CBS did a fluff piece of reporting last night about strategic defaults, whereby a homeowner makes a business decision to walk away from a mortgage – the way businesses do all the time. Spend a few minutes watching this. I’d love to hear your opinions about whether homeowners should be held to a higher standard.
We are certainly in interesting times, and the question of strategic defaults isn’t going away for a while.
Update: Thanks to BHB, I saw this from January:
I would love to hear from any (former?) homeowners in Charlottesville who have made the decision to walk away. I can think of a couple local developments – and one in particular – where walking away makes sense, because nearly every single house was bought speculatively and the home buyers were manipulated by the machine. The houses were not homes, they were houses. And everyone in that development is paying the price.Related:
Note that Morgan Stanley is current on the loan and is not in foreclosure. They are simply “walking away” because the buildings are worth less than the amount owed.
IF you blinked, you might have missed the ugly first-quarter report last week from Freddie Mac, the mortgage finance giant that, along with its sister Fannie Mae, soldiers on as one of the financial world’s biggest wards of the state.
Freddie — already propped up with $52 billion in taxpayer funds used to rescue the company from its own mistakes — recorded a loss of $6.7 billion and said it would require an additional $10.6 billion from taxpayers to shore up its financial position.
The news caused nary a ripple in the placid Washington scene. Perhaps that’s because many lawmakers, especially those who once assured us that Fannie and Freddie would never cost taxpayers a dime, hope that their constituents don’t notice the burgeoning money pit these mortgage monsters represent. Some $130 billion in federal money had already been larded on both companies before Freddie’s latest request.
But taxpayers should examine Freddie’s first-quarter numbers not only because the losses are our responsibility. Since they also include details on Freddie’s delinquent mortgages, the company’s sales of foreclosed properties and losses on those sales, the results provide a telling snapshot of the current state of the housing market.