CNN recently reported about a trend emerging in real estate, specifically in the mortgage arena. As people find themselves "underwater" with mortgage loans, they are exploring all options, including "walking away" from the mortgage and the home, even if they are capable of paying the debt. Many homeowners who face negative equity as the result of the burst of the housing bubble believe they will fair better with a short term credit hit than by remaining in what has become a poor investment.
While the nature of this blog is to report trends, news and information and not to judge the merits of the information or practices on which we report, in this instance, I must address the ethical nature of this kind of practice. As with almost any purchase, there is a loss of value upon ownership. Goods, whether tools or vehicles, become "used" and are most often worth less (if you go sell them) than they cost you. Now and again, a piece of fine art or other purchase might see a gain in value. However, vehicles are a perfect example of something you purchase that loses value, especially initially. You do not "walk away" from a vehicle loan just because the car is worth less than the purchase price. While paying on a car loan, you have use of the vehicle. While paying on a mortgage, you have use of the property and home. Thus, if you can afford the payment, just because your home lost value, does not mean you should abandon it. There are extenuating circumstances that might necessitate this kind of decision, yet overall, if it is merely about whether you "want" to pay versus whether you can pay, you might want to consider the moral obligation.
Disclaimer: This blog is for informational purposes only and does not establish a client-attorney relationship. Consult with an attorney before taking action on any information found herein as individual circumstances may affect the applicability of information provided. Call The Law Office of Michael Riley at 508-405-0831 with any questions.
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