February 12, 2008

HousingPANIC Stupid Question of the Day

Is it immoral to walk away from your depreciating debt-trap and toxic mortgage? And your car? And your credit cards? And every loan you've ever taken out?

Because millions are doing it, and millions more are thinking about it...


Frank@Scottsdale-Sucks.com said...

"Is it immoral to walk away from your depreciating debt-trap and toxic mortgage?"


I propose a change to the credit laws - no 7-year limit on "walk-away" foreclosures - they stay on PERMANENTLY.

That'll learn 'em. Especially since these scumbags rely on credit bought crap for 100% of their self-worth and self-esteem.

Anonymous said...

No it's not...If you don't want it, don't pay for it. It's that simple. That's why the loan is collaterilazed. "If you don't pay, we take". I don't want thus I won't pay - you take it. Where does morality enter the question? I seriously enjoy watching bankers squirm and lose their jobs. In some odd way, I'm enjoying the melt down.

Blue_Tarp_101 said...

Is it immoral to become homeless?

Anonymous said...

I'd give my car back if it wouldn't destroy my credit and put me on the hook for the difference.

Its BS that FB get to walkaway and not have to pay a dime, but if you walk away from a car your taken to the cleaners.

drop the soap Im behind you said...

I like how the idiot executive from Bank of America(Mexico) was telling people to pay their credit cards, but not to pay their mortgages. What a stupid embecile, if you default on your mortgage, you will LOSE YOUR STUPID F*CKI*G CREDIT CARDS, IDIOTS! They will report to the credit bureaus, and your credit cards will get the report, and will cut off your credit line. These exec. are a bunch of morons with no real life experience.

Afterthought said...

Is it immoral for a business to go out of business?

Nobody even asks, because it is always the little guy who is supposed to be the sucker and get left holding the bag!

When you loan someone money you take a risk that they wont pay it back.

The option to walk away is allowed by law.

Anonymous said...

Yes if you can easily make payments and you still walk away its immoral


Debt is a form of slavery — ‘the borrower is a slave of the lender’ (Prov. 22:7). Instead of being bond-slaves of Jesus Christ, debt makes us slaves of Mammon: the god of money.

Jesus taught, ‘no one can serve two masters, either he will hate one and love the other, or he will be devoted to one and despise the other. You cannot serve God and Mammon.’ (Mat 6:24). Jesus follows this with, ‘Don’t worry about food or clothing — God will provide.’

Anonymous said...

Ask Casey Serin

to walk or not to walk said...

yes, if you're a housing gambler who made the wrong bet

no, if you really had a medical emergency, death in the family, force majeure type of event

Anonymous said...

Its no more or less immoral than the banks & brokers hawking all their toxic slime mortgage products. So just as there is no honor among thieves there is nothing immoral about walking away from a toxic loan that puts the loss on the corrupt banks, in fact its the best form of market JUSTICE I can think of!!!

Anonymous said...

Of course it is.

happy homeowner in the stix said...

Unless you can prove somewhere in the paperwork you signed that you don't have to pay the loan back if the asset depreciates, you have to pay the money back.

I have yet to see any loan paperwork anywhere that states that you can walk away without a penalty if you start losing money on your purchase. Anyone else ever seen a loan package that states such a thing?

Why are we even discussing this???

Oh, and btw, drop the soap....the reason he was telling people to pay the credit cards is because in bankruptcy, BofA would be lucky to get pennies on the dollar for each outstanding CC loan. He wants to at least get something on them.

And no....you don't lose your right to get credit. I still have trouble believing that my friends who went through bankruptcy were met practically at the courthouse steps after the proceedings by people trying to sign them up for new loans. (Yeah, yeah, I know why they were doing it....but it still seems like it is the same thing as giving heroin to a junkie...)

thomas jefferson said...

Uh no.
Just walk.
Credit cards are just unsecured loans. Such lending entails risk. Banks understand this.

Mortgages? I got nothing.

Just walk.

Anonymous said...

Hmmm... I have never signed a mortgage, what does it really say?

Does it say something to the effect that I promise to pay to the best of my abilities no matter what?

Or does it simply say that if I stop paying the bank will get the house?

DOPES said...

"GM won't say how many workers it hopes to shed, but under its new contract with the UAW, it will be able to replace up to 16,000 workers doing non-assembly jobs with new employees who will be paid half the old wage of $28 per hour."




goron said...

it might be immoral but has our behavior ever been directed by morality? in my opinion, moral talk only lives in our poems of faith.

i.e. companies like GM have been called "hollow shells for debt" since they simply keep borrowing to pay of old loans; and I really wonder if GM will ever pay off it's loans. and we've seen the government bails out industries like GM over and over again just to make people that these companies can actually pay off debt and are viable.

