Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.

"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, "one can have a good credit rating again -- meaning above 660 -- within two years after a foreclosure."

Better yet, homeowners can default "strategically": Buy all the major items they'll need for the next couple of years -- a new car, even a new house -- just before they pull the plug on their current mortgage lender.

What kind of law school professorial advice is this? Aren't mortgages legal contracts? In so-called anti-deficiency states such as California and Arizona, mortgage lenders have limited or no legal rights to pursue defaulting homeowners' assets beyond the house itself, White said. In other states, lenders may decide that it is not worth the legal expense to pursue walkaways, or consumers may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.

The main point, he said, is that too often people's emotions get in the way of clear financial thinking about mortgages, turning them into what he calls "woodheads" -- "individuals who choose not to act in their own self-interest." Most owners are too worried about feelings of shame and embarrassment after a foreclosure, and ignore the powerful financial reasons for doing so.

read the rest at: [url= http://www.latimes.com/classified/realestate/news/la-fi-harney29-2009nov29,0,3801270.story]Professor advises underwater homeowners to walk away from mortgages[/url]

I find it interesting that this kind of view comes mostly from people on the west coast-southwest who benefited the most from property value run-ups, and are now having to pay the price. It seems like they want to alter/reconfigure the rules and morals to fit thier situation.

Just an observation.

Many home owners have just walked away without knowing about this legal weasels advice, but he is probably correct with his statement.

To answer the question of whether or not a mortgage is a legal contract - yes, of course it is... but the fact is that Strategic Defaulters are complying with the terms of the contract - If they don't pay, the bank gets to foreclose. Them's the terms. If the bank doesn't choose to foreclose, or delays foreclosure or doesn't pursue the default after the foreclosure, that's their decision. But the mortgage-holder, in my understanding, LEGALLY broke the contract by defaulting.

What I hate to see is someone walking away because they are upside down on a mortgage today and even though they have 10-20 years left on the mortgage, they think they should walk away today. What about the possibility that the value in 10-20 years will mean they will no longer be under water?

Have the people that walked away or are thinking about it, considered the long term implications to their credit? I am afraid that the lenders will make us all pay for the mistakes of others, with higher rates, stricter lending guidelines, etc. And the people that do walk away may discover that walking away will hurt them for the rest of their life.

I did pre-foreclosures for years. The options will vary widely based on a judicial (court process) or non-judicial (power of sale clause in the deed with no court).

As mentioned it will also depend on if an attorney can find flaws in the original mortgage documents with a forensic loan audit.Many loans funded 3 years ago with sloppy paperwork.Originators slammed them through and resold for big money. Making sure the paperwork and all disclosures were there was the furthest thing from their mind along with everyone else.

Morals and ethics have NOTHING to do with the law. People need to see the difference between the two and not intertwine them.

Yes if an owner qualifies while there credit is good debt ratio wise they can buy another home and then default under the one that has no value. The new home title in a corp or llc so they can't attach it later. If you are paying cash you can do it right away but a lender might want it in your name first then do the title change.


I have seen where "IT DOES MAKE SENSE" to stay in a home. I had a seller I sold 3 years ago and now the house is worth 20k less than the mortgage.Sellers have lost one job but the other still makes decent income.

If they sold as a short sale a replacement property to rent would have been 1,500 a month and their current payment is 1,300 a month. I was able to get them a permanent loan mod to an interest rate of 3 percent and payment is 1,000 a month.

So buy staying in an upside down home with a loan mod they are saving 500 a month over renting the same space and getting foreclosed on. So in not all cases is it smart to walk away. Also if there are a lot of assets or to sell you need to come up with 10k at closing it's better to preserve credit.

It's true after 2 to 3 years you could get back up to 660 for other credit but for a home loan they would stop you from a loan unless you had excellent income and 20 to 25 percent down.

Most people do not want credit cards anymore with the new laws passed banning credit card companies from excessive fees they have jacked up everyone's rates to 25 to 30 percent. If it hasn't happened to you it is coming as they want to do this before the deadline and the new law goes into effect.

Credit card companies are freaking because like banks make 75 percent of their money on overdraft fees cc companies make the most off of bad credit people with initiation fees,annual fees,program fees,overlimit fees,late payment fees,etc.,etc.

Everything really is on a case by case basis.

Many people dont realize when they "walk away" from their mortgage that many other issues are affected. They will pay more for auto insurance and auto loans (if they can get one) and credit cards interest rates will sky rocket.
Many employers check your credit rating for business related jobs..so I hope they have a job. In general the world will view them as someone who doesnt honor their legal contractural obligations..which is what in fact they are...they contractural agreed to the terms of the loan...now it's not financially favorable for them to continue their obligation?
That the risk you take when you enter a 30 year contract.
Honor the contract or accept the legit consequences.

That's why the author recommends strategic walk-aways (read the article)

I can't imagine credit card rates much higher than the 29% they are charging - if they pay an additional 30% on their car insurance that might be a whole extra $500/year - and car loans are too easy to get so that's not an issue.

If someone is paying $2500/mo on a home that'll take 15 years to recover its lost equity, then I agree with the author that it's wiser to pay $1200 rent and use the extra $1300 towards other expenses.

I must have missed the class where they taught "real estate always goes up". The thing I remember was the Florida Salesperson pre-licensing class where we were told specifically that stating such things or stating that it will go up by a certain percentage was a violation of the licensing law.
I know that homeownership is billed, in part, as equity building, but it was never inteded to be a short term investment.

NAR disagrees:
"On average, home values nearly double every 10 years"

Artiste-
I knew that, look at some of the "economic" forecasts by David Lereah, former NAR Chief Economist, disgraced housing cheerleader and unemployable pundit.

Like all things, just because NAR says it doesn't make it true.

David Lereah - lol - I have a little personal experience with the man and he's "something else," no doubt...

Anyhoo, back to the topic - I read that it took Japan 15 years to recoup lost equity after their housing crash so I think it'll probably be 15 years here too.

Some guy - forget who - the head of CA's DRE spoke in 2006 and said that housing values usually go up by 3%/year.

If the "Powers That Be" want to restore our housing values, they need to start handing out easy loans again and demand will take care of the rest.

If you look at real estate purely as an investment, wouldn't it make sense to get out of the market when you're 40% down in value and jump in again in 3-5 years to start building equity again 10 years earlier than you would have if you had stayed?

If you can cut the emotional ties and deal with the social stigma and strategically walk away with your ducks in a row - it makes a lot of sense to me.

A few hundred years ago, the inability to cover your nut led you to the poorhouse, a real place where you lived because you had no money.

