that makes you unable to pay, how do you justify benefitting from the debt for 12 months? 

      Schaef:  Your entire argument/premise for your moral stance is directly proportional to the morality of others imparted on you.  “If you’re bad, if you cheat, if you deceive…Hell yes, I’m going to steal & cheat.”  Problem is, you can’t define your actions as morality, but Relativism.  You’re certainly free to hold that belief system, but you should call it what it is. 

      NetRanger:  Pretty clever.  By definition, all corporations can default on other corporations with no moral hazard.  Just curious, do these corporations have the ability to write e-mails, talk on the phone, go out on business dinners, tender proposals, read the fine print etc etc.  You’ve attempted to create a copacetic relationship that is “all about the paperwork.”  In all of my business dealings, the biggest factor in any transaction could be summed up under the tenet of “Good Faith.”  Any transaction can go bad, however, going into the deal, the issue garnering the most weight is my belief in the good & fair faithfulness of the person representing the other corporation.  Extension of credit, pricing, logistical concessions etc are all determined (not by one inanimate corporation talking to another inanimate corporation) but by two guys working out the details.  Once the deal is inked, yes, it is a corporate contract…But to then suggest his backing out of the deal, and bringing harm to me could be construed as “moral-less” is absurd.  And for Jonny V to suggest that this guy could be referred to as the “Paragon of Virtue” is pretty sad commentary. 

      In a prior string, Durango Kidd was talking about how strong & determined our nation is to do whatever it takes to rebuild our republic…After reading the comments on this string, it is clear he is disconnected from the true “moral” fiber of our citizens which is, “To each his own.” 
       
      We’ve gone from, “I regret I have but one life to give for my country” to “He got his, I’m gonna get mine.”

      Inspiring stuff America.  Inspiring stuff.
      Dad

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    43. Obama Bin Lyin says:

      Comments…..Stay out of this system, there are many people not earning interest from the Banksters.  If you have a good job find one of thses depositors friend/family and pay them the interest via a private mortgage.  You don’t need their system… 

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    44. Hope says:

      The reason for hatred of Christians is that immortality is front and center under the flood light of the believers.  They know their weaknesses and repent their sins to live a better life. 

      Unbelieving sinners are like an ostrich, as long as their heads are stuck in the sand, they don’t have to face their transgressions.   They attack any that try to live by God’s code.   

      Nobody is perfect , including Christians, but they work to be better each day.  We all die alone.   God sees all and knows what’s in your heart.   Are you ready for that?

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    45. Jonny V says:

      OK Pop, maybe I went a little too far with the paragon of virtue thing.  However I stand by my argument.  The banks cannot make any claim to moral or ethical behaviour after raping the nation and it’s citizens for going on 100 years now.  They deserve no mercy or forgiveness whatsoever.  They deserve to be run through the wood chipper.

      As I look back at the history books, I’m starting to realize that the only real chance we had to escape the fate we’re in now was during the Roosevelt administration (the FIRST Roosevelt).  That was the last president we had with the balls to stand up the the bankers and Wall Street.  Too bad he didn’t go far enough.

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    46. Sam says:

      Comments…..Jonny V, no you didn’t go too far, you said it right, scripture prohibits the practice of usury, when Dante travelled through hell the first person he saw was the userer, imagine that he didn’t see the murderer first, the userer beat him to the top of the list. I guess that’s why the scripture says oppression is worse than murder. King Solomon said die a king rather than live like a dog.
      So did MC do the right thing, this is the way I look at it, if a hooker stands on the street showing her wares and tempting customers, we can’t blame her fully, it takes two to tango and commit sin, this is no different.

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    47. greaseman says:

      Comments…..  a good point was made during this thread.  You sign a conract to pay back a mortgage, OR lose the house.  if you choose to lose the hiouse,  have you violated the contract, or merely chosen the second option of the contract.  it seems perfectly ok for banks to do this on commercial loan deals all the time, an no one talks about the morality of that deal.
            Also, many people have tried to re-structure their loans, and make good faith effort to honor their contract as they are able,.  The low life  bankers stall and basically refuse to help out the homeowner, who has fallen on hard times.
           I say, take the second option if you need to, and chose to lose the house.   let’s face it, there are many extenuationg circumstances in these loans, and no one can claim the moral high ground.  Too many factors in the deal.
            Lastly, I have always believed in paying my debts, but in the circumstance of these sub prime loans, and if the banks refused to help me out if I was making a good faith effort to pay, I’d walk away in a heartbeat.

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    48. yourdaddy says:

      Jonny V:  I’m not sure the banks are claiming a moral high ground or asking for forgiveness.  If they are, then you & I are in full agreement.  Like I said, they’ve got their own moral deficeits to account for.

