Everett Mortgage On Line

An Ivory Tower professor has no concept of ethics

Brent T White an Arizona law school professor has some disturbing things to say about California real estate and homes for sale Everett. He says to walk away from your home if you are underwater with your mortgage. He says go ahead and break the chains of guilt, shame and fear and simply walk away. No matter the ethics involved, no matter any morally just walk away.

First off he suggests that you would save hundreds of thousands of dollars doing this. He sites facts and figures that distort the problem. On page 8 of the abstract he claims that 51% of all home owners in Arizona are underwater. He also claims that 32% nationwide are underwater. But my research shows his numbers are a bit exaggerated but that is beside the point. The California real estate market has seen ups and downs. The same can be said for homes for sale in Everett. Both markets have gone up and down many times in the last 30 years.

Professor White claims that these home owners have no hope of ever recovering their equity. He thinks that the market will never recover and they will simply be paying forever. He seems to think that this market correction is the first of its kind and has no precedent. He claims that your credit score will take a hit but will recover to acceptable levels within 2 years. He claims that if you stay current with everything else you can get a decent score back within 2 years. By acceptable levels he means a 660 score or better.

This ethically challenged professor has a few other claims. In some states such as California and Arizona so called anti-deficiency states lenders can’t go after defaulting borrowers. That isn’t completely true. Also that in other states lenders will simply not pursue borrowers because its not worth it. I have heard that some borrowers will hire attorneys to see if some flaw can be found in the contract to make the mortgage invalid and therefore not enforceable. This can become as expensive as simply paying the mortgage.  White’s main point is that borrowers let emotions and ethics get in the way of clear financial thinking. To Whites way of thinking a contract is not deal if it doesn’t work out for the borrower. He thinks the bank should get stuck with the debt and the borrower let off the hook with no liability beyond a credit ding. White claims that there is an inherent imbalance in the relationship between the bank and the borrower.

Let’s examine his ideas and extend them out into the future. First Fannie Mae and Freddie Mac dispute Whites claims that your credit will recover in 2 years. In my experience a foreclosure will haunt you for at least 5 years unless there are extenuating circumstances. You had better be able to document those circumstances. And expect a rough road to obtain another mortgage within the next 2-5 years. Borrowers who simply walk away will face severely reduced credit scores for at least 5 years. And beyond the moral dimensions if many people actually start to do this think of the effects on future borrowers. Mortgages are already getting hard to get. Now if walking away happened on a large scale they will become extremely hard to get and much more expensive. Interest rates reflect the risk involved in full repayment. I consider Whites position completely lacking in ethical and moral standing. This is exactly what I expect to hear from a left wing nut from Academia. I came across this same point of view in a blog from a financial advisor also from Phoenix. He and I had quite a flame out going via email. I said the same to him as I do here. This stance is completely without merit.  The bank made this loan to the borrower expecting repayment. The bank didn’t ask you for any of your expected profit. And when you made that mortgage you expected to make a profit. The bank didn’t make the rules that created this mortgage crisis. Banks on a different level do have some responsibility for the mortgage bubble. But the real responsibility lies with the federal government.

What are your thoughts on this? I welcome all comments below.

Jim Johnson