In today's environment, people that can't pay their bills (such as Donald Trump) become idolized and are given more money so they can go bankrupt again and again.

No wonder there's no stigma to walking away.

It's not just with mortgages. It's in many married couples' best financial interest to stiff their spouses as well. Those are the after effects of dumbing down morals and ethics, laziness, and a general lack of responsibility. I see it in relationships everywhere: Husband/wife, broker/agent, mortgagee/mortgagor. We as a people have been breaking our promises more so now than ever. I believe that trend is due mostly by following moral relativism.

It's just you and me against the World, Pal.

And I'm not so sure you can even count on me.

I'll join you guys in the revolution, but I'll need more coffee first.

There is no morality to a "business decision" - only a cost/benefit analysis - but we're so used to getting the decision, not making one.

It makes $en$e to walk away. If you're paying $200,000 for the same home your neighbor bought last week for $130,000 - I think saving $70,000 is fair compensation for the "stigma" of walking away.

That's exactly the type thinking I'm talking about. This type thinking bugs me because it is congruent to how most folks say their wedding vows. Those vows/promises become more of a tradition or formality than a promise, and it's disheartening to see. There's a right and wrong behavior in that business decision, whether you'd like to acknowledge it here or not. Take a look at your promissory note that went with the mortgage. That promise was much more than a formality. It was more than just one of many pieces of paper you signed at the closing table. You agreed to it. Nowhere did it say that it was right for anyone to walk away from the promise based on fluctuating home prices.

So what of the inverse? If your home was now worth more than what you paid, then by that same rule, your mortgage company should foreclose and sell to keep the gain. If it's right for you to follow that rule then it's right for them to do it too. Doesn't make any sense in the reverse, does it? And if you make the argument that the mortgage companies are already doing this by way of bail out, then I'd have to agree, but that's not the argument here. It's a gamble. Folks know this when they go into it. There's no surprise that they may end up upside down for a while. Walking away is morally and ethically wrong, but if you subscribe to moral relativism, or deny that morality and ethics have anything to do with it, then there's nothing more I can say to show you the truth if you choose not to see it. For many people, principles go out the window when it involves sacrifice, real sacrifice - like losing money. Although for me, money isn't such a huge sacrifice because money is not my god.

If you believe it's a greater wrong to stick to your promise than to be out of some money, then this speaks volumes as to what center your principles are based upon.

"There is no morality to a "business decision" - only a cost/benefit analysis - but we're so used to getting the decision, not making one."

Some people stick to their word regardless. It may cost them money but they live up to their agreements and the consequenses thereof. Going down the road of "no morality in a business decision" is a slippery one, but one that is gaining steam non the less.

Expect consumers to say: screw agents - it's about me not you - it's a business decision.

Not quite. That was a very strange way to describe what just happened in that scenario. That's synonymous to: a man of sound mind and body randomly killed another man, but since the law states that if you randomly kill a man you will likely go to jail, and the killer went to jail, then the killer complied with the terms of the law.

I'd hardly call that complying. He suffered the consequences for *not complying* and agreed in advance that those consequences were considered restitution.

Even further, most folks don't even comply with foreclosure. They'll rent the home out and/or steal all of the appliances and fixtures and/or take a bribe to get out (cash for keys).

Unfortunately, bad behavior can only be thwarted by way of harsh punishment. Sad to say, the "stigma" isn't enough of a punishment to deter folks from strategically defaulting, especially for the moral relativists.

If the Universe was perfect then everyone would have morals,ethics,etc.

Client representation is based on license laws. I do not see morals or ethics in any of the state laws.

So when I counsel people I do not say "you should honor your mortgage because it's the right thing to do"

Instead I stick to the laws and what options they can take available to them. In the end it is their choice.

You could do the WHAT IF factor all day. Say someone agreed to honor a mortgage note when they signed it. They are looking at paying for their sick child and paying the mortgage. They walk away so they can rent somewhere cheaper to pay medical bills that the insurance companies won't cover.

What happens if people have job loss,divorce,death,etc.??

For every person that games the system I can give an example of people who truly fell on hard times. At the end of the day I believe human life needs overshadow a paper mortgage.

I talked to families facing foreclosure for over 3 years before I went into commercial real estate. Down in the trenches you can see both sides.

And if the universe was perfect, we wouldn't be having this discussion right now. We're not speaking in absolutes here. I don't expect the universe to be perfect. This discussion isn't about that. I do my part to strive for perfection. Clearly I'll never reach it, but I shoot for it. Too many people dumb it down though, and there's no longer a balance. When you have too many people dumbing it down, you have chaos. I'd say things are chaotic with our economy right now, wouldn't you?




So say you. Those license laws that you are asked to follow were based upon morals and ethics at least to some degree. The laws are designed to be fair. What do you think the fairness is based upon? Thin air? So in that sense, they have much to do with the law. And if we shouldn't base laws on morality, on what can it be based? You're in Georgia, surely you know what the Blue law is, yes? It was designed to enforce religious standards (moral philosophy). If the law is separate from morality, the retributive theory of punishment, and many features of the criminal law, are likely incoherent. You seem to be a good guy and speak a lot of sense in the posts I've seen, but you're just way off base on that one. You even said it as a matter of fact when it's just so grossly untrue. If you're going to throw out such generalizations about morality, ethics, and their supposed "nothing to do with law", then at least back it up with some meaningful evidence.



I don't think many people would expect you to be their moral counselor, unless these people were your children.



Ok.



That wasn't the premise here. I'll quote:




I don't know about you, but I'm responding to those posts. Of course if you had no job or you died you wouldn't be able to pay. We are talking about choosing to walk away because your home is now worth much, much, less than what you paid for it.



If there were some way to prove it, I'd bet you're dead wrong on that one. It's not a one to one ratio of folks falling on hard times versus folks being reckless and irresponsible. I contend that we have more of the latter than the former.



I happen to agree.



I can see both sides too. I can't see the side that we've been talking about and that's walking away because your home is now worth much less than what you paid.

Reckless and irresponsible and morals and ethics are open to interpretation.

You will never get an absolute answer to what is right and what is wrong.

I help people reach the best choice for them with the least collateral damage. It might not be their dream choice but it is the best available to them.

Mark we see things similar but not 100 percent but that is what keeps this planet interesting. You can ask 10 different people to answer a question and they would all have a unique take on it with some being similar and some being way different.

Whether we like to see it's ugly head money is what makes this world go round. Look at almost any story and money is involved in some way.