      However, this string had nothing to do with the banks seeking absolution or justification, but one man who walked away from his debt. 

      If he truly could afford the $100k/year for that 3/4 of million home and circumstances drastically changed his ability to pay, then quite possibly I am over-reaching by accusing him of “Bad Faith” going in.  Unforeseen events (weather, health, political turmoil etc etc) can all conspire to change our financial outlook in a hurry.  If that is the case, then I owe this man an apology.  However…
      That still doesn’t excuse him from “stealing” 12 months of free rent.  Period.  He realized his situation changed, and then used the full extent of time available to live “rent-free” and then goes on to brag about how that was a good financial move because he was able to recoup his $40k downpayment by implementing this strategy.

      He adds:   “The only real downside I see at this point is that my credit is shot. “  To which I say, nope…that isn’t the only downside.  The REAL downside is you traded the full value of your integrity for $40k…He may have stuck it to bankers (aka per your quote: “the spawn of Hell, the children and sex partners of Satan) but the point of my thread he’s no better off for doing so, and I would argue has joined them in their morass.

      Virtue, Integrity, Morality, Ethics have everything to do with how YOU and YOU alone act, speak, give, respond to each situation faced.  They have never been, and never will be, defined in relation to another one’s actions/words/misdeeds. 

      America has become a pluralistic, realivisitc, liberal minded, God-less, politically correct, something-for-nothing country that elevates many of the tenents shared in the string above…

      Durango Kidd disagrees with me.  He believes our country’s majority is represented by God-fearing, conservative, self-starter, morally fit, family first patriots that will soon rise up and put us back on track…Not sure where he lives but I’m considering moving there because that sounds wonderful…

      Should I hold my breath?
      Dad

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    49. sartx says:

      Whether made by handshake or pen to contract, I keep my word.  Sounds like this guy had the ability to honor his contract, but chose monetary gain over his own honor.  I respect that about as much as I do that stray dog that crapped in my lawn yesterday evening.  I’m very well aware of situations where people cannot pay their mortgages.  There is no dishonor in that; they tried.  This was not such a case.  I would not trust this man as part of a retreat group.

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    50. Bill says:

      Good answers dad.  Thank you.

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    51. Jonny V says:

      Dad, you and I agree.  To put things in a nutshell, what’s wrong with America is that we have become the living embodiment of “the love of money being the root of all evil”.  It used to be that in business, it was acceptable to make a “nice” profit.  Not anymore.  Now, any quarter that does not see an increase in profits over last quarter will result in people being fired.  American business, and  banking in particular, has become nothing but a gigantic ponzi scheme, destined to collapse.  Social Security is another example of this type of scheme, and it will collapse too.

      MC will suffer far longer than the banks will.  He’ll be thinking about his decision on a near-daily basis for years to come.  The bankers who handled his case will forget his name within a week.  The FED will just print them up another bag of FRN’s to cover the loss, and they’ll move on to the next sucker.

      Durango Kidd is trying to take pro-active steps to start turning things around.  It’s awful tough to make fun of the guy for that.  If more people were taking pro-active steps, maybe things would get better.  I don’t think he’s under any delusions (you listed) about the make-up of the country either.

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    52. Comments…..My daughter worked with a realitor for 2 years to get in the position to purchase her first home.  Sehe improved her credit and saved up a down payment.

      She bought her home and had a good paying job to make the house payments.

      Then the crunch hit and her company went bankrupt.  She had to take a job at several dollars under her previous hourly wadge.  She has been in her home for over a year now.  She can not pay her payments and feels as if her American Dream has turned into a nightmare.

      She will have to let the bank foreclose on her and she may have to file bankrupcy.  The life she has built fell into a black hole.  She can not see the light at the other end of the tunnel.

      But she is going on with her life.  She hopes to repair her cridit rating in the future if the opportunity arrises.  She truges foreward with her children to show them that life is not always a happy ending.  You have to pick yourself up and keep on going if you expect to have any life at all.

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    53. MadMarkie says:

      @ mona ~

      We were all very sorry to hear of your daughter’s problems with her house and employment situation; she worked hard and did all the ‘right’ things and in return got shafted for her efforts through no fault of her own.

      This isn’t the world that my father knew or the world that I grew up in. Our children and our grandchildren aren’t going to have it better than we had it. Whenever I hear one of the ‘talking-head-idiots’ on the twonkey telling the young folks of today that the world is theirs for the taking if they only study/work hard and apply themselves; it makes me so damn mad that I want to vomit while I kick the crap out of them.

