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Strategic Defaults: Is It Morally Right To Decide To Simply Stop Paying Your Mortgage?

In 2010, record numbers of Americans are defaulting on their mortgages.  For most of them, it is because they simply cannot afford the mortgage payments any longer.  But for a growing number of Americans, the decision to stop paying on a mortgage is not because of financial hardship.  Rather, after taking a hard look at the numbers, many Americans are simply deciding to walk away rather than continuing to make monthly payments on a home that has dramatically declined in value.  It is called a "strategic default", and it is a phenomenon that is sweeping the nation.  So why have strategic defaults increased so dramatically?  Well, in some areas of the United States, homes are only worth about half of what they were going for at the height of the market.  So what is the morally right thing to do in that situation?  Should someone "honor the contract" that they signed and continue making payments no matter how hard it hurts, or is the morally right thing to stop making payments on the mortgage in order to put your family in a better financial position?

The truth is that the answers to these questions are not easy.     

In the past year it is estimated that at least a million Americans who can afford to stay in their homes simply walked away.

Take a moment and think about that.

A million Americans that have simply walked away from their homes.

This is something that is absolutely unprecedented in American history.

In fact, 31 percent of all foreclosures in March were deemed to be "strategic defaults" by researchers at the University of Chicago and Northwestern University.  That is up from just 22 percent in March 2009.

So the strategic default trend is accelerating.

And with more than 24% of all homes with mortgages in the United States underwater as of the end of 2009, it is likely that we are going to see a whole lot more strategic defaults.

This is particularly true in areas that were hurt the worst by the real estate crash.  In Arizona for example, it is estimated that 50 percent of all homes are underwater, and in Nevada it is estimated that a whopping 65 percent of all homes are underwater.

That is a whole lot of families that have some very hard decisions to make.

But it just isn't families that are making these kinds of decisions.  Even the biggest financial institutions in the United States have committed strategic defaults.  For example, Morgan Stanley walked away from five San Francisco office buildings they bought at the height of the real estate boom.

But is it the right thing to do?

Well, let's look at both sides of the issue.

Why many would say that strategic defaults are morally acceptable....

Many Americans have no problem at all walking away from their mortgages.  After all, they would argue, they never agreed to pay twice what a house is worth.

If they signed up for a $400,000 mortgage, they would argue that they expect to be making payments on a house that is worth somewhere around $400,000.

So is that unreasonable?

After all, if a $400,000 house goes down to $200,000, there are many that would argue that it represents an unforeseen circumstance that negates the deal.

Others would argue that bankers tricked millions of Americans into accepting mortgages that they could not possibly afford, and therefore nobody should be crying for the bankers when people quit paying on those mortgages.

In essence, the argument is that the bankers created this mess so the bankers should be the ones to pay the penalty.

Still other Americans are choosing strategic defaults because it enables them to provide for their families during these hard economic times.

For many Americans, often the choice is between paying the mortgage and putting food on the table.

And because of the massive delays in processing foreclosures these days, many people are finding that they can live in their homes "rent free" for months on end after they stop making payments.

In fact, Bank of America's credit loss mitigation executive, Jack Schakett, has even acknowledged that many home owners have a huge financial incentive to walk away: "there is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers."

So how much "free rent" are those who have walked away from their mortgages getting?

According to LPS Applied Analytics, the average home owner in foreclosure has been delinquent for 438 days before actually being evicted.  That is up from 251 days in January 2008.

The truth is that especially in states where the foreclosure process must go through the courts, the systems are simply being overloaded.

For example, in Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases.  Ten years ago, there were only about 4,000.

But there are others that would argue that strategic defaults are 100 percent morally wrong.

Why many would say that strategic defaults are morally wrong....

Those who would say that strategic defaults are wrong would argue that no one put a gun to the head of anyone signing up for a mortgage.

They would argue that "a contract is a contract" and that Americans should fulfill their obligations, no matter how hard it hurts.

The truth is that once upon a time in America, a "strategic default" would have been unimaginable to most people.

Back then, a man was only as good as his word.

Even today, to purposely break a contact is on the same level as purposely telling a lie to many people.

Not only that, but the reality is that a strategic default will ruin your credit for years to come.  Many would argue that it is immoral to ruin your family credit for the simple convenience of getting out of a bad mortgage.

In addition, many would argue that it is wrong to take advantage of the banks by exploiting the delay in foreclosure processing - no matter how evil the banks have been.

After all, do two wrongs make a right?

Plus, in some states there may be additional financial penalties even after you walk away.

Kyle Lundstedt, the managing director of Lender Processing Service’s analytics group says that those who do willingly walk away from their homes are playing a very dangerous financial game....

"These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure."

Plus, those who do commit strategic defaults raise borrowing costs on the rest of us.  In the future, banks are going to have to charge all of us higher interest rates on our mortgages in order to factor in the risk that many Americans will simply walk away from their mortgages if their house values go down.

So is it right for everyone else to suffer in the future so that some can get out of bad mortgages right now?

The truth is that it is not the purpose of this article to answer these questions.

The purpose of this article is simply to raise these questions.

We live in unprecedented economic times, and we are all going to be faced with very hard decisions as we move into a very uncertain future.

Strategic defaults pose some very interesting moral dilemmas, and if you ask 10 different people about strategic defaults you are likely to get 10 different opinions.

So what do you think about strategic defaults?

Is it morally right to decide to simply stop paying your mortgage?

Feel free to leave a comment with your opinion....

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  • http://Theeconomiccollapse Dang

    Yes since the gov didnt help the average people out with tarp money. Only the choosen banks got the money. And also since borrowing on your house is almost a no goer anymore. An yet even another problem since every thing is going to hell fast your credit rating doesnt even seem to much matter now. Face it the american dream is gone. Even when your house is paid off now how much is it really worth. Since the gov has that trump card. There fiancing 95% of all morgages now.

  • Chris

    Is it morally right for banks to loan you created out of thin air money after you gave them an asset of like kind with your promissory note and then charge you interest on the created out of thin air money that you actually gave them first by giving them a promissory note? A promissory note is an asset, it is like cash on a banks balance sheet. Like any asset, they can keep it or sell it. If it wasn’t an asset of like kind, then they couldn’t sell it.

    As far as I am concerned no one is morally, ethically or legally obligated to pay a bank back money they created out of thin air. Any many are catching on to this and getting out of it legally and keeping their home by having the debt legally released.

  • Chris

    In addition, per contractual agreement, the home is collateral. Right from the beginning, both parties know that if the mortgage isn’t paid, then the bank gets the house. That’s part of the deal right from the beginning. That is the option that everyone has if they choose.

    Think about it. The bank creates the money out of thin air and loans it to you. You make thousands of dollars in payments and then default. Now the bank has all your payments plus the home that they can sell. THE BANK DID NOT LOSE ANY MONEY EVEN IF THEY GIVE THE HOUSE AWAY.

    Why am I morally obligated to give the bank more money than it deserves?

  • Dean

    Not everyone has the same moral standard today. However as a Lutheran minister for 32 years I have some opinions on the subject.

    There are different reasons for default. If a person was genuinely deceived (and didn’t silently play along with the deception) I have no problem with a strategic default.

    If a person used his house as an ATM to play during the good times, then it’s a moral problem in my mind. But I’d have to know more.