I just deal in realism and telling someone or expecting someone to stay in a house that is worth 70,000 less when they can go purchase one that will have 70,000 will be a losing battle in most cases.

It's like the homebuyers writing a letter about how much they love the house and they can only offer XXXXX for the property.

A few sellers would take the lower offer because they appreciate the person buying their house but a ton of sellers would say nice story but we are taking the offer that gives us more cash at closing.

It's the same principle "GREED is a wonderful thing" (sarcasm)

The author of the original article referred to the people who stay & pay because of the morality of their contract and in return damage their family's best financial interests as "woodheads."

My sister stayed in a terrible marriage 20 years because she made a vow. Finally, it got through her "woodhead" that staying was ruining everyone's happiness and it was in her family's best interests to break her covenant. It was tough for a couple years but she bounced back, better than ever.

I'm old enough to remember the shame and stigma attached to getting a second mortgage - people have seemed to have gotten over that these past 8 years.

I understand that sometimes people need to walk away, but I also know that when they do they affect their neighbors when the home gets foreclosed on. It's a vicious cycle. Those underwater, foreclose which drops their neighbors home values which isn't what they asked for either.

Good point. Lot's of homeowners that have faithfully paid on their homes for 10-20 years lost a lot of value/money due to neighbors taking their "best financial interest" and defaulting.

Here's an interesting article on the subject:

http://articles.moneycentral.msn.com/Ban...-your-home.aspx

Does anybody know of someone who successfully got a home loan in recent months after having a foreclosure on their credit?

With the way credit is tightening up I don't think the old rules for short sales and foreclosures will apply in the future.

This guy is advising people to make life changing decisions based on old rules that may not apply next year.

Well, I'm glad to have poked my head back in to this thread to find out that my back end was not chewed off. It's nice to discuss things with folks who don't take the "back and forth" as attacks, at least for this round.



Morals and ethics are more open to bastardizing than interpretation. Most folks have no clue as to what those two words mean, much less how to apply them. They'd have to at least know that much to carry them out and to live a character driven life. It's a self damning cycle. Because they choose to be reckless and irresponsible, that same behavior will keep them from wisdom.


In all situations, no. I will never get an absolute answer to what is right and what is wrong if the answer is coming from a moral relativist. If everyone has their own set of rules, you'll soon see chaos. We are starting to see much chaos today. I'm not surprised. Add to that, so many people today worship money. When you make decisions based primarily on money at the expense of morality, you've sold yourself out to something you won't be taking with you after your short life here on this earth.


Uniqueness isn't a problem until that uniqueness takes the form of immorality. An even bigger problem is when immorality is suggested in a manner to influence the masses which is precisely what the professor is doing. It's nothing more than an lame attempt to rationalize "getting back at the man."


That's a cliche, and I don't see what it has to do with supporting any of your points, or creating a new point. We shouldn't write off morality because "money makes the world go round." Look at any story where money is involved and I'll probably show you at least one person with a love of money who is also heading for a storm. Money is so volatile and fleeting that it makes no sense to base your actions primarily upon it, yet I see it every day. I see it in this forum. I hear it at real estate seminars. I hear it at the barbershop. I see it in my work place. Countless families contact me to buy a home. I ask why. The vast majority do so because of the opportunity to make more money in my town. They're not making more money to pay for a sick child, they're simply chasing more money. So they uproot their families, pull their children out of schools and away from their friends, all in the name of more money. I suppose that makes sense if money is what's most important to you.




There's nothing greedy about that decision. It's not greedy to accept a higher offer on your home because someone may or may not appreciate the home more than the other.


I help people reach the best choice in congruence with my mission statement. No part of my mission statement includes influencing client decisions if the result may be immoral or unethical while conflicting with my promised high standards. But then, if my promises are repeatedly broken solely because I'd be in a better financial position, how in the world is anyone to trust me? Would *you* trust me? If I was a buyer, I'd be very interested in coming to this forum and listening to what many real estate professionals say about this matter. I'd want to know which agents would choose to break a promise they made to me solely because it would put them in a better financial position. What's good for the goose is good for the gander, so I ask, how many votes are there to strategically break a fiduciary responsibility to our clients in the name of "best financial interest" for ourselves? Anyone?

I disagree.
Where the professor is comming from, walking away from a home is NOT immoral. Don't judge your morality as the only truth, until you have been in the exact same position and mind set as the person who is walking away.

He had over 50 pages to support his view. Glad you were able to express and support your point in just three sentences.



Where I'm coming from - IT IS.



I can be a non moral relativist all I want. And you can be a moral relativist to your heart's content. I most certainly can and will discern immoral behavior as well as not like it and shun it.




That's just absurd. I don't have to be in the exact same position and mind set as a child molester who rapes and kills a 4 year old girl to say that it is immoral.

That's not equating child molestation with foreclosure, it's simply showing that you don't have to be in an exact same position and mind set as the person in order to call it what it is.

I see everyone's points and mine are well known in this post.

I think this is a dead topic running in circles.It's like people on two sides of the debate team that can talk until they are blue in the face and yet their views have not changed. Every pancake has 2 sides no matter how flat you make it. You might not agree with the other side of the pancake but that does not mean it doesn't exist or has no value.

In the end I respectfully tell people we "agree to disagree" on some matters. Nothing wrong with that it's how you communicate it.

I am moving on to other topics.

"moral absolutism" exposed! In other words, everyone that doesn't agree with the moral absolutist is dumb, irresponsible and lazy. Maybe a better description of "moral absolutism" is myopia??

absolutes? there are NO absolutes in this universe. I challenge you to name just ONE absolute that is real and provable. Even gravity and time are subject to change and extinction. billions of years from now, time and gravity will cease to exist.

So, waddaya think? Is there Life before Death? Or is that just a cruel Illusion?

Super_realtor, you didn't really engage. A discussion goes beyond seeing points on down to challenging points. In the end I think you are a valuable asset with overall good advice here on this forum.




I think you forget about the many folks currently reading this thread who may be getting something out of it, and may change a view, or learn something new. Assuming longevity of this board, folks will be pulling up this thread from google long after it's disappeared into 100+ pages of thread history here at agentsonline. It isn't all about you which is why it's not a dead topic. If we all agreed, we wouldn't really have much to say, now would we? Application of morality should never be a dead topic.


If there is a beginning of a formation of a circle, it would be right there. We've been talking specifics and you back out to generalizations that don't really apply. I haven't said anyone's side didn't have any value.



