Here’s the news:
Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.
The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.
“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”
This is what we’re told – over and over and over again – not to do. We, the people, dare not walk away from our mortgages! That would be evil! Wrong! Deadbeat! The horrors of it all!
Which, of course, is all just so much nonsense. It is what the bankers and the bureaucrats want us to believe. It is, indeed, what plenty of regular folks who are not “underwater” believe. But its simply not true – when you borrow money to buy a house, you have a secured loan. What is it secured by? The house. You can either pay back the loan, or give up the house. You and the bank are both betting that the house will maintain or increase value and that, of course, over a 30 year period you’ll continue to be in the financial shape necessary to make the payments. There is no guarantee, here. Its not like laying money on a blackjack table in Vegas, but its not like putting money in your piggy bank, either.
The moral obligation of the debtor is to render his payments as agreed or give up the house. The only thing which would be morally wrong is for the debtor to not pay and keep the house – and not in terms of missing a few payments, but in having the house for life and being able to sell it without having paid off the loan secured by the house. That would be wrong. But giving up the house? Its a six of one, half a dozen of the other proposition – with the only caveat being that banks don’t like it when you don’t pay up, so they will report you to the credit bureaus and, in some jurisdictions, they can attempt to recover any difference between the sale price and mortgage value (though this is harder to do than one might think, and a person can always go through bankruptcy to avoid such a thing – and if you are thinking of walking on your mortgage, do consult a lawyer before you do it). All of this becomes even more true if the homeowner has lost income since the start of the loan via unemployment, illness or death of a breadwinner.
Morgan Stanley is just doing the logical thing when faced with property which not only has lost value, but probably won’t recover that value in any reasonable amount of time (and this, by the way, should be taken as major indicator of our economy, at the moment). But we’re still bombarded with a “you must pay your mortgage, no matter what” bit of Bankster/Bureaucrat propaganda. I’m not having any of that – if you’re “underwater”, consult with an attorney and do what works best given your overall economic circumstances.
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