    Many people made bad investments because they were lied to, and because they know nothing about economics (not surprising). They were told: houses always go up, you can make no mistake here. They figured many millions of people can’t be wrong on this point. That one could go either way.

    However, there’s one overwhelming clear cut case in my mind and that is this: the govt and central bank started the party, brought the booze and wouldn’t let people go home.
    By manipulated low interest rates they made saving a worthless practice and buying on credit the only sensible financial decision possible.

    They wanted to trap and deceive people and succeeded. Because of this, and the fact that these same underwater homeowners are being forced to prop up the big banks, I consider it a virtue to do a strategic default. It’s a way to recover the money they stole and are stealing from you. But don’t but stupid in the future. Anyone can get an economic education on line today at no cost.

  • infocyde

    First, my financial situation is very precarious. Moved, couldn’t sell my condo, so I’m renting it. Being an absentee landlord sucks. Even when it is rented I’m still taking a hit each month on it. Wife is making less money now then when we got married, so we are stretched. Then we got hit with thousands in medical bills that our insurance company jacked us around with for years, coming up with new reasons not to pay. I’m going to sue them, but in the mean time got hit with collections for it. Top of that, tried to have kids, didn’t work out, so did the fertility thing, that drained all our reserves till we finally had to give up for now. That happened right before the medical collections started calling.

    Got to tell you, doing a strategic default, so called, is looking very appealing right now. I’m trying to hold on, even went to a debt counseling agency and that potentially could keep me just barely afloat. Also looking for part time work on the side when it is available.

    But I think it is the right thing to do to try to stay the course if you can. Why?

    It isn’t because I feel I owe the banks anything. Those shifty muther farkers have been playing games for a long time now. What did the mega banks do with TARP money? Help out mortgage people? No, they bought up little banks, like bank packman. F*ck ‘em. I do feel bad for all the smaller financial institutions that are honerable that will go under over the next too years. Many of them played by the rules too. Now the rules that the big boys avoid are tightening on them to the point where they couldn’t compete even in a good economy.

    What about my debt to society? If people like me default, it will just make credit more expensive to everyone else. Good! Credit is too cheap and too easy right now, that is the problem. Plus so many Americans are scamming the system somehow anyway, getting subsidized, evading taxes, whatever, I don’t really feel like I owe at least the vast majority of Americans a thing. Plus, even in the worst of times, if you have assets, and have a good record, you can get credit. Look at now, if you are doing well you can get mortgages for under 4% right now. Sounds like all the defaults are actually helping out not hurting those with good credit ratings.

    Ultimately, you sign a contract. Pay or we will repo the property and give you bad marks on your credit. In business contracts are broken every day, every hour, all the time, all over the world. Life goes on. Sometimes they are broken for good reasons, sometimes bad ones. It is business. The goal should be to keep your contract, but if the benefits outweigh the gains, it is standard practice for business to break deals.

    Regardless of this, I will hang on as long as I can, till that unforeseen variable comes out of the blue (job loss, more medical bills, who knows). Do I feel good about this? Not really. I actually feel dumb doing it. I feel like I should not only walk away from the houses, but this country as well. Head for whatever place on the globe will whither the coming storm the best. But I won’t. I have it too ingrained in my head by social conditioning to try to meet my obligations as best as I can. I’m a fool.

    Why? Because I will take the unforeseen hit. And by the time I cry uncle and bail out, our financial “gods” will have plugged the wholes, and my debts will follow me wherever I go. So, even though I’m going to try to stick it out, I in away envy those amoral bastards that didn’t. They saw through the game and walked away. By the time I follow the doors will be closed.

    Oh well. I also believe in God, even though I cuss sometimes. I believe Jesus wants me to honor commitments, not because I should fear or honor corrupt men, but I should fear and honor HIM. So maybe I’m dumb, but God sees my plight, and sees the evil of the day, so even though through my eyes it doesn’t make sense, I will trust in HIM to get my though.

  • http://bowssenbath.blogspot.com/ bowssen

    I say stop paying, although individual cases may depend on the circumstances. In general, though, I’d say it’s only fair to stop paying. Homeowners may not have been forced to sign contracts, but what the hell are people supposed to do with their lives? People go to school, to go to work, to buy a home, to start a family–and now they’re being punished because they were trying follow social protocol. Banks lured people into these contracts so that they could trap people with slavish contracts, and then use the “money” to make mortgage-backed securities to trade left and right with derivatives, thereby exponentially expanding the financial sector increasingly controlled by a select financial elite. And now that we’re all in this mess, they’re probably betting on people maintaining their morality and honoring these contracts, because it’s the “right” thing to do. Honoring a contract is more palatable when the contract is designed with equal representation of the parties involved, but when people have no influence in the construction of their contracts and are now learning that these contracts were completely designed against them, why continue honoring the contract that doesn’t honor them? RIght and wrong are just words. People need to see the situation for what it really is, and simply act, not fret over whether or not something is “right” or “wrong.”

  • http://infowars.com AvantGardeDog

    Well, since the monies loaned were just made up out of thin air, why should we not just be able to “add a few zeroes” to our account & pay them?

  • de malfosse

    speaking specifically about the area I live within…

    so “you”, all muscled-up and mighty with your over-sized gov’t paycheck, migrated to this area and started the trend of paying $120,000 for what were $30,000 houses, elbowing me out of the home-purchase market.

    now “you” discover how underwater your mortgage is and you want sympathy and understanding? I think not.

  • http://www.allthatisnecessary.com jjmurphy

    I must disagree with the other comments. (I am only talking about people who can afford to make payments and don’t.)

    When I bought houses over the years as I moved I was never forced at gunpoint to sign the contract or the mortgage papers. I was an adult, fully capable of knowing the risks and rewards of owning a house and paying a mortgage. I signed willingly. I rode the rising tide over the years from house to house. I never heard any complaints when houses went up in value, but once they went down we hear wails of anguish and charges of being lied to, blah, blah, blah.

    My current house is not under water, but any equity I had is gone thanks to the bust. However, I pay my mortgage every month, and will continue to do so. Never mind any contract – I gave my word. That is more important to me than any piece of paper.

    Some of you may have read about the guy who stopped paying his mortgage and can now go to Outback Steakhouse more, go on trips, splurge a little. To me that guy is a leech and has learned nothing.

    I know I know. I am a relic.

  • roadrunner

    I wish to reply to Infocyde.
    It seems to me, that after reading your post is that your biggest problem is not the mortgage, but it is the medical bills. It is a well known fact that medical bills have led to more bankruptcies than anything else, including mortgages. I would say casually to you to try to pay the mortgage to keep your shelter, and if you want to default on anything, screw the medical bills. The authorities keep chirping about the high cost of medical care but dont ever make any comments about what exactly causes the high cost. I think there should be a no-holds back investigation, and tell the public just what is causeing the high costs.

  • Matt

    I hate bankers, lawyers, and politicians – they all live off the backs of those who produce for they produce nothing. With that being said, I still believe in doing the right thing personally even though that collective group are just a bunch of scam artists. The right thing in this case is to do a short sale. You will be much better off in the long run. Your credit rating will not be trashed for one. Be the better man/woman.