      The only bright side that I am able to see in this whole mess is that soon the rich elites of today who have stolen our children’s future with their unbridled GREED will be in a much worse situation than we will when the fiat currency and stock/bond markets collapse. Most of these a–holes have an ‘entitlement mentality’ much worse than the biggest ‘wellfare queen’ of old. Most of them have absolutely NO job/life skills other than the BS that flows from their mouths. We know who they are and will remember them in the times ahead.

      Life is what it is on a daily basis, no better and no worse than it actually is. On a positive note; we ‘common’ folks are much better prepared mentally and from a skills point of view than are the elites. Country Folk can survive??? Hell yes!!!

      God Bless and the very best of luck to you, your daughter and grandchildren in the future.

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    54. yourdaddy says:

      Sam:  You are correct.  The practice of Usary is condemned.  However, are you trying to associate “sub-prime” lending to usary?  The entire sub-prime lending escapade could be referred to as many things, but usary?  No way!  That product allowed people who would never had the opportunity to own a home get into a home.  (Not saying I agree with it, nor would I implement it if I had owned a bank).  Case in point is our “morally conflicted” joker in this original post.  He was able to buy a $740,000 home with an ante of only $40,000.  And, let’s be honest, his interest rate was nowhere near usuary levels.  In fact, his rate was probably below 5%.  This guy was literally licking his fingers at the closing and continually pinching himself to make sure he wasn’t dreaming.  Somehow, the folks in this string have attempted to paint this bank as the spawn of Satan.  Why?  You can accuse them of awful business practices.  You can accuse them of imprudence or a lack of due diligence, but to accuse this bank of illegally screwing over this guy via usary or taking advantage of his ignorance?  Please!!!  You do not have a leg to stand on with this position.  Morally conflicted knew what he was doing, is an educated citizen, has obtained legal counsel for advice on how to proceed etc etc..He is not “poor pitiful pearl” being financially raped by the banking system…However much you may wish that he were.

      Goner:  Well said!  You’ve hit the nail on the collective head here.  It is the removal of the taboo once associated with being a deadbeat that has thrown all caution to the wind.  Had ‘Morally Confused’ lived in a time that not only didn’t reward his actions, but looked down on him for doing so, he probably would have taken a moment to think through the math on this one.  Do you really need a $750k home?  If so, do you have an adequate downpayment to bring the debt levels in line with your current income & future expected income streams?  Do you have adequate reserves available after closing (FNMA used to require 6 months of P&I in reserve to qualify), Is your income anywhere near $225k to properly support such debt levels? etc..etc…Let me save you the suspense.  This guy didn’t give it 2 seconds thought.  He let greed drive his decisions, and used a tool made available by the banking industry to execute his desires.  Desire to own a home that he could show-off to his friends.  Desire to own a home that would, “most certainly appreciate by 25%/annum ad infinium.”  Desire to beat the system with no social repercussions whatsoever as walking away from this mistake will be deemed a “smart victory” by a huge majority.

      Prairie Dog:  You’ve over-simplified the issue.  In this string, we’ve got two, very different scenarios.  On the one hand, you’ve “morally confused” (er bankrupt IMO), and you’ve got mona’s daughter. 
      MC moved forward as a slick gambler who got caught on the wrong end of the tape, and then maximized his financial exit strategy by consulting an attorney, and living rent free for a year.
      Mona’s daughter is an hourly employee, single mother, who worked & saved for 2 years to buy her dream home (most presumably for much less than $750k), then experienced an income shock at work, found another job for less to hang on, ultimately fell below the water line…
      To tidily summarize both of these scenarios as “contracturally a-moral” is naive at best.  To sweep morality under the rug and claim, “It’s only a corporation’s paperwork” insinuates that the intent or good faith of both the lender & lendee are irrelevant.  The legal term “Bad Faith” is a very powerful one in our judicial system.  Sure, you & I can execute a contract which stipulates collateral, loss of use etc, and once signed we have a legal, financial contract that could be deemed amoral.  However, if it turns out that one of us operated in Bad Faith, the contract can be nullified, and damages can be awarded.  What does that mean?  It means your “INTENT” or “MOTIVE” is EVERYTHING. 
      Morally Confused isn’t confused at all…IMO he is trying to clear his conscience by sharing his tale to a very popular blog economist, who will most certainly justify MC’s position..Mish might even refer to him as a “hero.”  But we all know better, don’t we? 
      Mona’s daughter Intent & Motives (based on the information shared) seem much more noble.  She wasn’t slick, she wasn’t calculating, she wasn’t talking to attorneys weighing options, she just caught in an unforeseen & regretably set of circumstances.

