What Do the Experts Say?
Morality and Ethics
Voluntarily defaulting on a mortgage is not immoral or unethical. Ethics
should not enter into your decision concerning whether or not to strategically default.
Law Professor Brent White of the University of Arizona puts it simply in
his academic paper entitled
Underwater and Not Walking Away: Shame, Fear and the Social Management
of the Housing Crisis -- Morality and emotions have no place in one’s decision to strategically
default on a mortgage. Forget about shame and guilt -- Professor White
says -- Don’t worry about your credit score. If you owe more than
your home is worth, stop paying your mortgage and walk away.
“Underwater homeowners aren’t knowingly making bad financial
decisions; they just can’t cognitively grasp that they would be
better off if they walked away from their mortgages,” he writes.
“Most underwater homeowners don’t default as a result of two
emotional forces: 1) the desire to avoid the shame or guilt associated
with foreclosure; and 2) fear over the perceived consequences of foreclosure
-- consequences that are much less severe than most homeowners have been
led to believe.”
Yale professor and economist Robert Shiller is concerned that the housing
market may not recover for at least 50 years. Professor Shiller is probably
best known for helping create the Standard & Poor's/Case Shiller
index, a widely-followed measure of housing prices,
"It can get big as it was again maybe in 50 years. This housing bubble
was a once-in-a-lifetime thing, I imagine," Shiller said. "Although,
you know, the market might be more volatile, so the future is always unknown."
To make his case, Shiller noted how the investing culture has changed over
the years, thereby greatly affecting the housing market.
"50 years ago, hardly anyone thought of houses as investments, but
now, people are focused on it like never before," Shiller said, adding
that homebuilding was so rampant in markets like Florida, it quickly drove
up home prices to where one could see the bubble forming very early on.
"The funny thing about this recent experience is it became so nationwide.
Housing markets aren't supposed to be correlated all over the country
like that. It was a rare phenomenon."
Going forward, though, Shiller doesn't expect history to repeat itself
anytime soon, if ever.
This is bad news for Florida property owners, many of whom owe much more
to the bank than their houses are worth. As the economy continues to deteriorate,
many Florida owners are choosing to walk away from their underwater mortgages
by engaging in strategic mortgage default.
What Should You Do Next?
What should you do if you are one of the millions of Americans who owe
more to the bank than your home or property is worth? Call me for a free
telephone consultation today. No office visit is required. I will evaluate
your individual situation and discuss your options. I handle cases in
all Florida counties. Call me today at 800-915-3923. I'm here to help.