Buying a new home and walking away from your old, the new American Dream

It seems that the new American Dream is to buy a new home at a new rate and reduced value while walking away from a current mortgage. Most attorneys will tell you this has been a trend in commercial real estate for years and there is no reason for residential clients not to follow the same path.

Mortgage companies would like us all to believe there is a moral responsibility to stay in your home. I would argue that the responsibility is more of a civic one, however I also agree lenders too have a responsibility throughout this crisis. For those with a qualifying event, such as a loss of income, adjustable rate mortgage, balloon payments or other real reason a loan modification should be given then a bank has a civic responsibility to provide one. With that being said, I completely understand that banks should not lower the principal of the mortgage and can’t lower the principal as it would amount to a run on the banks.

Making adjustable rates or interest only loans fixed or extending the terms through the crisis does not harm the banks, it helps them. It helps no one, when a home is worth 50% of the amount owed and the bank is unwilling to extend the terms o f a loan which has become due.

Unfortunately for us, banks rarely do their civic duty and often refuse legitimate requests for loan modifications. In these cases, when the home owner has done all they can and all that has been required to obtain a loan modification, in my mind it is the banks fault when the home owner then walks away, allowing the home to go into foreclosure.