Commercial property owner deadbeats on the rise

[Kingside]

[quote=davelj]
I really don’t think there are a whole lot of *true* strategic defaulters in SFRs. I think most of the people who say they are strategically defaulting – that is, they can afford to pay but simply choose to default anyway – are not. I think that most of these folks are probably close to hitting the wall financially and just throw in the towel earlier than they might have to from a technical standpoint. They want to make it look like a business decision (“Hey, I can afford it – I’m just going to screw over the lender. Ha!”), but I think most of that is bluster. Most of these folks are headed toward dire financial straights. I’m sure there are some *true* strategic defaulters, but I doubt it’s a huge number if you peeled back the onion of these folks’ finances. I bet that most, although not all, of these folks can’t really afford the homes they’re living in.[/quote]

I am not sure I agree. This is anecdotal, but what I am finding in my practice is that there are many decent folks in good professions with good income who after a few years of feeding the alligator on a significantly underwater property, start looking at their options. They learn from friends, co-workers, the Internet, government programs, etc. that it is no longer a huge social stigma to walk away.

When you can rent a better place for a quarter of your monthly mortgage nut and you are 2-3 hundred thousand under water, it is not rocket science to decide that your credit will come back before your equity. The decision is made easier when the lender/servicer denies a loan mod because the applicant who is current has good income, or offers a crappy mod. It is an especially easy decision when the the loan is non-recourse, even if they can afford the payment based on their income.

I don’t think most of these people are scamming the system. they are making rational business decisions based on what is best for themselves and their family, even though they can afford the payment. Many of these folks got into the property as part of their retirement plan, but are now realizing that sticking with it may cost them their retirement.

[briansd1]

[quote=Arraya] Interestingly, one of the biggest hang ups for upside down home owners is their personal estimation of home value and future projection. The lie to themselves. Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda. Second, is a tie between irrational fear of consequences and “old-school” honor. Though, when one is realistic about the value and future projections one would hold their moral responsibility to their family as a higher moral then honoring a contract that the holders of the mortgage so very publicly evaded those very same moral bonds.
[/quote]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.

[briansd1]

[quote=Arraya] Interestingly, one of the biggest hang ups for upside down home owners is their personal estimation of home value and future projection. The lie to themselves. Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda. Second, is a tie between irrational fear of consequences and “old-school” honor. Though, when one is realistic about the value and future projections one would hold their moral responsibility to their family as a higher moral then honoring a contract that the holders of the mortgage so very publicly evaded those very same moral bonds.
[/quote]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.

[briansd1]

[quote=Arraya] Interestingly, one of the biggest hang ups for upside down home owners is their personal estimation of home value and future projection. The lie to themselves. Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda. Second, is a tie between irrational fear of consequences and “old-school” honor. Though, when one is realistic about the value and future projections one would hold their moral responsibility to their family as a higher moral then honoring a contract that the holders of the mortgage so very publicly evaded those very same moral bonds.
[/quote]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.

[briansd1]

[quote=Arraya] Interestingly, one of the biggest hang ups for upside down home owners is their personal estimation of home value and future projection. The lie to themselves. Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda. Second, is a tie between irrational fear of consequences and “old-school” honor. Though, when one is realistic about the value and future projections one would hold their moral responsibility to their family as a higher moral then honoring a contract that the holders of the mortgage so very publicly evaded those very same moral bonds.
[/quote]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.

[briansd1]

[quote=Arraya] Interestingly, one of the biggest hang ups for upside down home owners is their personal estimation of home value and future projection. The lie to themselves. Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda. Second, is a tie between irrational fear of consequences and “old-school” honor. Though, when one is realistic about the value and future projections one would hold their moral responsibility to their family as a higher moral then honoring a contract that the holders of the mortgage so very publicly evaded those very same moral bonds.
[/quote]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.

[Arraya]

[quote=briansd1]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.[/quote]

It’s quite the moral pretzel with contradictory interests. They went from being sold a great investment and asset for a comfortable future to virtue in the form self-imposed indentured servitude. Quite the bait and switch in such a short time period.

[Arraya]

[quote=briansd1]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.[/quote]

It’s quite the moral pretzel with contradictory interests. They went from being sold a great investment and asset for a comfortable future to virtue in the form self-imposed indentured servitude. Quite the bait and switch in such a short time period.

[Arraya]

[quote=briansd1]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.[/quote]

It’s quite the moral pretzel with contradictory interests. They went from being sold a great investment and asset for a comfortable future to virtue in the form self-imposed indentured servitude. Quite the bait and switch in such a short time period.

[Arraya]

[quote=briansd1]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.[/quote]

It’s quite the moral pretzel with contradictory interests. They went from being sold a great investment and asset for a comfortable future to virtue in the form self-imposed indentured servitude. Quite the bait and switch in such a short time period.

[Arraya]

[quote=briansd1]

You’ve touched on a very interesting aspect of our society.

Poor people pay more for everything (bank fees, fines, interest rates, car payments, health care, education, etc…) They are strapped for cash, are ignorant, and can’t afford to shop for the best prices. As a society, we allow businesses to take advantage of them.

As you rightly put it, rather than educating vulnerable people and protecting them through regulation, we use morality to keep them down.[/quote]

It’s quite the moral pretzel with contradictory interests. They went from being sold a great investment and asset for a comfortable future to virtue in the form self-imposed indentured servitude. Quite the bait and switch in such a short time period.

[sdduuuude]

[quote=Arraya]Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda.[/quote]

I think the definition of “strategic default” is the reason why it is more common in “upper socioeconomic strata.”

To be a strategic default, you have to be able to afford paying the mortgage on an under-water property. Most in the lower strata are unable to do so, and thus their defaults are not considered “strategic.”

[sdduuuude]

[quote=Arraya]Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda.[/quote]

I think the definition of “strategic default” is the reason why it is more common in “upper socioeconomic strata.”

To be a strategic default, you have to be able to afford paying the mortgage on an under-water property. Most in the lower strata are unable to do so, and thus their defaults are not considered “strategic.”

[sdduuuude]

[quote=Arraya]Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda.[/quote]

I think the definition of “strategic default” is the reason why it is more common in “upper socioeconomic strata.”

To be a strategic default, you have to be able to afford paying the mortgage on an under-water property. Most in the lower strata are unable to do so, and thus their defaults are not considered “strategic.”

[sdduuuude]

[quote=Arraya]Which, I would bet, is the reason strategic defaulters are of a dramatically higher percentage, in the upper socioeconomic strata. They are better as estimating these things and probably less prone to self-interested propaganda.[/quote]

I think the definition of “strategic default” is the reason why it is more common in “upper socioeconomic strata.”

To be a strategic default, you have to be able to afford paying the mortgage on an under-water property. Most in the lower strata are unable to do so, and thus their defaults are not considered “strategic.”

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