  • Hard Truth

    Its more than morally right to walk away from your mortgage, it should be every American civil duty to do so. The truth is banks do not own the houses they sell you…when you get a mortgage your essentially asking the bank to give you paper fiat money out of thin air in exchange for your promise to repay on a property that represents real wealth, you do not have the money to buy that house and the bank doesn’t either, instead the bank opens an account and wrights next your name a numerical value of your debt that you have to repay. Should you default on this false contract, the Bank then forecloses on the property they never owned and essentially steal the real wealth. In other words the property becomes legally theirs only after they steal it from you!

    The ignorant writer of this article would do well to become educated on the issue before he writes such bull. Watch this video for the truth about mortgages and the banking system.

    http://video.google.com/videoplay?docid=-2550156453790090544#

  • JohnJay

    Talk to a Re lawyer first to avoid blowback, then if it is to your advantage, stop paying and live rent free as long as you can.
    Morality went out the window back in the Johnson administration.
    No bid contracts, TARP, millionaire Congressmen, Imperial wars, etc.
    It is everyman for himself.
    If it is legal and to your advantage stop paying immediately, your only friend is the guy in the mirror!

  • Larry

    Chris, you are right on point. Read the contract, when they loan the credit they always say that they loan you x amount of dollars. Some of them actually state lawful money,aka, gold and silver. Not FRN. These lying bastards loan you nothing but your promise to pay. There are legal ramifications concerning undue enrichment. Fraud it another term.

  • infocyde

    Thanks for the comment road runner.

    I think what we are seeing here is loss of trust on pretty much on all levels of society. The little guy doesn’t trust the “big” guys, and vice versa. Everyone will screw everyone else when it is to their advantage.

    I don’t think the big fish in the game anticipated that their would be any loss of trust to them (arrogant bastards). That it was OK for them to break the law, get paybacks, skip rules, do back room deals, etc. But they really don’t like it when the masses that support them discover some loop holes and actually use them. The nerve! I’d expect to see modifications to the laws to make it a lot harder to walk away from your mortgage. I know it varies by state, the ones where it is easy I would expect changes coming, though they will be marketed as compassionate changes, they will put you on the hook for your loan none-the-less.

    What a freak’en nightmare world we live in huh?

    I hope the people who play by the rules, do their best to make wise financial decisions do come through everything unscathed. Silver spooned moralist can stow their self righteous self made critiques (really, you are self made? Did you design the care you drive to work in? Grow your own food? Build the nuclear missiles that keep our enemies at bay? Wow, you must be God!, He is the only “self made” person I know of). But for those of you who are humble and doing your best, trying to do the right thing even though others around you aren’t, I hope and know God will bless you for it, even if it looks foolish to do so.

  • Will

    I paid for my home outright, after working and saving for years. Thanks to TBTF banks, it’s worth about half of what I have invested in it. I’m stuck, no bailouts for people like me. If I had a no money down loan and still had the cash in my pocket, you’re damn right I’d walk away.

  • Spencer

    Obviously it’s wrong to walk away from the mortgage.

    With regards to your argument in favor of the strategic default being acceptable:

    Par1: They made no mention of worth in the contract, only a tangible dollar amount for a loan. It is their fault if they overpaid, and if they underpaid then they would have gotten a good deal, and they would have been happy.

    Par2: Their fault, stupid idiots. According to that same logic, if the value of the house doubles then they would expect to pay double the payments. The bank doesn’t sell you the house, another person does…the bank just makes you a loan. Someone else got 400K for your purchase, if the house loses value that was your stupid mistake, not the banks.

    Par3: YES

    Par4: Those people would be idiots. If the value doubled to 800K, the banks would not in turn say it negates the deal and that you owe 800K for the house.

    Par5: The bankers tricked no one. People need to blame themselves for the mistake. If they want to pass the bucket, at least point the finger at your real estate agent who promised you house prices would continue to rise

    Par6: People created this mess, not bankers. The same person who buys a house for an overinflated house had likely just sold a house at an overinflated price…he played the game, he got burned, deal with it.

    Par7 Par8: Accepted

    Par9 to the end: This just shows the selfish mentality of Americans, if they had any honor left they would at least rent somewhere. Trying to get something for nothing…simply selfish…

    There is a legitimate: “I can’t pay you, and I’m sorry”. We have bankruptcy for that, and banks assumed the risk that you might not be able to pay up. This strategic default mentality however, is a plague in America and it sickens my stomach that I would live amidst such cowards. Once it’s considered a strategy, if it were to be implemented by the masses, then it would collapse the entire system.

    infocyde: you’re the glue that holds the society together. In a way you envy those who don’t hold the same standard, but just go to an impoverished country where everyone is just in it for themselves and you’ll see what happens to a society without people like you, without a system of trust. These are tough times, I won’t lie, but what will save America is the genuine, hard working honest people…not the weaklings who can’t stand by their word.

  • Dion

    Use the system to your advantage. That’s what the banks do. It is phony nonsense that there is any morality to this.

    If there were any morality to this you could walk to your bank and say , “Look Mr. Banker, I’m having a tough time here. Lower my payments for a few years and let’s make something work”

    what you think would happen? Of course nothing. so screw it, use the system to your benefit just like the banks, mortgage companies and credit card companies do.

  • http://www.youtube.com/user/Solos99 Nick

    So if we want to talk about “morality” lets take a look at what ALL religious texts say about bank lending and interest. The term referred to is Usury (http://en.wikipedia.org/wiki/Usury) it means to charge interest. Here are some biblical references:
    25 ” If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest.
    26 “If you ever take your neighbor’s garment as a pledge, you shall return it to him before the sun goes down.
    27 “For that is his only covering, it is his garment for his skin. What will he sleep in? And it will be that when he cries to Me, I will hear, for I am gracious. (Exodus 22:25-27)
    —————-

    35 ‘ If one of your brethren becomes poor, and falls into poverty among you, then you shall help him, like a stranger or a sojourner, that he may live with you.
    36 ‘Take no usury or interest from him; but fear your God, that your brother may live with you.
    37 ‘You shall not lend him your money for usury, nor lend him your food at a profit. (Leviticus 25:35-37)
    —————

    19 ” You shall not charge interest to your brother — interest on money or food or anything that is lent out at interest.
    20 “To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)
    ————–

    10 “I also, with my brethren and my servants, am lending them money and grain. Please, let us stop this usury!
    11 “Restore now to them, even this day, their lands, their vineyards, their olive groves, and their houses, also a hundredth of the money and the grain, the new wine and the oil, that you have charged them.” (Nehemiah 5:10,11)
    ————-

    5 He who does not put out his money at usury, Nor does he take a bribe against the innocent. He who does these things shall never be moved. (Psalm 15:5)
    ————

    8 One who increases his possessions by usury and extortion Gathers it for him who will pity the poor. (Proverbs 28:8)
    ———–

    24:1 Behold, the LORD makes the earth empty and makes it waste, Distorts its surface And scatters abroad its inhabitants.
    2 And it shall be: As with the people, so with the priest; As with the servant, so with his master; As with the maid, so with her mistress; As with the buyer, so with the seller; As with the lender, so with the borrower; As with the creditor, so with the debtor.
    3 The land shall be entirely emptied and utterly plundered, For the LORD has spoken this word. (Isaiah 24:1-3)
    ———–

