In the long post last week, I delved into those forgotten people who bought homes at the peak of the real estate market in 2005, 2006, 2007 or 2008 in bubble cities, decided NOT to do strategic defaults back then, and today are still underwater.
(BTW, I added a video to the original post. Was having problems with my video editing software.)
From that post;
A study done in 2009 asked the general public this question, “Do you think that it is morally wrong to walk away from a house when one can afford to pay the monthly mortgage?” Over 80% said “Yes.”
I think American attitudes towards walking away from your mortgage changed a ton because of the real estate bust. My theory is that before the real estate bust, getting foreclosed on was considered to be shameful but after the real estate bust getting foreclosed on is only considered to be unfortunate.
To get a ballpark idea of the change in American attitudes toward walking away from your mortgage, I ran a poll on Twitter. Yeah, yeah, I know this isn’t scientific at all but I wanted a quick way to get a general idea how people feel about strategic defaulting in 2016.
My personal attitude toward the non-defaulters is bittersweet – I think they are heroes for sticking to their ethics and not defaulting despite being scarily underwater, but I’m sad that sticking to their ethics hurt so many of them financially. I admire Don Quixote, too.
In 2009 over 80% said it was morally wrong to walk away.
My quick 2016 Twitter poll shows roughly the opposite attitude today.
Heroes. Only 19% said they were “Heroes.” That sounds like only 19% gave the non-defaulters 100% support for their decisions to not walk away.
Naive. 24% said they were “Naive.” That sounds like they thought the non-defaulters were foolish for not walking away.
Both heroes & naive. 27% said they were both “Heroes” and “Naive.” This is probably closer to my confused feelings about all this. I greatly admire their sense of personal responsibility and morality, but some may have been naive to believe that chivalry still lived.
Neither / Other. The most popular answer at 30% was “Neither / Other.” This is probably the best answer. They’re saying those people who chose not to walk away were neither “Heroes” nor “Naive” nor a combination of the two. I think they’re mostly saying the non-defaulters were just people doing the best they could in a bad situation with the facts they had at the time.
In 2009, is was considered morally wrong to walk away from your underwater mortgage. Today, you’re likely to be considered naive if you don’t.
What do you think?
- Did the real estate boom and bust change American attitudes towards personal responsibility?
- Who was right, the strategic defaulters or the non-defaulters.
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One Response to U.S. Attitudes Toward Strategic Defaulters vs. Non-Defaulters
I got a nice email from a reader who said that he took out a business loan in 2005 and was paying it down on time and ahead of time but in 2009 the bank informed him that they would not renew the loan, they needed cash. “Sorry, just business.” So he had to sell his home and other assets at the bottom of the market.
He says he learned his lesson, it’s just business.
If his mortgage says he makes the payments AND if he doesn’t, they foreclose, fine. Since both sides agreed to that he would have no problem at all if it were to his advantage to walk away and let the lender take the property back. Sorry, it’s just business.
Some people had that attitude during the real estate bust but most didn’t, at first anyway.
If we had that same real estate bust today, I think people would walk away much faster and much more. Sorry, just business.
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