CHESSNOID

We have a large population of homeless people now and too many more on the way of becoming homeless.  The social pressures put on by banks, government, and realtors that walking away from your mortgage is unethical is a load of crap.  Trying to guilt people in keeping their promise on a written contract works both ways.  The banks make a profit, the government has bailed out the banks, the and realtors had no problem collecting a commission check.  They all acted in their best interest and didn’t care if you could afford the house or not.  They just wanted to get paid and they did.   People must also act in their best interest if they are to survive this recession.

Just to put it in perspective, if you decide that it is not in your best interest to keep paying on a mortgage because of whatever reason (loss of income, underwater loan, can’t sell the place, etc.) then the bank simply gets your home back.   The house or condo was the collateral and if you default that is what they get back. Period.  To feel guilty about making a business decision that’s best for you and your family is ludicrous.

Many of our homeless population felt guilty and did the wrong thing financially.  They committed financial suicide.  They emptied out their savings, retirement funds, and even insurance policies for the sake of paying mortgages, credit cards, and personal loans.    In the end they paid until they depleted all their resources and couldn’t pay anymore then eventually became homeless.  What they should have done from day one is hold on to every dollar and used it for  their survival.

People need to put pride aside and  focus on a higher social obligation than just keeping the promise on a mortgage promissory note.  The highest obligation should be towards their family and keeping them safe and providing for them.  There are too many tent cities in America.  Most people should run their personal finances as they run a business.    If you make a bad investment, then you cut your losses.

Los Angeles Times:

When push comes to shoving your loved ones out the door, Bob Hunt of Keller Williams O.C. Coastal Realty in San Clemente says the moral duty to protect your family outweighs the moral duty to repay the loan.

“Promise keeping is not the highest moral value,” said Hunt, who before his real estate career taught ethics and logic at the University of Redlands. “If I promised to lend you my gun and you are now in a clearly dangerous psychotic stage, breaking my promise would be the right thing to do, not the wrong thing.”

Hunt also believes that when it comes to mortgages, moral considerations carry more weight than they should.

“Mortgages are secured notes,” Hunt said. “They are not like borrowing from your grandmother. If you willingly default on her, shame on you; she has no recourse. But if you default to the bank, it can take your property. That is the deal they made.

“The property may not be worth what they lent you, but whose fault is that? They are big boys and girls. They made a business decision, and in today’s market, they lost. A deal is a deal.”

Maybe so, but doesn’t that work both ways?

Plan your future wisely. Forget about the social stigma of losing your house.  One out of every ten homeowners are losing their homes right now.  If you lost your job or source of income, can’t afford the home, can’t sell the home, or the banks won’t modify your loan, simply walk away.   Do not keep paying until you deplete all your resources because homelessness will soon follow for you and your family.   After all, a mortgage is simply a business contract, nothing more and nothing less. Protect yourself and your family and walk away if you have to.