We noticed a recent entry at the You Walk Away blog describing the rising incidence of banks walking away from properties prior to completing the entire foreclosure process. Say what? We know that more and more individual borrowers with massive negative equity in their home are choosing to do this, but banks? What’s the deal? According to an article quoted from the Chicago Tribune, the deal is this:
“Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.”
There you have it. The article goes on to say that 1,896 properties have been abandoned by Chicago area banks using this method. Furthermore, 57% of these vacant properties have not even been registered with the city. So much for being good neighbors. The interesting twist to the scenario is that, since the foreclosure was never consummated, the borrower still owns the home and is responsible for maintaining the property, and paying the debt and taxes. Neighborhoods are not being notified either, so are delayed in taking action to do something to prevent the property from becoming an eyesore.
Something else that caught our eye in the You Walk Away blog was that CEO and blog author, John Maddux, went out of his way to suggest that, for the first time in modern history perhaps, homeowners walking away from an underwater mortgage were doing the right thing. It’s interesting what we have come to view as “right” in this country. Last time we checked, a mortgage was a legal contract, signed of the borrower’s own free will. So now, in the view of Maddux, it is right to walk away from a legal obligation. His reasoning is that the big, bad financial industry caused the problem, so all bets are off.
We don’t deny that it makes financial sense, in many cases, to abandon a mortgage but to do so proudly while blaming someone else for your own poor judgment is sort of incredible. What happened to personal responsibility? It’s one thing if the contract was illegal in some way, but something else entirely if you’re just bailing out. Go ahead and leave if you want – but it’s nothing to be proud of, Mr. Maddux.
The Creating Wealth Team
Flickr / lejoe
