L.A. Land poll: Is walking away irresponsible? Or smart?

A first at L.A. Land -- a reader poll. Yesterday's post on whether it makes sense to "Walk Away" from an upside-down mortgage drew so much comment and discussion, I'll pose it as a poll question:

Opinion Polls & Market Research

Comments

[Sue]

Quote from Ben Franklin's autobiography:
"It is hard for an empty sack to stand upright."

[Aaron Kramer]

Peter,
I've posted about this several times and the bottom line is that borrowers have the legal right to walk away from loans. The reason for the inclusion of this right is that is forces banks to be cautious when lending money, or they will literally be caught holding the bag. I can't believe the sanctimonious people on this blog arguing that borrowers should stay in their homes even if they are upside down on their note, for what? So that they are slaves to their debt for a generation? So that your precious investment/home doesn't go down in value? Due to the impact on society? Given me a break if you were so concerned you should said something before or during the bubble no afterwards.

The worst part about the new stimulus package rolling through Congress is that it will raise the amount for conforming loans. This is only going to allow more people to refinance their home with the government backing the loan. The burden is being shifted from private banks to the public, where is the outrage? Real estate values are going to drop further and we the tax payers will ultimately have to pay more for this stupidity. If the bankers or lenders thought real estate values were going to be steady or rise they would offer the loans themselves. That is capitalism folks, it got into this mess and it will get us out if it, if we let it work without becoming socialists. My advice to those upside down on their loan is to walk away as quickly as you can before Congress changes the legal covenants that protect you.

[Ace]

I must admit that I am shocked that 60 percent of people who voted so far think it is ok to walk away from a house because it went down in value... even if they could still afford to pay for it.

That is a great plan! You have eliminated risk completely in your investment.

Of course you are probably going to hell for all eternity... so there is that small risk.

But hey, BOA is the bad guy right? They are the big evil bank that takes everyone's money. By stealing from them, you are kind of like the modern day Robin Hood. Steal from the rich and give to the house poor!

[Roger Moore]

Isn't there a "A plague on both your houses" option? Walking away from an underwater mortgage is irresponsible, but so were many of the mortgages that provoked people into doing so.

[just me]

Arti,

You're right.... Thanks for the post.

[Anonymous]

I find this whole discussion baffling. How can there be a supervening moral obligation to pay back a nonrecourse obligation to a third party you don't personally know? Each party entered these loan transactions knowing full well that the borrower had the LEGAL RIGHT to walk away from the home if he or she so desired. I see no room for disagreement on this issue; walking away is legal, moral and probably a good decision for many of those in upside down situations right now.

[Walt Harasty]

In my opinion a lot of people do not understand the basic nature of buying a house. When you do not have all the money to pay the purchase price you BORROW the money and you promise to pay it back. In some cases the person or entity making the loan says that I will take the house as security in the event you don't repay the loan and not look to you for any more money. Other lenders say I will take the house back, but if its value is less than what you owe, I will sue you for the balance. which may be against the law in certain jurisdictions. In a simple transaction between two people, what is so hard to understand; does the fact that an "institution" lends you the money any different? If the lender were your grandmother would you "walk away" and let her have a house whose value will not be enough to repay her? If you did, most people would consider you to be an "SOB".

[Walt Harasty]

Looking at the poll results so far, it appears that a lot of people who sign promissory notes that say "I promise to repay the money I am borrowing", do not understand those words.

[Solomon's sibling]

How about considering another dilemma that balances the values of personal well-being against honoring a social contract: you have no money or work or prospects, your kids are hungry and you have the opportunity to steal a loaf of bread to feed them (from Wal-Mart, not from another family). What do you do? I don't even have to think about that one -does anyone else? Yes, it's a more extreme case, but not really different in kind, in my view. It's just a sliding scale from food-on-the-table to roof-over-your-head.

And to those who are holier-than-thou about the real choices made by real borrowers impacting their real families, I say walk a mile in their shoes before rendering judgment.

[Jeremy R]

"i think forclosure is for when you really can't afford the house...maybe you get laid off etc. but they shouldn't just decide thay want a cheaper payment and shirk responsibilities. "

Again, bankruptcy laws are bankruptcy laws. If they are strict, then people cannot get a cheaper payment. When they repurchase a home at a lower price they will pay way more interest and way more money donw.

After 4 years and lots of credit counseling, they can refinance once they repair their credit.

[Jeff]

Typical lousy construction of a poll question. Makes you choose a biased answer that doesn't accurately reflect the situation. It is not a black and white world and this issue, like most others, is much more complicated than good vs evil.

[gary]

"hard to get loan for 7 years"
I think he is brillant. He secures a second home that he can live in then walks away from the lemon loan he has. Smart to me. He stays in the other home for a few years, builds some equity then can get any loan he wants or just dosent move. In a few years these whore banks will be so desparate to make loans they will start the foolish process all over again. I went looking for a car and the dealers offered the world to me if I would just buy. Do I feel for these guys?? yup nobody should be stressed financially, but the bansk and bushco created this nightmare and why not take advantage isnt that called making a good business decision?? after all arent all of you bushcos just hugging business for there wisdom in screwing the public and pretneding to be market driven while depending on the whore bushco friends to protect there millions>>>>

[Cal]

In some way, Wise beyond their years.

