Walk This Way
by digby
Huffington Post’s Delaney, Grim and Graves have written a blockbuster article about the effects of being underwater and walking away:
Nearly one in every four homeowners across the country owe more on their home than it’s worth. Once a month, those 10.8 million are faced with a question that cuts to the core of the American Dream and offers a confusing collision between a deep-seated sense of personal obligation and a cold, simple business calculation: Should I pay my mortgage?
For decades, there was only one answer for most people: Of course I should keep paying, it’s the right thing to do. Besides, the argument went, a home is a great investment. Today, in the wake of the most seismic housing collapse in the nation’s history, that logic has increasingly been challenged by homeowners despondent about their lack of options.
Although researchers find that some underwater borrowers who could continue paying their mortgages strategically default anyway, the vast majority continue to pay. Many homeowners, out of a combined sense of fear, shame, courage and morality, resist making what is otherwise a logical financial decision.
Walking away from a home, however, is more than the sum of a few business decisions. For many homeowners, it’s either an act of civic defiance against a system they no longer buy into or the end result of being shuffled around by institutions that don’t help them solve their financial problems.
While walking away is a frightening and dangerous step into the unknown, millions have beaten the path in the past few years. To find out what it’s like to walk away, The Huffington Post asked readers who were considering making the move, or who had already done so, to write in and share their stories. That was in January 2010. A year later, we followed up with them to see how they reflected on the experience.
It’s an amazing story and well worth reading.
Buying a house is the biggest financial investment most Americans ever make and yet they are told that they have a moral obligation to stick with their contract regardless of whether or not it is in their financial interest to do so. Businesses and wealthy investors, however, are not held to such moral obligations and they make these decisions purely in light of their own best interest. Donald Trump has walked away from huge real estate developments and suffered no social or financial penalty for doing so. In fact, he’s an American icon whose opinions are eagerly sought by the media.
It’s so interesting that our elites are so concerned with moral hazard — for everyone but themselves.
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