What about personal responsibility?

Charles Reichley
Published: July 24, 2008

I know people have lost houses because they couldn’t afford their mortgages. Others have lost jobs and cannot pay off their debts. For many, foreclosure or bankruptcy is the only option, and I don’t fault
them for it. Still, a few people are taking advantage of the situation to shirk their personal responsibility. Having borrowed money in good faith, they decide they have no obligation to pay it back.

Take this question from Knight Kiplinger’s column in last Sunday’s Washington Post Business section. A reader explains that their house is worth less than the mortgage, but they can comfortably afford
their payments. But, she writes, “My husband says it would be smart to default on the loan, give the lender our house and buy a similar house for much less. “Everyone’s doing it,” he says.”

Everybody isn’t, but it turns out some are — enough that there is a term for this, the “buy and bail”. As explained in the Wall Street Journal, you use your good credit to buy a new home, and then default
on your old mortgage. Because many public officials have made “unscrupulous lenders” a target of attacks, people feel it’s OK to cheat them out of their money. The Journal quotes a California real estate
agent: “If you’re upside-down $250,000, why would you keep [your house]? It just doesn’t make sense.”

In the Kiplinger column, the expert advises against default, partly because “you were not tricked by an unscrupulous mortgage broker.” The implied message is that if you were “taken advantage of” it
might be OK not to pay up.

Some people are getting that message loud and clear. Another article in the Journal tells of a California family who bought a house in 2004. By 2007 they had taken $335,000 in second mortgages. Then
they bought a house in Texas for $283,000, and purchased two new cars. They stopped paying their mortgage, and took a vacation to the Caribbean. So they ended up with a free house, two free cars,
and a nice family vacation.

Some borrowers simply cannot pay back what they owe, and lenders know they risk getting a house back. But that doesn’t mean borrowers have a right to simply refuse to pay their debt. It would be nice
to see some expression of remorse.

Elisabeth Razzi, in her column in Sunday’s Washington Post, notes a new crop of companies springing up to “help” struggling homeowners renege on their loan obligations — for a fee. One
company, “YouWalkAway.com,” will help you “get unshackled” from your house for $995. The company not only expects you to stop paying your mortgage, they advise that you keep living in the house
while not paying, instead of abandoning the home.

Co-founder Jon Maddux says $995 “is not a hard payment to make when you’re not making a mortgage payment.” But I bet he would be upset if you didn’t pay his fee.

Some people have to abandon houses, to default on payments, and even declare bankruptcy. There was a time when these acts were considered shameful, maybe too much so. There is no shame in
needing help. But we’ve gone too far when, instead of shame or regret, people think paying their debts “doesn’t make sense”, and believe they deserve to have lenders and taxpayers pick up the tab for
their overspending and fiscal irresponsibility.

Unfortunately, government keeps encouraging more people to feel like fools for doing the right thing. The mortgage bailout being considered now rewards people who refinanced their houses, spending the
money on trips and toys. Meanwhile, those who lived within their means, who didn’t borrow against their rising home values, will have their tax dollars spent to prop up the mortgages of those who
benefited from free mortgage money.

It would be nice if some of the people who are bailed out show some sense of gratitude, rather than laughing at the rest of us for not taking advantage of the situation. Maybe they could thank the
taxpayers, instead of acting as if they were entitled to our money.

Charles Reichley has been a Prince William County resident since 1981. He can be reached at critically .