      Contracts, Corporations, Financial Instruments…ALL of them are designed, executed, proposed, signed by HUMAN BEINGS.  You just solidfy my earlier points that America has become a nation that shirks responsibility, and now blames the other guy while doing so…Ssshhesh.  What happened around here?  Could it be because we’ve demanded God to take a hike?  I’d bet dollars to donuts on that one.
      Dad

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    55. Dave says:

      When someone  defaults on a credit card,the defaultor gets to keep the loot, such as: toys, TV’s, furniture, clothing travel, jewellry.
      However, a bank can repossess the home,so it’s not as if you’re taking something away from the bank,they just take the home back into their possession and keep the amount that you’ve already paid them, plus interest & begin the process of selling it again.

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    56. Jonny V says:

      I seem to have given some here the wrong impression about me.  I bought a $330,000.00 home in 2005 with my girl.  Our payments are over $2,500 per month, we bought in on a 30 year fixed.  Since that time, my income has gone down by about 40% due to lack of construction in the area (I run a drywall crew).  My wife and I are making it work.  We are not close to doing one of these “strategic foreclosures” like MC did.

      When I describe banks as the “spawn of Satan” and “vampires”, it’s because I have good reason to.  Every month, I worry that the vampire gets enough blood to leave me be until the next donation is due.  I am rendering unto Caesar, but I’m not required to like it.  I know that the bank has absolute power over me, and they could have to cops come kick me out at any hour of the day or night, whether my mortgage was paid or not.  The cops here have killed three people in the last day and a half, one of them by tasering a guy to death as he lay on the ground.  It’s already been ruled justified, so we’ll just move along……………My only hope is to not attract any “official” attention.

      My home is where I plan to stay.  I’m not moving.  I do identify with MC however, and cannot find much fault with his position, if his goals in life don’t include owning property.  Some people can’t handle it.

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    57. Sam says:

      Comments…..Dad, I appreciate you response, but I am in business and I seen how these people are taken advantage of,first let me say I refuse to bring this kind of practice into my business,the reason is I’m the first to talk the customer out of the deal for the simple reason it’s obvious he can’t afford the purchase to begin with, you have to remember subprime financing is for those who can’t  get what we call conventional financing meaning they are a risk to the banks and need to go a different route. They are given the line that we are doing you a favour at these  rates and we are given you the opportunity to rebuild your credit, which is nothing but a line of BS. But let point something else out, don’t just look at the rate, look at the amount financed, 700k on a 400 house, I say 400k  house because the 740k price tag was inflated due to lower  interest rates as you mentioned, but if you lower interest and double the price on houses, is he not then paying double on the payment. I tell people this whole thing  a illusion, in 1980-81 interest rate shot up to 20-21 percent , so if a house was 80 k back then and the same house today is 240k, isn’t that 21 percent  on the 80k the same as 7 percent on a 240 k house. The whole thing is a scam because at the end all the so called securities where sold to different banks world wide that were told they were AAA grade products, so one scam to the next, then the same people selling this garbage were betting on it crashing because they knew what they designed to begin with,  then you have those who owned their homes and due to the crazy inflationary prices had lots of equity which they went ahead and borrowed on, money that was simply printed out of thing air that didn’t cost the bank a dime, so SHTF  those people lost their homes as well, what actually transpired throughout this whole thing was the biggest transfer of wealth in human history, I mean the house is still a house a hard  tangible asset while the money disappeared into thing air the way it was created and the old owner is living in a tent, on and on I can go forever  talking about what kind of scam this whole thing was, but I think I made my point.

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    58. yourdaddy says:

      Sam- Thanks for the response.  I understand your point, and I have no doubts that many games in this life are rigged for the benefit of a few (just think Blackjack inVegas…).  The game is clear, the rules are fair, the odds are knowingly stacked in their favor and you aren’t forced to lay down a $100 chip, but…you still do (or at least I do :) ). 

      Point being, the premise of your point is that our dubious Mr. Morally Conflicted is a “victim” in a diabolical scheme.  Maybe that’s true.  But my point is, no one forced him to pitch in an anemic 5% of the sales price of a home we now all know to be bubbly overvalued (hindsight).  For your point to be valid, Mr. Morally Conflicted would have to be the biggest lemming on the planet who was just in the wrong place at the wrong time…I just can’t get there.  He was looking for a financial home-run, and instead struck out.

      I purchased a 4500 sq. ft  home 5 years ago for $440k.  10 years prior to that, I purchased a starter home for $102k which over that decade, appreciated to $264k.  I took all of the net proceeds of that sale (around $145k)kicked in another $75k from savings, and financed $220k.  In order to take on such a huge investment, I ensured that our monthly P&I payment would not only be “manageable” but “comfortable” as well.  I could have done what every DREAMER in America did, and take that $220k and plow it into the stock market, and finance the whole truckload on the house, but I’m not an idiot….In spite of that fact, many of the folks around me thought me to be a financial moron..”Mortgage rates are below 5.5%, use that money in the market for a better return…Plus, your home will appreciate till the end of time, no need to buy it all now…blah blah blah..”

