Is it unethical walk away from a home you are underwater on?

[Ursa Majoris]

But IMO owning a home is not an "investment" in the traditional sense; it's a way to get SOME appreciation on the money you spend on housing as opposed to just throwing it down a hole (in a sense).

Agree completely. This thing around me is not an investment per se, it's my home. Period. Never have used it as a piggy bank except when I re-fied into a better rate and shorter mortgage period which made financial sense because the total payment was still six figures less than it would have otherwise been even with the increased outstanding mortgage.

[AtomicCEO]

If your $300k house has just been foreclosed...well, let's just say your situation is unlikely at best.

 

If you walk away from a $300k house on hopes you can buy it at auction for $175k, that means you probably had $175k laying around, since NOBODY will touch you for a home loan after foreclosure. It's worse than bankruptcy.

 

And if you had a spare $175k, your house probably won't end up in foreclosure.

 

Wiegie's question was "Is it unethical to walk away from a home that you could still afford the payments on if you owe more money on the house than it is worth?"

 

You're assuming this is a person who cant afford the payments, which was specifically not the situation he described.

 

So GUMMI BEAR, deeck. I'm right, you're wrong. Go back to Milwaukee and suck my High Life.

Edited November 15, 2008 by AtomicCEO

[Beaumont]

Someone needs to explain to me how you walk away from a home you are upside down on. Are there really no recourse mortgage loans?

[Fatman]

Sorry.*

 

 

* - nah, not really.

 

 

[H8tank]

I have a coworker whose daughter and son-in-law just walked away from theirs. They were hughly upside down on the home thanks to the drop in market value (something close to 50% if I recall correctly.) This was a newer neighborhood and the homes around them were vacated and foreclosed on. The HOA went belly up. It would take them years to pay down on the home just to reach the value of it.

 

It may not be "the right thing to do" but I can understand the thinking behind getting out.

 

How can you possibly justify it?

 

Simply amazing, you people and your zero accountability.

[HowboutthemCowboys]

We live across the street from my parents, and it's an absolute blessing for my family and I.

Are you Ray Barone?

[Big John]

Are you Ray Barone?

no.

[Chavez]

Wiegie's question was "Is it unethical to walk away from a home that you could still afford the payments on if you owe more money on the house than it is worth?"

 

You're assuming this is a person who cant afford the payments, which was specifically not the situation he described.

 

So GUMMI BEAR, deeck. I'm right, you're wrong. Go back to Milwaukee and suck my High Life.

Somehow I missed that; it was late and I was caffeined up.

 

A person who CAN afford the payments walking away from a house they are upside down on is 100% unethical.

[yo mama]

Someone needs to explain to me how you walk away from a home you are upside down on. Are there really no recourse mortgage loans?

Well, recourse just means that the lender can foreclose on the property, which was pledged as collateral. (As oppossed to non-recourse debt where the lender cannot go after the property in the event of default). I think what you might be thinking of is when the borrower personally guarantees the debt. In that case walking the property doesn't get you out of the mortgage; the foreclosure sales proceeds would merely be applied to the debt and the borrower would remain liable for the difference.

 

But good luck finding the person who walked their property. And even if you find them, they're probably insolvent anyways.

 

To address the initial question:

- yes, its unethical to walk a property. You've breached a contract and welshed on a debt in the process.

- that said, necessity often forces people to do unethical things.

Edited November 15, 2008 by yo mama

[dmarc117]

is it unethical to walk away from a fantasy football league when you are 3-7?

 

when one makes an agreement, stick to it. dont be a puke.

Edited November 15, 2008 by dmarc117

[AtomicCEO]

Somehow I missed that; it was late and I was caffeined up.

 

A person who CAN afford the payments walking away from a house they are upside down on is 100% unethical.

 

I'm not sure why ethics have anything to do with a transaction like this. It's a business decision that you're making for your family.

 

You really don't need to have any more sympathy for a bank than they would have for you. If banks were going around right now trying to help their customers who were in trouble, maybe there would be an argument that they are deserving of fair treatment... but they foreclose on shadily acquired mortgages as a business decision all the time and some people would say that's unethical.

[JoJoTheWebToedBoy]

I bought my house in Jan 07, just as things were cooling off, and since the house had been on the market for a while, and the owners had moved back east, and I thought it was over-priced, I gave them an offer that I thought was right (around 25K lower), and they excepted.

 

But since then, my guess is my house is worth less then I payed for it. But I would never walk away, not as long as I can afford it. Doesn't make sense to me.

 

And people that are doing it are unethical, and with any luck, it will eventually bite them. I can understand it if, in the end, you can't make the payments. But if you can, honor your word.

[Jimmy Neutron]

Yes, I think it's unethical. Part of buying a home is assuming the risk of ownership - there is no guarntee of equity.

[Furd]

I might be kind of old fashioned, but if I reach an agreement with someone, I'm going to do everything that I can to fulfill my obligations.