    10 Woe is me, my mother, That you have borne me, A man of strife and a man of contention to the whole earth! I have neither lent for interest, Nor have men lent to me for interest. Every one of them curses me. (Jeremiah 15:10)
    ———-

    7 If he has not oppressed anyone, But has restored to the debtor his pledge; Has robbed no one by violence, But has given his bread to the hungry And covered the naked with clothing;
    8 If he has not exacted usury Nor taken any increase, But has withdrawn his hand from iniquity And executed true judgment between man and man;
    9 If he has walked in My statutes And kept My judgments faithfully — He is just; He shall surely live!” Says the Lord GOD. (Ezekiel 18:7-9)
    ———

    13 If he has exacted usury Or taken increase — Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him. (Ezekiel 18:13)
    ———

    17 Who has withdrawn his hand from the poor And not received usury or increase, But has executed My judgments And walked in My statutes — He shall not die for the iniquity of his father; He shall surely live! (Ezekiel 18:17)
    ——–

    12 “In you they take bribes to shed blood; you take usury and increase; you have made profit from your neighbors by extortion, and have forgotten Me,” says the Lord GOD. (Ezekiel 22:12)
    ———
    14 ” For the kingdom of heaven is like a man traveling to a far country, who called his own servants and delivered his goods to them.
    15 “And to one he gave five talents, to another two, and to another one, to each according to his own ability; and immediately he went on a journey.
    16 “Then he who had received the five talents went and traded with them, and made another five talents.
    17 “And likewise he who had received two gained two more also.
    18 “But he who had received one went and dug in the ground, and hid his lord’s money.
    19 “After a long time the lord of those servants came and settled accounts with them.
    20 “So he who had received five talents came and brought five other talents, saying, ‘Lord, you delivered to me five talents; look, I have gained five more talents besides them.’
    21 “His lord said to him, ‘Well done, good and faithful servant; you were faithful over a few things, I will make you ruler over many things. Enter into the joy of your lord.’
    22 “He also who had received two talents came and said, ‘Lord, you delivered to me two talents; look, I have gained two more talents besides them.’
    23 “His lord said to him, ‘Well done, good and faithful servant; you have been faithful over a few things, I will make you ruler over many things. Enter into the joy of your lord.’
    24 “Then he who had received the one talent came and said, ‘Lord, I knew you to be a hard man, reaping where you have not sown, and gathering where you have not scattered seed.
    25 ‘And I was afraid, and went and hid your talent in the ground. Look, there you have what is yours.’
    26 “But his lord answered and said to him, ‘You wicked and lazy servant, you knew that I reap where I have not sown, and gather where I have not scattered seed.
    27 ‘So you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.
    28 ‘Therefore take the talent from him, and give it to him who has ten talents.
    29 ‘For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away. (Matthew 25:14-29)
    —————

    11 Now as they heard these things, He spoke another parable, because He was near Jerusalem and because they thought the kingdom of God would appear immediately.
    12 Therefore He said: “A certain nobleman went into a far country to receive for himself a kingdom and to return.
    13 “So he called ten of his servants, delivered to them ten minas, and said to them, ‘Do business till I come.’
    14 “But his citizens hated him, and sent a delegation after him, saying, ‘We will not have this man to reign over us.’
    15 “And so it was that when he returned, having received the kingdom, he then commanded these servants, to whom he had given the money, to be called to him, that he might know how much every man had gained by trading.
    16 “Then came the first, saying, ‘Master, your mina has earned ten minas.’
    17 “And he said to him, ‘Well done, good servant; because you were faithful in a very little, have authority over ten cities.’
    18 “And the second came, saying, ‘Master, your mina has earned five minas.’
    19 “Likewise he said to him, ‘You also be over five cities.’
    20 “Then another came, saying, ‘Master, here is your mina, which I have kept put away in a handkerchief.
    21 ‘For I feared you, because you are an austere man. You collect what you did not deposit, and reap what you did not sow.’
    22 “And he said to him, ‘Out of your own mouth I will judge you, you wicked servant. You knew that I was an austere man, collecting what I did not deposit and reaping what I did not sow.
    23 ‘Why then did you not put my money in the bank, that at my coming I might have collected it with interest?’
    24 “And he said to those who stood by, ‘Take the mina from him, and give it to him who has ten minas.’
    25 (“But they said to him, ‘Master, he has ten minas.’)
    26 ‘For I say to you, that to everyone who has will be given; and from him who does not have, even what he has will be taken away from him. (Luke 19:11-26)

    So if most people use texts like the bible to define morality. The bible clearly equates Usury, what all banks have been doing to the people for at least the last 600 years, with evil, sin, wrongdoing etc then how could it be immoral to finally wake up and decide to stop allowing yourself to be used as a debt slave? Answer it is not. If just 10% of the worlds population decide to wake up and kick the fat cat politicians and bankers out we can rebuild from this mess and have our lives back. Funny is it moral? In six months when more people realize how deeply they have been lied to and taken advantage of you will see bankers swinging from lamp posts, that will be immoral…

  • saysaysay

    Simple.

    The rules were set before the game started. The rules state you walk away the bank gets the house. Too bad for the bank if the house isn’t worth as much anymore. not your problem anymore if you choose to walk away.

    It is like poker, play the hand your dealt. In some cases, walking away is simply playing your hand properly.

    The only ironic thing is the gov’t end sup bailings the banks out with your (taxpayer) $ anyways. So the bankers end up winning anyways.

  • mc

    Its usery in lending,period.Houseing should never been trated as a commodity.Its shelter for people that are burdened enough with essential living expenses.It’s a debt based system we live in.screw em.Teach younger generation the faults of debt based lending and to stay away from mortages,car loans and other slave programs.Live smarter.

  • http://www.pair-annoyed.com:9090/FORUM-DATABASE/forumdisplay.php?f=25 Calm

    Think of private-equity firms that close a factory — essentially deciding that the company is worth more dead than alive. Or the New York Yankees and their World Series M.V.P. Hideki Matsui, who parted company as soon as the cheering stopped. Or money-losing hedge-fund managers: rather than try to earn back their investors’ lost capital, they start new funds so they can rake in fresh incentives. Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.”
    http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html

    Morgan Stanley walked away from their mortgage and were quite able to pay.

