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Family decides to abandon their mortgage and just live in their house for free.

I'm plain speechless. And I know this is happening all over. But I think it's the attitude that irks me more than anything else. "Personal Responsibility? Who's he?"

Sinclair: We had to start making some hard choices, which included going into foreclosure on our house and kind of starting again. We're midway through the process, about a six to eight month process and we kind of have a plan of attack. If plan A doesn't work, we go to B, C and D.

Plan A is asking the mortgage company to lower the principle they owe on the house, something Fed chairman Ben Bernanke has suggested to the banking industry.

What the hell? I'm not even going to get into how stupid Bernanke is, because that's tangential, but this "idea" is nothing more than "We suggest you eat the cost." Great thinking, Ben.

These people make me about as sick as the Fed. Listen to some of these priceless quotations:

Sinclair: If they reduced our interest rate back to 4.25, we might be able to make the payments, but I don't think we're going to.
Vigeland: Now, why not?
Sinclair: We would do it if the equity was there, but in a case where we're already so behind... Imagine that for five years, say, we're gonna pay four grand a month and then we're just gonna be back up at what we bought the house for. We feel like we're throwing away money.

It's not the bank's fault that the equity isn't there. You made a bad investment. You (should) have to live with that.

Sinclair: I mean, you ask a good question. Is it really the right thing to do to let the mortgage companies take up the difference? That's a really tough ethical question.

NO. IT'S NOT. It is an absolutely simple ethical question! It might be a tough financial question (for them), but invoking ethics as to whether or not you should steal money from your bank? Really?

Vigeland: But you're not paying your mortgage. You're not paying the biggest obligation you have. How does that feel good?
Esmeralda: We already went through the guilt. This is really what we need to do, not what we wanted to do, but what we need to do.

Oh, ok, I misunderstood. They already "went through the guilt." Once you've rationalized a horrible mistake, it's ok to feel good about it. Feeling guilty is just as good as paying back your debts. I bought a car once with a stack of guilt.


( 16 comments — Leave a comment )
Apr. 16th, 2008 05:18 pm (UTC)
I agree with everything you just said.
Apr. 16th, 2008 06:26 pm (UTC)
I would argue that the mere proliferation of sub-prime and adjustable-rate mortgages (ignoring the ignorance of people who actually sign into them) is less ethical than any of your beef above.

The banks should've never made those loans available. It was a high-risk loan and, holy crap, the risk seems to be outpacing the reward.
Apr. 16th, 2008 07:20 pm (UTC)
Maybe the banks were unethical, but they certainly didn't do anything illegal. Is your argument that, because the banks were unethical, that makes it more ethical to accept their terms and short them?
Apr. 16th, 2008 07:27 pm (UTC)
I'm not sure what you mean by "accept their terms and short them", but I'll assume that you mean to accept the terms of defaulting on the mortgage and get out of paying whatever is left.

Is that correct?

If so, there's nothing unethical, IMO, in letting the bank keep the house (which, arguably, was their investment to begin with) and moving your shit into a new pad that you can afford.

IMO, that's a no-win situation. The banks keeps a house that it shouldn't have financed, so it technically hasn't lost much of anything, and the borrower takes a huge credit hit for biting off way more than they could chew.

That would end in lessons learned all around, as far as I can tell, and the bank isn't left to fight with people for money that they don't have.
Apr. 16th, 2008 07:37 pm (UTC)
Accepting their terms and shorting them means signing the paper that says you get $400,000 with which to buy a house, and you'll agree to pay back $400,000 (plus interest) in X number of years at this rate, and then bailing out once your investment depreciates.

If so, there's nothing unethical, IMO, in letting the bank keep the house (which, arguably, was their investment to begin with) and moving your shit into a new pad that you can afford.

I strongly disagree. The bank doesn't own the house. The family does. They own a $200,000 house, and have a $400,000 loan and, instead of finishing paying off the mortgage, they're just bailing on it, giving the $200,000 house back to the bank and calling it even.

If my house value falls, I can't just say I don't want it anymore and try to sell it back at the original price. Doesn't work that way.

IMO, that's a no-win situation. The banks keeps a house that it shouldn't have financed, so it technically hasn't lost much of anything, and the borrower takes a huge credit hit for biting off way more than they could chew.

No, the bank has lost the entire depreciated value of the house, and all the interest on their money that the family never paid. The family's credit is just ruined (and maybe just the father's).

Edited at 2008-04-16 07:38 pm (UTC)
Apr. 16th, 2008 07:40 pm (UTC)
Again ... the bank should've never made the loan. They knew the risks involved and they accepted them.

Arguably, they were more aware of the risks than the borrowers. Yet they still signed the loan and gave $400k to someone who, ultimately, they knew probably couldn't afford it.

Apr. 16th, 2008 07:50 pm (UTC)
There's no evidence that this was a sub-prime situation. These people might've had fine credit when they got this loan. They jumped out because the value went down.
Apr. 16th, 2008 07:58 pm (UTC)
I managed to completely miss that part. WTF?

Yeah, assuming that this isn't a sub-prime situation, this guy's nuts. In general, though, I stand by my comments above. :P
Apr. 16th, 2008 08:01 pm (UTC)
The sub-prime situation came up because everyone in their neighborhood defaulting is what caused their value to drop so suddenly.

If you ask me, buying a house in the area with the highest default rate in the nation was probably the stupidest risk.
Apr. 16th, 2008 07:04 pm (UTC)
Apr. 16th, 2008 07:07 pm (UTC)
oh and what really sucks now is that legit people who have no credit card debt can't get loans cause of everything going on...when a few years ago, they'd prolly let a newborn 'sign'!

i have several clients who are living happily in a debt free life, but are having trouble getting approved for a mortgage. :/

way to go ben! :P
Apr. 16th, 2008 07:22 pm (UTC)
So you're saying the banks are actually starting to realize that sub-prime loans are costing them money? Holycrap.
Apr. 19th, 2008 07:05 am (UTC)
I would like to point out that this couple has three small children.

It's fine to play fast and loose with your own finances...if you don't have any other responsibilities. Kids, for example.

A stoner friend once told me, "It's okay to screw up your life as long as your not responsible for anyone else's."

God, I'm a bleeding heart and that article made me angry. I'm on deferment for student loans--first financial hardship and now because I'm back in school. However,
1. Citibank knows that eventually I will be able to repay them.
2. I could not afford even the minimum payments. (I didn't ask, they told me that I couldn't.)
3. I didn't have the attitude of the Sinclairs, as evidenced below:

Sinclair: We went through months of being skinflints, because we knew that we were going into the red, so we didn't buy anything. All the sudden, we had a bank full of money and we're living rent-free, but we know that's not really our money.
Vigeland: How does that feel?
Esmeralda Sinclair: Great! Like he said, we were so tight with money...
Dan: It does feel great, because all the sudden, we feel like we have a little margin now where we can go out to dinner, get a babysitter...

I call shenanigans! I was great at being irresponsible, but "the man" kept telling me that I had to grow up! They didn't have to and they have dependent minors! How do I get the same deferment they got?!
Apr. 19th, 2008 04:25 pm (UTC)
It might be late, but just a) get a mortgage, b) don't pay it. The banks are just so backed up with those that it'll take forever for them to get around to foreclosing on you.
Apr. 20th, 2008 06:43 am (UTC)
I dunno....

Jack freaked out the last time I accrued an enormous amount of debt using his SSN.

How long would forever be? Because perhaps spending time in our new McMansion could soften the blow of leaving it. Years or months?

Apr. 20th, 2008 03:58 pm (UTC)
I was kinda jokin.. lol
( 16 comments — Leave a comment )

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