I’m always saying to my delightful mother-in-law when she’s doing that age old ‘I dare you to say butter would melt in my daughters mouth’ kind of chat. I say, “Honestly, even contractually, I’m pretty sure the Mum bit in mother-in-law gives me some rights too". She then laugh's, gives me the look, then I do whatever it is she has just told me to do, which generally has something to do with me shushing J. This was the exact cause of a recent dilemma I’ve been having in the rare but difficult time when the Champagne and Liberal parts head in different directions.
So like I’ve said, I’ve been having an internal battle. I was getting attacked for my lack of compassion. Reluctantly this Liberal had found his “line in the sand”. I just couldn’t feel bad for people who were walking away from their debt. Those people who had no financial hardship other than they owe more on their house than it’s worth. Sat in a $300K house with a $410K mortgage and a couple of good jobs. It was hard for me to feel bad for them let alone support them beyond any normal “sorry any of us need to go through this” type of way!
We’ve all experienced some different phases of this “housing crisis” and we probably have more on the way. It’s likely that you know of someone who has already lost his or her house, is in foreclosure, losing a job or the like. It’s been easy for me to feel sympathy for these people because I genuinely believe that hard selling, half-truths, got lots of them in trouble. I also think that millions more were unfortunate to fall into a bad situation through losing their job, paying for a massive healthcare issue, or some other financial tsunami. Maybe a combination of it all and they couldn’t afford the “gap” insurance. Trust me, I see that horrible situation everyday at work. As far I was concerned they all share a common link. They pulled on my heartstrings and I felt good that developed countries have safety nets, albeit some holes are still too big.
However, I started having an issue with some of this after reading articles about couples choosing to walk away from an underwater mortgage. I really couldn’t believe that people who were still in well paying jobs, in some cases were on their 4/5th re-mortgage, were simply logging on to a website, getting legal advice, and packing their bags. They didn’t have a sheriff knocking on the door or Chemo every two weeks, they were walking! The advice that was being followed included stop paying all of your bills, especially mortgage and credit cards. They were / are being told to leave that 100/200/500k hole on their balance sheet for the bank and try to show hardship. Not exactly good “heart tugging material” for this “bleeding heart” liberal, I must say.
So why the internal battle? Why wasn’t this just the “no brainer” it appeared? Well the mother in “mother in law” gives me rights too. More specifically the “Champagne” or “Capitalist” in me needs feeding. The funny part about it all was “having to see it through another’s eye” or ‘empathy” ultimately got me there. You know that “bleeding heart liberal, tree hugging, I have the ability to walk the moccasin mile, help the marginalized, peace loving” label that some people actually believe is an insult, lol.
I tried to think what it would be like through the bankers’ eyes, just as I’d do if I had to decide to extend unemployment benefits, help a homeless cat, or any other issue I might be trying to form an opinion. (This is the point when I got surprised) I found myself time and time again coming down on the side of the refi, good job, walkaway couple. Not because it was “big business vs. the little guy” but because it was business. Not some moral issue for me but a contractual one based on what would be best for “My Family”. Would the bank weigh up their options if the coin were flipped? Darn right they would. If after the bank had done there “cost to gather the debt” analysis and found it would be better to declare bankruptcy, would they walk? Darn right they would. Would they in fact even give you (the second party in this deal) any consideration at all? No way Mr!
The bottom line here and a surprising conclusion for me is that when the lenders lost their heads and caused yet another bubble (plenty to read on this subject from Tulip bulbs to dot com), millions of people were doing what business people have done for a millennium. Taking advantage of a good deal and walking if it wasn’t. The banks have been caught holding the bag of the ones smart enough to cut up these derivatives and sell forward, before getting caught “scoffing” the cookies. The homeowners have done a cost analysis and found that 7-10 years of bad credit is worth the 100/200/500k. Can you blame them? I thought I could but have since changed my mind. I guess I went looking for a line and found another darn circle. In fact the Champagne and liberal weren’t heading in different directions at all, they just decided to take different routes to get there. Time to Chug!!!
Here are a couple of articles I read but mostly I just goggled “walking away from a mortgage”
