Tishman Speyer Properties walks away from 11,232 Manhattan apartments because it can’t pay its mortgage. That’s good business.
Rick Gilson, a college custodial supervisor in South Dakota, wants to walk away from the mortgage on his mobile home. If he does, he’ll be a deadbeat.
Those two borrowers face the same financial dilemma: Their mortgages far exceed the values of their properties. Yet one gets to walk away without guilt, while the other can’t.
Gilson is too scared to dump the mortgage on his mobile home. He owes $31,973, but the home is only worth about $14,000.
“I have 12 years of money put into this property that I will never get out,” said the 50-year-old Gilson, from Rapid City, S.D. “But I am still paying because this is what I have been told to do. That’s what I think is right.”
Until now, the focus of the real estate crisis has been on individuals. One in four U.S. homeowners, or nearly 11 million Americans, are underwater on their mortgages. In some parts of the country – Florida, Nevada, Michigan, California and Arizona – the share tops 40 percent.
Some experts say it makes sense for some people to walk away if they’re deeply underwater, even if doing so could wreck their credit score for seven years. It may not be worth it to keep paying a mortgage when they can find comparable rental housing for considerably less money.
The argument against walkaways is that they will wreak economic havoc if a lot of people do it. Banks will have more bad loans on their books. They’ll make fewer loans. Home prices will plunge more.
To read this article in its entirety visit the Huffington Post
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