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Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That's freeing up cash to use in other ways.
Ms. Richey's family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March. Mr. Fernandez takes his girlfriend out to dinner more frequently. "We're saving lots of money," Ms. Richey says.
Ms. Richey and her family made the move to Club Rancho Drive in August, when she was already several months behind on the mortgage. With Mr. Robbins's help, she recently sold the house on Caspian Drive for $195,000, money that the bank will accept to settle the $430,000 mortgage debt. She's also considering walking away from the mortgages on her two rental properties.
Showing a visitor the personal touches in her new home, including a $1,800 dining set she bought with some of her newly available income, she notes the advantages of being a renter rather than an owner. "You take a risk for the American dream," she says. "I don't have to worry about paying property tax, homeowners' insurance, the landscaping, cleaning the pool or any repairs."
With an income of about $8,300 a month and a rent of $2,200, Mr. Fernandez says he now has the wherewithal to do things he couldn't when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.
Shouldn't people like this be in jail? I borrow money from you, decide later that I'm not paying and can walk away scot-free. Hang on, not just scot-free. I spend the money I've "saved" by buying myself goodies.
These people can walk away because US laws are designed to allow this. Here in Canada you cannot walk away from your home without very severe consequences i.e. the banks will take ALL your savings + property + might even garnish your wages. In the US you can just walk.
Leaving aside the moralities of this behaviour (and the proud photos that the defaulters are happy to pose for), doesn't anyone see that this simply lays the foundation for the next debt crisis? And more broadly, what does this say about the validity of contracts? What are these so-called analysts thinking when they come up with stuff like:
"It's a stealth stimulus," says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. "The quicker these people shed their debts, the faster the economy is going to heal and move forward again."
Are defaulters just shedding debts or also racking on new ones, which they will again default on in future? Cheat me once, shame on you. Cheat me twice, shame on me.
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