Here is a letter we received in response to our last weekly newsletter. If you haven’t yet, make sure to sign up for our newsletter on the http://youwalkaway.com/ homepage, we’ll send you insightful commentary from the front lines of the foreclosure crisis
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For authenticity purposes no spelling or grammatical corrections were made to the original email.
“What category do I fit in?….I walked away because of divorce…my realtor could not get one looker…over a yr, not one single person looked…I walked away in order to be a father for my sons, they moved 1200 miles away…my choices were…pay child support, pay mortgage..pay all the credit card bills..pay all medical, dental and vision care..live on potted meat, spam and crackers…drive 94 escort with 200,000 miles…leave my heat at 50 degrees during the winter in minnesota…or….walk away, save money, find a job near my sons, cash out my 401 k…pay all credit cards and medical bills off…and see my sons all the time, and every weekend…you tell me…what was the rite thing to do?….pay bailout citi bank company and sacrifice my sons lives with out a father?..or walk away..and be near them to raise them….the banks and wall street are soulless demons Hell bent on money..not me…..Im a father first…I will never borrow again. From anyone..I will not pay anyone for pipe dreams….Im sure this will not be posted or used……”
I’m always heartbroken to hear about the personal problems and situations that often times lead people to walk away from an upside down mortgage. Many times, it’s not just a financial decision… people face all sorts of problems in their personal lives that can act as a catalyst or force people to default on their mortgage. Illness, job loss, divorce, death – there are often very serious issues, and very good reasons leading people to stop paying the mortgage. It’s easy to feel sorry for someone like this and say it’s OK to walk away, but be angry at the man who strategically defaults though he can afford his home. Even if it would be financially irresponsible to his family if he kept putting money into a home that he once thought would be a great investment and now is going to burden his family for the rest of their lives. The decision to keep the underwater home could mean no college for the kids, no life insurance or that daddy can’t make it to his sons baseball game because he has to work a 2nd job on Saturdays.
With that being said, it’s always nice to hear from someone who “Gets It”.
Are the banks, lenders & credit card companies of the world gonna be there for you when times get tough? Offer to help you find a new job? Help pay your kids’ tuition? Pay for the healthcare that’s not covered by your health insurance when you get sick? Of course they’re not… you can rest assured that they’ll do exactly what they have always done – Ask you where their payment is and when they can be expecting it.
Not that there’s anything inherently wrong with that. After all, this is America and at the end of the day, they are a “for profit” business trying to make a buck (or billions of bucks). It just illustrates the fact that there are two very distinct realities at play here… the reality of business world and that of the personal world. In the business world, we can’t reasonably expect compassion, handouts, or leniency. Every decision is based on cost effectiveness and the bottom line, and if your needs don’t fit in with a businesses bottom line, sorry to say but most of the time, that’s tough sh*t for you.
In the reality of our personal lives, however, we are often faced with less cut & dry decisions.. especially in tough economic times as we face today. At our core, the vast majority of us are upstanding people who wouldn’t think of missing a mortgage payment, defaulting on a credit card, etc.
But the fact remains that sometimes life puts us in situations where we are forced to choose between the lesser of two evils, most of the time due to no fault of our own. Banks & corporations do this all the time. Do we lay off 5,000 workers so we don’t have to report a quarterly loss to our shareholders? Do we make risky real estate bets just because our less reputable competitors are doing it, risking long term growth for short term profits? Do we hold off on foreclosing on millions of homes, prolonging the recession, so we can make our balance sheets look good and get more taxpayer bailout money, or just face the music and say “We screwed up and we’re prepared to suffer the consequences?”
In many cases, these “lesser of two evils” cases on a macro scale have led to millions of cases just like the one we read about in our email inbox the other day. The risky bets, the huge bonuses, and the “tough decisions” on a corporate level do have trickle down consequences, but that doesn’t seem to stop any of them from coming. The fact is that there is no remorse or sympathy in the boardroom or on Wall St. The banks that caused the housing crash, the credit cards charging 29% interest, the crooked healthcare system and insurance lobbyists, surely couldn’t care less if this man gets to see his sons or has heat on in his home, so why should society look down upon him for making the tough, but correct decision, to live his life the best way he can and be the best father to his children that he can be?
I applaud you sir, for your ability to make the tough decision for the good of your family. Sometimes your personal life can be serious business, and needs to approached with a business like mindset. Perhaps when it comes to issues of personal survival and family, we can all take a page from the book of the banks that got us into this mess.
