Since the beginning of the housing crisis, "jingle mail" has been increasing. That's the practice of a homeowner who is underwater on their mortgage, owing more than the home is worth, mailing in the keys and intentionally defaulting. This is in spite of the fact that they can continue to pay their payments. In an article titled The Chaotic Consequences of Being Unethical, the author comes down clearly on the side that this is a damaging unethical action by homeowners.
Then pop over and read the PBS site article titled Exploring the New Corporate Bankruptcy Strategy. There we're treated to interviews that show there is a strategy employed by corporations to file for bankruptcy as a business strategy, and some who do this are celebrated as sharp business people and "turnaround experts." Of course, in many of these bankruptcies some lenders are left holding the bag while many times it's investors and pensioners who lose their shirts.
Interesting divergence in ethics.
Agreed, both “strategies” are shady, at best. I don’t understand how a homeowner can expect to turn in keys if able to make payments, and to retain any sort of credit rating. It doesn’t seem logical to pursue such a strategy – nearly always, it will cost a homeowner more to rent a similar property than they are paying for mortgage etc. I’m afraid this strategy is poorly thought out, and in the long run, will hurt the homeowner far more than it will help. Once the economy recovers, and it will, home values will rebound. Just as with stocks, unless you sell after the current value goes down, you have not sustained a loss. The best course of action is to stay put if possible (this issue becomes especially thorny for those who are transferred to other parts of the country for their work), and to continue to maintain your home and be a good neighbor. Eventually, the market will recover.
Regarding the second business “strategy” – this is the strategy which has enabled Mr. Trump to build his fortune, to the detriment of his former creditors. It stuns me that he had the gall to imagine that his history of employing this strategy would play well in a presidential campaign.
I wonder how we have sunken to this level, where what is financially expedient for an individual or a company trumps what is best for society as a whole. (No pun intended). Folks who employ these strategies are, of course, the first to complain when we are faced with more regulation, necessitated by their own greed. This is what laissez faire economics brings us.
Greed cannont be allowed to run untrammeled – it would seem that is what has gotten us into this economic quagmire.
Vicki,
Thanks a lot for the thoughtful and detailed comment. I appreciate your input to the site.
Jim