A portion of interest rate you pay is reflective of the risk of you walking away. If lenders are understating the risk premium then homeowners are having their cake and eating it too.

It is basically an option contract and people are excercising their option to walk away when it is in their best interest to do so.

What some homeowners might be understating is the total risks/costs involved of walking away (some may be walking away too soon, or it may get to that point). It doesnt stop at housing and they need the complete picture before pulling the trigger. Sadly, most people cant do the math so it will be just whatever the pervailing mood at the time will direct their thinking.

[Dr. JwB]

Ace brings up a good point. Not the fact that 60% of us would go to hell (sorry, I'm a nonbeliever, your mythology won't work on me), but the fact that there is risk involved. If you want to make money, there is always risk. So if my grandmother (to use Walt's example) loans me money with interest, then she must know that there is a chance I won't pay it back. Thats the risk she takes.

Sorry Grandma.

[amir]

I'm with Arti.

Please people, leave your homes now, let the banks sell them for nothing. It's the right economic move for you, for the economy, and most important, for me.

Yay!

[TrojanDLA]

What an easy poll - there is NO SHAME in walking away from a business transaction gone bad. Business is all about calculated risks on both sides of the bargaining table. The banks calculated that the borrower would be able to pay, and the borrower calculated that he had an appreciating asset. Borrower made a bad business decision and has now decided to walk away from the deal. He will now face the legal consequences that range from possibly fraud at worst to bad credit at best.

What's the problem? It's not like there is a moral dilemma in play here. Business is about making money pure and simple. Corporations make bad business decisions and go out of business all the time - hello New Century, Yugo and Gateway Computers. As individuals, we similarly have a right to try and profit to the best of our ability, and if things don't work out, well, walk away and pay the consequences.

[MyLessThanPrimeBeef]

I am with James Bond, aka Roger Moore.

When borrowers stir not themselves into holding declining assets, the lenders are shaken.

[Adolfo]

If somebody did a refi and pulled money out of the house and thinks about walking away...the lightning should hit you right there.

For people who bought a house in good faith, learning that they just lost 50k in equity and can not even refinance the house, well, get your shoes and walk. They should even sue the bank and their appraiser.

[redneck]

yeahhh marc, it cracks me up that if a corp or a politican or a business lies steals makes millions gets people killed thats ok, but some guy use the same law and its immoral and not honorable, why is it the corp or pol world can do it but an individual do it its bad. like many have said. its a contract, you pay and keep home you dont you loose home. there is no free amrket in america its all about what the corps and pols can do to make themselves rich. i for one will hang around afew more years at best and if my sinkhole is still a money pit then goodbye bank and hello renting and building my 401k where i can hide my real money. oh and before ya go too nuts a 401k is judgement proof so cry all ya want. anybody cry when the ceos made millions while running there companies in the toilet? anybody hear of a place called enron?? ken lay walked away with millions and thats moral? and honorable? screw all you loosers that are stuck in your funk. i hope all your rates goe thru the roof.

[LeavinLA]

Jeremy: you're clueless,as always. Within 2 years after BK you can get a mortgage at market rates if you have done your credit rebuilding properly. And there's no ongoing counseling. Check your facts before you post.

[judge dred]

HEY WALT you sound like so old fart still sucking up social security and cryong when they wont raise the rate by $5.00

[Aaron Kramer]

All those saying the borrower takes a risk and should repay are only looking at one side of the equation. BOTH the borrower and Lender take a risk that is why the lender demands three times the loan amount over the course of a 30 year fixed. The non-recourse aspect of the loan is supposed to ensure that lenders actually fact check and strictly adhere to the process of "due diligence ," to ascertain an accurate probability of repayment. The bottom line is both parties suck and those not involved in the contract will be affected the most due to the ensuing extensive collateral damage.

[Al]

Once the decision is made to walk away after trying to work all issues before hand. The black mark on your record will cause more financial pain for years than points on a speeding ticket. A person may not get that job, apartment, or a new loan for a very long time. Any new loan or Credit Card will cost plenty. The best bet is to plan ahead for the rainy day before hand. Some people are blinded by the high life style when they can't afford it. The empty box test -The box looks good on the outside but there is nothing inside.

[the terminator]

hey walt guess what i am not paying on my home and have moved in with my Girlfriend who is getting allimony for another 4 years so we cannot get married and by then my credit will be great because she owns her condo and dosnet want me to help because her ex can make her reduce the alimony

[CallMeJinglemail]

Update: Never mind... click on the comment button on the poll box and it will show the number of votes and their mapped locations... looks like half are on the east coast... wowers.

Posted by: Uncle Billy

yea -- and i see we are split here in beverly hills one for jingle mail and one against!