Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis

[Robb]

http://brokerexecutives.com/wordpress/law-professor-to-home-owners-walk-away-from-your-mortgage/

Brent T. White, an associate professor of law at the University of Arizona, has a different perspective: “Homeowners should be walking away in droves,” he writes entitled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.” (PDF link to the full paper.)

Mr. White says. “Fear, shame and guilt also are preventing rational decisions, he believes. And, he says, those “emotional constraints” are encouraged by politicians and bankers, who ruthlessly and amorally follow their own economic interests while telling Joe Soggy Homeowner he has a moral duty to pay his debt so long as he possibly can.” At the same time, there is still a stigma that comes with failing to pay bills. “Nobody wants to be identified as a deadbeat,” Mr. White writes, and a high credit score can be seen as a sign of moral fiber.

Mr White wants to amend the Fair Credit Reporting Act to bar lenders from reporting mortgage defaults to credit bureaus. The chances of this are very slim but the more people foreclosing the better the chances of an amendment happening.

[Robb]

1. Wanted to add the abstract from the paper itself:

(emphasis mine)

Abstract

Contrary to reports that homeowners are increasingly
“walking away” from their mortgages, most homeowners continue
to make their payments even when they are significantly
underwater. This article suggests that most homeowners do not
strategically default as a result of two emotional forces: 1) the
desire to avoid the shame and guilt of foreclosure; and 2)
exaggerated anxiety over foreclosure’s perceived consequences.
Moreover, these emotional constraints are actively cultivated by
the government and other social control agents in order to induce
homeowners to ignore market and legal norms under which
strategic default might not only be a viable option, but also the
wisest financial decision. Unlike lenders, individual homeowners
have thus generally not acted to minimize their losses and have
born a disproportionate share of the burden from the housing
collapse.

[hobbit709]

2. Sometimes you have to cut your losses and walk away from the game.

[DBoon]

4. the mortgage lenders know this

and have no shame about "strategic" default and bankruptcy

It's just another business decision to them, just another profit-maximizing strategy

Homeowners, however are supposed to just eat it up

[Craftsman]

3. Once the inflation really kicks in you will see them run away

When you have to choose between your mortgage and your kids eating it is a no brainer

[AtheistCrusader]

5. In that vein

who else is stockpiling basic staples like flour, sugar, corn meal, etc?

Even a 3-9 month spike in inflation is going to make paying that mortgage an interesting proposition for a lot of people I know.

[PassingFair]

6. I know a LOT of people doing the "jingle mail"...

and I know even MORE who are/have going/gone through
bankruptcy in the past year.

I'm starting to feel left out.

[hopewell]

7. Written by Someone Who Has Never Faced Foreclosure

How about this country standing up to the predatory lending practices by the Banks and demanding that Washington really regulate the situation???


Sign our Petition to the Government Here:

http://www.petition2congress.com/2/2564

[pokercat999]

8. My sister bought half a duplex and her married son bought

the other half a several years ago in Florida. This was a 120k property in an awful neighborhood with drug and gang activity everywhere. Her mortgage payments were about 350 a month she got some type of local govt assistance with the down payment, she could handle expenses with SS and a job at Wal-mart (she will be 70 on Nov 7th and is still working). Yesterday while wishing her a happy birthday we were talking and I found out her payments have shot up to over $1000 per month even as the "value" of the property has fallen dramatically. She told me she had refinanced to pay off the car and get a new roof on the house and make some other repairs. I told her at this point she was crazy to stay there as there are beautiful houses to rent in much safer areas for much less than she is paying. She is a devout RW fundie Christian that buys anything put out by her fundie church and I'm sure she would consider it a "sin" to walk away. I encouraged her to do just that, explaining that the contract was between her and the bank, not her, the bank and god and that in defaulting the bank would (maybe) do the right thing and repo the house which was why you had a freaking CONTRACT in the first place. It's purpose is to explain what happens when either party doesn't uphold their side or terms of the contract, the other party has legal, not moral, recourse. I didn't want to upset her so I didn't press too hard....it just upset the snot right out of me though. After her birthday I will call again and see if I can help her get out of the hell she is stuck in. I need to know if Florida is a recourse state (I don't think so but I gotta check), if not, my recommendation is going to be to default and stay in the house as long as the bank permits which maybe up to two years or more. The house and neighborhood is so bad the bank may actually do a walk away and leave it to her. If not and they do foreclose she will have all those months of $1000 payments in the bank and a nice nest egg to get started over in a much nicer rental in a good neighborhood. Her son could probably buy her half of the duplex from the bank when it's an REO for next to nothing and rent it out for enough to cover more than half of the entire mortgage.

[happyslug]

9. I do NOT know if Florida permits "No recourse", most states do but

First, her Social Security is 100% exempt from attachment by FEDERAL LAW, thus if the house is foreclosed on and later on a judgment is entered against her for what is owned over and above what the house sells for in the foreclosure, no one not even the bank can touch her Social Security (Social Security can be touched to pay back federal debts and student loans but that is about it).

While, Florida does permit attachment of wages, Federal Law restrictions apply. The attachment MUST not be any larger then 25% of her Gross income AND she must be left with 30 times the Federal Minimum wage in her take home income (i.e. 7.15x20=$214.25 every week). Please note Florida Bar Association claims the head of the household has a $500 per week exemption from attachment of wages. Lets also do NOT forget Florida exemptions from execution sales:

Florida Bar on Debtor's rights:
http://www.floridabar.org/tfb/TFBConsum.nsf/0a92a6dc28e76ae58525700a005d0d53/f1bc20015cfdb2e985257408005290ed!OpenDocument

This site says 100% of wages are exempt IF YOU ARE HEAD OF HOUSEHOLD (but to be a "head of household" you must have a child in your home of less then 18 years of age):
http://www.bcsalliance.com/debt1_florida.html
But the statute clearly says a child MUST be a member of the household"
http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0222/SEC11.HTM&Title=-%3E2009-%3ECh0222-%3ESection%2011#0222.11

The stature granting the exemption:
(1) A debtor's interest, not to exceed $1,000 in value, in a single motor vehicle as defined in s. 320.01.

(2) A debtor's interest in any professionally prescribed health aids for the debtor or a dependent of the debtor.

(3) A debtor's interest in a refund or a credit received or to be received, or the traceable deposits in a financial institution of a debtor's interest in a refund or credit, pursuant to s. 32 of the Internal Revenue Code of 1986, as amended. This exemption does not apply to a debt owed for child support or spousal support.

(4) A debtor's interest in personal property, not to exceed $4,000, if the debtor does not claim or receive the benefits of a homestead exemption under s. 4, Art. X of the State Constitution. This exemption does not apply to a debt owed for child support or spousal support.

http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0222/SEC25.HTM&Title=-%3E2009-%3ECh0222-%3ESection%2025#0222.25

Mu advice would be to move out, but that is her choice.


Florida Statutes:
http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Index&Title_Request=XV#TitleXV