      My point is, I live in what is now commonly referred to as a “McMansion.”  I only owe 35-40% of value of the home, and after refinancing last year, my P&I payment is now down to $1068/month.  Never in my wildest dreams would I EVER LOOK TO OWN A HOME WORTH $750k.  You know why?  Because I can’t afford it.  Period.  It wouldn’t matter what line of crap the spawn of Satan lender fed me, 1+1 would never equal 3 for me.  Either you are liquid enough to handle something that large, or you put your nose back to the grindstone and live within your limits…(Seems that might even have been an American past-time although you wouldn’t know it looking around now) 

      Plus, how much is enough?  I waited 10 years to buy my dream home for my family of 6.  Knowing we had around $220k for a downpayment, and knowing a mortgage of around $250k would leave us with a very comfortable payment, we set out to find a home within that range.  We now have more then enough space if my wife & I elect to grow our family, and we did so with foresight, patience and a plan.  So why in the world does Mr. Morally Confused look for sympathy & support for over-extending himself into the realm of the absurd?   (There are probably many reading this that think my home is the realm of the absurd…where would that put him)? 

      To sum up, you make a good point, but “The house always wins” theory doesn’t hold muster for me.  Just don’t get on that plane to Vegas…
      Peace
      Dad

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    59. Prairie Dog says:

      yourdaddy, I think you’re trying to project a bunch of intellectual baggage on to something which isn’t for the most part a morality issue. I PURPOSEFULLY did not bring in any religious issues because in general, mortgages ARE just contracts.

      The saying “guns don’t kill people, people do” is very true.  Contracts are just the tools of the trade. Some of the banks and borrowers are using mortgages in immoral ways such as fraud, but in the end, it’s the contract that rules.

      If you want to self righteously project morality on to the issue, you also would face the criticism that one or both parties were being immoral for just signing such contracts solely because they leave such “immoral” options on the table.

      Most people enter into the contract solely as a tool with all contingencies regarded as “options” (including foreclosure).

      Yes that is a change from the past when there was more of a stigma attached to foreclosure but insofar as that goes, I think the bankers brought that on themselves.

      Achim’s razor is much more sophisticated than you may have been led to believe.

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    60. yourdaddy says:

      Prairie Dog-
      Contracts are just contracts.  Yes, I get that.  But a contract signed by a party that has no intent of fulfilling it (Bad Faith) is what I’m postulating Mr. Morally Confused did.  If I’m right, then his blog post to Mish confirms he isn’t confused at all, but is suffering from a guilty conscience, and is looking for anoymous absolution. 

      You suggest that “most people” enter into a mortgage contract with a good faith belief that a future foreclosure is a possibility (an “option” as you call it).  I would argue just the opposite.  Who in their right mind would go down this road if a foreclosure was anywhere near their radar?  I know I wouldn’t.  And I’ve gotta believe that “most people” would agree with me, and would continue to rent if they felt a foreclosure was at all a conceivable if not possible outcome at their closing.

      The home ownership process is much more emotional then you suggest.  Closings have realtors doning gifts, moving trucks, door mats reading “Home Sweet Home.”  You try to wrap up that entire process with the word “Contract” as if it is a Put or Call Option executed from an on-line account. 

      Perhaps Achim’s Razor IS more complicated then I thought.  :)
      Morally Clear on this one…
      Dad

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    61. Chris C. says:

      No.

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    62. Rob says:

      Two comments from an attorney.

      1: A lot of people here refer to what the guy did as “stealing” or “theft” – even if people think it’s justifiable theft.   However, there is no way that what he did could ever be considered theft in a just court of law.
      Consider this: A contract MUST have consideration on both sides – i.e. both parties must be actually doing/giving something of value to the other in order for there to be a valid contract. The bank gives you the money, you promise to repay the bank.
      However, contracts virtually always have provisions which deal with what happens if one party fails to abide by the terms of the contract. In a house mortgage, the bank’s recourse is virtually always that the bank can come take the house – i.e. the house is collateral. The bank loaned the money on the assumption that the house is worth as much as they loaned – not [primarily] on whether or not the buyer had good credit. No matter how good your credit is, most banks are not going to loan you 150% of the value of the house. Thus, the bank’s faith is not in you, the borrower – but rather, in the value of the house.
      If you choose to walk away – and you have every right to do so under the terms of the contract – the bank then has the right to take the house back. Thus, no one has stolen anything from anyone.  The bank has taken back a house which they valued at “x” dollars.  If they made a serious miscalculation, then that’s their problem. – and they’ll likely do something about it – and that something will be:
      2: Perhaps this varies from state to state, but in the two states I practice in, if you owe $700,000.00 on the mortgage and the house sells for $400,000.00, then the bank can sue you for the $300,000.00 difference. Whether you can pay or not is another matter (i.e. you may be able to get out from under it in a bankruptcy), but you’re not out from under the $300,000.00 just because you walked away. It’s more complicated than that.

