One thing about Big Shitpile that seems to have gone under the radar is the potential for--and, increasingly, the reality of--debtor revolt. That is, people who owe more than their home is worth refuse to pay without a renegotiated mortgage. Sean Broderick thinks that "a debtor's revolt is going to be one of the defining trends for 2010", and recounts this episode:
Two years later, Adam's $450,000 Loxahatchee House was worth only $189,000. And he couldn't find a renter for his home in Lake Worth. He tried working with the bank (one bank had given him mortgages on both properties), but they refused to budge on the amount he owed on either home or the terms of the mortgage.So, Adam stopped paying both mortgages. He piled the money he saved up, figuring that if he lost both houses, at least he'd have a cushion of cash for a rental. The furious bankers threatened to foreclose. Adam said: "Go ahead."
Months went by. Then the bankers came to him with a new deal. They offered him "a lot" of forgiveness on both loans, and the interest rate on the Loxahatchee home dropped to 2.9%....
He had to be willing to walk away from everything. I would not be able to sleep at night doing what he did. But obviously more people are doing it - they feel no moral obligation to continue paying a mortgage that isn't working for them. And why should they? Wall Street is doing the same darned thing ...
A mortgage is a business deal that is complicated by emotional attachments to the notion of 'home.' Of course you have to be willing to walk away, otherwise they won't take you seriously--that's Negotiation 101.
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I'm surprised the originating bank still had the paper on those mortgages.
If your bank has bundled your mortgage and sold it, then it is well worth demanding the current claimant to the lien prove that "he" does, in fact, hold the lien. A lot of short cuts were taken in the secondary market frenzy and the legal and documentation niceties were sometimes overlooked.
Some may end up owning their residence by default.
Oops...sorry. I hadn't read your first link until after I commented. You made the point so much better.
Corporations default on secured loans every fucking day simply as a business judgment, and no one says jack fuck about it being some sort of "moral failure". And they threaten to default to renegotiate eleventeen fuckjillion times a day. Moralizing about home-owners defaulting on mortgages or threatening to default is nothing but corporate plutocrat propaganda.
Reading a contract and abiding by it? What's the world coming to?
Defaulting on a secured loan *is* "abiding" by the contract.
I agree that this sounds like a good strategy. Also making a stand for a better, fairer society in which individual's power is balanced against that of corporations seems like one of the most honorable and moral acts I can think of. The actions you're discussing seem as though they would support the greater good. Well done to the people who have the nerve to do it.
This form of 'debtor revolt' should definitely BE ENCOURAGED. Continuing to pay on a mortgage when your home is severly "underwater" is allowing one's self to be played for a sucker by the loan originator/martgage banker/ inverstment banker/ K-street banker lobbyist/ Congressional oligopoly. (I know, I run-on shamelessly sometimes. -- But I'm sure you get the point.)
Much of the ability of the "top 1%" to continue to amass wealth at the expense of society in general depends on everyone (except them) following the rules.
Paying of a mortgage has never been a "moral obligation." As you have so rightly pointed out: a mortgage is a CONTRACT. It is not a covenant with God.
Once again, HOME OWNERS SHOULD BE ENCOURAGED TO TAKE ADVANTAGE OF THOSE CLAUSES OF THE CONTRACT WHICH MOST BENEFIT THEM.
And, perhaps, if enough families shove these contracts up bankers' asses, the banking community may allow Congress to address the problem of foreclosures with a something like a Home Owners' Loan Corporation (as in FDR's New Deal).
The problem with encouraging this kind of debtor revolt is that Congress isn't going to let the banks take a big hit on this because they would argue, it would tank our economy even further.
So I end up paying to bailout Wall Street and my idiot neighbor. And I'm no where near the top 1% of american wealth, I'm a civil servant who rents. I rent because I live in a place with an over inflated real estate market and was smart enough not to take a loan I couldn't pay back on an over priced asset.
Somebody has to suck it up and take responsibility. I'm tired of it being me. Sometimes people need to pay for making stupid choices.