Viral Nature of Walking Away

[sdduuuude]

[quote=davelj]But it’s pretty clear to me that moral standards have changed too.[/quote]

Did they ? Or did the situation change? i.e. are borrowers more up-side-down than ever before and the “morality” of paying off the loan in underwater conditions has not been tested to this extent before.

Or, perhaps the availability of ez credit drew in more people of a lower moral standard than ever before.

[Anonymous]

My facts are: $0 down, interest only loan on a $360k mortgage. The property is worth $130k now. I can afford the payments, since its interest only. Note that my mortgage agreement was not simply “I promise to pay.” It was “I promise to pay you either (a) all of this money or (b) the title to the property.” How is choosing option (b) immoral?

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?

The answer is no, in both situations. Walking away from a purchase money loan – in California – is explicitly contemplated by the terms of the contract. As long as I turn over title to the property, I am upholding my obligations under the contract, and the bank is getting exactly what they bargained for. Remember that the bank charged a slightly higher interest rate because of the ‘non-recourse’ nature of California loans.

Unless you want to start arguing that people who use coupons at the grocery are less moral than those who don’t use coupons, the morality of a commercial transaction does not change depending on who is getting the better deal.

[Anonymous]

My facts are: $0 down, interest only loan on a $360k mortgage. The property is worth $130k now. I can afford the payments, since its interest only. Note that my mortgage agreement was not simply “I promise to pay.” It was “I promise to pay you either (a) all of this money or (b) the title to the property.” How is choosing option (b) immoral?

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?

The answer is no, in both situations. Walking away from a purchase money loan – in California – is explicitly contemplated by the terms of the contract. As long as I turn over title to the property, I am upholding my obligations under the contract, and the bank is getting exactly what they bargained for. Remember that the bank charged a slightly higher interest rate because of the ‘non-recourse’ nature of California loans.

Unless you want to start arguing that people who use coupons at the grocery are less moral than those who don’t use coupons, the morality of a commercial transaction does not change depending on who is getting the better deal.

[Anonymous]

My facts are: $0 down, interest only loan on a $360k mortgage. The property is worth $130k now. I can afford the payments, since its interest only. Note that my mortgage agreement was not simply “I promise to pay.” It was “I promise to pay you either (a) all of this money or (b) the title to the property.” How is choosing option (b) immoral?

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?

The answer is no, in both situations. Walking away from a purchase money loan – in California – is explicitly contemplated by the terms of the contract. As long as I turn over title to the property, I am upholding my obligations under the contract, and the bank is getting exactly what they bargained for. Remember that the bank charged a slightly higher interest rate because of the ‘non-recourse’ nature of California loans.

Unless you want to start arguing that people who use coupons at the grocery are less moral than those who don’t use coupons, the morality of a commercial transaction does not change depending on who is getting the better deal.

[Anonymous]

My facts are: $0 down, interest only loan on a $360k mortgage. The property is worth $130k now. I can afford the payments, since its interest only. Note that my mortgage agreement was not simply “I promise to pay.” It was “I promise to pay you either (a) all of this money or (b) the title to the property.” How is choosing option (b) immoral?

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?

The answer is no, in both situations. Walking away from a purchase money loan – in California – is explicitly contemplated by the terms of the contract. As long as I turn over title to the property, I am upholding my obligations under the contract, and the bank is getting exactly what they bargained for. Remember that the bank charged a slightly higher interest rate because of the ‘non-recourse’ nature of California loans.

Unless you want to start arguing that people who use coupons at the grocery are less moral than those who don’t use coupons, the morality of a commercial transaction does not change depending on who is getting the better deal.

[Anonymous]

My facts are: $0 down, interest only loan on a $360k mortgage. The property is worth $130k now. I can afford the payments, since its interest only. Note that my mortgage agreement was not simply “I promise to pay.” It was “I promise to pay you either (a) all of this money or (b) the title to the property.” How is choosing option (b) immoral?

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?

The answer is no, in both situations. Walking away from a purchase money loan – in California – is explicitly contemplated by the terms of the contract. As long as I turn over title to the property, I am upholding my obligations under the contract, and the bank is getting exactly what they bargained for. Remember that the bank charged a slightly higher interest rate because of the ‘non-recourse’ nature of California loans.

Unless you want to start arguing that people who use coupons at the grocery are less moral than those who don’t use coupons, the morality of a commercial transaction does not change depending on who is getting the better deal.

[LAAFTERHOURS]

I know two couples with kids who bought into the downtown condo complex in 2004 who have moved out, rented their place for a while and have stopped paying their mortgages because their place is probably 50% less than what they paid and they think its better to walk.

[LAAFTERHOURS]

I know two couples with kids who bought into the downtown condo complex in 2004 who have moved out, rented their place for a while and have stopped paying their mortgages because their place is probably 50% less than what they paid and they think its better to walk.

[LAAFTERHOURS]

I know two couples with kids who bought into the downtown condo complex in 2004 who have moved out, rented their place for a while and have stopped paying their mortgages because their place is probably 50% less than what they paid and they think its better to walk.

[LAAFTERHOURS]

I know two couples with kids who bought into the downtown condo complex in 2004 who have moved out, rented their place for a while and have stopped paying their mortgages because their place is probably 50% less than what they paid and they think its better to walk.

[LAAFTERHOURS]

I know two couples with kids who bought into the downtown condo complex in 2004 who have moved out, rented their place for a while and have stopped paying their mortgages because their place is probably 50% less than what they paid and they think its better to walk.

[davelj]

[quote=wooga]

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?
[/quote]

The bank would not be making “a tidy profit.” It would have to pay you the difference between the net received on the property (after all expenses) and the price for which it was sold. The situation you describe would never occur.

[davelj]

[quote=wooga]

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?
[/quote]

The bank would not be making “a tidy profit.” It would have to pay you the difference between the net received on the property (after all expenses) and the price for which it was sold. The situation you describe would never occur.

[davelj]

[quote=wooga]

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?
[/quote]

The bank would not be making “a tidy profit.” It would have to pay you the difference between the net received on the property (after all expenses) and the price for which it was sold. The situation you describe would never occur.

[davelj]

[quote=wooga]

But what if instead of losing value, my house had increased to $500k. If I walked away then, the bank would be getting title to a $500k property on only a $360k loan. The bank would be making a tidy profit. Would walking away be “immoral” in that instance? Would the bank be acting immorally by taking the property?
[/quote]

The bank would not be making “a tidy profit.” It would have to pay you the difference between the net received on the property (after all expenses) and the price for which it was sold. The situation you describe would never occur.

[Author]

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