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    63. Perr Mason says:

      Most of the comments here completely miss the mark and show a rudimentary or simplified understanding of the application of moral principles to a commercial transaction.

      There are two applicable moral principles here, which I will not defend in this thread: (1) do not steal, even if stolen from and (2) the golden rule.

      A loan agreement with a mortgage, like a couple of posters rightfully noted, is an agreement to pay or surrender the house.  All other recourse is generally waived (although some allow for deficiency judgments if the Lender decides to sue, which is its choice).  There is no unbound or unlimited promise to pay in the total agreement.

      Now let’s apply the principles to the facts:

      MC agreed to pay back the money or surrender the house.  Unlike “yourdaddy”‘s assertion, there is no evidence that MC was fraudulent in never intending to repay the loan, or so reckless as to be near-fraudulent. 

      MC’s decision to walk and surrender the house is a right under the contract, as a matter of justice, which the bank agreed to.  Whether he should exercise that right will depend upon the golden rule.  Stealing is a non-issue, because MC has the right, so the moral principle is inapplicable. 

      Thus, if MC thoughtfully decides that he must walk to preserve himself and his family, and that there is no compelling hardship on the bank such that the golden rule would direct a different course of action, then MC can morally walk.

      All the talk of “deadbeats” and other moral indignation is misapplied to this set of known facts.  Worse, it presumes to judge the heart and inscrutable motivations of MC, which is an act of judgment prohibited to man by God. 

      Side Note:  To the extent MC’s mortgage decision was financially unsound and not well-considered, this is a different fact and at best is a different moral violation that has no bearing on the justice of walking. 

      Also, there is a compelling argument to be made that if the bank from which MC walked received bailout funds and other government assistance, MC is feasibly, at least in part, only recovering his lost stolen wealth (stolen via inflation/taxation).

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    64. robwbright says:

      To Yourdaddy:

      You said:

      “HungryDJ & GoldenFox:  Exactly right.  When you borrow something (whether it be from a “person” or a “company” you give your word that you will re-pay the debt under the terms of the loan.  Period.  If something changes that makes you unable to pay, how do you justify benefitting from the debt for 12 months?  ”

      No, you don’t give your word to pay, period.  You agree to pay and if you don’t, the bank has recourse against you in the form of taking the house (and possibily/probably suing you for the remainder on the mortgage after sale).

      Your responsibility under the contract – if you stop paying – is to evacuate the premises

      The person in the article didn’t immediately evacuate [and it appears he had no intention of actually trying to keep the home – and I object to that approach).  However, sometimes people stay in an attempt to work things out and keep the home – we’ve got clients in a similar situation right now.  It’s not the client or the attorney’s fault that the bank takes 12-18 months to finalize the new terms.

      As Vox Day put it here:

      http://voxday.blogspot.com/2010/02/walk-away-walk-away.html

      “If you own a property that is underwater, it is financially insane for you to continue paying the mortgage if it is less expensive to rent a similar place. There is no “moral” aspect to the situation since the contract clearly delineates the limits of your responsibility. So long as you give up the property, you have abided by the contractual terms specified as part of the deal. While it’s very important to confirm that you have no more liability than the loss of the property before taking such an action – the debtor’s liability varies on a state-by-state basis – that’s the only decisive factor.”

      Or here:

      http://voxday.blogspot.com/2010/06/calling-bankers-bluff.html

      “I don’t see why anyone who has a mortgage with any bank that received TARP money should pay them so much as a single dime. It is very clear that the rule of law no matter applies in the USA, so there’s no reason why the enmortgaged masses shouldn’t follow the lead of their would-be financial masters and ignore anything that isn’t in their immediate pecuniary interests.

      If your credit is already ruined, why on Earth would you continue to send what little money you have left to a collection of bankrupt thieves and scam artists.”

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    65. yourdaddy says:

      Rob & Perr Mason-

      Good stuff.  Appreciate the feedback.  For the record, I’m not in dispute to the legal facts that under a mortgage contract the ramifications for non-payment result in the loss of the underlying collateral.  I think ALL of us here fully understand & accept that.  That however is not the core issue of this string.

