Report: Under Water and Paid As Agreed…
What are the consequences of teaching our children, friends and family that our word has no meaning? And what about when the going gets tough; is it ok to walk out on our obligations and look for greener pastures?
I recently returned from a mortgage convention where the topic of Strategic Default came up. Strategic Default is the term used to describe the person who has the financial ability to make their mortgage payment but decides to not continue paying their obligation and either let the property be foreclosed or be sold through a short sale (sold for less than what is owed on the property).
As a 4th generation real estate investor and a veteran residential mortgage loan officer, I have a real affinity for real estate. I’m convinced real estate is the single best investment for average Americans. It offers the most leverage, the best tax deductions, the lowest interest to finance and a place your children can call home. That’s hard to beat!
Unfortunately, there are some out there that feel no moral obligation to keep their promise to pay as agreed. You see, that promissory note said they agreed to pay until the loan is paid in full. They gave their word, signed their family name, had it recorded by a Notary Public and had it publicly recorded at the local municipality. I consider that a pretty serious promise.
We all know the obvious consequences if your neighbor defaults; home values are driven down as distressed (bank owned) properties often sell for more than twenty percent discounts to fair market prices. The result is a toilet bowl like effect, where values continue to go down and down as distressed sales become the norm, banks continue to discount more and more to sell their portfolio of properties.
That’s bad, but it might not be the worst part of this cycle. I’m worried about the effect on our moral compass as a nation and the eventual effect on our children. I’m picturing lessons learned as the children are sitting around the dinner table listening to Dad justify his actions. What are those children going to learn and how will that impact their future decisions in life?
I mean, if it’s ok for Dad and Mom to walk out on their responsibilities, what are the chances that the children in their household will make an effort to pay his or her obligations? What about just telling the truth and being a generally honest person? Is it much of a stretch to assume that if it’s ok for Dad and Mom to walk out on a house, then it’s ok to walk out on other responsibilities? How about teen pregnancy, or other hot moral issues facing teens? Is it ok to walk out on the mother of your baby? Where could this deficit of moral responsibility lead us?
As real estate professionals, we should have been more vocal about the potentially dangerous mortgage products that were available and being sold. Far too few of us were silent (me included). So this time, I think it’s time to make our voices heard as an industry.
I’m a real estate professional, owner of a home over $200,000.00 under water and I’m proud to keep my word and make my payment as agreed. If you are with me and support this movement, let’s get the word out. Forward it, mail it out to clients, publish it on your blog. Let’s make our voices heard and we stand up for what is right.
Josh Mettle is a top producing mortgage lender specializing in financing Physicians, Dentists and Medical Professionals in Salt Lake City, Utah. Check out his site http://www.utahphysicianhomeloans.com/ for medical professionals. Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages. If you're ready to buy or sell residential real estate, get Josh's latest free tips, tools and newsletter at http://www.joshmettle.com. Utah Real Estate Professionals can keep informed by visiting Josh's Mortgage and Real Estate Blog at http://www.joshmettle.com/blog/
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