I waited about 5 years before putting the house on the market, considering the downturn in the economy. Now, I have had it. I’m paying about $1400 monthly for what might bring in about $40K in purchase. I currently have job issues again. I don’t have $1400 a month just for housing. I own my car, my motorcycle (yes, it’s my second vehicle as a single person), and most of a lot of things. Many “things” have been jettisoned through garage sales, free cycling, cheap cycling, and just plain donations. That HURTS a LOT! I have lots of resumes out there, and I’M A NURSE, but as I am older, not a lot of interviews. I have advanced my skills past what any manager wants to deal with. I am still paying on one credit card and one school loan for my daughter who refuses to acknowledge it’s hers…and since I refinanced it in my name to get AWAY from Sallie Mae…it’s mine.

So, should I keep paying $1400/month on a house that maybe is worth $40,000 on the market? The house down the street, similar property but smaller home, just sold for $30K.

Yes, I promised to pay to the best of my ability, but my ability is being CHALLENGED by the current market. It’s NOT MY FAULT the market crumped.

I may find renting an apartment, and maybe purchasing a used mobile home in the future, might be a better option.

Once I find a job.

Trent, I love your postings, but not much applies to the near-retirement senior facing my constraints.

HOWEVER, if you live in a non-recourse state, the mortgage agreement with the bank says you either pay them back the loan OR you give them the keys. Your choice. By walking away, you are simply selecting an option that is in the contract. You don’t have to pay the difference and can’t be sued for it.

1 – The RICH & POWERFULL (big banks) who got their bailouts in the 1st month of the financial meltdown.

2 – The really smart Americans who did a STREAGIC default on their mortgage and got to live rent free for more than a year ()

3 – The Majority dumb who are still paying a mortgage of 300000 when the house is not even worth 200000.

IF the big bank and the Hedge funds can do it why cant the average American DEFAULT………it is all about the MONEY honey.

Credit scores is a overrated piece of junk just required only 3 times in life ………. To buy a car (Which most already have) / house (not required staying on rent) / pay for college (I am 40 and never going to college)……….

People forget the MORAL obligation ……..just default if it makes financial sense ………..it is a financial decision not a emotional one ………

I need some freakin’ options!!

I bought my (first) home in 2005. With an I/O arm. I got no gov’t money. I am “upside down” right now, certainly. But I am not going anywhere, b/c it’s my home, and I have an obligation to pay back the loan I took out to purchase my home.

I think it’s probably really easy to judge this situation when you’re sitting comfortably in your 30-year-fixed, with savings and retirement and a steady income. I bet it is pretty easy to get indignant about the situation, people that obviously made bad choices and now are being irresponsible.

How about – for just a second – you get all the details first and then judge. For instance, in my situation: At age 22 I got a very large bonus and instead of blowing it on toys and travel we decided to invest in ourselves and bought a house. We bought the house in 2005 with a 30 year fixed, FHA insured, home loan in the amount of $138,000.00. Today the house is worth $40,000.

Since then we have worked hard to put my husband through school borrowing enough to pay for classes, books and a small portion of living expenses, the loans were well under the maximum amount offered. He graduated with a B.S. in electrical engineering in May 2009.

Since graduating my husband has been applying for jobs all over the country and has yet to get so much as an interview. He is employed at Home Depot, but is unable to get full time hours, so his paycheck is barley enough to cover insurance most months. I have a great job as a legal secretary but it just isn’t enough. We are currently running a $500 deficit each month and we haven’t even started paying back student loans.

So our “bad” choices to date:
A) We followed conventional wisdom at the time and bought a home instead of renting.
B) We got a fixed rate, insured mortgage.
C) My husband went to school for an engineering degree.

This crisis isn’t just hitting the irresponsible and the greedy. It is affecting the hardworking American who made all the right choices and still got whacked by the housing market. We aren’t losing our house because we are worthless slackers who don’t respect the value of personal responsibility. We are losing our home – the home my husband and I have worked hard to maintain and improve, the home I brought my baby boy home to – because times are hard and life is hard. People are crying about how unfair it is that people can walk away from a mortgage without penalty? I think it’s unfair that no matter how hard we try to get ahead we still get our knees cut out from under us.

My point is not that this crisis is all someone else’s fault and I should not shoulder any blame or criticism. My point is that before you start laying a blanket judgment over everyone involved in this mess you should make sure you have all the facts. Was your friend just jumping ship because she didn’t want to pay her loan anymore? Or were there other circumstances she didn’t mention? Life is a whole lot more complicated than an email and a blog post. And this issue specifically goes deeper than a 12 paragraph soap box speech.

