This morning, I heard from a reader on yesterday’s post about the quandary underwater homeowners face in walking away from their mortgages. I was trying to find a couple of paragraphs to quote to share with you but I can’t choose; it’s written quite compellingly.

So here’s the whole note:

I bought an income property in late 2004, and it has been a huge financial drain ($60K and running!) because it had major structural problems the inspector didn’t catch. We would be hard-pressed to sell it for what we owe the bank, and rents from the three units fall slightly short of covering mortgage/tax — and way short of covering all the other expenses involved in a rental property.

At times, I fantasize that — instead of doing all the repairs when the problems surfaced just a few months after we purchased the property — we had walked away from it and just taken the hit to our credit for seven years. It was 100 percent financed, so basically, we would have lost the $5,000 deposit and about $10,000 in cosmetic upgrades we did early on.

But there was something that made us completely deplete our savings — and then some — to do these repairs instead of walking away. It’s called honor. We signed a contract and made a commitment to pay our mortgage. Just because things didn’t turn out so well, you can’t just walk away if there’s an alternative that allows you to honor your obligations.

It’s troubling to me that people have so little shame — and so little sense of obligation toward their neighbors and their commitments — that they would just throw up their hands and not make their best efforts to do what they said they would.

There are repercussions to foreclosure beyond your own credit. Foreclosure is bad for the whole neighborhood. It reduces the chances your neighbor will be able to save his own house through refinancing because it pulls down property values. Really, it’s bad for the whole economy for people to have this cavalier attitude toward mortgages.

A mortgage should remain a big deal in people’s minds because they are a big deal. Property ownership is a huge responsibility — and not just financial. There’s also a tacit commitment to the neighboring property owners.

I know the mortgage brokers and banks acted totally short-sighted and sleazy. My broker flat-out LIED about the terms of the loan, and the docs were confusing. When I asked questions, I got fed a lot of bull. There are a lot of helpful required disclosures that you don’t see until you’re in the escrow office signing the loan docs, and by that time it’s almost like there is a gun to your head.

They might deserve what they get, but two wrongs won’t make a right; they add up to something even worse than the sum of their parts.

I hate this property with every fiber of my being. I hate being a landlord. I hate my whiny, irresponsible tenants. I hate that part income from my day-job goes into its upkeep and to cover the mortgage each month instead of into my kids’ college fund. I wish more than anything that I could walk away from this place and relegate it to memory (or rather, try to forget it).

Yet, I still think I got myself into this mess, and it’s my duty to honor my obligations if it’s possible to do so — even if that involves some hardship.

I guess I’m just old-fashioned.

What do you think? Is this an old-fashioned perspective? Is there enough anti-lender sentiment out there that most of society will justify walking away from a mortgage? Let’s keep talking about this. Click my name below to send me an e-mail.


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