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
19 Things You Should Never Buy at a Grocery Store
19 Things You Should Never Buy at a Grocery Store

These household necessities are overpriced at the grocery store. Get them cheaper at these places instead.

5 Medicare Mistakes to Avoid for a Healthy Retirement
5 Medicare Mistakes to Avoid for a Healthy Retirement

Medicare can be confusing. Beware these missteps — which can hike your costs.

Big-Ticket Things You Should Never Buy
Big-Ticket Things You Should Never Buy

In this week’s podcast: Are you wasting big money on these common purchases?

17 Home Maintenance Tasks That Save You Money
17 Home Maintenance Tasks That Save You Money

Here’s how to cut household costs and maintain your property’s value.

This Cellphone Carrier Has the Worst Network Quality, Customers Say
This Cellphone Carrier Has the Worst Network Quality, Customers Say

One major wireless provider stands out for the least reliable call, messaging and data services.

View this page without ads

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

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

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.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

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.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

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.