Banks Refuse to Help Homeowners with Underwater Mortgages in Atlanta on Moral Grounds
It was big banks that helped homeowners get in over their heads during the height of the housing bubble. So why are lenders now claiming they have a moral obligation to not help us out?
Chalk it up to what's known as moral hazard, or the theory that people will take undue risks if not held responsible for their actions.
As the New York Times reports, lenders are claiming that implementing programs to relieve homeowners with underwater mortgages would send the wrong message. By offering better terms or reducing a person's principal, banks say they would be rewarding bad behavior - and encouraging those who can afford to make mortgage payments to default as a savings strategy.
This belief may be to blame for Fannie Mae and Freddie Mac's refusal to offer debt relief.
Though a recent $25 million mortgage settlement with large banks like Wells Fargo and Bank of America is intended to help some borrowers who were unfairly booted from their homes, government-backed Fannie and Freddie - which service roughly half of the country's mortgages - aren't participating.
But banks are failing to consider that there are plenty of incentives to keep homeowners making payments - if they can afford it, say Atlanta bankruptcy attorneys. Defaulting on a mortgage doesn't only mean losing the roof over your head. It also means hitting rock bottom financially.
A homeowner's credit takes a hit after just 30 days of delinquency. It's only downhill from there. By the time most homeowners walk away, their credit is so damaged that they have difficulty qualifying for an apartment, let alone a credit card or loan.
Though the media likes to spotlight people who walk away from a mortgage as a financial strategy, the vast majority only leave when they believe they have no choice.
But they do have a choice: bankruptcy. If banks refuse to help you out, it's still possible to help yourself out. Filing for Chapter 13 bankruptcy in Atlanta provides a way to stop foreclosure and gives homeowners time to get payments back on track.
Meanwhile, an Atlanta bankruptcy has the power to reduce or eliminate credit card debt, medical bills, and other forms of unsecured debts. For many homeowners, relief from other financial burdens can make paying the mortgage possible.
Banks may not have a consumer's best interest in mind, but bankruptcy does. In fact, bankruptcy law was created specifically to make it possible for a consumer to affordably meet obligations and enjoy a fresh start.
If you'd like to learn more about bankruptcy, give the DebtStoppers Bankruptcy Law Firm a call at 800-440-7235 to speak with an Atlanta bankruptcy attorney. Call today at 800-440-7235.
More Blog Entries:
Atlanta Bankruptcy Still a Solution for Homeowners Not Helped by HARP: February 27, 2012
Moral Hazard: A Tempest-Tossed Idea, by Shaila Dewan, The New York Times