Most wrestle with their conscious or sense of morality when choosing to default on a mortgage that they can afford to pay. For the most part, the thought process is that the loan contract that was signed is a responsibility and an agreement that must be fulfilled. However, as the days and months pass, a lot of homeowners continue to lose equity, especially those who purchased no later than 2005. Back in 2005, if you purchased a condo for $350K in Long Beach, CA, it was considered a steal! Now you are fortunate if you can sell it for $200K. $150K has disappeared into thin air, yet you are holding the note that says you still have to pay.
Should banks be responsible to write down loans to the true values of such properties? Banks will not run out of cash flow as long as the Federal Reserve exists. Did you know that banks get to keep any profit they make and all their losses are passed on to consumers in the form of inflation? This happens when the Federal Reserve prints more money to buy back bad mortgages!
Ultimately, why do some choose to default while most keep on paying for properties that are worth a fraction of what they owe? Do some make decision based on how others will perceive them? Your neighbors certainly aren’t going to pay for your mortgage and probably are not going to ostracize you either based on your financial decisions. Decision on financial matters should be based on what is best for your family.
There are consequences involved, whether one chooses to let go or not. At the end of the day, only you will live with those consequences. These types of issues are therefore very personal in nature and should be deliberated fully before a decision is taken.
By Sharon G.