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Is It Morally Wrong to Strategically Foreclose Your Home?

Are the people who walk away from their debt being dishonest? Stealing?

One in every 330 homes.

That is how many houses in Georgia received foreclosure notices in November according to RealtyTrac. Nationally, one in every 579 received a foreclosure notice.

With , many people have found themselves unable to pay their bills, including their mortgage payment. Others may be able to make the payment, but have found themselves "underwater" and elected to strategically foreclose their home.

In a , Dacula Patch blogger Cynthia Montgomery wrote:

"Let’s say I pay home taxes on a county assessed amount of nearly $300,000. Fast forward to now, the county has assessed my home at $170,000! ... For many whom bought a home in the past five years and did not put down a hefty down payment, they are now “UNDERWATER.”  Underwater means that I owe more on my mortgage than the house is currently worth. In other words, my house is now worth $170,000 yet, I still owe $288,900 to the mortgage company. With families facing this reality, many home owners decide to do a "STRATEGIC FORECLOSURE.”  A strategic foreclosure is when a family decides that they will never see the value of their home equal the remaining payment owed to the mortgage company so they make the strategic decision to walk away from their home and payment."

Are the people who choose to walk away from that debt making a morally correct decision? Montgomery continues:

"In my moral mind, I must think, have I broken one of the 10 commandments. Is this stealing? Is a strategic foreclosure stealing? Is a strategic foreclosure lying? I am giving the house back so what has been stolen? I am not stealing a house. Basically, I was only renting the home from the bank is what many feel nowadays." 

What do you think? Is it stealing to walk away from mortgage debt when you are able to make the payments? Is it morally wrong to default on financial obligations? Tell us in the comments.

Cynthia Montgomery February 01, 2012 at 04:31 AM
Mr Robert, I have indeed read about how those doing FC and SF will be taxed. But I can not find the site. Do you have the site. I did go to your site above and it did not talk about the tax implications of a foreclosure. Regulations and tax laws are changing so fast, I would like to get the latest word on what happens to those who decide to do a SF and it might help those souls make a quality decision about when they want to pay the money, now or later. Thanks for your comments!
Robert Higgins February 02, 2012 at 02:22 PM
No, unfortunately I have not. I think that is the whole point in this - that there are a lot of hidden costs and people are not thinking clearly because the info is not out there in clear cut form. The implications are far reaching, and yes the tax laws are changing fast, so much so that these people will get caught up in something down the road. The government can and will come back to get more money from you if they feel like this is an epidemic. No one is talking about the predatory borrowers, it just the lenders. I firmly believe that there will be stats after this disaster that confirms buyers played the biggest part in this. The feds will look out for the banks down the road, not people, because the banks will demand it after all the feds have forced the financial institutions to do. I appreciate your comments as well. People are running to the Internet to blogs like this to garner symapthy for their situations. It makes them feel comfortable with what they are doing. Unfortunately people like us don't take the time to blog back in opposition of this on-line pitty party. People are more likely to complain and look for inforamtion that comforts them. I am satisfied in the fact that the vast majority are like US and not them. Good luck. The economy and housing market will recover inspite of these people that are trying to keep it down. RJH
Cynthia Montgomery February 02, 2012 at 10:14 PM
I have been told that a 1099c is the bank form for those who choose to do a FC or a SF. Let's say you owe the bank $300,000 & you have paid off $150,000 & then you walk away from the loan. For some, the bank will politely send you a 1099c or Canceling of Debt form that you must include in doing your taxes. You will have to claim the other $150,000 as income & pay taxes on that amount. You & your bank must come to a decision. TIME is changing this for some. Depending on your current income that is a HUGE income amount to have as a taxable income! It is important that you speak to a qualified professional before you simply walk thinking you are out of the woods. As I do my taxes & talk with my wonderful mentor, a 3 time PHOENIX Realtor, I see that we both went into holding companies about the same time. Realtors have monthly cost to just stay in business; broker fees, office cost, rental fees, gas cost, key fees,postage, marketing fees, license fees, advertising cost, FMLS and MLS fees, training class fees, annual convention fees and the list goes on and on.I look forward to the day when a client does not open with, "I want to buy/invest a $50,000 FC home!" The average pay on that home is about $1500. It takes 6 months for a FC or short sales, you are looking at making below minimum wage. Some still refuse to see that KING OB has run out of time. He said he would be a 1term President on this date 3 years ago if the market was still as bad in 3 years-it is worse!
R++ One of the Famous Dacula Crew February 03, 2012 at 02:50 AM
"I have been told that a 1099c" That is correct and the 1099 can be used disclaim an interest in debt owed and forgive it. When the IRS gets it, it is considered income for the year issued for the recipient. While most won't use this approach because of the way it may impact the originator's interest in any recovery process available, its an effective way to fire a last shot in a complete loss situation where you can't use the "loss" against other taxable business interests and want to stick it to the offending someone. Surprise!
Cynthia Montgomery February 03, 2012 at 04:02 PM
Mr R. WOW WOW WOW, now I know why I am hearing so many sirens going down the road this week! TOO many FC & SF getting 1099c in the mail and having a heart attack! God Bless everyone in this sad economy. Register and VOTE in November!

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