    Morgan Stanley to Give Up 5 San Francisco Towers Bought at Peak
    By Dan Levy
    December 17, 2009
    http://agonist.org/numerian/20091218/morgan_stanley_defaults

    Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis
    Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.
    By Brent T. White
    October 2009
    (PDF Document)
    http://online.wsj.com/public/resources/documents/WalkingAway1029.pdf

    Moral and Social Constraints to Strategic Default on Mortgages
    We use survey data to study American households‘ propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household would default if the equity shortfall is less than 10% of the value of the house. Yet, 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house. Besides relocation costs, the most important variables in predicting strategic default are moral and social considerations. Ceteris paribus, people who consider it immoral to default are 77% less likely to declare their intention to do so, while people who know someone who defaulted are 82% more likely to declare their intention to do so. The willingness to default increases nonlinearly with the proportion of foreclosures in the same ZIP code. That moral attitudes toward default do not change with the percentage of foreclosures in the area suggests that the correlation between willingness to default and percentage of foreclosures is likely to derive from a contagion effect that reduces the social stigma associated with default as defaults become more common.
    By Luigi Guiso, Paola Sapienza and Luigi Zingales
    July 2009
    (PDF Document)
    http://www.financialtrustindex.org/images/Guiso_Sapienza_Zingales_StrategicDefault.pdf

  • http://www.pair-annoyed.com:9090/FORUM-DATABASE/forumdisplay.php?f=25 Calm

    Tishman, BlackRock to Hand Stuyvesant Town Ownership to Lenders
    “SNIP”
    Tishman Speyer Properties LP and BlackRock Inc. will cede control of Stuyvesant Town-Peter Cooper Village to lenders after the value of Manhattan’s largest housing complex fell and they were prevented from raising rents.
    Tishman, which bought the property with BlackRock Realty Inc. in 2006 for $5.4 billion, missed a $16.1 million debt payment on Jan. 8. Creditors with a claim on the complex include mortgage finance companies Fannie Mae and Freddie Mac and holders of so-called mezzanine debt including a Winthrop Realty Trust affiliate and Gramercy Capital Corp.
    “We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,” Tishman and BlackRock said in an e- mailed statement today.
    The New York-based investors bought the 80-acre development from insurer MetLife Inc. near the top of the market with plans to remodel and raise the prices of rent-regulated units to market rates. Those plans were challenged by a recession, slackening demand for rentals and a legal victory for tenants who claimed some rent increases were illegal. In October, Fitch Ratings valued the property at $1.8 billion.
    The companies decided to hand over the property after failing to reach an agreement to keep some level of ownership, according to the statement today. Tishman Speyer said it wouldn’t consider a long-term contract to manage the complex that doesn’t involve ownership.
    By Oshrat Carmiel, Ross Larsen and David M. Levitt
    January 25, 2010
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aRna946fkA6c

  • lostinmissouri

    This site is “theeconomiccollapseblog” so in that spirit, since our government has been taken over by Organized Criminal Banksters, who now own 95% of all mortgages, then lets hasten the collapse…Everyone should stop paying! Hopefully, that would collapse this phony money system that is enslaving all of us.
    The sooner we can rid America of this crooked Federal government, the sooner Americans can rebuild this great country…imho.

  • Something Wicked This Way Comes

    I am not sure it is a question of what is morally right.

    In fact, there were a lot of players not acting too morally right to begin with. People inflating incomes, banks not even verifying income.

    What is left is triage. Banks trying to squeeze every thin dime they can out of home owners and the gov- home owners unable to pay. I am not sure it matters whether it is morally right or not. It just is. And everyone involved should have taken their fair share of the beating. That banks were made whole at the expense of all of us- that was not morally right.

    What really pisses us off is that those of us who behaved responsibly are forced to pay the debt of those that weren’t. That’s the real issue.

  • Marcus Davinci

    One cannot quote God’s Word on usury and apply it to every situation, without first knowing the context. There are different commands for different categories of people.

    Example: “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury” (Deuteronomy 23:19-20).

    The context for “brother” here was Jew to Jew, within the nation of Israel. However, most evangelical Christians would agree the principle still applies within the church today, and indeed is echoed in many New Testament verses.

    One can make a very strong case for “your word is your bond” from Scripture. This indeed is a moral issue, but may not be as black and white as we would like it to be. In other words, the conscience may prick one man, while freeing another. It all boils down to the individual circumstances and the heart behind a decision to foreclose or not foreclose.

    If we all strove to live by the law, we would die by the law. But even the law first given to Israel by God instructed freedom from debt every seven years. We see this time frame echoed, I believe, in our nation’s laws governing bankruptcy, which may only occur every eighth year.

    Should God’s specific laws given to the Jews apply to all people? Some say yes, others no. Clearly, Christians and non-Christians all live under the same law of the land. Prostitution is legal in Nevada; does this mean it is morally acceptable?

    Similarly, our laws allow bankruptcy. They allow divorce. Are there moral considerations for both of these cases? Absolutely. For believing Christians, is grace involved as well, or is it all law?

    When anyone, regardless of faith or creed, signs a contract to purchase a car or house over time, there is a clause in the contract that allows the creditor to repossess the item in the event of failure to pay, regardless of the reason for the failure. Do some manipulate the system? Sure. God is their judge. Do others file or foreclose reluctantly, but gratefully, and view it as grace to be free from a lifetime of bondage? Yes.

    Gone are the days when business was on a handshake, and all debt was local. Now, car loans and mortgage loans are international business. In other words, agreements are not with Joe Banker on Mainstreet USA, and breaking a contract does not directly impact your local reputation or hurt the local business. Most would agree that life was better when this was the case — but it was also a time when “mortgage” was an unknown term.

    One can also reasonably argue that repossession is a part of the contract, and therefore, a morally acceptable choice. You stop paying; you hand over the keys. In the past, this was the sole purpose of a down payment, whether on a home, car, or big-screen TV. But “EZ” credit, no down payment has contributed big time to the debt monster we have today.

    One thing is certain, as King Solomon pointed out long ago: “There is nothing new under the sun.” As Proverbs 22:7 states, “The rich ruleth over the poor, and the borrower is servant to the lender.”

    It is also largely our choice what master we serve: “No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.”

    Americans, including most professing Christians, have worshiped and served creature comforts more than God’s Word — so it should come as no surprise that the party is over, so to speak, and that for many, the eternal value of our investments is already being tested.

    Have you lost your home? Car? Filed bankruptcy? Is it due to your greed and covetousness? Is it due to your negligence? Is it due to medical emergencies and catastrophic loss of investments or job? Take it to God and confess your complete and utter dependence on him, and “lean not on your own understanding.”

    If you have gamed the system, confess this as well. As in the case of divorce, clearly it is never God’s will or desire. However, it does occur. Healing and hope are available, for “His mercies are new every morning.” Paul asks, “Shall we continue to sin, then, that grace may abound? God forbid!” (Romans 6:1-2).

    So it is with our financial lives. As Jesus instructed the woman accused of adultery, brought by religious leaders to him for judgment, “then neither do I condemn you. Go and sin no more.”

    The handwriting is on the wall, folks. Let’s all get our houses in order — financially, physically, and spiritually.

  • CWWS

    I really have a beef with folks that continually refinanced and took cash out and now doing strategic default. They give the house back, but not the boat, Escalade, etc they bought.

    Also, I hope these folks are getting tax advice and are prepared to pay taxes on the forgiven debt if in a recourse state.

  • Suetonious

    Before I comment, let me state that I do not have a mortgage, and never had one. First, because I generally move around way too often for it have made financial sense, since one’s got to allow time for significant enough appreciation to overcome the costs of getting into and out of a house. Second, I don’t like any kind of millstone encumbrances that prevent one from saying “Get out of Denver – say go!” – to paraphrase that great song. Finally, I instintively knew that even though there was 70 years of year-over-year appreciation in the housing market – nothing “always goes up”, especially when the fundamentals look so bad.

    With that said, I feel qualified to comment on this phenomena with no personal axes to grind.

    The two primary arguments against “walking away” are quite different. The first one comes from morality, the second – from strategic prudence.