 

I don't know if its as much a question of ethics as it is of honor. I'll take honorable over ethical every time.

[Ursa Majoris]

is it unethical to walk away from a fantasy football league when you are 3-7?

 

when one makes an agreement, stick to it. dont be a puke.

That's fine and dandy but what is your attitude to e.g. credit card companies changing the rate of interest being charged on a residual balance even though the CC user has made payments on time every time? That's happening all the time.

 

You really don't need to have any more sympathy for a bank than they would have for you. If banks were going around right now trying to help their customers who were in trouble, maybe there would be an argument that they are deserving of fair treatment... but they foreclose on shadily acquired mortgages as a business decision all the time and some people would say that's unethical.

And there we have it.

Edited November 16, 2008 by Ursa Majoris

[dmarc117]

That's fine and dandy but what is your attitude to e.g. credit card compan9ies changing the rate of interest being charged on a residual balance even though the CC user has made payments on time every time? That's happening all the time.

 

 

what does it say in the cc card contract? if it says those rates can flucuate, then thats the agreement one made when using that card. im not saying it doesnt suck, but when you(not you) sign your name to something, you agree to the terms.

Edited November 15, 2008 by dmarc117

[Ursa Majoris]

what does it say in the cc card contract? if it says those rates can flucuate, then thats the agreement one made when using that card. im not saying it doesnt suck, but when you(not you) sign your name to something, you agree to the terms.

Rates can fluctuate but should not on existing balances. That is completely unethical, IMO.

[Beaumont]

Well, recourse just means that the lender can foreclose on the property, which was pledged as collateral. (As oppossed to non-recourse debt where the lender cannot go after the property in the event of default). I think what you might be thinking of is when the borrower personally guarantees the debt. In that case walking the property doesn't get you out of the mortgage; the foreclosure sales proceeds would merely be applied to the debt and the borrower would remain liable for the difference.

 

But good luck finding the person who walked their property. And even if you find them, they're probably insolvent anyways.

 

To address the initial question:

- yes, its unethical to walk a property. You've breached a contract and welshed on a debt in the process.

- that said, necessity often forces people to do unethical things.

 

I am pretty sure you are wrong here Yo. Recourse refers to personal liability. Secured and non-secured refers to whether property is pledged as collateral.

 

A nonrecourse debt or non-recourse debt or nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. With a mortgage (as opposed to some Home Equity Loans) you are pretty much always personally liable (at least to what I have seen). Home Equity Loans in Texas are non-recourse, in that only the property and not the individual stand behind the loan IIRC.

 

Therefore, I miss how one can walk away from their mortgage (at least without realizing they will be subject to a big ole deficiency judgment).

Edited November 16, 2008 by Beaumont

[AtomicCEO]

I might be kind of old fashioned, but if I reach an agreement with someone, I'm going to do everything that I can to fulfill my obligations.

 

I don't understand this. It's not a pact of honor, it's a contract:

I'll pay you this amount every month... and if I don't, you will take my house.

 

People are opting for the "you take my house" end of the deal, and that's not a breach of contract or unethical in any way. This is the risk the bank assumes as a lender.

[Clubfoothead]

Is it ethical for a mortgage company to kick the ARM in just because it is contractually permissible?

[Furd]

I don't understand this. It's not a pact of honor, it's a contract:

I'll pay you this amount every month... and if I don't, you will take my house.

 

People are opting for the "you take my house" end of the deal, and that's not a breach of contract or unethical in any way. This is the risk the bank assumes as a lender.

 

 

You can look at it however you want, but you are breaching your contract with the bank if you stop paying on your mortgage.

 

A lender takes security for a loan in case the borrower breaches the contract. Not too many contracts of which I am aware give you the option of abiding by its terms.

 

So if you and I have a deal, I'm not going to back out of it just because its to my financial advantage to do so, even if you have a security interest in my 1971 Dodge Dart.

[AtomicCEO]

So if you and I have a deal, I'm not going to back out of it just because its to my financial advantage to do so, even if you have a security interest in my 1971 Dodge Dart.

 

Then you are not in business.

[muck]

A 'loan' or 'mortgage' is nothing more than a legal document that provides certain opportunities to publicly require others to acknowledge a previous promise to repay a debt. Occasionally, the lender will require the borrower to pledge asset(s) to provide further opportunities for the borrower to be able to keep their promises.

[Chavez]

You can look at it however you want, but you are breaching your contract with the bank if you stop paying on your mortgage.

 

A lender takes security for a loan in case the borrower breaches the contract. Not too many contracts of which I am aware give you the option of abiding by its terms.

 

So if you and I have a deal, I'm not going to back out of it just because its to my financial advantage to do so, even if you have a security interest in my 1971 Dodge Dart.

 

 

Then you are not in business.

I recall a lawyer friend of mine saying a contract "is something that means it will cost you money to go back on your word."

[whoopazz]

Come to North Carolina. Paid 200, owe 150, worth 250. Whats the problem