There's a lot of work that goes into complicated discussions. Some bail out when it looks like too much work, and that's fair in this environment, but I didn't really get down to the bottom of why you say what you say so I don't really know what I'm disagreeing with, do you? It sounds more like we're respectfully agreeing to not understand each other. Part of understanding is challenging what you hear and trying to make sense of it. I don't know about you, but I go the distance to try to understand people and concepts.

There's something that's exposed here alright, but it's not what you think. Those in other words that you concluded were not my words. I described a group of separate variables (dumbing down morals and ethics, laziness, and a general lack of responsibility), not that they all collectively equated to moral relativism. Maybe a better way to express your view would be to address the theme of the opening post, give your points, support your points, instead of just taking a tongue in cheek jab like that.

If you believe there are no absolutes are you absolutely certain of that being correct? Think about that one for while. A long while.

Whos statement is absurd now?
What if walking away was against your morals, but provided food on the table and a roof over your families head is more important and walking away makes it possible?
It certainly would be an easy choice for me.

Pikes, you are running this in a circle now. Either you're not reading the posts or you're not comprehending. Please read the post from 12/09/09 10:52 PM. This has already been covered. Your scenario is not the premise in the opening post or the article referred to by the opening post (which in turn refers to a paper by a "professor").

my statement, as it relates to the study of cosmology and ontology, is logical and consistent, but I don't claim that it is "true", in the sense of complete accuracy. I deal with testable theories, not strictly beliefs or untestable hypotheses, which seem to be the underpinning of your absolutist moral position. so, it is you that proclaims absolute truth, while you nor anyone else have offered any tangible evidence to support that view.

the only "absolute" that we can envision is the end...the heat/cold death of the universe, the "big crunch", whatever you wish to call it. and according to current theories, that probably holds true on a universal scale. until then, everything is changeable.

a faulty assumption that you and other "moral absolutists" always make is that the moral relativist inevitably loses or ignores all sense of morality and ethical conduct. that is simply absurd. this is the equivalent of saying that because your morals are different than mine, you have no morals. congratulations, you are the consummate egotist.

I know, I rest my case.
The professor was right.

How about relating a statement to the opening post or the theme of the argument?



Yeah. So? Please quote where I've claimed complete accuracy.

[EDIT: I hope you understood what I meant about your statement, "there are NO absolutes in this universe". Maybe you didn't think about it long enough. It was a complete self contradiction. The declaration itself implies the existence of absolutes. I see you've back peddled with "not completely accurate." You may want to withdraw that contradictory statement and never repeat it again. I hope you see your error. If not, you're not going to do very well in symbolic logic and set theory class, and you're not doing very well here either.]



Please quote from my posts any claim of favoring moral absolutism. Non moral relatavist does not equal moral absolutist. You realize this, correct? Does non white mean black?



I think you'd jump to fewer conclusions if you quote me instead of creating your own arguments.



Not even the end is an absolute, but what does that have to do with "it's in the homeowners' best financial interest to stiff their lenders" while being perfectly able to pay, for reasons of fluctuating home values?



A faulty assumption I see is yours - assuming I'm promoting a view of moral absolutism.



Not only are you incorrect about my view (I don't promote moral absolutism) but you're opening up a new topic that has nothing to do with the premise here. That being said, even creating a new argument claiming you know of a tangent assumption that moral absolutists *always* make isn't even reasonable to consider. Some moral relativists may seem to lose or ignore all sense of morality and ethical conduct, some may not. Again, you are creating your own arguments here.



"You" means me personally. I've been talking about belief systems and immoral acts. Hey, I appreciate the name calling. Name calling works wonders for adult discussions.

Shana, are you a member of NAR? If so, please answer this question: Would you strategically break a fiduciary responsibility to a client in the name of "best financial interest" for yourself (no other significant variables at play here...no sick child of yours..no conflicting moral obligation..just for the reason of best financial interest)?

I think I may begin a new policy of ignoring posts from anonymous posters. It seems there's less accountability for things said when no one knows who you are. I gladly attach my views to my reputation. Seems many here don't, and I can see why.

You rest your three sentence case? You must be very tired.

Mark, whew, that sure is a long-winded response, but you've ignored my challenge.

does this mean you are refusing to accept my challenge to name ONE "absolute" in this universe?? this is the entire basis for your series of arguments thus far, so I think it is only fair that you produce just ONE example of an absolute that exists in reality. honestly, Mark, I'm pulling for you here...I want you to win. :O)

"That's just absurd. I don't have to be in the exact same position and mind set as a child molester who rapes and kills a 4 year old girl to say that it is immoral."

hey Mark, was virgin sacrifice (and other sacrificial events) "immoral" or illegal when those practices took place in past cultures?? were not these practices commanded by their god or gods, making the practices completely moral??

wait, by examining history, have we stumbled upon a great example of "moral relativism"?

in all sincerity, Mark, what you may not understand is that "moral relativism" is responsible for our current, prevailing morals and ethics..at least in this culture. If that were not the case, we'd still be sacrificing virgins...or worse. so, relativism is not a bad thing after all, but "change" is a difficult thing to accept, isn't it?

Now that the debate over morals is done, can anybody answer this question?

Does anybody know of someone who successfully got a home loan in recent months after having a foreclosure or short sale on their credit report?

With the way credit is tightening up I don't think the old rules for short sales and foreclosures will apply in the future, or even now for that matter.

This guy is advising people to make life changing decisions based on old rules that may not apply next year. I think his basic pretext is flawed because these things will not be forgiven as readily as they were in the past.

Its always a risk. I don't advise anybody to allow foreclosure or short sale, thats the job of their attorney.

I know a guy who filed chapter 7 and built a new home 6 months after discharge, and bought new cars. He gave back 3 cars, a house, and unloaded alot of CC debt.

That was a few years ago. I think the foreclosure situation will be forgiven alot soon these days. There is no shame today in being foreclosed on.

THIS.

There used to be shame attached to a getting a 2nd mortgage...but not any more.
Landlords used to reject applications that showed foreclosures...but not any more.

Soon the is going to be a huge group of shorted/foreclosed/jingle-mail'd/cfk/deed-in-leiu former-homeowners wanting to buy a home again - and there will be lenders willing to grab that market share and service the clients too

And in the short term, there are many investors and landlords willing to rent to the people. Its a huge group here.

I think that because it has become the norm for some people to walk away from their debt, lenders will be reluctant to lend to people who have demonstrated this trait.

I think there are a lot of people who are setting themselves up to be longtime, if not lifetime, renters.