    Before we address these specific argument, though – some background. Yes, there was a quiescent time in America when the people and the banks dealt with each other quite honestly and in a straightup fair and prudent fashion. This was true even though the government was bought and paid for by criminal banksters way back in 1913. The reason the banksters allowed this state of affairs to exist on Main Street was the same that a smart pack of mosquitos might look at a herd of wildebeasts. They can milk a healthy herd for quite a long time before the herd might start dying off from the diseases the mosquitos carry. The more healthy and numerous the herd – the more they get to leech. But there comes a time when the herd weakens and the mosquitos realize they better get all they can out of them before they fly off to milk another herd. So they attack the herd with a vengeance to get every last drop out of them before the herd inevitably drops dead from a lack of blood.

    So, let’s look at the morality argument. Joe Homeowner sees his property lose boatloads of value, but he’s on the hook for quite a bit more than the value of his home. Yes, he signed the agreement – but he looks at the banks getting Trillions! from the government at near 0% interest rates – which he as Joe Taxpayer is on the hook for. He also sees these big banks unilaterally jacking up interest rates on credit cards to 33% and higher, from lending money that he himself “loaned” to the banks at 0%, through his indentured servitude to the Fed/IRS. “So,” he thinks, “screw that…and them. I’m outta here.”

    Now let’s look at the other argument that I call – strategic prudence. This argument goes like this: “Sure, you can walk away, and nobody will judge you for it. However, at some point you’re gonna need credit, and if you do this – you’re burning all bridges back to a normal existence. You need your credit rating.”

    To this, I say: There IS no going back. We are finished. We will never return to this insane world of debt-fueled “prosperity”. The ongoing and swelling unwinding will collapse the biggest and most numerous entities ever. All credit ratings will be trashed, from Joe Underpass-Squatter to the most respected individuals, businesses, institutions, municipalites, states – right up to the federal government itself. In this context, a stirling credit rating is like having a First Class ticket on the Hindenberg – good for oildrum fire conversations, but that’s about it.

    Those that think outside the system – to see and prepare for the coming “system”, will have a significant survival advantage.

  • MrPotato

    please give more information what it means to “walk away” from your home, are you legally allowed to do that?
    does this mean that all of us non-homeowners who didn’t make money on the boom because we feared of the boom can’t laugh, becauase even now that those who borrowed money turned out to have made a mistake they can just walk away from this mortgage?

  • http://rosarynovice.stblogs.com/ Augustine

    It would be helpful to remind the readers that in many states the bank can still go after the borrower to make the loan whole even after foreclosure. In these states, the loan is due until paid off and walking out of the mortgage will not change this.

    I’d like to see a chart of strategic defaults by states and which ones forgive the loans upon foreclosure.

  • crazyBanker

    For the people who mentioned religion i think it was religiously wrong getting into a contract of usury in the first place. So religion cannot be brought in now to get out of the contract.
    But lets think of it in a different way.

    * I saw the housing market
    * I made an investment
    * No one put a gun on my head
    * I made the contract with the bank and got the money to invest in the house
    * The house went ****
    * My investment went ****
    * I screwed up
    * Bank is not responsible..

    That is ONE side of the story
    the OTHER side is this

    * The bank got a customer
    * The bank did their screening
    * The bank decided to give me the loan
    * No one put a gun on the banks head and told them to pay me
    * They invested in my good credit history
    * And then the market came down
    * I defaulted
    * They made a bad investment

  • http://businesslawspot.blogspot.com Knute Rife

    For years, free-market legal theorists have advocated that contracts should be amoral, that a decision to honor or breach should be based solely on economic considerations. Corporations have eagerly adopted that approach. So why are moral obligations suddenly being injected back into contracts? And why do those obligations seem to run unilaterally against the borrower?

  • paul

    Logic would dictate that if it’s okay to walk away from your house because the market value is less than what you agreed to pay, then conversely, it would be okay for the bank to kick you out and resell it to a higher paying customer if the market rates continued to go up.

    All you have in this world is your name, your word, and your deeds. If your financial situation is the same as when you signed the deal (i.e. you haven’t lost your job) then the only honorable thing to do is to keep paying.

    If we don’t all stand for honor and it becomes every man for himself, then we’re all doomed.

  • SeattleBruce

    “As far as I am concerned no one is morally, ethically or legally obligated to pay a bank back money they created out of thin air. Any many are catching on to this and getting out of it legally and keeping their home by having the debt legally released.”

    I’m not mega bank defender, but ‘As far as you’re concerned?’ There’s a little thing in our free society called ‘the rule of law.’ If we all did what we thought right as far as we’re concerned, we’ll pretty quickly be in a Mad Max scenario with no once abiding by contract law based on all kinds of reasons – including ‘as far as I’m concerned.’ Hope you’re prepared to figure out how to get food on the table in that scenario.

    By the way, if you run up a credit card, to get the miles, since that money was made out of thin air by the government/bank debt based money scenario, as you just going to walk away from that also? Good luck with that.

    Who is going to determine for us what debt is morally OK to walk away from? You?

  • SeattleBruce

    “* And then the market came down
    * I defaulted
    * They made a bad investment”

    One question here is, at what point does the defaulter need to leave the premises? Apparently in some states it’s two years later. Since when does someone get to live in a home rent free for two years? We’re not talking about children here.

    The unholy Fed Government/Banks alliance has screwed up this nation, and others royally, with its debt backed money contagion.

    However, last I checked, men and women must pay for their room and board in this world – correct? What in the world is unfair about that? I’m all for these folks renegoiating their mortgages down, but I am not for the idea that someone can squat in a home that is not fully theirs for 2 years.

  • SeattleBruce

    Chris: “Think about it. The bank creates the money out of thin air and loans it to you. You make thousands of dollars in payments and then default. Now the bank has all your payments plus the home that they can sell. THE BANK DID NOT LOSE ANY MONEY EVEN IF THEY GIVE THE HOUSE AWAY.”

    Do the banks, or do they not, pay the builders or the sellers of the home? The banks WILL lose money if the home is not worth as much as they paid the builders and sellers of the home. That is a distinct possibility in today’s market.

  • SeattleBruce

    Hard Truth: “the Bank then forecloses on the property they never owned and essentially steal the real wealth.”

    Do the banks, or don’t they pay the builder, seller of the house?

  • SeattleBruce

    Augustine: “I’d like to see a chart of strategic defaults by states and which ones forgive the loans upon foreclosure.”

    Right. And there’s GOT to be an impact on people’s credit rating. I’m no mega bank fan, for sure, but most of the ‘walk away’ bravado act like there are no consequences – when in many states, and in other ways, there clearly are.

  • http://www.thunderdrake.com/blog/ Aury (Thunderdrake)

    I think one of the biggest tragedies of walking away from a strategic default is that you completely whiff the ability to turn a liability into an asset.

    Apparently most people who walk away on these homes haven’t heard of the word ‘tenant.’ Play your cards right and you could have a solid income producing asset from it.

  • possum

    If it went the other way and the house was overnight worth double what you paid for it, would you pay the profit over to the bank? Not a chance. We in the non-US world are observing the decline and fall of the great American nation with disbelief. Walking away from your obligations is morally indefensible and pointing fingers at banks doesn’t make it any less so.

  • Mr Carpenter

    The United State (as well as the rest of the world, lest anyone boast) is:

    Economically bankrupt
    Morally bankrupt and
    Spiritually bankrupt

    Imagine a house. A foundation, the walls and the roof.

