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May 27, 2015

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Housing crisis rife with perverse ironies

Of the acre-feet of response I got to Friday’s column — about the moral calculation of whether to continue paying the mortgage on my overleveraged house, or walk away — none was more startling than this:

I might be making the problem worse.

Not just me, of course. People like me, dog-paddlers in our underwater homes. Here’s how a government housing expert, in an informal chat, explained it: We bump along every month, dutifully making payments on a place that’s lost so much value, we won’t invest a lot to fix it up. Replace a faucet, yes; redo the bathroom, not a chance.

But because real estate activity is so central to the economy, the jobs lost to those undone projects — from drywall installers to clerks at Home Depot to tile manufacturers — constitute a significant drag on recovery. “It’s perverse,” he said ruefully, but getting people like me out of our houses, so they can be sold at current (low) market value to people who’d spend good money to improve them, would actually make things considerably better.

Like the man said, perverse.

But the housing crisis is rife with perverse ironies, defiant anger and painful, life-altering consequences, as demonstrated by some of the reader response that blew up in my e-mail and voice-mail queues. These are the voices of the real-estate dump.

“Thanksgiving dinner this year turned very ugly,” one reader wrote. The explanation: Friends in various stages of home-owning agony — some mired in deep debt, one in Chapter 7, another who wants to short sell — gathered for the holiday meal and started talking about their housing situations. Tensions grew. Some were angry that others wanted to shuck their debts and obligations; others got riled at the thought that this could be anything but a cold, hard business decision.

“As I worked in the kitchen, I saw and heard friends who have been close for almost 30 years attack each other,” she wrote. “The morality of ‘stiffing a bank because you can’ or ‘you thought it was a good deal when you signed’ went on and on.” Some of them still aren’t talking to each other, the reader adds.

For more than a few readers, the abstract dilemma of whether to keep paying or walking away is something of a luxury. “Our situation is far more tragic in the sense that my husband was in construction for decades and lost his job in April 2008,” another reader wrote. He finally found a low-paying job, last October — and was laid off two weeks before Christmas.

“We are now in real danger of losing everything we have worked our entire lives for,” she said. “We have no cushion and no way to pay all our bills. To make matters even worse, he was diagnosed with a debilitating and possible deadly disease on December 29th.”

That was a recurring theme among people I heard from — the collapse of their housing investment compounding other life-altering situations. “What about those who have lost their job (or jobs), or, like us, have lost their job and their health?” one worried. “Do we, as hardworking Americans who have paid taxes for decades, deserve to be forced to die in the streets?”

And just try to find relief if, despite losing income, as this reader did, you still eke out your mortgage payments:

“The gentleman (from the bank) said that since I am still able to pay my bills, there was nothing they could do for me. So I responded, ‘Are you telling me that if I do not pay my mortgage and go into default, then you would help me?’ And he replied that I would have a better chance of getting help. I was so angry I had to laugh.”

And then there were the many who argued that stay-or-walk isn’t a moral decision at all; it’s not a statement of character or a decision worthy of ethical ambivalence. It’s just business.

“I am still able to pay my bills, including my mortgage,” one reader announced. “You see, my income is high and the amount of the mortgage is irrelevant to me.”

Well, perhaps not so irrelevant that he’s going to actually pay it:

“I am not going to make my mortgage payment ever again ... I am not going to dump money down the drain on an ‘investment’ that will never recover from the depression. This decision has nothing to do with morality; it has everything to do with common sense and doing the right thing for my family’s financial security. I am intentionally defaulting on my mortgage and there is nothing that anyone can do about it.”

Like the man said, perverse.

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