I agree that at times it can be in the homeowners best financial interest to stiff their lenders. Other times not... depends on the details of the situation. (short and sweet)

Morals are changing. Not only do many people think it's OK to walk away from your home, priests are now saying it's OK to shoplift as long as you're poor.

http://www.christiantoday.com/article/priest.says.its.ok.for.poor.to.shoplift/24949.htm

That is such a huge statement. I am terribly interested in these things. I will say I agree with you sentiment somewhat, but would add that morals never change. What changes is how people choose to adhere to morals. We are taught and we learn to shirk personal responsibility. The is a poor lesson and makes us think, incorrectly, we can behave poorly with justified reasons.

Thanks for the link...

I saw the headline today on MSN and dismissed it as another bait and switch attention-getter.

Well, I guess soon it will be OK to hijack a car if you really need a ride...

-AP

It may be in the homeowner's "best financial interest" but hey, it's in my best financial interest to rob the 7-11, too!

LOL! Good one! I thought this was a dead topic?? Who needs morals, right? Lets all just do what feels good and/or puts us in a best position. Certainly that won't breed any chaos.

Merry Christmas.

Morals don't change, people and cultures do. It is becoming culturally acceptable to do certain things that are viewed as immoral. People change as they dumb down morals then chaos ensues.

Regarding the article, please, yet another Catholic priest who sits in self righteous imaginary authority pretending to be some sort of moral compass for those who don't know any better.

Instead of saying this, "it was for better for people in such circumstances to turn to shoplifting from large retailers rather than prostitution, mugging or burglary." what that ignoramus should have said was this: it is better for people in such circumstances to turn to manual labor or whatever talent one may have in order to achieve an honest means of income. For him to postulate that an immoral set of choices was their ONLY set of options is ridiculous.

Then the ignoramus followed with a logical fallacy: "My advice does not contradict the Bible’s eighth commandment because God’s love for the poor and despised outweighs the property rights of the rich,". It is possible and very likely that many people who work for large chain retailers, such as Wal-mart, are very much "poor", and would make even less of an income with increased shoplifting in their stores by way of no bonuses or pay raises, and possible furlough days to compensate. Shoplifting rarely if ever "trickles up" to the rich in large chain retail.

Along with shoplifting advice, maybe he's been passing out mortgage stiffing absolution in his confessional as well.

Morals are fun for you and me but they don't apply to "Business Decisions" which are based solely on a cost/benefit criteria.

In Europe, poverty IS a defense for theft.

That was a really fascinating article. I must say I agree with the writer's theories. For people who are way upside down with no real hope of recovery for MANY years to come, yes it is a better business decision to cut the losses now and move on. The recovery will be quicker. This is not a "moral" decision although it is in the banks best interest to convey that general message to the population.
Would the bank stick with a loser asset because "it's the right thing to do"? Come on.
Taking on a mortgage is not a MORAL commitment. Its a financial commitment with its own consequences for default.
If the homeowner defaults the lender can collect the asset.

The homeowner has the choice to take the loss now in the form of bad credit and a lost home, or stretch the loss out over the next 10-15 years as they wait for values to recoup.

This amounts to a simple business decision.

I am sorry but I disagree with you completely. Honoring your commitments IS a moral thing.

No wonder the world is going to hell in a handbasket.

Which commitment is more important?
The one you made to your lender?
Or the one you made to your family to preserve their financial well being?

^^ minna gets it

Not in every case, but in most, the commitment to preserve financial well being was never considered by those families now walking away from their obligations. Those decisions to over extend themsevles too deeply into credit were based on desire to live in a home they in fact could not afford. All of us who were able to accurately guage our ability to borrow, despite what was told to us by the lender made a real commitment to preserve our family's financial well being. We are living in more modest homes and making our payments even if it is uncomfortable to do so. Do not equate our solid business decisions and moral compass with those who were living fun and fancy free in the good times and turned tail once things hit a rough patch.

There is a difference.

My statements are not intended to apply to true hardship cases.

I'm of the opinion that your word IS your word. There is a time and place for helping those that made legitimate mistakes or were "hood-winked" by some less than desirable lenders, but the homeowner made a committment to re-pay what they borrowed at terms that BOTH parties agreed to. If you buy a $25,000 used Lexus, with no warranty, and finance it thru a third party lender, are you going to stop paying the note when YOU never checked the oil and blew up an 8k engine? I always pay for my mistakes, even if it is painful to do so, because my WORD is important to me.

It's just the way my Mama raised me!

But would you still do so when you are 250k upside down with a mortgage designed for 500k?
What if the note for the 500k is the difference between sending your kids to college, or staying in your upside down house?

Artiste, anonymous poster, have you thought about proudly displaying that first sentence above on your business cards?

Poverty as a defense for theft has no bearing on whether it is immoral to steal. In America, slavery was once legal, but was it moral then? Is it moral now? Sounds like you have the tail wagging the dog. There's not a law for every morally correct event, and there never will be. You're looking at the wrong end of the stick.



If you think about it for a minute (and read all of the posts so that we aren't going around in circles) that's exactly what the bank does. The deal is this: if you borrow $100K for a property valued at $100K and 3 years later it's worth $300K, does the bank take it from you and sell it to keep the gain arguing that they had a "loser asset" when they loaned you the money for it? Either way, up or down, the bank doesn't renege when the values fluctuate. That's the part you don't get. The idea is to take the good with the bad. Problem is, folks only want the good and bail in bad times. These are the same folks who do the same type deal breaking in marriage.



Yet another logical fallacy. You can do both. Keeping your promise to pay your loans, even when the values fluctuate does not "unpreserve" the financial well being of your family. Add to that the wise words from doin'bpose. For many of those stiffing their lenders and wanting to walk simply because they are currently upside down, the bad decision was made when they got overzealous and took a step longer than their legs could take them in their home purchase. Since I answered that question, answer this one: will you strategically break a fiduciary responsibility to a client in the name of "best financial interest" for yourself?

Some of us have integrity some dont..some value integrity, their commitment, some don't

those that dont will continue to make excuses to walk away not our of necessity but to profit..it's not an excusable business decision to default on your word/contract/legal obligations..it's an act of bad faith, a betrayal of actions you agreed in good faith to uphold; there was no contingency related to future value of the property

most of us on the board get that....

