Economy · Religion/Ethics

Would you ever walk away from a mortgage?

Eric Ringham Sep 17, 2010
25

More than a third of Americans reportedly think it’s acceptable in some circumstances to stop making payments and abandon a home. Today’s Question: Would you ever walk away from a mortgage?

  • Dan Lenarz

    I did. I fell behind in my mortgage payments when I got sick and had trouble getting caught up. The banks were real a..holes about offering me any relief or help. The pressure I felt was very heavy and caused me a lot worry until I realized my home of 30 years had become worth less than I owed. I actually fell behind 3 times and got my payments caught up twice, but the third time I just didn’t care anymore. I asked myself why I should keep working my butt off to save what had become a loosing proposition. So I walked away. The lifting of the weight off my shoulders was wonderful. I felt none of the guilt that the establishment tries to lay on people only relief and freedom. The bank had no emotional attachment to my home and when I got over mine I was able to make a reasonable decision to cut bait and be free. A year later I think it was one of the best decisions I’ve made in my life.

  • Steve the Cynic

    No. I wouldn’t buy more house than I could afford in the first place.

    The moral question cuts both ways. It’s unethical to walk away from a legitimate debt, but so is predatory lending.

  • Steve the Cynic

    The idea of an amoral, impersonal corporation demanding ethical behavior by the human beings it’s been exploiting for profit is laughable.

  • chloë

    in late 2007, my husband took a job that brought us to minnesota from texas. we couldn’t afford two mortgages, so we stayed with relatives while we tried selling our house, which was worth $11,000 less than our mortgage, and ultimately we lost 18% of the value from when we bought the house in 2000. during the 23 months it took for us to get an offer, we talked seriously about walking away from the mortgage, but we were concerned about the impact on our credit and our ability to buy a new house in the future. now that we’re finally free of the old mortgage, we’re renting a small apartment while we save for a new home.

    we didn’t buy more house than we could afford – when we made our initial purchase, we were approved for up to $400,000, but bought our house for $320,000. Unfortunately, I got laid off in 2005 and my husband lost his health insurance a few months later, so our income-to-expenses ratio changed significantly, and we struggled to keep up with the bills. I’ve heard plenty of people blaming homeowners for their own misfortune, and i’m sure in some cases it’s true that borrowers were reckless. but the problem wouldn’t exist without a lot of other factors coming together, including the short-sighted behavior of real estate speculators who drove the housing bubble.

  • J

    If my house was underwater, and my lender refused to re-finance or change the mortgage terms … I’d be out of there! Steve’s right, making this a “moral” question is nutty.

  • Amy

    I’d like to say I couldn’t walk away from my home, but I guess if it was my only option, I would have to! I certainly feel morally obligated to do everything in my power to keep my house because that is how I was raised. I am grateful that I was able to purchase my home at a really great price. In fact, my house was a foreclosure, so I fortunately got the other side of the coin

  • Jim B.

    No. I’ve made a promise to pay back the money I borrowed and intend to honor that agreement. I’ve been fortunate that my income has remained steady, but even if it didn’t I would try and sell my home before allowing it to go into foreclosure. In part, of course, to avoid ruining my credit, but also because I do think there is a moral element and an obligation to fulfill the promise I made. I’m not trying to criticize those who have made different decisions (every situation in unique which makes it dangerous to judge in generalities), but even if my house is underwater (and if it isn’t it’s close) that doesn’t change what I agreed to pay for it and under what terms I’ve agreed to pay back the bank for that amount. Maybe the fact that I saw buying a home as buying a place to live rather than an investment makes a difference here. For what it’s worth, my lender of its own volition offered us the opportunity to refinance into a lower rate with a shorter term for no cost (and yes, it really was no cost), which I’m fairly certain was the result of us having always made our payments on time.

  • Philip

    Never. It is contrary to everything I have been taught and believe in. The Lord said render unto Caesar what is Caesar’s.

  • James

    NO,

    I live within my means and honor my debts.

    DTOM

  • steve

    if i had a mortgage i would certainly honor it but my house is paid off so i dont have that stress but i have other financial stresses to more than make-up for it!

  • Matt

    Only if goaded into it by a lender whom I felt was undeserving of my fiscal loyalty.

  • Khatti

    I would probably not walk away from a mortgage only because I would worry about the potential repercussions to me. I would not honor a mortgage because I thoght the douches at the bank deserve my concern!

  • Carrie

    Only as a last resort.

  • Sue de Nim

    What gets me is the fact that many of those who are decrying the moral laxity of people who walk away from their mortgages are at the very same time vociferously opposing financial regulations aimed at preventing predatory lending. There’s some hypocrisy here, don’t ya think?

  • Kevin

    I live with a group who trusted their Realtor. They could have gotten a GI Home loan but the Realtor pushed on the last day for a VARIABLE interest rate loan, uncertain what it meant and no time to think on the day of signing they trusted them.