Since we have a unethical fractional reserve system with an unethical central bank I think it’s fair that we screw them the same as they screw everyone. They created the housing collapse, and then the Federal Reserve and Government bail them out with our money? That is no where near ethical/fair, and it’s time to change that.

Research this yourself! Get Angry, you should be angry! Demand your Senator/Congress Rep to support Ron Paul’s S 604 and HR 1207 bills to Audit the Fed!

Integrity
Golden/ Platinum Rule
Look in the Mirror

I think these 3 things tell people what they are made of when decisions like these have to be made.
In cases of emergencies, if you are an ethical/integrity/ STAND UP person, you simply.. DO WHATEVER/ BEST YOU CAN to hold up your end of the bargain.
Thats just my opinion.

TA Smith, Creator, Smile-Therapy.com

I agree with the myriad of posts above about the contract between one and the bank being exteremely explicit – the asset(house) is the collateral, and that is what they get if you stop paying – along with your downpayment and all payments to date. They wrote the contract and took the risk just as well as you did.

Just read an interesting article on this at another blog “EconomistsView” where he compared mortgage contracts with option contracts – quite interesting.
http://economistsview.typepad.com/economistsview/2007/12/walking-away-fr.html?cid=126276550#comment-126276550

Anyhow – very good topic.

I find myself in personal debate on this one – as I’m probably 250-300k underwater, but can afford to keep paying. I can hold and may be rightside up to breakeven in say 7 years – but I could buy elsewhere – like down the block (before I walk away – probably have the income to qualify and will have to scrap for the 20% down to do so) and would have several hundred grand in equity, not to mention the value of the the lower mortgage payments invested elsewhere (or put toward prepaying) years from now when things have inflated again.

But I’m just investigating at this time…thanks again for bringing the topic up – when I have a chance I want to read mre of the comments – there are a lot of them!

But, how old are the borrowers? Twelve? They need to take the hits for their past behavior, as well. You choose to act with integrity, or choose to act without integrity. You choose responsible behavior or you choose to be irresponsible. Most of these people knew they were biting off more than they could chew when they signed the papers. Before they walked through the door with the real estate agent. But they bought these houses anyway. Hoping that magically, it would all work out.

We don’t want the government to interfere in many aspects of our private lives (e.g., seat belts, helmet-wear, etc.), but we’re okay with the government bailing us out of our irresponsible mistakes. I don’t want the government to bail these folks out of their poor choosen house purchases.

I’ve made mistakes in my life, and learned from the consequences of those mistakes. If someone bails us out all the time, how do we learn and grow to be productive citizens?

I don’t want my hard-earned tax dollars to be spent in this way. Nor do I want another stimulus give-away. Can you image the good things that could be done with that money?

Regarding “Trouble in Suburban Detroit”, and many people in similar situations, I, too, feel for you. I live in an area that suffered a collapse in our main industry, and was directly affected by it, as well as saw many friends live through it. Plant closure after plant closure and layoff after layoff. Where I live, the state extended unemployment benefits and paid for dislocated workers to return to school or receive other training to move to different careers. I was skeptical, but it panned out. Many people who did not think they would be successful with returning to school, were successful, and now have different jobs. Not all happy endings: some lower pay, one much lower pay, and a couple didn’t make it through school but moved to another job area anyway. Most, however, at least those of whom I’m aware, are doing well. I’d much rather see our tax dollars spent on programs like that. And I am all for helping out people who like “Trouble in Suburban Detroit”, are in trouble through happenings truly not of their own making and out of their control.

An agreement is an agreement. It is up to those entering into the agreement to look at the worst case scenario and ask themselves, can I deal with that? (Unforseen events and trickery excluded.) Were the banks ethical? No.
Were the borrowers responsible? No.
Should we take dollars away from other important areas to pay for it? No.

My personal feeling is that you live up to your ethical code when you can. If you can’t, do what needs to be done and try to do better from there on. No one is perfect, and life does get in your way even when you do your best.

I hope everything works out for you.

In the xbox example, the right thing to do is probably to suck it up and take the loss. Negotiate if you can, but heading over to his house and taking his tv doesn’t really balance the moral scale. Ethics doesn’t really change based on chance or other people’s behavior; it’s always unethical to drive drunk, regardless if the guy you hit (or miss) is too.