The real naivety in the argument over walking away
I got some great responses to my post about underwater homeowners who walk away.
Not long ago, they would have been called “deadbeats’’ by some. Now they have a much more respectable name, “strategic defaulters.’’
But let’s put the moral question aside for a moment.
The cheerleaders for walking away like to pitch the idea as a hard-headed business move.
In a world where major corporations gin up their stock prices with layoff announcements, homeowners who do the math and walk away are simply protecting their own interests with the same, steely resolve, or so the argument goes.
After all, your credit report turns over every seven years. So it’s just a simple matter of doing the math and figuring whether it makes more financial sense to stay or go, or so the pro-walkers contend.
There’s no real financial disincentive to walking and moral arguments against it are “naïve,’’ writes “Tim,’’ who I quote below.
“Once a homeowner comes to believe that it will require 7 or more years of payments just to break even on a home, the seven year ding on the credit report isn't any deterrent at all. If the rent of a comparable dwelling is significantly less than that mortgage payment, then the difference can go straight into the pocket of the former homeowner … With loans spread across hundreds or thousands of individual creditors, what possible sense of social responsibility can there be? To give the global economy any more consideration than it gives you seems naive.”
Yet for all the talk of being hard headed, I argue it is the folks who think walking away is a relatively painless option are the ones guilty of being truly naïve.
For starters, read carefully this story on new research being done on “strategic defaulters.’’
This is not an academic study, but rather a survey of millions of files by credit bureau Experian and consulting firm Oliver Wyman.
Buried in the story is a section on the purpose of the research, which, you can be assured, is not just to gin up some interesting press coverage.
Rather, the Experian-Wyman report urges lenders and loan servicers to devise ways to detect in advance who is at risk for walking away.
Basically, lenders are onto to this.
But it’s also naïve to believe that in our increasingly data driven world that you can just walk away from your home and not have that explosive bit of data haunt you for years to come.
The market is saturated now with companies tracking foreclosures and finding all sorts of ways to profit from this data.
The days of the record of your foreclosure sitting unexamined and collecting dust in the county courthouse are long gone.
Will lenders be able to use that against you when, say a decade from now, you decide buying a home is once again a good idea?
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