Tangelo Mozilo said...

Of course it's moral to walk away from your debt trap; that's one of the options open to you in the mortgage agreement!

However, it may be immoral to default on your credit cards, as those are typically not secured.

tangelo mozilo said...

P.S. it DOES make a difference that the mortgage loan is secured by the house.

That is, as a practical matter (and in Maryland and some other states, as a legal matter), the bank owns the house until you pay the balance of the mortgage.

Until then, you simply agree with the bank that if you pay the mortgage off on schedule, you will become the new owner of the house when all is said and done. If not, the bank will continue to own the house, but is not entitled to your principal payments until the mortgage is paid in full.

The option to walk away is baked into the cake. If the bank was so stupid as to make a bad deal, that is too bad for the bank. There will be a bagholder either way.

Ate-Up said...


What are u bringing to my BBQ? Keith ain't invited ya know...Blowfly is comin' and Andrew is bring Snappin' Turtle AND Armadillo!

Bring those three bleached blonde strippers, OK???

Anonymous said...

"Is it immoral to become homeless?"

Or do you mean loanless?

Anonymous said...

>> Jesus follows this with, ‘Don’t worry about food or clothing — God will provide.’

God seems to have forgotten about the starving bum I just passed on the sidewalk who was too busy defecating in his pants to say 'God Bless You' as I told him to fuck off.

Tanker said...

Letting people walk away from a bad decision creates tremendous moral hazard. I don't care if they lose the house (that they NEVER should have had in the first place), but they should have to pay back every dime that the bank loses. Their wages should be garnished.

They would have benefited if prices continued to rise and they should take a loss when they fall.

Same thing with credit cards. And I agree w/ Frank. It should be PERMANENTLY reflected on their credit reports.

yuckfu said...

Not immmoral at all. This is one of the reasons many immigrants came to America back in the day.

Our ancestors were tired of being thrown in debtor prisons for being unable to pay their debts.

Heck, our independence was just one long fight against the corporations that controlled the British empire at the time.

About as immoral as FOX News said...


It's no longer considered to be immoral to walk away from your mortgage.

And for any FAUX News watching idiots who want to climb up on their moral high horses, don't even bother.

ALL the major corporations lied to cash in on the housing bubble. All of them. And they're ALL writing off huge debts because of losses incurred from gambling too much.

So why is it immoral for the common Joe 6-pack to walk away from the loan that they were hooked into by the appeal of easy money, yet it's not immoral for the big corporations to do so?

Oh yeah, that's right. Being a wealthy person or corporation somehow gives you a moral imperative to do whatever you want in order to get ahead.

Shut up already! I bought a house in late 2004 in Kitsap County, Washington state, so am about to take a major reaming as housing prices go far below what I paid for it.

Stupid *^*&(^*^*&^( corporations!

Malcolm said...

It is not immoral to go broke and lose your house.

But if you are intentionally playing the system, not making payment in the hopes of sticking around until they physically kick you out; then yes, absolutely immoral.

Anonymous said...

IMO morality can only be determined by the true heart of the person walking away from the mortgage. We can't judge another, we can just assume and put words in mouths and intent in actions.

If someone walks away with a "so what" attitude, or does like the troll here that keeps posting that they took on a bunch of debt and then filed for bankruptcy, IMO that is immoral.

If someone got in way over their head and didn't really realize what they were signing, I guess they've gotta do what they've gotta do. It's part of the unfortunate weakening of the gene pool.

What blows me away is the cavalier way people do the former and admit it. You would think everyone in foreclosure would throw a pity party, but some people were deliberate and show no remorse.

Mark in Floriduh said...

It isn't only subprime borrowers who are doing this. Many prime borrowers are doing it too.

The subprimes are walking away because they took crappy loans for houses they couldn't afford in the first place. Now they simply don't have the money to pay the reset amount, even though they knew perfectly well that the rates were going to go up at some point.

Primes are walking away because they owe more than the house is currently worth and they can't sell it for enough to pay what they owe on the mortgage. They are getting tired of paying too much for a depreciating asset and have decided it is better to take the foreclosure hit for the short term and move on. Most believe it will be at least 7 years before the market returns to what they paid for the house and by then the foreclosure will be off of their record.

So who is more immoral? The greedy Subprimes who bought more house than their incomes allowed or the Primes who can afford their payments but either want to move and can't or who just think they are entitled to an asset that only appreciates?

Peter T said...

You cannot walk away from your HELOC debt without filing for bankruptcy, and that is good.

Russ DoGG said...

The January 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices


""Domestic respondents expect their banks to face several potential obstacles in undertaking these loss-mitigation strategies: Respondents anticipate difficulties in contacting borrowers, and they are concerned with borrowers’ reduced motivation to retain possession of their properties....

isn't as fun as HP bu more authoritative looking.


