60 Minutes Reports on the House of Cards

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A friend of mine recently gave me this URL:

60 Minutes – House of Cards

Yeah, I didn’t catch it on 60 Minutes because, even though I have Charter Cable with the HD package and a couple of hi-def flat panels, I don’t really watch much TV. Too much work to do, alas. And it turns out, half the real estate blogosphere is talking about this story, so I’m a little late to the party, even though it just aired a couple of days ago.

It’s a great little exposé about how we got into this whole foreclosure crisis. I get questions about this all the time, and this story explains it all pretty well. Another part of the story I know well is the human side of it – all the people who bought real estate at high prices, which have now dropped down markedly in many cases – they are now stuck with the house, or they can walk away and let the lender foreclose. If the value of their asset keeps dropping, why continue to make payments? For many people who have no money in their homes, who bought with 100% financing, it makes a certain sense just to walk away.

I get it. I totally get it. Many people feel like they were cheated. In many cases, they were cheated, they were sold a bill of goods which proved to be something else than they thought it would be. Sure, they signed a contract. But it’s not a crime to breach the contract and get foreclosed on. Here’s a question, though – while not illegal – is it unethical, to just walk away from your contractual obligation, even if you could afford to make the payments?

Well, it’s just business. Businesses do it all the time (break contracts, that its). Sure, there’s a price to pay. Your credit gets ruined for what, seven years? Yeah, that IS a big deal. But how much cash would you shovel down the sinkhole of your heavily depreciated asset, at the end of which there’s no guarantee you’d be above water again?

What do you think?

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