Those who walk away from mortgages & other debt are deadbeats

April 19, 2011

I’m concerned about things that are fast disappearing from our American scene:
A sense of personal responsibility and ownership.
A feeling of obligation to society.

And about the sense of entitlement that has replaced them.

And if you’re new: I am not a conservative, not even a “compassionate” one.
I am considerably left of center politically.

But I am also the daughter of parents raised in poverty
who lifted themselves up to a better life
and lived with a sense of responsibility to themselves and society.

So here goes:

People I know bought a hugely expensive place with a gigantic mortgage.
Over a million dollar mortgage and they put almost that much more into improvements.

On the cusp of retirement, they saw that they couldn’t
get their money out.

That saw they would have to write a huge check at closing if they short-sold.
That they were tied to this house for maybe the rest of their lives.
And then after retirement, they would be seriously house-poor.

It was a bad investment.

They walked away from it.
But before they walked away, they bought a smaller home nearby
and took a tiny mortgage. For retirement. While their credit was still intact.

THEN they walked away from the mortgage on their original home.

This was not a case of job loss or hardship. These folks
make very good money. Very. They saw what was ahead ahead and acted
on their bad investment to preserve the good retirement
to which they felt entitled.

Yes, it was crafty.
But was it moral?

I know people who wanted to leave their state
for a more expensive one.
They didn’t want to buy a home in the expensive state,
but they were under water on their mortgage for the home they currently owned
in their original state.
They couldn’t sell without writing a check back at closing
and didn’t have the money or desire to do that.
(Like anyone wants to do that.)

They wanted what they wanted: a move to their dream state.
They felt no responsibility to the decision they’d made to buy their original home.
To their commitment to their loan.
They felt entitled to life in their dream city.
They walked away from their mortgage and moved.

Again, not a question of hardship. No one lost
their job. They just wanted what they wanted,
felt entitled to it and acted. {I am
all for helping people in need. These cases? Not in need.}

So here’s my question: who pays for this?
And here’s my answer: we do.

When banks lose money on bad deals, they must make it up in other ways.
New borrowers will face higher interest rates.
All bank customers will face higher fees.

When people default on loans, it’s like a large-scale form of shoplifting.
Other customers pay for these deadbeats.

In both of the cases I describe, the homeowner actions are
highly unethical, immoral and just plain wrong.

It’s stealing, really.
From us.

Wouldn’t we all love to get out of our bad investments?
Just walk away with no real penalties.
But you know what?
We made these investments.
We bought the houses, got the mortgages and got caught up in the boom.

Now, the pendulum has swung.
Many of these same people who played the boom want to escape the bust.
They aim to walk away and play the blame game to avoid facing the facts.

They blame anyone but themselves.
Banks who gave them loans. Real estate agents who sold them houses.

Yes, of course, everyone played a role.
But the buck stops with the buyer.
Caveat emptor.
But we just don’t hear the words “I made a bad decision” very often.

I would like to believe that in situations like this, people will do the right thing.
As it turns out, few do.

A sense of personal responsibility is becoming a thing of the past.
So we depend on consequences to keep things in balance.

But there are few individual consequences any more. Our society runs on entitlement.
People feel entitled to have what they want and jettison their mistakes
without a hangover of any kind.

It shouldn’t work like that.
Because you and I are the ones
who are really paying for these walk-aways.

Some structure is needed, because
everyone can’t just walk away from their debt
and leave the rest of us holding the bag.

We need laws and regulations to serve as disincentives to walk away from a home.

In the first couple’s case, their original bank should be allowed to take their new,
smaller home, as well as their original home.
It should not be possible to walk away from a property
and then buy another.

In the second case, sanctions are also needed.
Perhaps the couple’s credit should be so decimated
that it would be super-difficult to start a new life
in a new state.

The purpose of these laws isn’t intended to be punishment,
but to serve as a disincentive
to walking away from financial obligations.
To force Americans to
think twice before defaulting.

How sad that it’s come to this.

Look. I’m under water, too, on my coast property.
But we belly up and pay the mortgage every month.
I made the decision. No one talked me into it.
My bad decision.
I have an obligation to pay for it, even if it’s painful.
And if we had to produce more income to pay it, we would.
Because we understand that we incurred that debt,
benefited from it
and it’s our responsibility to pay for it.

Here’s an excerpt from a column* about the financial meltdown I just read:

Greed had a less ennobling effect …Instead of fighting the looters, they joined the looters… no one takes into account the weakness to the entire system that occurs when everybody indulges in the same kind of risky behavior, the innocent and the guilty are engulfed.

It’s hard to respect people who don’t fulfill their obligations.
Who, in effect, loot.
And it’s outrageous that they can work the system
and walk away.

This goes for other obligations, as well.
Credit card debt. Auto loans. Student loans.
If you’ve incurred debt, the money wasn’t a gift from the rest of us.
You have an obligation to pony up.

That’s just the way grown-ups do it in a civilized society.


2 comments on “Those who walk away from mortgages & other debt are deadbeats
  1. Anonymous says:

    Excellent piece, Carol. Can I “share” the link on FB? Susan

  2. Alice says:

    I have been dying to read this all day. (out and about all day). I just finished and I am positive you hit the nail on the head. Great article!

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