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  1. #1
    Senior Member AirborneSapper7's Avatar
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    Law Prof Tells Underwater Mortgage Holders To Walk



    Law Professor Tells Underwater Mortgage Holders To Walk

    Buttressing these emotions is a system that White labels "the social control of the housing crisis" -- pressures and messages continually sent to consumers by the "social control agents," namely banks, government and the media. The mantra that these agents -- all the way up to President Obama -- pound into owners' heads, White said, is that "voluntarily defaulting on a mortgage is immoral."

    Yet there is an inherent imbalance in the borrower-lender relationship that makes this morality message unfair to consumers, White says: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20% to 50% in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

    Only when homeowners cut through the emotional fog and default strategically in large numbers, White argues, will this inequitable situation be seriously addressed.

    How does White's 52-page manifesto go over with mortgage lenders? Predictably, not well. Officials at Fannie Mae and Freddie Mac -- investors who fund the bulk of all new mortgages in the country -- disputed White's characterization of how quickly after foreclosure a walkaway borrower can obtain a new loan. It's not three years, they said, it's a minimum of five years, absent extenuating circumstances such as medical or employment problems that caused the foreclosure.

    "Borrowers who walk away from their mortgage obligations face serious consequences," including severely depressed credit scores for extended periods, said Brian Faith of Fannie Mae.

    In addition, he said, "there's a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community."

    http://www.latimes.com/classified/reale ... 1270.story
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  2. #2
    NotRacist's Avatar
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    The American economy is broken, ruined by the greed and irresponsibility of fabulously wealthy corporate chieftains and their shabby acolytes and enablers in government. While Wall Street is handing out billions in bonuses, American families are struggling with joblessness, home foreclosures and rampant debt. The economic woes are exacting a fierce toll on family life, and children are taking a big hit — emotionally, psychologically and otherwise.




    http://livinglies.wordpress.com/podcast ... ield-show/

    Great web-site for anybody having mortgage problems. DO NOT, I repeat DO NOT walk away from your home!

    This site is not user friendly, it takes some navigating.

    "When governments fear the people there is liberty. When the people fear the government there is tyranny."

    -Thomas Jefferson




    ...because America is not for sale and our sovereignty is not negotiable!
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  3. #3
    Senior Member carolinamtnwoman's Avatar
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    Good post! Following is a bit more info:


    Should You Walk Away From Your Underwater Mortgage?


    Consumer Affairs
    Nov 5, 2009


    Millions of American homeowners are "underwater" on their mortgages -- owing more than the value of their homes. A University of Arizona law professor is rocking a few boats in the mortgage world by suggesting they would be better off walking away.

    Brent White, whose article will be published in this month's issue of Arizona Legal Studies, says fear, guilt and shame are what keep many homeowners from making what he calls rational economic decisions.

    "These emotional constraints are deliberately cultivated by the government and lenders who self-servingly tell borrowers that they have a moral and social obligation to pay their underwater mortgages," said White, an associate professor at UA's James E. Rogers College of Law. "Meanwhile, lenders ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility."

    White calls this a double standard, one that has resulted in "distributional inequalities."

    He argues that while irresponsible lenders have received government bailouts, responsible homeowners "who just happened to buy at the wrong time continue to bear a disproportionate burden of the housing collapse."

    In his article, White cited figures finding that, in the second quarter of this year, more than 15 percent of homeowners had negative equity that was more than 20 percent of the value of their homes. Also, more than 22 percent had negative equity that amounted to at least 10 percent of the value of their homes.

    This situation is exaggerated in a number of states, including California, Florida, Nevada and Arizona. Cities that have reached the 60 percent threshold, including Miami Beach, Fla.; Las Vegas, Nev.; Bakersfield, Calif.; and Phoenix, Mesa and Scottsdale. Numerous cities in California also make the list, including Fresno, Madera and Yuba City.

    "The government, lenders, and credit-counseling agencies bombard homeowners with moral and fear-laden messages that overstate the consequences of foreclosure, ," said White. "Moreover, as a way of enforcing the double moral standard, lenders hold borrowers' credit scores as collateral and will trash it in retaliation for the borrower's exercise of their contractual option to default. Lenders don't want these houses and, with the government's help, do what they can to scare and shame borrowers into making what is in many cases a bad financial decision to stay in their home."

    But White, whose article is already gaining attention across the nation, said he is not advocating that people walk away from their mortgages.

    Instead, he is simply pointing out that there is a double standard: lenders are expected to minimize their economic losses regardless of moral concerns, while homeowners are expected to behave in "morally responsible" ways regardless of the economic costs.

    "To the contrary, walking away may be the most financially responsible choice if it allows one to meet one's unsecured credit obligations or provide for the future economic stability of one's family," he said.

    White also suggested limiting the ability of lenders to report mortgage defaults to credit reporting agencies and, at a minimum, housing counseling agencies should give homeowners accurate information about both the advantages and disadvantages of letting go of their homes -- rather than simply telling them that foreclosure should be avoided at all cost.

    "The current housing bust should be viewed for what it is: a failure to regulate -- not a moral failure on the part of American homeowners," White said. "That being the case, it is time to take morals out of the picture and search for an equitable solution to the negative equity problem."

    Download Brent White's article here:

    http://papers.ssrn.com/sol3/papers.cfm? ... id=1494467



    http://www.thefreelibrary.com/Should+Yo ... 1612050250

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