Jon Maddux
CEO
www.YouWalkAway.com
My father got lung cancer in 5/06 at which time it became a very devastating time for my sister and I. Also at the same time we had to become the primary caretakers for him as he had no one else. Then one year later a new CEO was hired at our company who started making drasted changes to our personnel, laying off, firing and resructuring the entire worldwide organization. In May of 2007 my father died of lung cancer. I continued to work until the following year in which I went on medical leave in August of 2008. I was off of work for two months. Due to my severe medical condition, I went back out on medical leave in April of 2009, I was let go from my job on May 15, 2009. I was working for a company that had no compassion or understanding of human life, or personal issues that could arise. During this past year, I have struggled and am now in the position of losing my home. My credit is destroyed as I cannot make any credit card payments on disability and now reach the end of my rope. I really do not know what I will do. My sister lost her job last week. So she also has a heavy burden to deal with. We have no extended family and are completely fearful of what we are going to do about our situations.
Just one question. Where can you find a decent place to live with a “foreclosure” on your record? Finding a decent apartment is verboten when a foreclosure is on your record and they WILL check your credit report. Most applications say you will be automatically denied to live there. You can’t even “buy your way in” like you can with a few “late-pays” on your credit report. I think you’re doing a dis-service not to talk about this fact to the “walk-aways”. No-one likes to live in a crime-ridden dump but that’s what is available to people who walk away.
C. Kaye
thank you for your email. We have over 4,000 clients and I have yet to hear of 1 that has turned out homeless or unable to rent another home or apartment. Yes some chose to move back in with relatives until things get better, but still from our research and experience. If you apply at another home and offer a higher deposit, most homeowners are understanding about the way the market has turned. There have been articles and blogs written by landlords that have said they actually prefer to rent their home out to someone who walked away. The reason is that typically ex-homeowners are willing to pay a little more for rent, and also they know how to take care of a home like it’s their own. People who have never owned a home may be less likely to have a ownership mentality etc. In our protection plan & kit, we recommend that someone focuses on finding a rental direct from a landlord instead of a big corporate apartment center etc. due to their restrictions on credit. I’ve heard of million dollar homes being rented to homeowners who have had a foreclosure on their credit. They just have to put down a much larger deposit. Many people choosing to walk away have kept the rest of their credit clean and so their credit isn’t as damaged as one would think.
You can find a decent place to live with a foreclosure on you credit report – I have.
Gated, three bedroom 1,400 sq/ft with pool, playground and workout facility in an upscale neighborhood…All they wanted was an additional $500 towards the deposit.
When banks lend out money they charge interest which reflect the risk. If they calculated wrong, then they should bear the consequences. Why should banks get a bail out for making a error in judgement while simple folks are expected to shoulder all the blame.
Borrowing from the bank to buy a house is just a transaction. If it does not perform, get rid of it. The bank own the property as collateral until fully paid and they charge you an interest for the inherent risk. If the market was on the way up and you fail to pay the mortgage for any reason, believe me the banks will take the house from under you feet faster than you can say “Help” with no qualms about how it might affect you or your family. It’s business after all. So, why should it be different when the market goes south. It’s business after all.
I love this site. I wish everyone with a mortgage would just dump their home and move on. Let’s face it. The party ended three years ago. Get a life folks. Your mortgage is the biggest single liability you ever owned. Rental deals are everywhere. Just find one and move in.
The other option is to wait for your government to bail you out. That too was a myth, just like your home was an investment.
Just dump your home. You’ll be doing yourself a favor and helping the economy as well. Sometime in the future, homes will be on the auction block everywhere for 10 cents on the dollar. When that time arrives, you might want to buy a home again.
Bizarre reasoning here in spades. First, the mortgage transaction is not as complicated as the author slyly implies. The lender effectively does everything required of it on the day of closing. It is not a continuous exchange of actions here. The lender discharges their side of the deal by bringing a check to closing for the full amount of the loan. Of course the lender is only interested in the ensuing payments. Making this out to be some evidence of malintention is entirely self-serving. Second, the idea that unacceptable future sacrifices might have to be made to continue to meet the agreed payment schedule is equally a bizarre notion. If a loan balance endangered a savings plan for a child’s college education it does so whether or not the asset value of the house is high or low. The issue is strictly whether the borrower has the income to handle the loan and other obligations or not. A family with a $500K mortgage on an ARM might need second jobs after the reset and might not be able to put money aside for other family needs, but that was predictable on the day of closing for most people. Go ahead and walkaway: the ablility to do so is part of most mortgage contracts. But don’t add ridiculous sob stories, please.
I declared bankruptcy (though I didn’t have a foreclosure) after some medical problems a few years ago.