Russ DoGG said...

I like walking away idea= because it seems like it will have the least impact on the broader economy if those people can still buy stuff.

But hate the idea of tax $ bailing out the banks.The banks were so undercapitalized to begin with, that depositors can't get paid back without tax money.

Debtors prison for RE speculators (Casey Serin) has a certain appeal.... Can we throw in the realtors and mortgae brokers too?

Russ DoGG said...

Food for thought: question I asked "Bankrate" about defaults: I don't plan to default but I "plan" to sell for an unrealistically high price until I no longer "can afford" to pay the 2 mortgages..

Dr. Russ writes:

Could I ask a mortgage question about he opportunities to buy at
distressed prices? Ideas rehashed from the CBS news special house of
cards about borowers thinking about walking away from severely
underwater mortgages...

I was fascinated by seeing recent talk by "calculated risk" (is it a
"bubble blog"?) of the game contemplated by people walking away from
mortgages. After walking away from a mortgage your credit is trash, ad I
guess most of these unfortunate people move into apts. But I'd like to
ask- what if you move into a less expensive house that you bought
shortly before you stopped paying the mortgage on your expensive
underwater house? Could a national game of Musical houses may be next?

That's where you walk away from one overpriced house after you buy and
move into a foreclosed (or REO) property nearby for a lot less $$. Then
your neighbor can move into your foreclosed house doing the same thing,
and so on .

When the music stops playing everyone who actually wants to live there
has moved a short distance into a probably comparable house at a
fraction of their former house price / payment.

In the past apparently opportunities arose to do this in 'mill towns' or
'company towns' when a major negative employment event occurred causing
housing prices & demand to drop. and occur they did! Within the span of
a few years everyone shuffled into similar houses at a fraction of hte
previous price.

If you have a job, plan on staying, and are not generally dependent on
credit scores to finance cars, etc. then it may be worth the potentially
enormous savings if you have a large non-recourse underwater mortgage. I
guess you have to purchase the second home (at like 50% off) with a good
down payment (cash) prior to walking from the first. I don't know how
this can be pulled off (the details) but it has happened so i'm told.
Like a game of musical chairs.

Anybody know if there will be opportunity for home-debtors to do this
again in steeply-depressed priced markets? (040% declines) I have
excellent credit and a good down payment! But my house has declined in
value tremendously due to foreclosures in the neighborhood.

Thanks, Dr. Russ

The problem with playing musical houses is that it's against federal
law. I'm not saying that someone playing the game will be prosecuted.
They probably won't. Hardly anyone is prosecuted for mortgage fraud
unless it's to extract cash. People playing musical houses aren't trying
to extract cash; they're just trying to get a better deal on a house.
It's still illegal.

Here's why it's illegal: If you're applying for a mortgage, and you plan
to default on your current mortgage, that is a material fact that you
are legally obligated to disclose when you apply. Withholding a material
fact is deception, and it's just as illegal as lying on the loan

If an applicant *did* disclose the fact that he or she planned to
default on the current mortgage, the application would be denied. So no
one would be able to successfully argue that the deception made no

Holden Lewis
(561) 630-2400 x11338
11760 U.S. Highway 1
North Palm Beach, FL 33408
Read Mortgage Matters, the blog about mortgages and real estate:

Anonymous said...


FICO scores will have to be re-evaluated.

You have a 420 .... ahh that is a good score now! We'll take it.

National average is 245.....buy one get one free.

Plus you can always refinance, screw everybody else and move in with your n-laws/parents/transexual friend. You name it and Who cares...

Low FICO is IN!

Note: all the suckers that paid as scheduled....tough luck...nobody cares anymore.

Anonymous said...

Anon February 12, 2008 11:34 AM: "So just as there is no honor among thieves there is nothing immoral..."

Nice try at logic. What you are saying is because #1) someone else is a thief, and #2) because there is no honor among thieves, you #3) will become a thief. However, #2 is not established without #1 and #3 already being true.

All you have established is that you are a thief. Way to go! I suppose you do all kinds of nasty shit to people under the heading "Do unto others as they have done unto you" as opposed to the slightly different but correct "Do unto others as you would have done unto you"? I wouldn't be surprised...

Anonymous said...

Anon 4:33:
"God seems to have forgotten about the starving bum I just passed on the sidewalk who was too busy defecating in his pants to say 'God Bless You' as I told him to fuck off."

First, I call BS. Second, if you did have the balls, it figures you'd have to say it to someone who couldn't run you down and beat the piss out of you. Third, don't be a moron. The drunk gets what he deserves. I suppose you think people who jump out of building should be saved by God? Dumbass...

Anonymous said...

