We’ve been hearing tales of suburban McGhost-Towns that were submerged by a tidal wave of foreclosures at the height of the subprime meltdown and are now just sitting there, the lawns turning brown one by one.
Tess Vigeland from Marketplace Money found one of these mythical towns and interviewed some of the residents. With so many houses standing empty, one of the few remaining families has decided to stop paying their mortgage. You might expect tears, but the Sinclairs say it feels “great” to be living rent free with a “bank full of money”:
Sinclair: If they reduced our interest rate back to 4.25, we might be able to make the payments, but I don’t think we’re going to.
Vigeland: Now, why not?
Sinclair: We would do it if the equity was there, but in a case where we’re already so behind… Imagine that for five years, say, we’re gonna pay four grand a month and then we’re just gonna be back up at what we bought the house for. We feel like we’re throwing away money.
The Sinclairs say they want to take responsibility for their debts, but right now it makes more financial sense not to.
Sinclair: I mean, you ask a good question. Is it really the right thing to do to let the mortgage companies take up the difference? That’s a really tough ethical question.
Dan says he experienced the various stages of grief, including denial and anger. Now he’s just relieved.
Sinclair: We went through months of being skinflints, because we knew that we were going into the red, so we didn’t buy anything. All the sudden, we had a bank full of money and we’re living rent-free, but we know that’s not really our money.
Vigeland: How does that feel?
Esmeralda Sinclair: Great! Like he said, we were so tight with money…
Dan: It does feel great, because all the sudden, we feel like we have a little margin now where we can go out to dinner, get a babysitter…
Vigeland: But you’re not paying your mortgage. You’re not paying the biggest obligation you have. How does that feel good?
Esmeralda: We already went through the guilt. This is really what we need to do, not what we wanted to do, but what we need to do.
Isn’t that something.
Ghost Town USA [Marketplace Money]
(Photo:Tess Vigeland)
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“We went through months of being skinflints”
Maybe if they had lived that way to begin with, none of this would have happened. It amazes me the number of people who refuse to live within their means.
@wild_bill:
Dead on, wild-bill.
When I bought my home 7 years ago, I was “prequalified” for about $60,000 more than the home I actually bought- and that was with a fixed mortgage. I looked at what I was making, and decided that topping out my approved loan would leave me vulnerable in the future- so I opted to scale down.
I probably could have taken out an ARM and bought a considerably nicer house than the one I’m in, with a pool, a couple of extra rooms and all kinds of luxuries. However, common sense told me that if I couldn’t afford it now, I sure as hell wouldn’t be able to afford it when the ADJUSTABLE mortgage, well, ADJUSTED.
When people set themselves up to fall, I’ll be damned if I feel sorry for them when they do.
@wdnobile: Well, it boggles the mind that people would buy a house with an ARM at the BOTTOM of the rate curve. When I bought my first house in 1993, mortgage rates were quite high. I bought with an ARM and it adjusted downward every year for several years and when I thought rates were as low as they were going to get, I refinanced with a fixed. Rates actually went up for a while after I did the refi, then went down MORE, but I was happy with my fixed rate. *THAT* is when an ARM makes sense, either when you’re going to be in a place less time than the initial fixed period, or when rates are historically high.
I stated it earlier and it bears repeating: if they feel it’s best for them to stop paying their mortgage, that’s fine. No problem. The problem is that they need to find an apartment and move out. They’re now squatters on a property they have no intention of paying for.
@WraithSama:
No way. That is bad for the bank. Once they move out the bank will be responsible for maintaining the property. If the bank can’t meet the obligation they may foreclose but not repossess. That would leave the home owners responsible for the tax and up keep of a home they no longer live in or near.
It is far better that they stay there until they are relieved of their tax and maintenance obligations by the court.
Techguy: You are correct. Unless they file BK, in which case the Trustee takes responsibility for the property on the filing day.
@beavis88: Debtors prison sounds appropriate. Plus their children should be put up for adoption. Nothing worse than a new generation of fucking deadbeats who think it’s cute to not pay your bills and “feel “great” to be living rent free with a “bank full of money”" like these assholes are. I’ll bet their cell phone bills are big too (yet get paid on time every time). Deadbeats.
wtf. Seriously. It makes financial sense to sell drugs out of my car or to drive down to the Walgreens and crash through the door and take off with the ATM, but I don’t do it! Ugh.
@Eyebrows McGee:
Well, since getting through law school and the bar exam in two states and handling a bunch of contracts cases means that I might have a little understanding of how contracts work, let me try explaining it to you: these people are choosing to breach, which is their perfect right. Corporations do it EVERY DAY, with full intention. If the deal works, they’re happy; if not, they breach, take their lumps, and walk away.
Every contracts law casebook in the country has one or more cases dealing with exactly this situation, voluntary breach that makes economic sense for the breacher — the rule is that the other party should be made whole, no more. There’s no punitives for this, because voluntary breach is an inherent part of contracting.
The idea that these people should impoverish themselves to keep feeding the beast at the other end is simply nonsense. As long as they leave the house in good condition (and without trashing it) when they are foreclosed, they’re just doing what any financial entity would do–make the best financial decision for themselves in light of the new circumstances.
@Me: My credit rating has been checked for employment but then most employers here think every job seeker here is a deadbeat drug addicted illegal alien criminal anyway. Not all but enough I guess.