Waking up to a new housing reality

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My partners and I are a little jaded when it comes to strategic defaults.

Nowhere in our early careers – or even more than five years ago – could we have imagined the sea change in housing that has happened. To think that people would wake up one morning and simply decide to stop paying their mortgage and willfully walk away from their houses? Unimaginable.

Except that’s what has happened.

There has been a major attitude shift in America regarding our long-held dream of homeownership. I grew up with the Great American Dream including a beautiful house that led to a bigger, more beautiful house where my children and eventually, grandchildren, would come for holidays.

It was the move-up and move-up-again trajectory we all were raised on.

So when the crisis began to unfurl – one that we weren’t surprised by, given how crazily property values skyrocketed out of breathable range and how many people we knew who took on loans they couldn’t possibly sustain – we still didn’t think it would come to this.

I still wouldn’t have bet that people would just decide – like choosing a pair of pants to wear or whether to have cream in your coffee – to stop paying their mortgages.

And without that vision, how could our industry have possibly planned for strategic default? It wasn’t even a concept. We could not have laid the groundwork for a what-if we didn’t even envision happening.  There wasn’t even an economist around making absurd predictions on the business news circuit.

That’s why we’re stuck in the mud today.

It’s spun badly out of control and now it’s acceptable (in some circles, I still hold tight to my integrity) for some people to admit that they choose not to pay back a loan they agreed to, even though they can afford to make the payments.  I cringe every time I hear stories of people saying, “We’re just giving our house back to the bank.”  As if their lender had given them a home to begin with.

Don’t get me started.

What will it take to get our society back on track, to establish a pervasive ethic of caring once again?

I believe this sea change of perspective on home ownership goes much deeper than simply not caring about one’s financial record. It signals something far more unhinged. To not even try to protect one’s home, to have no pride whatsoever in the place one resides, to have no interest in building a home but rather, dwelling temporarily and moving on, consistently, it’s just not American.

This country was founded on freedom to roam, yes, but also on establishing new frontiers and putting down roots in uncharted land. If we don’t care enough to protect our homes, what’s next? We stop paying other bills, we stop working, we stop contributing to society, and we stop caring about one another.

Sounds like anarchy to me. This is a very slippery slope and one we want to shore up as quickly as we can.

For starters, the industry needs to effectively and deliberately pursue deficiency judgments wherever it is legal.  It has to cost a strategic defaulter way more than a hit to their credit score in order to deter others contemplating the same decision.

I am personally appalled when a borrower with the ability to pay their loan is offered $20,000 or more to move out of their home.  I’ve seen it first-hand.

Rather than listening to someone boast about their financial windfall (after not paying their monthly payment for over a year), I’d much rather be hearing about how financially painful it was and how swiftly the bank moved to recover more of their losses; that walking away cost them more than they ever imagined.

I believe we do have an ethical, legal and moral obligation to pay our contractual obligations.  It’s the way I was raised.

There are certainly folks who cannot make their payments due to job or income loss.  I get it.  Remedies and workouts have been designed to help those in need wherever possible.

We need to keep underwater homeowners making their payments because a housing recovery depends on it.