I'm gonna step out of character here and be a total jerk;

This dumba$$ deserves what he gets. ****ing financial moron.

Walking away only becomes an option when everything else is gone...and your family is hungry.

Well, that is your view.

But mortgages are non-recourse in many states. Homestead is an exemption in bankruptcy. And there is no such thing as debtor's prison in the USA.

So your view is very different from the law in this country.

A homeowner under stress - hmm, should he destroy his financial future to make you happy, or should he use the options available to him under the law?

Walking away is a business decision and moral obligation goes out the window quickly if it is a lot of $ people are looking at loosing. The problem I witness is that people walk away over very little money. 20k? I'd take that hit and pay it off in the future and keep my credit clean with a short sale. Sure, at 200k I'd walk too. But how did you get there in the first place?

What puzzles me is that there is no obligation to pay back the loan besides the collateral of the house. In other countries, the creditor will go after your paycheck, assets and future earnings. This is a surprise to people in other countries - possibly even banks.

George

just spoke to a friend who lives just north of Tampa.

says banks are selling 1,800' new homes 40% off last year's original selling price.

his cousin just got a $260k house for $160k.

My dear friend, who hired me in subprime 1.5 yrs. ago, took out a personal loan for $60k to make up the short sale of his main house. He could have walked away and rebuilt his credit over the years. But he felt bad about it. So he took an unsecured personal loan and brought the cash to the closing table. Obviously, he's a rare character.

If it were on fire.

It's been paid for years ago.

If you literally cannot make the payments and care for your family then you have to think of your family before your banker.

It's damned if you do, damned if you don't situation.

Everyone thinks only subprime dreamers and stated loan liars are caught up in this, but here in Michigan(and I'm sure many other places) the massive loss of jobs and decreased income have made the scenario quite common even among otherwise responsible folks. Many have conventional fixed mortgages.

They still made their own bed but you have to be realistic.

Of course it is my view. That is what the thread asked...not if there is some sort of legal loophole. As far as I am concerned...you give your word to pay a debt...you pay it...regardless if it is not in your best financial interest. A man is only as good as his word...regardless if the law will allow him to be something less.

I've had plenty of mortgages- Both residential and commercial.

But I've never had an ARM.

If I'm going to sign an agreement, everything needs to be fixed in writing. Giving the lender the option to change the interest rate mid-stream doesn't make sense to me.

It's amazing how many people live on 100% debt -- sacrificing no toy, car, or luxury but owning nothing. I have coworkers with relatively new cars talking about buying the next one when they "can pay this one down a little". A great deal to them is six months no interest.

How about living with what one can really afford and striving for NO debt, becoming truly financially free?

Feed the Pig.

The theory of contract law, aptly summed up by Wikipedia, is to esure, "that legal processes produce the most efficient allocation of resources." I'm certainly not advocating that one not honor their word. Dealing with friends and neighbors is one thing. However, in dealing with Corporate America, business is business. If it makes more sense to dump an investment gone South, then by all means do so. The bank knew the risks (and had the opportunity to account for them in the contract) when they agreed to the deal.

Gotta kinda agree with that. Your ability to walk away from the loan without recourse - that ability was agreed to and priced into the contract by the lender. If you are treating the loan as a recourse loan, you were paying too high of an interest rate.

It was the bank's money and the bank's responsibilty to accurately assess and price the risk. They could have protected themselves in any number of ways - requiring 20% down (or 30% for higher risk lenders), making sure that their appraisals were reasonable and accurate, charging higher interest rates, not making the loan at all, etc. (i.e., they could have and should have acted responsibly with their depositor's money). Their failure to do so is their own fault.

Gee, it really makes me feel good to know that the house and all of the improvements, along with a 18 acre stocked like, has no one else but me on the entire free and clear DEED!!!!

I agree with the others who say you walk away when you have no other recourse and it affects your ability to provide for your family.

Your friend has multiple properties so he needs to take the equity out of one where he has equity to dispose of the one he can no longer afford. That's the adult thing to do. Yes, the lender is also at fault because they signed up to this deal as well, but if they don't want to help thay are calling his bluff. He is the one with the most to lose.

+ 1

The lender doesn't have the "option" of changing the rate. It's determined by a very clearly spelled out set of rules before you even close the loan. On adjustment date, if the index plus margin are different than your current rate, it resets within the caps. There's nothing arbitrary about it. And since ARM are almost always cheaper than fixed rates, if you know you're only gonna be in a house a few years, why would you pay extra for a fixed?

I think what is is saying is he doesn't like a loan where the rate has the "ability" to change during the loan term. "Option" is used imprecisely. He doesn't want to undertake a payment obligation, when he does not know what the payment or interest rate will be a year from now, two years from now, etc.

But do you know for sure that you're only going to own a house for a few years?

Since houses go both up and down in value, being 100% positive you're going to be gone in, say, 5 years means that you are prepared to "walk away" (or bring money to the sale).