      MC isn’t looking for absolution for walking away from a payment he could no longer afford, but rather for staying in (and benefitting from) this house WITHOUT paying for it for 12 months. 

      You can espouse all the legal jargon you wish but MC sinks himself MORALLY when he shares this little nugget…

      After purchasing the house in 2005 for about $740K with only $40K down, if you count my mortgage payments as “rent,” in a sense, I recovered my down payment over the past year by living “rent” free over the past year.

      Safe to assume that he (as all of us homeowners) entered into this mortgage contract with clarity of mind, and a solid intent to fully repay his debt.  However, when his circumstances changed, and he could no longer make good on his payments, he had the legal right to give the house back.  So far, so good (legally, morally, ethically).  This is where we meet the fork in the road…

      Within a reasonable time frame, he should contact the lender, advise he’s defaulting on his contract, and make other arrangements to find that $1200/month rental.  Rather, he elects to squat in the home, not pay ANY rent, re-coup his $40k downpayment, and stick it to the lender.  All the while he did so with lucidity and forethought.  His comment:

      Sure, I “could” have been paying my mortgage over the past year, but given the hit my income took last year and the first part of this year, I would essentially be living paycheck to paycheck right now.

      I feel empathy for him and everyone else faced with this tragic turn of events.  I don’t want to come across as “judgemental” as a Christian I believe in the tenet shared in Matthew 7.  However, MC is the one coming forward looking to ease his conscience, and in that light, I don’t feel like I’m judging him by calling him out on the facts.  (Yes I did speculate on his original motives for jumping into this 5% down, 3/4 of a million dollar contract, and I could be wrong there…but I doubt it).

      His income took a hit, his situation turned for the worst, and rather then accept the burden, he shifted it back to the lender to the tune of $40k.  He could have easily left the home 10 months earlier, found his $1200/month rental, and never needed to spew forth this dribble in a public blog “confessional.” 

      To those above who are of the attitude, “well SCREW the bankers!  They’re the ones responsible for this mess, and they’re taking OUR tax money with TARP funds blah blah blah..”  That has absolutely NO moral relevance in this discussion.  Morality (as so well pointed out by Perr Mason) is how you respond to a set of circumstances.  If you believe you are entitled to steal because you’ve been stolen from, or that somehow the loss of your job and inability to repay a debt is circumvented because our politicians are idiots who have hijacked our financial futures, you are delusional & in denial. 

      In closing (to Rob) I have no idea who “Vox Day” is but wow…That is quite a sermon he is spewing.  Just the right message for our lost culture to soak up. 

      …so there’s no reason why the enmortgaged masses shouldn’t follow the lead of their would-be financial masters and ignore anything that isn’t in their immediate pecuniary interests.

      A recipe for disaster Vox Day, a recipe for disaster.  As for me and my house, we will follow THE LORD.
      Peace
      Dad

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    66. Perry Mason says:

      yourdaddy,

      Thank you for your thoughtful response.  I appreciate your partial retraction of jumping to conclusions regarding MC’s assumptions in his decision making process — at least you understand we can’t know what MC was up to (we can always speculate, but beware of spreading unfounded rumors).

      As to your rejection of MC living for 12 months without vacating, with no real intention of working out the matter with the bank, I am in complete agreement.  Such an act appears to be a violation of the golden rule, and a violation of the terms of the contract. 

      In other words, as a matter of justice, MC’s 12-month squatting constitutes the unlawful possession of property through artifice (i.e. fraud).  

      To those who want to default on their debt (without contractual justification) or lie in some manner to “screw the bankers” or the ruling class for doing such a great job at screwing the public, let me say to you: don’t let them make a liar or thief out of you.  The worse thing they can do is steal your dignity and morality; don’t let them.  The rewards from above will be much greater in the end.

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    67. Morality? How can one even bring up the concept of morality when the banks received billions of dollars in loans from us to shore them up?
      Fuck the banks. If they want to raise my CC rate (with no excuse) and cut my limits out of the clear blue sky (with no excuse) after they were bailed out….they can suck a moose dick after I charge their cards to the moon and  laugh at the me when they call begging for terms.
      Yea bud, I’ll give you terms…it’s right here in my pocket.Let me fish it out for you.
      MC in AZ is our new AMERICAN HERO.

