To walk or not to walk: Underwater homeowners face moral dilemma

By Scott Dickensheets

Friday, Jan. 21, 2011 | 2 a.m.

Mine is a nice house. Big enough for a family and all of its furniture and clothing and toys and books and papers and dogs and more books and miscellaneous junk and even a cat. Decent-size back yard, for a suburban tract home. Good-enough neighborhood.

Sometimes I really dislike that place.

Not for aesthetic reasons, although it is exactly the sort of home people have in mind when they sneer about the stucco banality of the suburbs. I’m OK with that.

My bouts of bad mojo have more to do with, of course, money and, perhaps surprisingly, morality.

We bought this house new in 2006, not market-savvy enough to sense the trapdoor already opening beneath us. In truth, we bought a little more house than we should’ve; we had a granddaughter on the way, she’d be living with us and ... well, never mind the exculpatory details. Point is, it was a stretch, but we could, and still can, pay the bank its monthly vig, even though the house has hemorrhaged half of its value.

Not everyone can or wants to. The people next to us moved out recently — short-sale, I think, not foreclosure — and soon enough a U-Haul will back into the driveway, and a happy family will spill out of a minivan, all smiles at having nabbed a bigger house than ours for a lot less than we paid. It’s already happened around our neighborhood, short-sale or foreclosed homes snapped up on the cheap.

Each time, I’m reminded of the choice we’ve made, my wife and I, not to bail on this house. Not to walk away, not to short-sell, not to declare bankruptcy — not to do whatever you do to rid yourself of the terrible dragging burden of a debt that will probably never be the investment you meant it to be.

At moments like that I hear two conflicting voices. One is the internalized voice of my late father, reminding me that it’s important to fulfill my obligations. He was big on personal responsibility; we like to believe that’s an American virtue. That’s a mark of your character, I can hear him say, and that if you default on your responsibilities just because it’s easier, it says something about you that you don’t want said.

But I also hear another American voice, the voice of capitalism’s moral relativism, the one that preaches “enlightened self-interest.” Because America also salutes doers smart, nimble and entrepreneurial enough to game a bad situation to their advantage.

That voice tells me I’m a chump for sticking to my outmoded principles while all these other people are snagging great deals. Look at your new neighbors, this voice purrs, they’re getting the same amount of house for half what you paid.

(Actually, there’s a third voice, one that wants to cram a fistful of negative equity down some mortgage-broker’s craw, but let’s leave that for my future shrink to deal with, shall we?)

I’m far from alone in this. “I’ve seen sellers agonize over whether or not to walk away from their homes,” says Realtor Diann Tonnesen of Prudential American Group; she’s a 28-year veteran of this crazy market. “It’s not what they want to do, it’s not how they were raised. But at the same time, they feel it would be stupid not to in this market.”

She explains that even people who don’t have financial hardships can wrangle a short sale for a house they no longer want to pay for, if the investor — not necessarily the bank, but the investor who ultimately holds the note — agrees. (Some investors would rather get the money from a short sale than risk getting less down the line in a foreclosure.)

“They’re rewarding people who walk away from their responsibilities,” she said sternly. Meanwhile, “the person who lives up to his responsibility feels like a sucker.” This doesn’t sit well with her. “People should be forced to live up to their obligations, or go to debtors’ prison, like they do in England,” she says. I chuckle. “I’m serious,” she adds.

Hey, me too. I don’t like the way homeownership, cornerstone of the American dream, kindles this kind of moral quandary. This kind of self-re-evaluation. “It’s up to each person to search their own soul,” Tonnesen concludes, “and figure out what they’re going to do.”

Right now, the voice of my father still wins; we’ll stay. But sometimes I wonder ...