"Is it immoral to walk away from your depreciating debt-trap and toxic mortgage?"

I don't get this. Why is it any more immoral for an individual homebuyer to walk away from a mortgage than for a builder to walk away in the middle of building some new development? In both cases, it's just a smart business decision. Morality doesn't enter into it.

AmazingRuss said...

I'm starting to wish I had bought...even with the worst case scenario, these people end up with a good bit of free rent.

I don't really borrow money, so the credit rating hit would be fairly meaningless to me.

Ah well, live and learn. Next time some fool offers to lend me that kind of scratch with no penalty for screwing him, I'll be all over it.

ross said...

The loan is by definition secured by the mortgage (a lien on the property). If there is a breach of the loan terms, the mortgage makes the lender "whole." If the buyer breached, but kept the house, then you could say something about that being "immoral" or "unequitable." If the bank takes the home after default, neither party has cause to complain.

laureleaw said...

It's not immoral. Buying a house was marketed as an investment this decade, and investments are neither moral nor immoral. Is it immoral to quit pouring money into a losing investment? No. People make decisions all the time to cut their losses and leave the game.

Debtors who leave their houses are exercising the option that was provided to them in the mortgage contract. The banks simply did not price that option correctly when it set the interest rate and loan terms. It is the rare instance in our economy when the sheep have the opportunity to outwit the wolves.

That is why we are seeing the increasingly desperate "mortgage workout plans" being floated. "Please, please keep overpaying for your house! I'll even throw in free rent for a month!"

The debtors are weighing the hit to their FICO scores into their decisions. I agree that lower FICO scores will soon be acceptable, because the banks will still want to make loans in 3+ years when the dust settles.

It's also true that the 30 day foreclosure freeze is going to help the banks with their financial ratios. Otherwise I think some of them would be insolvent. The government is not eager to take over any large banks! Look for another freeze to come up in late May/early June.

ChicagoLoopy said...

Yes, it's immoral.

I made the mistake of buying during the boom and putting no money down on my mortgage; therefore, I will have to rectify my mistake by taking on a second job and waiting for a few years before selling. Pure and simple.

For those that believe it's not immoral - You probably blame the teachers when your lazy children fail a test too, right?


Paul E. Math said...

It's a simple contract - morals don't even enter into the discussion.

Anonymous said...

Walking away from your obligations isn't immoral. It is just a business decision. It's a shame that we are even talking about whether it is immoral or not; when corporations (i.e. like Chase, Bank of America, etc...) make such decisions, they do it based upon business decisions. So today, it is our turn to make "business decisions". If the shoe fits...

Anonymous said...

I think walking away is one of the smartest moves you can make!!!

Five years ago I was laid off and fell behind on some of my bills. Two years ago someone I know sent in the keys and just walked away from their house. Now guess who pays more for everything because of their credit rating, ME!!!!

Think I'm lying? Find someone who walked away a few years ago and ask them how their lives are going now. They will LAUGH and tell you life couldn't be better... plus they will be driving a nicer car and paying less interest than you!

That 7 year credit report scare tactic is nothing but B.S.

Anonymous said...

"Yes, it's immoral.

I made the mistake of buying during the boom and putting no money down on my mortgage; therefore, I will have to rectify my mistake by taking on a second job and waiting for a few years before selling. Pure and simple.

If you're being serious, then you are a fool, pure and simple.

Do you think the Bank ever thinks about morals? No.

A real man would admit his mistake, walk away, take the hit, and move on. A weak man will suffer with his mistake, and make his family suffer for his stupidity as well, while justifying it like you're on some kind of moral high ground. Wake up!

John said...

I was a student in the US for a few years, and a couple credit cards with about $30K limit. I always full and on time, and they were all cash back cards so I actually got something back.

I no longer live in the US. I'm tempted to max out all the cards and not pay a penny. I don't have any credit history to worry about, and if I'm lucky I'll never need to go to the US again. Immoral? I won't keep a penny of it and send all the money to charity. I think it's the right thing to do to stick it to the banks and the US.

What do yo think?

Anonymous said...


That is why in a sea of debt,crap,and darkness...


If Americans walk away from their debts, then foreigners WILL WALK AWAY FROM US DOLLARS BECAUSE AMERICA IS NO LONGER CREDITWORTHY!!

Anonymous said...

money and morality dont mix.
u think big boys on wall street keeping their high morals? BS
just walk away and stick it to the banks!

Drop the Soap Im right Behind you said...

Hey People: You think you are sticking it to somebody when you walk away? The banks will just take delivery of the real property, and you will end up losing money, or if you got a "no down" then you got a free rental at the expense of a few hundred fico points and a few judgments. You think you are sticking it in, but the banks don't care, they win in the end.