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    68. greaseman says:

      Comments…..  Interesting followup to this thread. I was talking to a lady that worked at a storage unit business.  Evidently she was having trouble paying her mortgage.  She asked to renegotiate the terms so that she could make the payments, and fulfill her contract. Re -finance money is available through many different programs. The bank said no.  So she lives there untill they run her out. She wants to pay, but is having trouble with the current mortgage. Seems the bank would be better off getting some money, and keeping the house livable till another buyer could be found.  But greed drives the business.
            I can’t blame the lady for living there till they throw her out.  She is unable to afford the mortgage at it’s present rate. Did she make a mistake applying for the mortgage at these rates??? probably, but it seems to me there should be some common ground that both parties could come out ok.  But the banks aren’t about common ground.  They are about squezzing the last penny out of everyone, no matter what the cost.  It’s sad when someone makes a good faith effort to apy, and has a rough time making payments, and the bank won’t renegotiate. I haven’t read of too many cases where they will re negotiate anything.
          I don’t agree with someone geting a mortgage knowing they will never keep up with the payments, and trying to cheat a mortgage holder, but by the same token, someone that falls on hard times, that made good faith efforts to pay on time, should be given  some slack.  Trouble is, the banks aren’t in the slack giving business. No easy answers are there???

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    69. yourdaddy says:

      Perry Mason- I like the way you present your position.  I also like your strong Christian convictions.  Well put in all posts.

      Greaseman- TOTALLY different set of circumstances for Storage Unit lady vs Morally Conflicted.  The biggest difference (to me) is her “Good Faith” attempt to work out the situation for BOTH parties.  MC, worked out the situation all right, but ONLY for his interests by staying the home for 12 months rent free and doing so intentionally.

      I feel empathy for S.U.L.  My only guess as to why the banks are digging in now is that there are ridiculously difficult standards required to underwrite new loans.  And although (logically) reducing this women’s rate or terms would make sense so as to keep all parties covered, the bank (technically) will never be able to get this loan underwritten.  I.e. if she can’t make payments now, there’s no way a refinance will go through.

      What a huge mess!!  I’m not pontificating a solution to any of this (who can?), but Perry Mason made a deft observation…Regardless of how all of this “stuff” ends up, DON’T trade in your dignity, morality or word.  Do the best you can, operate fairly and above board with the lender, and remember the Golden Rule always.  That is and always will be the crux of the matter…Everything else is just a tool to vet out our positions in these matters.

      Our goal should always be to  choose the high road (as difficult as that may be)…not the one espoused to by  Mr. Kevin John above.  Because as Perry Mason pointed out, our goal is to store our treasures in Heaven…There they won’t fall to rust, decay, thieves or repossessions from lenders.
      Peace,
      Dad

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    70. greaseman says:

      Comments…..  This whole mortgage thread has opinions from one end to the other. One observation that can be made though. There are going to be literally millions more who lose their homes through financial collapse that is surely coming.  We are only seeing the tip of the iceburg.  So many more will be facing the same circumstances.
         I believe our economy is headed for a situation in which most business will be at a standstill, so that even somewhat “safe” jobs might even be suspect. But the discussion of the state of the economy to come is an entirely different thread.

             Just keep in mind, that this housing catastrophe that’s happening now, is just one part of a coming avalanche of conditions that will bring down the entire nation.  if you can’t put two and two together by now, good luck.  Always look at the big picture. it’s not going to get any better folks for a long, long time.   Batten down the hatches, and get ready for a storm.

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    71. MadMarkie says:

      My family and I DON’T go camping …… NOT EVER!!! But we recently purchased a very high quality, spacious two room tent. It sits there brand new in the box and won’t be opened any time soon ….. at least not to go camping. We purchased it just in case it ever becomes necessary for us to leave our home and move into one of the numerous ‘Obamavilles’ (tent cities) that are springing up around our poor country. We wanted to get ready now while we still had the money and there were still any tents on the shelves. Folks everywhere may want to give this course of action some thought.

      It’s obvious that things are getting worse with each day that goes by and that our economy is getting ready to fall off a cliff. God Bless and good luck to all.

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    72. Taint boil says:

      Comments…..

      Here is a funny story of a guy sticking it to the Banksters.

       

      http://patrick.net/forum/?p=25968

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    73. As a christian, i believe that only God (and this dude) really knows if something immorally happened.

      As a logically-thinking person, I dont believe anything immoral happened: the guy broke the contract and the bank took back the house—just as the contract dictated.

      As a libertarian, i believe the monetary and financial system in america is so corrupt it doesn’t make sense to play by the rules so, as long as you dont harm your neighbor, stick it to the bank every time. (They got a bailout so why worry about their balance sheet?)

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    74. signalfire says:

      GOD only wanted 10% interest; the amount of a tithe.

      MasterCard and Visa want 29.9%. 

      Apparently MC and Visa think they are 3 times more important than God. 

      My discussion is short and to the point:  We have plenty of tar at the bottom of the Gulf of Mexico.  We  just need feathers now, and the addresses of the people responsible for this obscenity that the US has become.  A few tarred and feathered bankers, politicians and Wall Street types would get everyone’s attention right quick.

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