World's STUPIDEST "Smart Person" advice - Law Prof says walk from your mortgage

**Greebo** · 12-03-2009, 11:21 AM

Professor advises underwater homeowners to walk away from mortgages

Excerpt

White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.

"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, "one can have a good credit rating again -- meaning above 660 -- within two years after a foreclosure."

Better yet, homeowners can default "strategically": Buy all the major items they'll need for the next couple of years -- a new car, even a new house -- just before they pull the plug on their current mortgage lender.

Obviously this lawyer has no idea of the financials involved. Just WHAT does he think will happen if said "strategic" defaulter buys a new house and new cars and walks away from a house say, in Florida, and the bank sells it for 1/2 what the defaulter owed?

How will defaulter be doing so well when the courts grant the bank a garnishment for the hundreds of thousands of dollars the defaulter will win in the subsequent court case following the foreclosure?

What. A. FREAKING. MORON!!!

**SixxOfDiamonds** · 12-03-2009, 12:32 PM

Oh. My.

I pray that there isn't more of these "professionals" advising Americans. If there are, then we're much more doomed economically than I thought.

What happened to ethics?

**Greebo** · 12-03-2009, 12:35 PM

Well apparently AZ is a "non-recourse" state - which means in many cases, walking away from a first mortgage means NO penalty to the borrower (beyond the harm to the credit report of course), so I *can* see how an attorney might recommend this.

Honestly, however, if I were a lender in AZ, I'd stop being one until the laws were changed - if people start doing this habitually, AZ homeowners are screwed.

**SixxOfDiamonds** · 12-03-2009, 12:40 PM

Originally Posted by Greebo

Well apparently AZ is a "non-recourse" state - which means in many cases, walking away from a first mortgage means NO penalty to the borrower (beyond the harm to the credit report of course), so I *can* see how an attorney might recommend this.

Honestly, however, if I were a lender in AZ, I'd stop being one until the laws were changed - if people start doing this habitually, AZ homeowners are screwed.

Wow! I would really hate to live in Arizona. I still don't see how a person could walk away from a debt and not feel for the rest of their lives that they've stolen something.

I still don't see how an attorney could recommend it. Maybe say it's a last-ditch escape plan. But recommend it? No way.

**fixer** · 12-03-2009, 01:06 PM

And people wonder why mortgage lenders have tightened their requirements.

**akolb** · 12-03-2009, 01:22 PM

people like this are the reason that it has taken 6 WEEKS for an underwriter to decide if we can buy our house...and we still don't have an answer.

Main reason for us being a "high risk", my significant other has no debt...translation, no credit record. We were approved for an FHA loan up to 150k, found a house for 106k and have been fighting tooth and nail for 6 weeks to get an underwriter to "take a chance" on us.

Fingers crossed we won't be having to do a last minute move to a new rental :/

**Lora88** · 12-03-2009, 01:50 PM

I thought lawyers were officers of the court where is his ethics?

**Nishu** · 12-03-2009, 04:02 PM

I think he's right.

**Greebo** · 12-03-2009, 04:07 PM

Note to self: Never sign a contract with Nishu...

Its one thing if the borrower is in desperate times and can't afford the house (anymore or never could).

But if a borrower can afford the payment, I'm sorry if they were stupid enough to buy a house in a market they didn't understand and sign a lending agreement when they didn't understand it, but I absolutely don't agree with the idea of letting them walk away scott free.

And to do it strategically? To buy a NEW house and even cars, then walk away from the old mortgage? In such a circumstance, even in a non-recourse state, thats just theft. "Dear bank, you're out $100,000 cause of us, too bad, haha, bye".

Should the banks do modifications? Yes - they're stupid not to.

But stupidity on the part of the banks isn't justification for a complete vacation from ethics on the part of the borrower.

**Nishu** · 12-03-2009, 04:32 PM

Originally Posted by Greebo

Note to self: Never sign a contract with Nishu...

Its one thing if the borrower is in desperate times and can't afford the house (anymore or never could).