I was turned down for a couple of corporate apartments, but I had no trouble getting a much better townhouse from a private owner. It was cheaper and I wasn’t asked for an additional deposit.
Eric,
You said…. “Second, the idea that unacceptable future sacrifices might have to be made to continue to meet the agreed payment schedule is equally a bizarre notion. If a loan balance endangered a savings plan for a child’s college education it does so whether or not the asset value of the house is high or low. ”
Many people purchased a home and put down 10-20% as an investment for their future. Possibly for their retirement, possibly to help pay future things like their kids college fund or their daughters future wedding. If a home has negative value, is depreciating massively and showing no signs of being a good investment, that home could in fact burden the family for many years to come. Even if one can afford the payments, they may not be able to afford other things like life insurance, a wedding, unexpected medical expenses and possibly a college tuition. It may have been a mistake on their part to buy such a home, but now that the housing market has crashed similar to the great depression, it may be in their best interest to break free, get a hard reset… and move on.
You can always find someone – whether and individual or corporation – in worse shape than you. As long as you have income and a month upfront, you can find a place. Several years ago I was going through business failure, bankruptcy, behind on my mortgage and had tax issues – still I was able to rent w/option to buy a nice one year old 4 BR 3 BA home in same school district for several hundred dollars a month less than my mortgage. The owners had little equity and the wife was pregnant with their first child and determined to move close to her parents. I did the option in the event prices went up, when the market tanked and my daughter switched schools, I walked away since the whole thing wasn’t my problem. Now, I have a multi year lease on a high rise condo from a developer who cant sell the units and was in a lawsuit with the HOA on unpaid fees – my rent is less than 2x the HOA fees on the unit, no way I could own anything like this for 1/2 what I pay in rent and my condo owning neighbors are all glad to see me in here contributing to the building’s expenses. My rent is market rate for the general area, but low for the building. The whole idea you have to have a good credit report to live decent is a scam used to keep people paying as long as possible. The key is taking charge of your own situation and treating your personal situation the same as a business would – don’t deny, face reality, quit sending cash to lost causes and hoard it, know timetables and prepare ahead of time, and most importantly ACT to take charge of the situation – don’t react to what others are doing.
Just for the record, I’m another person who “walked away” and I am presently renting .
Lest we forget, until the real estate crash it was not difficult to sell a home or condo if life circumstances changed. The harsh attitude that sticking with a situation although it is untenable and regardless of the cost to family, health, etc doesn’t fly in my book. Ironically the company that built the Condo which I purchased(Blackrock) recently walked away from a huge investment.
I think the gentleman who sent this later has stated it as clearly and accurately as possible. It becomes not only a business decision, but a LIFE decision first and foremost. Its against everything we were ever taught in growing up but what are you supposed to do? Live at the mercy of the bank and not be able to put new tires on your cars for safetly? Not be able to provide surgery for a pet’s health condition? Or even provide for your own being and your children. Are you supposed to never have a life again and remain in this box from hell?
I dont think so and I cannot agree any more with him as to why he is doing this. People need to stop and NOT judge others…for you never know when you just might be in the same situation, one day.
Thank you for posting his letter…and I thank him for realizing that his life and family are more important that a credit score and the word foreclosure, short sale or deed in lieu. BRAVO! BEST WISHES!!!
> Just one question. Where can you find a decent place to live with a “foreclosure” on your record? Finding a decent apartment is verboten when a foreclosure is on your record and they WILL check your credit report. Most applications say you will be automatically denied to live there. (…) No-one likes to live in a crime-ridden dump but that’s what is available to people who walk away.
What kind of fright propaganda is that? Crime-ridden dump? Are you a realtor or a mortgage broker?
In case you haven’t noticed: the rental market is good to renters now; landlord need to woe tenants and they do. The credit information is still important, but an explainable foreclosure is better than many unpaid bills.
Thank you Mary W. Your response got to the heart of the matter much better than mine
For the record. The issue is when you Walk a way and the house is worth less than the mortgage that you are paying. The Bank will sell it. Then come after you for the difference. You signed the 200,000 mortgage and the house is worth 100,000. They get 50,000 selling it. Guess what. They dont wash it away.
They come after you for the 150,000. Then you file bankraupcy to reliquish that debt. You see the company that built your home has paid their people with the money you barrowed. So someone has to pay the piper. If not you then. All of us !!!
The bank took the risk, charged you an interest rate. Made a profit. They should take the hit. The problem is that they get a bailout for our government. So that should enrage the people. They banks can’t lose… It’s like gambling with a rigged set of rules. The homeowner will never win. Wall street and the Banks will.