Website Says It’s OK to Walk Away – No It Isn’t

Photo (cc) by cogdogblog

I recently got an email press release from a website that specializes in helping homeowners with something known as a strategic default: walking away from a mortgage, even when you have the ability to pay.

Here’s an excerpt from that email:

They wouldn’t work with me at all, so they basically made the decision to take the property back.” – Jeff Horton (strategic defaulter)

(Website Name) client Jeff Horton opted to strategically default on both his primary and investment properties in Florida late last year. Horton’s property values had each decreased approximately $100K in equity. He has been living mortgage and rent-free for the last 13 months. After months of trying to work out a solution with his lender, rather than drown in Florida’s underwater housing market, he decided a strategic default was his best fiscal option. It was a business decision. Big lenders understand that if they can get away with paying only one person to sign up to 500 foreclosure papers a day they can make more profit. Cue the robo-signing foreclosure auditors.

Bank of America, JP Morgan Chase, and Ally’s greedy lack of oversight throughout the foreclosure process is reminiscent of their irresponsible lending practices in the early 2000’s. How can lenders question a strategic defaulter’s ethics when they themselves are breaking the law and cutting corners to make an extra dollar? Are these the same companies we directly deposit our paychecks with? Horton feels as though his lender gave him no choice.

Since all next week I’ll be presenting a series that agrees with part of what’s in this excerpt – namely that some big banks and the law firms they employed did display a greedy lack of foreclosure oversight – I want to make it clear just how vehemently I disagree with virtually everything else contained in this release.

When you borrow money and put up an asset as collateral, the value of that collateral is irrelevant when it comes to repaying the loan. If it weren’t, any person who takes out a new-car loan should feel justified in defaulting on it, since that collateral drops in value by 15-25 percent the instant it’s driven off the lot. For that matter, anyone whose house has depreciated in value since this crisis began could use that logic to justify a better deal from their lender.

If you owe $500,000 on a house that’s worth $200,000, and see no hope of ever getting back to even, the math could favor walking away. I can understand strategically defaulting – but I can’t understand how people like Jeff Horton, along with the author of this email, can in any way attempt to claim the moral high ground.

They wouldn’t work with me at all, so they basically made the decision to take the property backHorton feels as though his lender gave him no choice.” This is BS of the highest order. The lender isn’t under any legal or moral obligation to alter the terms of your original agreement just because the value of your collateral went south. If that were true, the same logic would justify the lender coming back to Jeff Horton and demanding a higher interest rate and/or a higher mortgage balance if the properties he purchased had radically increased in value.

“How can lenders question a strategic defaulter’s ethics when they themselves are breaking the law and cutting corners to make an extra dollar?” Lenders who broke the law probably can’t question a strategic defaulter’s ethics – but those of us who live up to our obligations and play by the rules can certainly question the ethics of both parties.

While it’s true that some banks have disgraced themselves yet again, pretending that these practices somehow justify defaulting on a loan you’re capable of paying is pathetic. Default if you must – like I said, I don’t blame you for that: it may well be the right thing to do. And if it helps you sleep at night, tell yourself it’s the bank’s fault for not “working with you.” But don’t try to pass that off on me.

I once let a stock broker friend of mine convince me that I should buy $30,000 worth of a company that ultimately went to zero – and it was money I could ill afford to lose. Did I blame him? You bet – at least at first. But after I thought about it, I realized that it was me who was at fault. I was the one who was so greedy that I carelessly acted on his stupid advice, and as a former broker myself, I should have known better. And guess what? Now I do.

You’re the one who bought a house and/or investment property at the top of the market. Time to man up, Jeff Horton.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Tricks to Cleaning Your Bathroom Faster
7 Tricks to Cleaning Your Bathroom Faster

These tips can get your bathroom sparkling with little time and no elbow grease.

14 Service Providers Most Likely to Lower Your Bill If You Ask
14 Service Providers Most Likely to Lower Your Bill If You Ask

With these companies, it might be easier than you think to negotiate your monthly bill down.

16 Affordable Products That Could Save Your Life
16 Affordable Products That Could Save Your Life

You’ll want to order these sometimes surprising products from Amazon ASAP.

10 Ways to Nail Savings on Your Remodeling Project
10 Ways to Nail Savings on Your Remodeling Project

Here’s how to save on your next remodeling project with discounted materials and more tips and tricks.

16 Products You Absolutely Do Not Need
16 Products You Absolutely Do Not Need

There are plenty of great ways to spend your money, but you can safely leave these products on the store shelf.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

The Next 5 Groups Who Will Get the COVID-19 Vaccine
The Next 5 Groups Who Will Get the COVID-19 Vaccine

The CDC has unveiled a schedule that likely will determine who gets the next doses.

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.