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Is Strategic Mortgage Default Shameful
Written by Chaz Lamm   
Wednesday, 03 March 2010 09:29
For almost a year, the Obama administration has been pressuring banks into renegotiating home mortgages to help homeowners stay in their homes. If your mortgage is seriously underwater, why bother?
by ChazLamm


For almost a year, the Obama administration has been pressuring banks into renegotiating home mortgages to help homeowners stay in their homes. If your mortgage is seriously underwater, why bother?

Government bailouts were designed to help the banks, not the individuals. The system cannot handle millions of foreclosures at once without the frail man behind the financial curtain being exposed.

Politicians want us to buy houses instead of rent. People tied to a home are more easily controlled. You can't quit a job you hate when that mortgage comes due each month.

I do become enraged when I see talking heads putting people down for not keeping up with their mortgages - especially when they have no idea of the individual homeowner's situation.

Are you morally bankrupt when you can't pay your bills?

If you did not obtain your mortgage with fake documents or fraudulent financial information, you intended to pay the bank their money each month. If the banks did not believe you would be able to pay, they would not have extended the loan.

People lose jobs, get sick, become disabled, or die. Family members may not be able to pick up the slack.

Preachers and politicians will quote the Bible to convince you to pay, even if you have to put your family's finances at risk. What they fail to mention is that the Bible also said to forgive debts every 7 years (reason 7 years was chosen in the first bankruptcy code).

Does this make any sense - morally or financially?

Paying way more on your mortgage than you could pay for the same space rented is stealing resources from your family and jeopardizing your financial future.

Banks assume risk by lending you money, and they make money when they guess right. If you default on your mortgage, you are only obligated to suffer the penalty stated in the contract. You don't have to feel shamed on top of it.

In some states, the bank can sell the foreclosed house and sue you for the money they lost by lending to you - called a deficiency judgment. Banks will sometimes obtain a deficiency judgment even if they agreed to a short sale.

If you are underwater, I hope you live in a non-recourse state. The bank can often wait years until you are in better financial condition to obtain the judgment, and even longer to try to collect on it.

Bankers want you to believe that it's shameful and immoral to ditch your mortgage, but you have already agreed to the penalty such as foreclosure. That risk is a part of doing business for the bank.

When it comes to the bankers themselves, they do not feel so obligated.

According to the Washington Post, the Mortgage Bankers Association sold its Washington, D.C. headquarters for $41 million, about half what it paid three years ago. Was their short sale immoral? Someone in their membership may have taken a huge hit. I have not seen any apologies.

Do what is in your best interest. Falling in love with a house does not make it a sound investment.

After all, slavery was once considered moral. A strategic mortgage default may keep you out of economic slavery without having to seek the protection of the bankruptcy court.

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