Feel like sticking it to your mortgage lender by walking away? I have heard more than a few friends go into rants about how much they hate their banks and how the banks are all evil and “out to get you”. I’m sure you’ve been witness to this kind of anger. These people want to teach the banks and Wall Street a “lesson”.
People with these feelings may have already implemented the Turn and Burn strategy, where they walk away from their underwater homes, either to save money or to get revenge against their banks who “won’t work with them”.
It’s not a question of morality. I understand the anger. Most people don’t mean to get themselves in trouble, and the current trouble certainly did catch innocent people in the mortgage trap as well as people who should have known better.
However, while it might seem gratifying to imagine everyone underwater in their mortgage standing up via the movie Network and yell, “I’m mad as hell and I’m not going to take it anymore!”, in the end, walking away from your mortgage may cost all of us more than you think.
The reality is, if everyone walked away, our financial system (and probably the world’s) would go into a tail spin. What do you think led us to the current crisis?
Right now, the banking industry estimates there are over 15 million “underwater” mortgages in the country, or 23% of all loans. According to Marketwatch, the value of these loans equated to 3.4 trillion dollars in August of 2009 – do you really think the banking system could stand to absorb another loss of this magnitude?
What kind of interest rate do you think you’d be paying for mortgages (if you could get a loan AND if there were any banks left) after this kind of disaster? Most likely, the 1981 rates of 17% or more. In addition, the housing market would devalue another 40%, putting even more people underwater. How’s that for sticking it to the banks?
I say that if you can afford your payments, stay in your home – even if it’s underwater. Imagine your home was worth what you owed on it – would you like it then? It’s all a matter of perspective. Eventually the value of your home will catch up (yes, really).
Are you stuck in an underwater mortgage? What are you planning to do?
Related posts:
- Lender Discrimination Protection: Know Your Rights as a Consumer You remain a consumer with rights even as you apply...
- I’m Not Paying my Mortgage – How Long Until I’m Evicted? With the unprecedented number of foreclosures happening at the moment,...
- Turn and Burn – a Highly Profitable Foreclosure Strategy The “turn and burn” a.k.a. “buy and bail” strategy –...
The banks have received over $ 9 trillion in tax payer bailouts, according to Bloomburg. It would take just a fraction of that to save the bad mortgages and the people who are paying 30% on their credit cards. Yes the global multinational banksters are evil and have destroyed our economy. People like David Rockefeller want to own everything and rule the world and they have taken over our government and they own our political leaders. If we still had a free market, a stronger more responsible bank would move in to fill the void of the too big to fail banks.
It’s time to audit the fed and throw these criminals in jail and get back to a free market instead of the corporatism that we now have thanks to the criminal banking cartel
Well said, Real Life. I wonder, if the banking system couldn’t afford to sustain a 3.4 trillion dollar loss (which, our government would never allow anyway – if everyone “walked away” from their upside down mortgages as the scenario says, the Fed would have more bailouts), then how can they afford to keep giving billions of dollars in bonuses to their executives? If their budgets were that tight, these big bonuses would be the first thing to go. I’m sorry, I think they have a lot more money than they lead on to have, and I don’t feel sorry for them one bit. They need to get a reality check and realize that their usary interest rates are only biting the very hand that is feeding them – the American consumer. I predict the entire financially industry is going to look very different in 3 years, especially after July 2010, than it does now.
The assumption the blog writer makes by silence is that the current system is sustainable. I disagree wholeheartedly with the assumption. The current system is corrupt and fatally flawed from its inception. I am deeply disappointed in Obama and the Democrats for not seizing the opportunity for fundamental monetary reform a year ago and fear that the chance to do so has passed. The reality is that this monetary pyramid scheme developed by the bankers WILL fail. The only thing in doubt is when. Who will be left destitute and who will abscond with most of the nation’s assets is the tug-of-war going on right now. Hard assets and commodities will be the only items worth anything. I say, “Take what you can homeowners or it will be taken from you!
I read my own comment and now wish that this site offered spellcheck.
I fixed it.
I feel that those who were dumb enough to sell investments based on us defaulting on the mortgages should be the ones bailing out all the banks. I would not buy a home for $600,000 if I am only making $70,000 a year.
Yes that is right…I was working in the Boston area and a realtor tried to sell me a duplex in the $600,000 range even after I told him I only made $70k at my job. I told him in my opinion that price should have a $6,000 a month mortgage and I was not interested.
Is a situation like this how all this housing bubble got started? Who determines how much a home is worth anyway? To me my home I have now is worth $1 Million dollers because my wife and I are happy there.