Friday, February 11, 2011

"Strategic Default"

I'm cruising channels tonight, because I've watched all my shows on DVR, and it's just a little bit too early to go to bed on a Friday night, and I stumble upon "60 Minutes on CNBC". I click on the info bar on my remote and see that it has to do with the mortgage debacle. Intrigued, but knowing it's probably going to piss me off, I hit enter just in time for the opening of the segment.

The first couple lives in Arizona, in a newer subdivision with the requisite cherry-cabinet-stainless-steel-appliances-granite-counter tops kitchen and three bedroom/two bath wonderfulness. They bought it a couple of years ago for $250,000 and their financial situation has not changed since then. They recently tried to sell it but apparently they determined its current value at around $145,000.

The second couple bought a bungalow, also in Arizona, about three years ago for over $400,000. Again, financially they are just as sound as ever, but they discovered the current value of THEIR home is now about $85,000.

The common denominator? They both are "walking away" from their homes. They feel that, what with being so upside down in their properties, the most reasonable thing for them to do is walk away and let the banks foreclose.

Um. Hang on a minute here. Didn't you sign a promissory note to borrow the money for those houses? A contract, if you will? Sure you did. So tell me the thought process here again?

One day you've decided to house shop and you find the perfect house and it's fabulous and you simply must have it because it's just a great thing and turns out the price is right and you qualify for a mortgage loan and you've got the down payment and you have a great job and your kid grows up with a back yard and this is just fantastic all around. Then suddenly the bottom drops out of the market and everywhere you read and everything you hear on TV is all about how everyone is upside down and property values are spiraling into nothingness and oh my hell you owe $250,000 on a house worth $100,000 less than that. But you still have your job, and you probably have had a couple of raises since you bought it, and here's hoping you paid a little toward the principle just in the normal course of amortization. So, what, again? No real reason, you just decided you don't WANT it anymore? What the fuck kind of plan is that?

Here's the thing, kids. If I see a sweater at Macy's and I really like it and it makes me look tan and the price is reasonable enough so I buy it, but then two weeks later I'm cruising past the Goodwill and I see one just like it in a window for $45 less than I paid for it originally, guess what? I don't get my money back. I have to live with the fact that the price I paid for it when I paid for it was my decision, and I am responsible for the consequences. This is what happens - values increase, values decrease. Just because everyone in your neighborhood lost their homes which resulted in really bad comps for your home doesn't mean that you should get any kind of special treatment. You bought the house, you can still afford it, you either need to sell it and pay the difference in what is owed to the bank, or keep flipping living in it. Why do you have to move anyway? You just told Morley Safer you were still financially sound!

I'm so sick of this. I am so sick of the selfish, simple minded people who feel like just because somebody else "gets" to walk away from their mortgage, from their LEGALLY BINDING CONTRACT, from the CREDIT OBLIGATION, that they should be able to, too. Yes the unemployment rate is a nightmare anymore, I know, half my friends are facing just that dilemma. Why? Because the housing market is in the toilet because there is too much bank-owned inventory pouring in daily and banks are terrified to lend money to NEW buyers. Why shouldn't they be? I just saw on fucking "60 Minutes" that half of America doesn't NEED to go into foreclosure but they are doing it ANYway because they WANT to. Not because they NEED to, but because they WANT to. Sickening.

They called this phenomenon "strategic default" and it makes me sick. These two couples know that their credit will be shot, but on TV they say to the camera, that's okay, I'm making more money now that I don't have to pay that horrid house payment (that horrid payment you have NO PROBLEM paying, by the way), so I'll just pay cash for everything. Which will be great for you when you need credit in some way and can't put electricity in your new rental with out a deposit, for instance, or can't buy that new Wii at the Best Buy you have to have, you fucking sheep, because your buddy has it and that means you have to have it, too.

We give the banks a lot of shit for getting us in this mess we're in, and I'll give you that. I'll agree greed is a terrible thing when it comes to corporate America. But what about personal responsibility? What about being aware enough of the risks of owning a home? What about signing a contract and actually abiding by it? That's not the fault of the banks - that's the fault of our society saying we DESERVE granite counter tops, and we DESERVE a new car every two years, and we DESERVE a 55" flat screen TV. Entitlement. It makes me sick. These idiots do not realize they are not a part of the solution.

Talk about the fall of an empire. Strategic, indeed.


At 7:03 PM, February 12, 2011, Anonymous Anonymous said...

Keep preaching the gospel sister.


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