Okay, the most hillarious part about the “walkaway explosion” is that so many people didn’t see it coming.
Giving people mortgages in a surging market with **NO DOWNPAYMENT** is like giving out free call options on housing…that pay a dividend (cash-out and HELOCs allowed if prices rise). Who in their right mind wouldn’t take that offer? Add to this the fact that nobody even had to qualify in any way — everyone was eligible, including dead people and dogs (true stories). There is no downside, as you can just walk away if the bet doesn’t go your way. The borrower has nothing to lose, and everything to gain.
Housing was marketed as an investment (let’s be honest and call it a gamble) to everyone, so why would anyone feel morally obligated to do anything that goes against their best interests (staying in a house and dutifully making payments when you **lose NOTHING** if you walk away). These people never had any skin in the game. Quite the opposite; they cashed out other people’s money on a bet they didn’t even have to pay for. Brilliant! And now, the govt is painting them as “victims” so they don’t even have to feel guilty for walking away.
Want to know the funniest part? They are doing it all over again with the $8,000 tax credit and 3.5% FHA loans (and other low-down mortgages).
(copied from my response to the same article on JtR’s blog)