    Now they are facing the idea every day as the house has dropped to a 1/4 of its original value, and their loan payments have grown to 3x what it originally was….

    And sadly if they have I have no choice to find somewhere as well….

    They have for over a year now been trying to get refinanced, but the banks keep doing delay tactics saying ‘certain’ forms or documents are missing. And they have already been FedEx’ed over 10 times…. the same ones! And they keep asking for the income of one of the two who does not make any money…. They know this yet keep asking, they keep sending back: “Retired, no income other then the retirement income and here is a copy of that.”…..

    Sad thing is this is the easiest time for the bank to move forward with the refinancing. But they do not, and I think its because they feel they will loose out on a ‘serf/slave’ to the loan.

    They like the idea you are bound to these loans. Why should they give up on holding you to them.

    Yet it is clear under the current terms they can not maintain them, as the income (One forced into retirement) and payments changed (interest changed the original agreed payment amount). If I was not here , they would have already lost the home.

    Walking away sometimes is the only tool left to say &*#$ to them. And I seriously feel it.

    Too bad they can not go back and redo the mistake, the con that they fell into. Even if the refinance law was designed to allow for such….

  • Paul

    Of course I would walk away from a mortgage, if it were in my best interest to do so. A mortgage is nothing more than a business agreement in which both parties (the bank and I) take on certain risks and obligations. There are negative consequences for violating the obligations (possible legal action, negative impact on credit scores, etc) for both parties. Remember, the bank doesn’t loan you money because it loves you; it loans you money because it thinks it is in its best financial interest to loan you money. Equally, I take on a mortgage (or walk away from a mortgage only because I think it is in my best interest to do so. This is not a moral issue… it is strictly a business issue.

  • chad

    Yes– especially if there was predadorty lending. Karma.

  • David

    I’m very tempted to walk away. I have a modest town house that was well within my budget at the time I bought it 4.5 years ago (just before the market crash). Since I’ve bought it I’ve watched the value drop over $50,000. I was laid off of my job, and the only job in my field I could get is now a 65 one way mile commute. I also had to take a significant pay cut with the new employer.

    I can’t sell it without still owing. I’ve been trying to do the government home loan modification, but the bank is not being cooperative as of yet. Why would they be? They’ve made up the difference in the house’s value in my interest payments so far. Taking it from me is in their better interest then lowering my interest rate is.

    I like my house and don’t want to move, but it’s a struggle. I have no more of a moral issue in walking away then the bank has in taking it from me.

  • Lisa Ragsdale

    I already have walked away. I quit making payments on my mortgage after my April 2010 payment as I did not have (still do not have) the financial resources to continue making payments. I am still living in my condo, but because I have not had any income since 07/2006 and no job since 12/2005, I have nothing left to pay out. I am not going to do a short sale or a deed in lieu because of the possibilities of liabilities. Sometimes life is like this.

  • Ron

    No, and I refuse to empathize with those who do. I sympathize perhaps, being conned is not pleasant, presuming that’s the issue and not just making a lousy business deal or old fashioned legal language laziness. But if I take on a debt, good or bad, smart or stupid, it’s my responsibility to pay it and not a group of strangers.

  • michelle

    What part of adjustable rate is uncomprehensable? People chose to by homes they could not afford; they knew the rate could rise. Where did personal responsibility go?

  • Liz

    “Lending money and expecting people to pay it back is laughable”? (Steve 9/17) “Paying back money is not a moral issue if it is not in my best interest”? (Paul 9/17) What is happening to us? Walking away from a mortgage affects entire neighborhoods. Having a house with nobody living in it is not exactly great for our neighborhoods, not to even get into the huge issue of who ends up paying for these people that do not think they need to pay it back. This affects everybody!!

  • Steve the Cynic

    Liz, if you’re going to quote me, please get it right. What I wrote was, “The idea of an amoral, impersonal corporation demanding ethical behavior by the human beings it’s been exploiting for profit is laughable.” That was in context of what I wrote a half hour earlier: “It’s unethical to walk away from a legitimate debt, but so is predatory lending.” It’s bad enough when politicians are misquoted and deliberately misconstrued.

    Who is more to blame: the people who can’t pay back the unwise mortgages they were talked into, or the crooks who talked them into such deals? It’s an under-regulated financial system that has ruined the neighborhoods you refer to.

  • Karen

    David makes a few very good points above in his comment. I too am involved in the Federal mortgage re-modification plan and so far, a year on, the battle has only ruined my health from stress and a resolution in still not in sight. We should have a discussion on HAMP and see how many people have succeeded in reducing their interest rate – my guess – none.

  • Bill

    I am in the middle of my second Mortgage refi. both times the bank lowered my interest rate by 1/2 of a percent or about $20 a month.

    And just keeps extenting the mortgage to be at it’s full term.

    It’s a pain in the backside and there are days when I just want to say to heck with it and walk away.