But if a borrower can afford the payment, I'm sorry if they were stupid enough to buy a house in a market they didn't understand and sign a lending agreement when they didn't understand it, but I absolutely don't agree with the idea of letting them walk away scott free.

And to do it strategically? To buy a NEW house and even cars, then walk away from the old mortgage? In such a circumstance, even in a non-recourse state, thats just theft. "Dear bank, you're out $100,000 cause of us, too bad, haha, bye".

Should the banks do modifications? Yes - they're stupid not to.

But stupidity on the part of the banks isn't justification for a complete vacation from ethics on the part of the borrower.

I don't really understand ethics I guess. Maybe I'm just an immoral person.

This is all part of the game. These banks have been fleecing the American public and making stupid investments for years and years now. It's time they paid the piper. Lenders are not tightening credit because a few people suck. They're tightening credit because they screwed up and got too loose with passing it out. Don't blame people in foreclosure for the fact that you want credit and can't have it. Save your money and improve your score.

An interesting point in the article (that has been missed, I guess) is that people aren't staying in these houses because it's the right thing to do. They're staying in these houses because of what basically boils down to peer pressure.

You keep your moral superiority and I'll keep my 100k.

**Nishu** · 12-03-2009, 04:38 PM

And typically, nonreligious folk like myself like to justify their moral values on how their actions affect other people. You can give me a ton of crap about how horrible it is that people would do that to a bank and how, in a round about, long term, convoluted way this will affect other people, but I can't say I care that much or that I even believe it. Not getting a loan if you want one is not the worst thing that can happen to a person. People who do this are probably going to be doing the world a favor. How long have we been complaining about the over use of credit?

**sabrelvssammy** · 12-03-2009, 05:12 PM

Originally Posted by Nishu

And typically, nonreligious folk like myself like to justify their moral values on how their actions affect other people. You can give me a ton of crap about how horrible it is that people would do that to a bank and how, in a round about, long term, convoluted way this will affect other people, but I can't say I care that much or that I even believe it. Not getting a loan if you want one is not the worst thing that can happen to a person. People who do this are probably going to be doing the world a favor. How long have we been complaining about the over use of credit?

so exactly what are your values nishu...? you've pretty much said in the 'pink glove thread'..." why can't we just let the cancer victims die...i am tired of hearing about them"....

over here...it's "screw the honest folks if they're dumb enough to be one....and for those that can get away with screwing the system (whether it screwed you first or not)...hurray for you"... obviously you are from the camp of '2 wrongs make a right'....and then you criticize another poster for trying to get a loan after making a few mistakes in the past and tell them they deserve what they got...

how on earth you can defend (even applaud) people walking away from their obligations tells alot about a person...

maybe you don't need to answer the original question...i think i just did it for you...no response necessary....

**Nishu** · 12-03-2009, 05:14 PM

Leave your drama in the other thread.

**Ms. Clear** · 12-03-2009, 05:25 PM

Well, I do question why some think that businesses are free to be immoral as they like and as dishonest, but individuals are held to a higher moral standard?

**sabrelvssammy** · 12-03-2009, 05:45 PM

Originally Posted by Ms. Clear

Well, I do question why some think that businesses are free to be immoral as they like and as dishonest, but individuals are held to a higher moral standard?

i could not agree with you more....but
i don't think its a matter of allowing the 'business' to be immoral...a business is nothing more than an 'entity' made up of individuals...
you have good people and you have dishonest people...and unfortunately the good people usually go down with the bad under no fault of their own....

but as i said to another poster...2 wrongs won't make a right....

a person can be responsible for themselves and their own actions but many times cannot be held accountable for the actions of their company..(unless you are one of these crazy overpaid execs we have all learned about lately...lol)....i don't for one minute agree with what the 'businesses' have done to people....

the bottom line is you have to sleep in your own bed at night...if you are comfortable with how you have behaved during the course of the day....then i guess it doesn't really matter....for me...i like to be able to sleep soundly at night....(and it didn't hurt having the difference between right and wrong pounded into me daily as a child growing up)....