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I remember a couple years ago, real estate professionals were expressing they had just about seen it all in recent years. Some of us thought it might get better, but alas, subsequent action by those in power to create meaningful change, has mostly translated to too little – too late!
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In 2010, Zillow.com reported 31% of California’s homeowners were underwater. In other words, they owed more on their mortgages than the current value of their homes. In present day, February 2012, the percentages have continued to increase, with some cities and areas of California reporting percentages considerably higher.
Two years ago, Kurtis Ming of Sacramento's Channel 13/CW31 (CBS), showcased the dilemma many homeowners experience, in a segment titled, "Giving Up On Your Home."
The expose’ asked the important question, if you are underwater in your house, and even if you can afford it, should you stay on course - or walk away?
Ming’s article showcased an El Dorado County couple, who was able to afford their home, acquired in 2005, but had decided to walk away. They saw it as a business decision.
Increasingly, real estate professionals are hearing from folks, who decline to believe they have a moral obligation to pay mortgages. These individuals have seen a double standard for Main Street and Wall Street. Main Street has historically felt ethically bound to contractual promises, but Wall Street often fails to be bound by ethics, when seeking to minimize losses.
When Kurtis Ming first aired his story in 2010, the California Bankers Association released the following response:
"During the past few years as foreclosures have increased we have seen historic efforts by the government, financial services industry and consumer groups to help millions of borrowers stay in their homes. These foreclosure relief/mortgage modification programs are designed to help borrowers who have a willingness to stay in their home, yet are no longer able to make their monthly mortgage payment. These programs were not designed to help those borrowers who have the resources to pay their mortgage, yet find themselves owing more than the house is worth. Throughout, concerns have been expressed over the moral hazard resulting from efforts to keep borrowers in their homes. Establishing residential mortgage assistance programs is intended to create a safety net for borrowers and minimize the adverse consequences of foreclosures to the overall economy.
With respect to what you refer to as "responsible" borrowers, it is expected that those borrowers demonstrating an ability to make their payment would continue to do so according to the terms of the loan documents they signed. The bank released funds based on that agreement and a failure to honor that agreement jeopardizes shareholders whose investment is adversely affected when loans are not repaid. In general, principal reductions may be considered by banks on a case by case basis, where a number of factors are taken into consideration including a borrower's ability to pay." --Beth Mills, California Bankers Association
So here’s the question as we sit here today. For those of you who have eyed the housing landscape from the trenches - What are your feelings and thoughts concerning Kurtis Ming's report written in February 2010? Do you see any meaningful change in the trenches – or do things seem much the same!
Click the following link for the complete Kurtis Ming report titled, "Giving Up On Your Home" It is very worth reading! It could just as easily been written in February 2012, as February 2010.
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