Should you walk away when you're underwater?
Wednesday, May 19, 2010 at 10:13PM Last week, a friend mentioned a 60 Minutes segment about the mortgage industry that she thought I'd find interesting. It was about people who had bought homes during the housing boom, and now that their home's price had tanked, they were going to walk - even though they could still make the mortgage payments.
Click here if you'd like to take a look.
After I watched the video and read through the comments, I realized that I was rather conflicted about the situation. Which is odd for me, as I usually react to a situation promptly and without changing my mind either.
For example, I've always believed that if you've signed on the dotted line, that's it. During the past few years, especially pre-housing bust, I would read about people who had no idea what sort of mortgage they had (fixed- or adjustable-rate). All I could think was "WTF? What could they have been thinking? Didn't they realize that this isn't the same as buying a car, or boat, or new pair of Ferragamos?"
But on the other hand, you have plenty of people who acted in good faith when they bought their white elephants. These people hadn't been led astray by a mortgage brokers who were busy saying Wall Street Made Me Do It. The NPR show This American Life did a fascinating episode on this called The Giant Pool of Money.
Can anyone blame them for walking away from a bad investment - especially when plenty of banks have done, and will continue to do, the same thing? One woman made a pretty good point: it was like trying to bail the ocean with a bucket.
There was one point that Morley Safer, who is not aging well, didn't make. Which is that most properties' prices will go up again. Sooner or later. One simply has to look at other housing markets (Hong Kong is a good example) to see this.
For the time being, I'm going to try to stay put. The estranged husband will show up soon and has promised to help me with the renovations; while I'm suffering some angst about seeing him again after so long, I welcome the assistance. And if I ask him to leave, he'll leave.
Reader Comments (2)
I'm not sure about when it makes sense to walk away from a mortgage. I know I wouldn't think any less of a person who did so (unless, of course, they were a career scam artist of some sort).
I am sure that, as you say, Morley is not aging well.
My opinion of Morley is drawn upon a single encounter with him during college. He was giving a talk about some long-forgotten journalistic subject and he walked by me when we were departing. He was/is a walking advertisement for those Stop Smoking campaigns; he stank horribly of cigarettes.