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This morning I sipped my coffee and watched Matt Lauer anchor a story on “strategic foreclosure”. As soon as I heard those words, I knew we (yes, literally you and me) were in trouble. As the story goes, of course, a middle income family buys a home at the top of the market only to see its value dip during the downturn. While, admittedly they can afford to make their payments, they are making a simple business decision to walk away from their mortgage. “Hey – it’s just a business decision. We bought something, we can afford the payments, but it’s not worth what it used to be, so why wait for the equity to build over time? Let’s just dump our little problem on someone else (we’d like to think it’s those big, Cadillac-driving, cigar-smoking bankers…but it’s really you and me again). And then the Today show brings on the financial expert to tell us that while you’re credit score is going to take a hit, there are all these ways to creatively rebuild your score quickly, so it’s really won’t be that devastating after all. And I’m guessing those same people who are walking away from their mortgage had no trouble taking the mortgage deduction off their taxes when they were making their payments, and will no undoubtedly petition their accountant to find a way to take their “loss” off their taxes as well. So the impact grows and grows.
Does anyone else have that sick feeling in the pit of their stomachs? We want housing to recover, which will help drag the economy into recovery (especially in the jobs sector) and we’re now getting advice from a major media outlet on how to get rid of that pesky little problem called our mortgage payment? What’s next? Those Jimmy Choo’s I overpaid for and have worn a few times, they just aren’t exactly what I’d hoped for, so I think I’ll walk away from my credit card debt? I bought a car last month, then I found out it dropped in value as soon as I drove it off the lot. Hey, GM, it’s sitting in my driveway. Come and get it!!
The very heart of the housing problem started with people who bought a home for the wrong reasons (short term investment gain), and took a mortgage they knew they couldn’t afford if their home didn’t continue to gain in value at 10% – 20%/year. The very definitiion of irresponsiblity. And now, to add to that bad decision, they think it’s okay to just walk away from their debt because it’s “a strategic business decision”.
Foreclosure is a terrible thing. My heart breaks for those good, hard-working, honest people who have lost their jobs and now face losing the home in which they were raising their families. Let’s not denigrate their pain and flippantly add to our collective economic woes by taking the easy (my new synonym for “strategic”) way out.
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