    The roof is economics; money (a portable means of exchange) is merely an easy way of replacing barter. If it have an elephant and wish to trade for a bushel of wheat, what am I supposed to do? Cut off one toe of the elephant? Problematical… Real money should be intrinsically worth something itself, however; whether it is sea salt, pretty rocks, silver or gold. Cotton paper with ink made into symbols is fake money; a lie.

    The house, made up of load-bearing walls and everything within, is morals. Morals are the structure which holds up the house, allowing someone to live under the roof; in other words, allowing society to function. Morals are an agreement as to what behaviors are acceptable or unacceptable (sort of analagous to rooms), allowing society to function well. There must be some sort of rules because we are quite obviously not automatically “ruled” in our behaviors by instincts, the way animals are. Humans are very obviously made differently (this being a hint to use that we were created by God). Seen any dogs, cats or squirrels worshiping God? I haven’t.

    The foundation is spirituality. To me, this is Christianity. There is but one religion on earth; “DO”. “DO” these acts, and the gods won’t be angry because you’re imperfect. Count those beads, avoid those foods, bow to that golden idol, do these things to appease mother earth, etc. Then there is the one faith on earth; “DONE”. I believe that Christianity is not a religion; it is a faith. God made certain rules when He created the universe and us; He must be just; He cannot allow imperfection to be in the place of His throneroom (we call this place Heaven); He must punish wrong; He must follow His own rules.

    So a conundrum when mankind “screwed it up” and did what we call sin. In short, God had to find a means of fixing it, yet staying within His rules. Pardon the bad english, but for the sake of the argument, what he “DONE” was so lower Himself into a human baby (Christ), lived a perfect life, and allowed mankind to murder Him on a cross in order to be scapegoat (sacrifice to God – Himself) and take mankind’s punishment instead of us taking it. We have the choice, therefore, of following the “DO” religions (which will result in our failure) or the “DONE” faith (which will result in our change gradually or suddenly).

    Therefore, discussion of abortion here is entirely valid because everything is tied together; pointing out a symptom of a cultural illness (murdering little humans for “convenience”) must be done before prescribing the medicine to fix said illness.

  • Mr Carpenter

    OK now that I am sure that the comment went through, I’ll “finish” it – sorry for the 2nd post. (I’d spent quite awhile on a prior comment and the computer rejected it – and I had to retype it! I entered it while my son was here to see if he could see what I was doing wrong – as a test – and it went through).

    As for the question of whether it is moral or not to do a strategic default of a mortgage, for a real Christian, the answer is “no”. So what happens if a Christian does this anyway? He or she sins. We Christians sin every day; being a Christian does’t make us perfect; it makes us forgiven. But continual slaps in the face of the creator of the universe is probably not a smart idea; and at some point, both people AND nations will be given a “slap back” (which is God’s means of trying to get our attention in order to change our behaviors / repent / ask for forgiveness and don’t repeat the same mistake if possible).

    Yes, God does hold us individually responsible as humans AND holds collective groups (known as “nations”) collectively responsible for bad actions.

    I’ll put this another way. What part of saying I’ll do my best to pay off the mortgage (and agreeing to this in writing) isn’t voluntary? Nobody forced me to ask for a mortgage. I could have bought land in a place with no building code, and taken 10 or 15 years to build a house using cash money and the sweat of my own brow (along with working a day job, trying to raise a family and paying rent all the while), right?

    The fact that our entire money supply worldwide is nothing but lies, doesn’t mean that I didn’t give my word.

    Now, could it be that our economic, moral and lack of decent spiritual lives – as well as the oil volcano in the gulf, the so-called president we have “lordingoverus” and the lies we call high finance, are God’s slaps to try to get or individual and collective attention? COULD BE. Also could simply be His allowing us to live (or die) with the results of the bad decisions we’re making along the trail of life. I don’t know.

  • Mr Carpenter

    PS true followers of Christ cannot make up a solid foundation any more because we merely make up one ROCK while so many other loose stones also make up the foundation on which morals (walls) and finances (roof) rest.

    Is that the failure of the one good rock, or the failure of the loose stones?

    The answer should be quite obvious.

  • http://www.youtube.com/user/ASimpleEquation A Simple Equation

    For many, this can be summed up by one word:

    SURVIVAL.

    I, too, got caught up in the housing collapse with a 120 year old property that I gut-rehabbed. I put in over 4000 hours of my own hard labor, well over $100,000 of my own money and had to walk away from the property last year. I had no other option. It was an investment property that I eventually moved into when I couldn’t afford to rent my other home. I thought all along I would be able to sell the property, pay off my debts and still walk away with a little cash – (after the collapse I was hoping to break even or even just get out with $10,000 in debt.)

    But there were no buyers. Apparently, after all was said and done, I had put too much faith in humanity and the property was in an “undesirable” area in which no one wanted to (or could afford to) live. With a house worth $25,000 less than the mortgage (it had been appraised for $85,000 MORE than the mortgage just 18 months before) and mounting credit card bills, I was broken. Being an investment property to begin with, I had my entire life wrapped up in it and my income was to come from the sale of this house.

    I finally had to, like many others, walk away. But I did so with only my worldly belongings. My car as over 160,000 miles on it and my lifestyle has always been modest.

    I got caught up in the frenzy of a LIE sold to us by the banks and media who control this world. I have since woken up to the TRUTH about it all, but I feel NOTHING for the banks and their little games. They created the loan out of thin air with a few key strokes and papers. I put 4000 hours of my LIFE, my blood, sweat and tears into this project and I got nothing but a pile of debt I still have to pay off.

    I only wish I had known in the summer of 2006 when I got into this quagmire, how this system of debt slavery really worked. I have paid and lost a LOT to learn this very hard lesson.

    I am simply now just trying to survive.

    The Illuminati and Banksters are a CURSE upon the earth and they will pay for the LIES and DECEPTION they have perpetrated upon humanity,..

  • vinny

    google the Mortgage Bankers Asc. of America and see what its role is and what it stands for ;
    Now I’ll tell you –they strategically defaulted on their Washington Headquarters because it was under -water; JP Morgan Chase defualted on 1 of their coporate commercial properties because why ???yep it was under-water;the only differerence is they got TARP money to bail them out of their other business ;isnt that great
    so I wouldnt feel guilty or take any words from them as anything more than a grain of salt by a bunch of theives and liars

  • Dave

    Who cares if it’s morally wrong. Just do it. It’s common sense. And, it’s the American Way.

  • http://www.internationalrealestatelistings.com/list_property Taylor White, P.H.D.

    I agree with Dave. Is it morally wrong or not? Its legal. Morals always depends on each person – WHEN they are that position.

  • Small Business Wasteland


    It is immoral to walk away from debt that one incurred with full knowledge and consent. It is also immoral to cheat people out of their savings through theft by inflating their currency. It is theft to create Mortgage Backed Securities on sub-prime mortgages and sell them as A+ investments. Unfortunately, the entire financial system is totally corrupt. It needs to collapse and start over.

  • Aaron

    Its pointless to consider the morality of abandoning an immoral system.

