Posted on Wednesday, January 11, 2012
I don’t like it Strategic Defaults personally. Of course deciding to “default strategically” is your own decision not mine. You make up your mind. I understand in the sometimes process bound world of banking some think it is the only way to get the bank’s attention. Some are upside down in their mortgage house and feel this is the best way out. I still don’t like it.
Maybe I feel this way because of my father the depression era banker who raised me or the wonderful example of a friend of mine who paid back millions to several banks from a prior business default although he had no legal options by that time to do so. Maybe it is the bunch of Habitat for Humanity homeowners I know who work so hard to stay in a safe affordable home and run a default rate less than 1% despite their poverty income levels.
Perhaps I feel this way because of the damage I saw caused by a couple in our neighborhood who just walked away leaving their fellow homeowner association members to foot a few bills.
I guess I am old school. Sign up for debt, put your reputation as well as your name on the document and you do all you can to pay it back.
In a recent article title “‘Strategic default’ poses ethical question” Florida Realtor reported “the growing number of strategic defaults across the country is alarming, particularly since many of homeowners can still afford their mortgage payments but choose to walk away anyway. In 2010, about 30 percent of mortgage defaults were from homeowners who could afford to make their payments – that’s up from 22 percent in 2009, according to a 2011 survey conducted by finance professors Paola Sapienza at Northwestern University and Luigi Zingales at the University of Chicago.”
I will also admit there is another side of this. The financial side. What if YOU were in a property worth less than your mortgage balance? What if the penalty for walking – in your mind – was less than the benefit of walking away? A tarnished credit record traded for a good financial deal. We are rational beings.
I guess I am old school. I just would not do it. What would you do?
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Mark Goebel, PA is a REALTOR with Coldwell Banker on 5th avenue in Naples, Florida with 35+ years of visiting and living in Naples. After 25 years at Accenture, Mark retired as a managing director and spends his time helping non profits and building a Naples real estate team with his wife Nan. Talk to Mark and Nan about life in Naples and why they chose this place to live full-time over all others and enjoy Naples real estate.
Mark Goebel, PA
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