An article in the Chicago Tribune describes how some mortgage servicers are exercising strategic default in reverse and are abandoning properties after determining that the costs of foreclosure are greater than the underlying value of the property. Often in distressed neighborhoods, such properties only add to the decline of communities, as vacant houses become eyesores and havens for criminal activity. Chicago area foreclosures increased by 20% in 2010, only adding to lower home values and further blight.
The Tribune article describes the “stewardship relationship” that exists between borrower and lender and how certain loan servicers are failing to live up to their responsibilities as “stewards” following default. (I find it interesting that lenders would ever be considered stewards, for in reviewing the behavior of many during the housing crisis, it appeared it was always about the money.) Good stewards take their responsibilities seriously, when it’s about the money, stewardship isn’t involved.
For two years now, we’ve read of the moral responsibility of borrowers to honor their mortgage obligations; and many have been critical when borrowers made the “choice” to walk away. It seems ironic that some of the very banks that have criticized homeowners for walking away are now choosing the same option, and solely for financial reasons. Regardless of who is walking away, it is always about the money.
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