I would absolutely break a fiduciary responsibility to my client if it involved me going under for the next 10 years.
Furthermore - I dont think marriage ranks the same as a contractual relationship with a bank. You're talking about two very different things now - don't put them in the same boat at all.
The banks - when things went downhill for them - what happened? You and I and our children showed up to bail them out. They got billions to correct their mistakes. What did the homeowner get? NOTHING.
The homeowner can "modify"...if they're up for the challenge. Was that the best "right thing" the banks could do? They'll lower a payment for a short while?
What about the big problem - HEAVY negative equity? What is the regular Joe supposed to do about that? Just live with it? For 10-20 years? Or perhaps they can fork over the XX amount it takes to break clean. What if they don't have it?
I believe no person should have to be a slave forever to their lost equity. Yes it takes a credit hit, but so be it.
It is the lesser loss.

It's a terrible financial decision to have children. Why do we do it? If it was all about me me me and what was the most comfortable, the most financially secure, the least stressfull, then the answer would not be words we want to share with the young ones. You work less and spend more, your hair turns gray and you blood pressure goes up. So why do we all do it...because it is the right thing to do. Maybe I'll write the article, "It's in the parents' best interest to stick their kids in an orpanage."

There seems to be a lot that you "don't think." I can and will put them in the same boat. The broken promise is the common denominator in both relationships.



I believe I've already talked about this event and won't comment on it again in this thread.



Do you also believe that no one should be a slave forever to a marriage to their lost happiness? Yeah, you'll have multiple divorces on your record, but so be it. It is the lesser loss, huh?



LOL! That would be the perfect backing to your next business card.

On the front:
"Morals are fun for you and me but they don't apply to "Business Decisions" which are based solely on a cost/benefit criteria."

On the back:
"I would absolutely break a fiduciary responsibility to my client if it involved me going under for the next 10 years."

Call Minna now!

Priceless.

My previous profession was a sub-contractor for (of all things), home construction! I lost my shirt on more than a few jobs, for a variety of reasons... some my fault, some weather related, some unreliable general contractors. I even had a general contractor file bankruptcy on a HUGE commercial job just as we were finishing up, but you know what? My employees and suppliers did what I asked of them, and they deserve to be paid , even if I never get paid. Yeah, it almost bankrupted me, but I made a reputation for integrity, even with my banker. The point is, doing the RIGHT thing is not always the EASY thing.

There will always be those who make excuses for their actions/decisions, everything is always someone elses fault or responsibility.

Augusta - would you honor a fiduciary relationship that caused you to go UNDER 100's of thousands of dollars for the next 10 years?

Doin' Bpose - do you really consider having your children to be in the same line as signing an agreement for a new VISA?
There is a difference - no?
All things are not equal...

I'm not paying for my kids to go to college. They can apply for grants and take out student loans and work it off just like I did. My mom helped me with some books and living expenses and that's it.

I dunnow. I'm just so used to trying to live within my means I just don't get it when people "can't." We could have totally cashed out our house a while ago on a home equity loan, but we really only borrowed what we needed and what we could afford to pay back monthly. We could have taken TRIPLE or even QUADRUPLE what we did - but we played it safe.

And we pay our bills, and we pay them on time....

Not only would I --> I have (couple hundred thousand dollars). I don't just talk the talk - I walk the walk. Anyone who really knows me knows exactly what event I'm talking about. But I wasn't under for 10 years. I recovered in 4, even adding a new business to my load during that period. I don't regret maintaining integrity one bit. Money is not my god.

I wrote up a deal last week that will net me $100K. I do believe I'm blessed for doing the right things. I believe I'd be very poor if I took the easy way out and chose not to persevere during the hard times. I'm much tougher, and more efficient now because of those hard times.

I was comparing 2 different things, yes. Artiste had boiled the discussion down to a business decision. I am illustrating how wrong you can be if you use only a business mentality to make decisions. You brough family into the discussion, so I tied it all together in my post. I think it is a very good point.

Mark it is funny you mentioned the 100k as I have a deal going that will net about the same a distressed shopping center I am selling.

I also have a possible sale on one of my coin laundry with a seperate automotive shop in the back that will be about 60k.

Is your deal you have on land or commercial or a property you are flipping??


On this other stuff it's just too deep for a Georgia man like me

All I know is I put my underwear on just like everyone else does daily (hopefully!) and last time I looked I am the person in control of my destiny.

The choices we make and how we live our lives is our choosing.

I get people everyday that offer an opinion on a subject. I weigh it,think about it,and then decide to forget it or add a part that I believe has value. Even though I might make different choices than someone else I will not judge them for believing different than me.

We had an awesome class back in college. It was a full course on religion for the semester. We listened to about 20 faiths in class (different one each class)and visited about 8. Most people would be scared to put their faith up against other ones but by looking and UNDERSTANDING what is out there instead of guessing you will be more solid and grounded in what you believe.

I believe everyone has tough times in life which builds character. My first job was working at a fruit market. I started at 14 because it was classified then as agricultural and fell under farming activities.I would work sometimes 70 hours a week from 7 a.m. until 9 p.m. with 1 or 2 days off.

The job consisted of unloading 18 wheelers by hand with another worker of pine straw,watermelons,pumpkins,wheat straw,potting soil,plants,food trucks,etc. We didn't have a palette jack just a manual 2 wheeler. The rotten fruit and vegetables after we found the bad ones we would cut off the bad part and shrink wrap the good side and price it.

This was just a small percentage of what I had to do there. I tell you what when I hit 17 and went to work at K-mart as a cashier it was the cushiest job I have ever seen. The other high schoolers complaining about how hard it was I was laughing. By having a really tough first job it has made everything since seem small in comparison.

One of the perks was at 14 my other friends mowed lawns but my paychecks were really huge for that age. So the rare time I had off I did have a lot of fun.

I know I got off topic and rambled but the water fights with hose for watering the plants,the jokes we played on Marlin the owner,and the rotten food we would throw at each other are the times I cherish most and will never forget.:)

Oh well Happy Holidays everyone!

Super, glad you're back

You have a similar past as I do. I went to work washing dishes at an extremely busy restaurant a few days after I turned 15. I had to get my work permit to work so young. Hands down, that was the suckiest job I ever had, with stacking boxes in the back of a UPS truck in 110 degree heat at the Atlanta Pleasantdale Rd hub being a close second. Those jobs and hard times definitely helped me build character and I can only guess at how much of an "easy way out" guy I'd be today if I weren't toughened up by those hard times and chose not to stick it out.

When I was 24 I racked up $30,000.00 credit card debt at 22% interest. A friend suggested that I file bankruptcy and just make a bunch of "poor me" excuses like everyone else, like blaming the jacked up interest rates or crazy high credit increases. I decided I'd start a business instead with only a $10K investment (I got a deal on the equipment) and pay off that debt so that I wouldn't be paying on that card for the rest of my life. Turns out I did the right thing. I got a ROI on my $10K in the first year of screenprinting and paid off the $30K within 18 months after that.

