Tuesday, April 21, 2009

Walking Away From More Than Just A House

Some people who are walking away from an upside mortgage and resetting ARMs are walking away from more than just a property. They can be walking away from good credit. And possibly the future that they had wanted for themselves.

Some people walk away because they can not afford the situation you are in, struggling monthly to pay the bills and have no real choice to change an impending foreclosure that is heading their way. Other people feel that they are throwing good money after bad and are under water so much that financially the hits they may take are worth it.

Just like with foreclosure, there is baggage with walking away. In the case of one Detroit Councilman it means national news and possibly throwing away his future plans. In this article titled Detroit councilman walks away from mortgage from MSNBC we see some of the issues people face. Let's take a look -

[O]ne day in December, City Councilman Kwame Kenyatta and his wife packed up their belongings, locked the doors, mailed in the keys and walked away — adding another vacant house to the thousands in a city hard hit by the nation's mortgage crisis.


It could damage his bid for mayor of Detroit this summer, particularly since he has been one of the city's most vocal supporters of measures to improve neighborhoods and clean up blight.

"If I'm going to follow you, you need to be a leader," said Patricia Dixon, a former neighbor of Kenyatta's. "You don't show leadership by walking away from your home in the city of Detroit. You have vandalism where they find out the houses are vacant. You have people stealing fireplaces."


Bought for $225,000, the home nose-dived in value to $100,000, according to Kenyatta. Its manageable $2,600-a-month mortgage soon was about to soar about $1,000.

About five months ago, the Kenyattas moved to a rented condo on the city's east side. It has three bedrooms, four baths, a whirlpool bath, finished basement and garage. The rent is less than their old mortgage. (In Detroit, City Council members are elected from the city at large, not from districts, so leaving the neighborhood does not affect Kenyatta's eligibility to serve.)


"If voters view being an excellent financial manager as an essential quality for the mayor, then it may cause him problems," said Lyke Thompson, director of the Center for Urban Studies at Wayne State University in Detroit. "If on the other hand, they sympathize with him because so many voters have had similar troubles, it may be less of a problem."

From the article Detroit sounds worse than we realized. In the past, we have seen houses selling for dollars in Detroit. The article mentions that unemployment is 20% there. Definitely a regional depression happening there.

Will walking away cost Kenyatta his political future? We though it would until reading the final quote by Lyke Thompson - he does have the first had knowledge of what many people in the community are facing. Tough choices. Putting his long-term future ahead of his short-term future. We will have to revisit this story this summer and see if walking away helped or hurt Kenyatta's political future. If it helps, expect to see this become more and more common.

No comments: