Despite some indications that the economy is recovering, the housing market remains a disaster area. Currently, about seven million homeowners are behind on their mortgages and that number is only getting worse.
Banks, with the help of the government, are offering some relief to homeowners who’ve lost jobs and just can’t meet their payments.
But there’s a growing number who can pay but are simply walking away from houses that are now worth as little as half of what they paid for them.
It’s called “strategic default.” People have done the math and decided making those monthly payments is just throwing money away, leaving the mortgage holders – the banks – as zookeepers of an ever-growing parade of white elephants.
In the past year it is estimated that at least a million Americans who can afford to stay in their homes simply walked away.
I loved the witty line about banks being “zookeepers for an ever growing parade of white elephants.” That’s a memorable, very funny way of expressing it. But of course, the reality is no laughing matter.
This is a very serious problem indeed, with no easy fix. This kind of analysis helps us realize that just as we didn’t get into this economic mess overnight, we’re not going to get out of it any time soon either. Very sobering. Another “inconvenient truth” we don’t like to face.
David Handy+
I think you can make a case that walking away from under water homes will bring the foreclosure mess to an end sooner rather than later. Make the banks dump them for what they’re worth and clean out the inventory, I say. And the finger pointing and tut tutting by the banks defenders I really find objectionable – a deal was made when the mortgage was executed, and if the borrower wants out, he can hand the house back. That the value of the house has fallen “too far” is the bank’s problem, not the borrowers. The back should not have made the loan in the first place if they were concerned about a drop in value (but they were not, they were GREEDY).
Related here:
http://articles.latimes.com/2009/nov/29/business/la-fi-harney29-2009nov29
[blockquote]”In the past year it is estimated that at least a million Americans who can afford to stay in their homes simply walked away.”[/blockquote]
This seems to be a misleading statement and I would want more information before I would believe it, for instance, who made this “estimate” and how do they know that the owners who walked away “could afford to stay”.
right #3, who’s to say they “can afford to stay.” Does that mean they should perform work that is dangerous to their health so they can make enough $ to “afford to stay?” Work on the road, away from their families? I mean, who cares about the family when the poor banks aren’t getting paid these ridiculous mortgage payments that are based on never to return valuations? Oh the humanity!
RE: “And the finger pointing and tut tutting by the banks defenders I really find objectionable . . . ”
Oh, the tut tutting from me is regarding individuals who do not honor their contracts. I don’t particularly care about the banks, but this is an example of the dishonesty and lack of integrity that has overtaken our culture.
RE: “That the value of the house has fallen “too far†is the bank’s problem, not the borrowers.”
No, it’s the person who made the deal’s problem — and fortunately all of this will go on their credit rating so that others can take note of the people who are unwilling to honor their purchase agreements and act accordingly.
RE: “The back should not have made the loan in the first place if they were concerned about a drop in value (but they were not, they were GREEDY).”
And the house purchasers were *GREEDY* believing that their investment would skyrocket higher and they would make money on their investment. Unfortunately the bubble burst and now they will — thankfully — pay the consequences in their credit rating and in the consequences that others will provide in light of the creditors’ dishonest behavior.
I am not defending those who walk away from their mortgages and I do not know much about how banks and lenders function but now that we taxpayers are helping out the banks, I can‘t help but wonder if the problem is more complicated than it appears to be.
I know that banks may lose money because people walk away from their mortgage but the banks do gain real property when they repossess. This property presumably does have worth if it is properly maintained and marketed and this brings a number of questions to mind, such as:
What do banks do with repossessed property? Does property instantly become a liability instead of an asset when it is repossessed? Do banks and lenders maintain and market repossessed homes properly for resale? If a bank or lender neglects property in order to carry it as a liability on their books isn’t this another way of walking away? When repossessed property is sold who gets the money the purchaser pays for it? Will taxpayers ever be reimbursed for the money they are spending on saving the banks and all of us from ourselves?