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HOME EQUITY LOANS BECOMING UNCOLLECTIBLE
DO WE HAVE A MORAL OBLIGATION TO PAY A MORTGAGE
Posted by: Darrell Castle
January 15, 2010
Topic: Bankruptcy
Does the mortgage on your home come with a moral obligation to pay, or is it acceptable to just walk away? Mortgage lenders today are going to extraordinary lengths to keep people in their homes and prevent mortgage defaults. Quite often people are expected to believe that this represents some type of philanthropy or new found generosity on the part of the mortgage industry but close examination reveals otherwise. When times were good and the value of homes was constantly rising, lenders were quick to foreclose. The attitude was basically, pay up or get out. Now that times are bad and home values are falling and many homes are worth less than the mortgage, lenders are more generous. Perhaps the industry is growing tired of foreclosing on mortgages that exceed the value of the collateral.
The fact is that a mortgage between borrower and lender, in the vast majority of cases, is a simple business decision and nothing more. The lender examines the property, gets an appraisal, looks at the borrower's financials and decides to make the loan taking the property as collateral. The borrower finds a home, does his due diligence, and applies for the loan. When the loan is made, the deal is simply; you pay the mortgage or I will foreclose, take the home, and sell it to someone else. Most of the time, that's all there is to it.
Sometimes both parties make bad decisions. The lender lends into a declining market for real estate and his collateral is worth less than the loan balance when the borrower defaults. The borrower has the same problem in that his home cannot be sold because its value has fallen below what he owes. That's the deal folks, and that's all there is to it. If you do not pay the mortgage the lender takes the collateral. There's nothing more to it than that.
Times are difficult and getting worse. Get out of debt as quickly as possible.
