I have had a few words to say on this topic before but it just keeps getting better. A December 10, 2009 article in the Wall Street Journal tells of a town in California where it has become fashionable to walk away from a mortgage because the mortgage is higher than the current value of the home. I suspect the fact that you allow your name and picture on the front page of a national newspaper relating your low moral values and outright stupidity is some insight into why these people got into this fix in the first place. Here is a hint of how indirectly your tax dollars are used:
Thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental.
Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That’s freeing up cash to use in other ways.
Ms. Richey’s family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March. Mr. Fernandez takes his girlfriend out to dinner more frequently. “We’re saving lots of money,” Ms. Richey says
You have heard of spin, here is a sample of the ultimate, walk away from your mortgage obligations and it’s a good thing for the economy because while you left the bank, its shareholders and most likely taxpayers with your unpaid debt you have free cash to help boost the economy. Even Ripley would not believe this.
The flip side of those losses, though, is massive debt relief that can help offset the pain of rising unemployment and put cash in consumers’ pockets.
For the 4.8 million U.S. households that data provider LPS Applied Analytics estimates haven’t paid their mortgages in at least three months, the added cash flow could amount to about $5 billion a month — an injection that in the long term could be worth more than the tax breaks in the Obama administration’s economic-stimulus package.
“It’s a stealth stimulus,” says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. “The quicker these people shed their debts, the faster the economy is going to heal and move forward again.”
Even before they decided to walk away from their mortgage, this family had no trouble spending, but they had no money for a down payment or thought it unnecessary.
Ms. Richey, the teacher, arrived in Palmdale in 1999. In 2004, she and her husband, Timothy, bought a two-story home on Caspian Drive, near Avenue O-8, with a no-down-payment loan. They took pride in the amenities they installed: a powder room with granite countertops, a backyard pool and play area, and the purple-and-turquoise fantasy playroom upstairs for their three daughters.
But the value of the house plunged to less than $200,000 in 2009. Their $430,000 mortgage, with its $3,700 monthly payment, began to look more like an unwanted burden.
Yeah, I have an unwanted mortgage payment too.
This guy had a mortgage payment of $4,800 on a salary of $8,300 and he still had the money to install a custom putting green in is back yard. It’s nice of him to sell the home though and stick the banks with a loss of only $123,000. Oh, now that he is renting and his payments a lower he is keeping his BMW coupe, fire engine red no doubt.
Mr. Fernandez says he made four attempts to modify the larger of the two mortgages on his home, which add up to $423,000. Ultimately, he was offered a monthly payment that, together with back taxes, was higher than what he had been paying. Today he’s working to partially reimburse his lenders, IndyMac Bank (now OneWest Bank) and American First Credit Union, by selling the home, which he expects to fetch about $300,000.
With an income of about $8,300 a month and a rent of $2,200, Mr. Fernandez says he now has the wherewithal to do things he couldn’t when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.
If you want to know what is wrong with America, it is a growing number of people who can rationalize this type of behavior.