To walk or not to walk away from your mortgage…that is a tricky question. Is a strategic default or disposal an ethical or even moral issue…..or is it simply a contractual issue?
Here’s the thing…as your REALTOR, it’s not my job to play moral police. It is my job, and my passion, to help homeowners (and buyers). So, in this epically distressed real estate market it’s my MORAL responsibility to help homeowners avoid foreclosure. If that means providing a strategic short sale for your homeowners…so be it.
The goal must be: Fewer Foreclosures.
More and more commercial real-estate companies are doing what many indebted homeowners would like to do: Walk away from mortgages on properties that are now worth a lot less than they paid for them.
Today’s Wall Street Journal highlights three major developers – Macerich, Vornado Realty Trust and Simon Property Group – that have recently decided to default on mortgages. Even the Mortgage Bankers Association defaulted on their $92 million dollar corporate building. Yes, you read that right…the Mortgage Bankers Association (MBA).
When companies do this, no one bats an eye…it’s just “smart business.”
When ordinary homeowners think about strategically walking away from their mortgage, the mortgage industry and government begin moaning that a mortgage is more than a business contract. It’s a social contract, in which homeowners have a “moral obligation” to pay.
That’s is just plain crazy. An individual mortgage is no different than a corporate mortgage. If corporations are allowed to walk away from mortgage obligations without feeling shame and guilt, then individuals should be able to do so, too.
The contract homeowners sign when they take out a mortgage spells out exactly what happens if the homeowner stops making payments on the loan. The lender has the right to foreclose on the house, taking the homeowner’s downpayment with it. In addition, the borrower’s credit rating will usually get destroyed, and, in some states, the lender can come after his or her other assets to recoup the capital the lender has lost.
Those are big penalties. They provide a major incentive for the borrower to continue making his or payments. And that’s why the lender, a corporation, put them in the contract.
Importantly, the lender voluntarily entered into the contract–and it did so because it thought doing so was a smart business decision. That it actually turned out to be a lousy business decision is not the homeowner’s fault. It’s the lender’s fault. And the borrower, who is already feeling plenty of pain his or herself, should not have to bear the burden of guilt and shame on top of everything else.
If you are ready to weigh your options: to walk or not to walk…
Call our office today at 877-610-1717