    Yes you can stop paying for your house, even if you can afford it, even if it is extremely profitable. You can stop paying for your car, insurance, food, utilities, and everything else as well. While your at it, you can quit your job and throw away all your money.

    You do not have to buy or sell anything, make any money or spend any money, own anything (nobody can really “own” anything anyway) or owe anything.

    To separate oneself from these basic principles is not easy for most of us, but it can be done. The only way to achieve true balance is to remove all weight from yourself. The only way to gain true freedom is by cutting all your restraints. The only way to acquire true wisdom is to recognize that you know nothing at all…

  • Wilhelm Klein

    As far as morality is concerned, there is no problem. The rules for walking away from the contract is part of the contract. It was written by the banks, they knew what could and would happen.

  • http://johnturmel.com KingofthePaupers

    Jct: Known as “bank-fighter extraordinaire” I used Christ’s Parable of the Talents to defend victims of foreclosure in the 1980s. See the press from those days at my site.
    Like the rebel servant, they too offered to return the principal but repudiated the usury. Yes it is immoral to loanshark money causing a mort-gage death-gamble among borrowers for more than was printed. But interest-free community and social database currencies are on the rise and banking will soon be done on Earth as it is in Heaven.

  • Fred54

    There is absolutely nothing wrong with
    walking away from a bank loan or evading
    taxes when the government no longer
    represents you. It a business decision to
    default on a loan. Corporations do it every
    day. There is no moral obligation involved
    unless it’s a loan from an individual.
    Remember a bank doesn’t loan you money. It
    extends you credit that it creates out of
    thin air. The credit costs the bank nothing.
    It’s creates the credit and sets an interest
    rate. All new money that enters the economy
    does so as loans at interest. The entire
    system is a ponzi scheme and a fraud. A bank
    loan is a tool for you to use to leverage
    property or assets. You should never loose
    a moments sleep if you screw a bank, I can assure you they don’t loose any sleep when they screw you. The same goes for the government..

  • Mark Blair

    Gee! A question in my field!

    The question –whether to enter unto jingle mail — concerns one’s ideology, that paradigm of values that governs one’s social behaviour. Now, without wishing to spark counterproductive emotional feelings, I must say that the average American’s knowledge of ‘communist’ or ‘socialist’ theory is shockingly lopsided. Authoritarian communism was a disaster (no surprise there for anyone with a background in human psychology). However, libertarian communist theory (which is a ‘step out’ from classical anarchism) would provide a clear answer to your question. H o w e v e r, I advocate a different model, ‘tenurism’: tenurism straddles classical ‘non-communal property’ and ‘communal property’ relations. (These are two technical terms from communist theory. Capitalism is non-communal. All forms of socialism are ultimately communal.) So, my ‘straddle position’ is as follows: land and water – tenure. Whether you own or rent or whatever, stop paying, and start devolving your world. No government agency can defeat (evict) ANYONE from the house they occupy if there is any amount of solidarity in resisting the evictions.

    I look forward to your comments.

    Mark Blair, Rocky Gully, W.A., Australia

  • Dave Mowers

    They created a system designed to take advantage of you financially and then when it failed, they made you pay for in increased taxes, lowered property values, crashed stock prices/retirements and inflation. Ever get bit by a dog four times and still say, “he’s a cute puppy?”

    Wake up.

    Right now banks and mortgage companies are getting federal tax dollars from selling mortgages at 100 cents on the dollar to the taxpayers. Every home that goes into foreclosure nets them a market-high profit. In clearer terms, they are selling you the inflated priced home mortgages from before the crash while driving down listed property values so they can buy in dirt cheap and profit from the market reversal. TARP is allowing the same people to get rich coming and going. The real questions are “What are morals?” and “Does America have any?”

    Do the people want an economic system that adheres to rigid structures? Anything that impedes the free flow of money in any direction will stifle economic expansion. Maybe we need a new concept of money and what money should be used for?

  • jeb

    I haven’t seen ONE comment that mentions the MERS secret. MERS is an invention of the financial industry, designed to facilitate the sale and transfer of commercial paper(mortgages) by avoiding the legal requirement of recording said transfers in the jurisdiction in which the property is located.

    Mortgages are bundled, sliced-and-diced and sold as investments. These investments circulate worldwide; possession of the note does not mean possession of the document of title(deed).

    The legal result of this is two-fold.

    1. Assuming the mortgage is paid off, the putative new owner is unable to record his ownership since he doesn’t receive the original of the mortgage. (S)he will never have clear title.

    2. In many jurisdictions nationwide, courts are holding that entities initiating foreclosure actions must produce the mortgage, without which they have NO STANDING. Deutsch Bank ran into this in Ohio.

    This is called the “Produce the Note” defense. Since the title is not clear, some courts have awarded title to the originator of the mortgage(buyer of the house).

    A good start is at: http://chinkinthearmor.net/
    All this is easily found via search; try “MERS” and “produce the note.”

    For those who debate morality, consider the payment of money to the originator of the loan who has sold the mortgage into the worldwide market for commercial paper. After you’ve finished making payments to the bank or whatever, the originator has been paid twice but the note is still circulating as a legal claim against you.

  • jox

    The question of the title of the article is wrong. You can not mix moral and business in the same sentence. You do whatever is better for your interests, such as breaking a contract, while it is legal. It’s the way companies and banks proceed.

  • http://survivaljoe.net/blog/ Survival Joe

    From a pragmatic perspective, I think if somebody is considering a strategic default, then he ought to do it sooner than later.

    At some point, the federal government may bow to special interests and try to make it illegal to default — and hold you liable for any and all losses even after you’ve vacated.

    -SJ

  • http://www.dslee.com.au Debbie Sue

    Reading these comments and articles about what is happening to everyday people in the USA is heartbreaking! The housing market here in Australia hasn’t reached the USA’s extremes, infact real estate prices here keep going up to the point we wonder how any of our children will ever afford to own one! However to say we are immune to foreclosures (we refer to them as repossessions)is out of the question. The Federal Reserve here keeps putting interest rates up, which makes is harder and harder for people who own their homes to keep them. But unlike in the USA, if our homes are repossessed by the bank, they fire sale them for whatever price they can get and the difference between what they sell it for and what the loan is for, that bank will follow you to the ends of the earth, for the rest of your life, until you pay them what you owe them!! That’s well and fine when real estate prices are generally up, the gap isn’t too bad, but say real estate prices begin to fall (which they are predicted to) there is where the problem is…owing 10′s of thousands of dollars on a house you no longer own, and then you have buckleys of ever getting another loan until that one is cleared! Seems wherever in the world you live, banksters and the government have you screwed!

  • http://www.creditloss.me Jim

    Well if you bought a house and you can pay for it, you should pay what you owe. It’s human nature to take advantage of any situation so it don’t surprise me that so many do.

  • Mark

    I have found that bankers are among the most evil people on God’s green earth. No one mentioned PMI. That’s just outright theft. I have paid for 6 years now even though I am 54 yrs old and always have paid my bills. Never had a foreclosure, bankruptcy, bad credit, etc. I get a pension every month that covers the mortgage with no problem so it’s not job sensitive. They still won’t take it off my Fannie Mae mortgage.
    I’m thinking of using the PMI insurance I have paid for and walking away as well. As a member of the middle class, I’m sick and tired of getting ripped off!

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