Since I no longer fear debt (I respect it though) and have a proven track record for getting out of the worst of situations (since I *chose* to keep my promises) I feel I can survive just about anything - and I have. I feel good about myself. I look at the kinds of deals I'm doing now that I'm in real estate and laugh at the $30K I was so afraid of when I was younger. If I took the coward's way out and blamed "the man" I'm sure I'd be living from paycheck to paycheck today.

Super, I didn't get into my religion, which definitely is the foundation for my morals/values/ethics. I'm trying to keep this discussion somewhat universal, but I know what it's going to come down to, only I haven't heard anyone go that deep yet. I heard you use an often misused and misunderstood word - "judging" and I'd like to say something about that real quick. We all judge, including you. To say something positive about someone is judging. I don't judge, as in condemning someone, for that is God's job - not mine. I most certainly can and should discern good and evil and will shun what is bad each and every minute of the day. That my friend, is not "judging."

Thank God for the credit report. In a sense it's somewhat of a "forced conscience." People can make those financial decisions that they think are moral all day long, fact is, those bad decisions will show up on their credit report and they will be "judged" accordingly. Let their record stand. I'm wondering how long it will be before someone argues that the credit report is discriminatory and goes against their feel good philosophy.

My point here is the same as yours, Super. When you tough it out and keep your promises, it makes you stronger and you come out better in the end than the perceived easy way out. Those are only tests and I believe many folks (the mortgage stiffers because of fluctuating home values) have failed those tests miserably. The belief systems to which they subscribe, along with the attached morals, ethics, and values, or lack thereof, are their worst enemies and they don't even realize it.

As for that $100K deal, it's a flip. My biggest flip being $250,000, of which the wife got it all on her way out with her broken vows in marriage. Money was her god. May she, all the money she walked with, and my mansion live happily ever after.

Merry Christmas to everyone!

Great post, Mark.

Everyone lives in their own reality. Right or wrong are not always defined the same way as you or I might interpret it.
Religion is a great example of that.
A Merry Christmas to everyone!

Homeowners: Play by Morgan Stanley’s rules and walk away

To the extent that Morgan Stanley is leading by example, the securities colossus is sending an unlikely message to underwater homeowners: Walk away.

The Wall Street firm is itself walking away from five San Francisco office buildings it purchased as part of a landmark $2.43 billion deal near the height of the real estate boom. But don’t call it a foreclosure or a default — not when this kind of money is involved. A spokeswoman interviewed by Bloomberg News called it “a negotiated transfer to our lenders.”

via If Morgan Stanley Walks Away, Why Shouldn’t You? Firm Walks Away From 5 Properties.

Businesses and corporations walk away from mortgages all the time, Brent T. White, a law professor at the University of Arizona, tells Huffpost’s Shahien Nasiripour. But homeowners usually don’t, mostly because they feel guilt or some kind of moral obligation to see things through to the bitter end.

Stop feeling guilty. Not only have business and corporations walked away from their obligations, but the Obama administration has now thrown homeowners under the bus.

Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won’t get help after all.

So you decided to play by the rules, and now they’re trying to sell your house without notice, the government has no interest in helping you keep your home (nor does it have to tell you why you’ve been rejected for help,) and Morgan Stanley gets to walk away from its obligations.

Got it.

To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That’s averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

In Thursday’s Wall Street Journal, the head of the Mortgage Bankers Association, John Courson, and his enormous cojones, laid a guilt trip on middle America and emphasized the moral argument against walking away from a rotten mortgage, asking: “What about the message they will send to their family and their kids and their friends?”

How do I put this delicately?

F*** you, John.

What message does Morgan Stanley send to its neighbors when it sprints away from $2.43 million worth of obligation? Or does it not count when corporations do it?

There should not be two tiers of “moral law” in this country where private citizens are expected to accept endless burdens with a smile, but corporations can cheat, steal, lie, and engage in all kinds of immoral behavior. Except, when corporations do it, not only are they applauded as the backbone of the free market, but they’re given tax breaks to continue their unscrupulous behavior while they ruin communities, ship jobs overseas, and poison the environment.

When the majority of the population keeps losing under these warped laws, the question must be asked: Why do we keep playing by these rules?

source: http://trueslant.com/allisonkilkenny/200...-and-walk-away/

Ok - I'm sure some would wish for this thread to die...BUT...I agree completely with the above mentioned. I think the individual bears a heavy debt to oblige to society's standards in this sceanrio. This entire thread is a testament to how quickly most of society will bear down on someone making a choice that betters their financial well being at the cost of the lender.
When did most of us become so brainwashed?
I doubt anyone outside of Artiste actually read the article. It is certainly worth reading.

Interesting...why do people often say this? yet today, we have a higher standard of living, more conveniences, better employment opportunities, more leisure time and access to more knowledge than we ever have in the past. this is "hell"? I think not.

Interesting how hedonistic thinking folks call hell their home. I think so.

CalPERS and an investment partner purchased the KOIN Center, a Portland office tower, for $108 million in June 2007. The partnership lost the building this summer after defaulting on a $70 million mortgage.

At the time, CalPERS said it was better to walk away from the investment instead of pouring more money in. "The partnership...didn't believe a capital investment was appropriate," the fund said.

http://www.sacbee.com/static/weblogs/real_estate/archives/2009/12/a-calpers-real.html

that's only true in New Jersey.

Idle hands belong to the devil.

no, it's not hedonism at all...it's obviously the effect of science and technology over the last few centuries. Mark, you are now sounding like the Amish, if you really think technology is a bad thing.

you seem to be implying that Earth is "hell". In all sincerity, where did you get that idea?

Oh yes, I know exactly what you mean...and isn't it disgusting?? I'm referring to all of those "evil" working folks who work their rear ends off all week long, so they can have leisure time and recreation on the weekend. I'm tellin' ya, the world is going to hell in a handbasket!! LOL

Ruthless Rich Dumping Mortgages
James Joyner | Friday, July 9, 2010

The NYT, which has been banging the drum on the Strategic Mortgage Default story for a while now, reports that the rich are at the forefront of the phenomenon.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population. More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment. “The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

More probable: The rich are more strategic. Just as importantly, they’re more able to accept the consequences of acting strategically.

First, the wealthy are more likely to think of their home — and certainly, their second and third home — as an investment whereas those further down the economic ladder simply think of it as a place to live.

Source: http://www.outsidethebeltway.com/ruthless-rich-dumping-mortgages/

What better employment opportunities? Ask the unemployed or those who have to work 3 - 4 mimimum wage type jobs to just feed their families.

Higher standard of living? I guess, thanks to credit cards and living with debt as the standard so we can bring home unnecessary materialistic toys...the support of such a lifestyle puts the family on the back burner in order to pay the bills...

Hell is here because as a society we are more selfish, rude, impolite than ever. Hell is here because most people espouse a "Me first" mentality and to hell with someone else unless it does not inconvenience you. Hell is here because more and more people do not think of a commitment as a lasting thing but rather something to be discarded as soon as it becomes inconvenient. Hell is here because more and more families live together yet do not know each other thanks to laptops, ipods, smart phones, gaming consoles, and thousands of channels on the TV.

We can't go to a restaurant these days and eat a meal together without being surrounded by a handful of large screen TVs mounted on the walls - soundless, yet attention gathering, training us to look at the screens rather than at each other...

Yes, this is hell. We as a society in general are more isolated (hiding behind screen names and cell phone numbers) and selfish than ever.

^^ I blame the new "Prosperity Churches" -- if Jesus came back, he'd have a lot to more say about selfishness and greed.

I agree. In fact, I think the entire modern church system as a whole - Protestant, Catholic, Main Stream, Mega Churches, etc... would be shocked at what Jesus would have to say to them and their role in society.

My newest listing is a 2nd home strategic default and my client is one of The Ruthless Rich. I'm so proud of him!!

Well stated Perky. I could not have said it better myself.

I met with a potential buyer last night. He bought a condo in Oct. 2005 for around $120,000, on a 5/1 ARM. The property now comps at about $82-$86. He has been trying for two months to get his lender to modify the loan to a fixed. Never been late on payments. His company has moved across town (about 1 hour drive) and he wants to move closer to his job, because he's on-call a lot.

He has the income to buy another house, and has pre-approval.
Once the ARM adjusts next year, he will not be able to rent it out for enough to cover his payment.

Yep, he's considering buying a home, and defaulting on the condo.

His argument, which to some degree I agree, "our tax dollars bailed out these banks and they still won't work with us to modify"

Morally wrong, maybe. What would you do?

Are you debating whether to help the client or not, or are you debating whether his actions are "moral".
I say its his business. If he's a willing ready able buyer, well so be it, and I would help him. I would probably though try to get him to short the old house rather than just let it foreclose, to minimize the damage.
I dont judge my clients. Whether their default is strategic or not, is not my busines. My business is helping people meet their real estate goals - whatever they may be.

He could win the lottery and pay off his condo - you don't know what the future holds.

The real "rich" aren't carrying mortgages. If you're financing a million plus, sorry, you're a wannabee. I don't care if it is second or third houses. Wealth isn't defined by the square footage of your home, the size of your lot, or the types of cars that you lease (which is a rip off anyway). It is defined by that number in the lower right hand corner in the "assets" column (and a mortgage is a liability).

There are a lot of people running around with thousand dollars suits who are broke or beyond broke. It's a sham. The wealthy I know aren't hurting and they're not thinking about "strategic default" because they pay cash for everything they buy. As the "fake" rich are "strategically" defaulting, the real "rich" are picking up what the "fakes" have left behind.

When the market picks up again, those "fakes" will buy second or third homes on mortgages again and make the real "rich" even wealthier.

The real rich probably have the most debt....it's called leverage. If you own your home outright, then not having a mortgage is probably more of a liability than having one. If you can borrow money at a low interest rate and earn a higher return on it by investing it elsewhere, you are further ahead to borrow as much money as you can get your hands on.

That is pretty naive. The majority of the real wealth in this country you would never know if you passed them on the street. I recommend you take a look at Thomas J. Stanley's blog and read some of his books. It will give you insight into where the real wealth in this country is, who the real millionaires are, and how they live. His books are excellent and he has spent a lifetime studying this very subject.

http://www.thomasjstanley.com

In theory that sounds great but what if your investments go sour? We have only a small home equity loan on our house (less than $30,000) and hope to pay it off within two years.

It's much more comfortable for me to debt free or owe as little as possible. I can sleep at night knowing that if something happened tomorrow (one of us is stricken, unable to work, etc) we won't lose our house...and we can use the equity in it if we NEED it. We have excellent credit but very little actual debt; so if we needed to fall back on a credit card to pay some bills, we could.

Will I ever get fabulously wealthy? Probably not; but that's not my goal anyway. My goal is to live happily, and comfortably...and the less debt I have, the more comfortable I am!!!!!!!!!

I could get a new car, pay on it for 5 years....but why? My 2004 car is in great shape, good for at least another 100,000 miles, and all I pay on it is gas and maintenance. What could be better? No repo man will come knocking on my door; no lender is going to foreclose...life is good. We're not rich, but we are happy and we are content. And that's the most important thing...wealth can be lost in a heartbeat.

"Will I ever get fabulously wealthy? Probably not; but that's not my goal anyway. My goal is to live happily, and comfortably...and the less debt I have, the more comfortable I am!!!!!!!!!"

I don't disagree with you....the discussion was about the wealthy though and it is hard to get to that point without taking some risks and spending other people's money.

Now I don't feel so lonely. I have no Mortgage or Car Payments, School Loans or Credit Card balances. I like it that way. I accidentally had to pay 66¢ in interest in 2009 and it still irritates me.

But that is not the American Way, so I'll keep my mouth shut and suffer in silence. I need to be able to empathize with Customers and Clients.

Well that didn't work out so well for the subjects of this thread...did it? LOL

lol Very true.

Borrowing for personal consumption vs borrowing to leverage on investments with higher rates of return are different things though.

I've tried for years by living somewhat above my real means by relying on borrowed money. In the last year, we have made the decision to become debt free and stay that way for life.

I agree that taking risk (borrowed money) means greater potential for gaining wealth, but it also means greater risk of losing it all. I'll take boring, slow growth any day over a Las Vegas crap shoot.

It is exactly this attitude, along with the ease in which you can walk away from debt-based obligations in the US that has created the perfect storm we are in now.

Whilst I agree that for many this is the best financial option, morally I have serious issues.

Really? Well who is king of walking away from debt based obligations? Is it really the homeowner? Or is it big business, and BANKING INSTITUTIONS?
Never mind, I forgot, they are free to walk, and we the tax payers will help them stay afloat to see another day...
But Joe Smith down the street? OH GOD NO.
That would morally reprehensible...right?

Here is your answer and it's quite obvious: Who's too big to fail, and why hold some morally responsible and let others walk?