CBS Says Not Paying Your Underwater Mortgage 'Best Hope for Some to Stay Afloat'
Once again, a national news outlet has sided with borrowers against lenders. This time it was CBS "Evening News" which interviewed families going into "strategic default" on June 16.
CBS defined those terms as a practice in which "people with no hope of ever even breaking even on their homes no longer even try." In other words, they stop paying the bills they agreed to and continue to live in their mortgages house until the bank forecloses on them.
CBS noted that 23 percent of mortgages are currently "underwater" - meaning that "homeowners owe more to the bank than their home is worth." Then they cited the opinions of those borrowers saying "almost a third of those homeowners say it's OK to give the keys back and just walk away."
The story featured Bob and Julie Sistik, who bought a house for $700,000 at the top of the housing bubble on the combined salary of a firefighter and a secretary - a decision even CBS reporter Jim Axelrod termed as "a stretch." When asked why they bought such an expensive house, Bob Sistik replied: "We could afford it." Axelrod didn't argue.
But Bob Sistik got hurt and couldn't work, and the couple couldn't make payments on their house. So the couple stopped making mortgage payments and have continued to live in the house for the past year. At least Bob Sistik acknowledged that strategic default might not be a moral option.
"I've totally failed," he said. "It's really difficult to not do what I said I was going to do."
But that didn't stop Axelrod from subtly encouraging strategic default, by interviewing only struggling borrowers and a foreclosure lawyer who claimed that foreclosure doesn't permanently destroy someone's credit. That lawyer, Chae Dupont, said: "It's [credit] not totaled at all. As long as you're paying all of your other credit on time, you should only expect about a 150-point hit on your credit score."
But it was Axelrod's conclusion that really gave away his report. He said, "It [strategic default] may be the best hope for some to stay afloat."
His report didn't include anyone who might have discouraged strategic default, suggested other options to struggling borrowers or even the perspective of the banks which made the loans are not getting the mortgage payments they were promised.
This is not the first time the media has encouraged this kind of borrower irresponsibility. NBC's "Today Show" favorably reported on companies that help homeowners walk away from their mortgages in April 2010. In a February 2010 story, ABC's "Good Morning America" featured a law expert who also encouraged homeowners in debt to walk away from their mortgages. And The New York Times even celebrated debtors who refuse to pay off their mortgages, live rent-free and "don't slink away in shame."
The Business & Media Institute has documented the tendency of media to avoid blaming the consumer for debt problems in its 2007 report "Debt: Who'$ Responsible?" In this report, BMI found that 62 percent of the stories on the three broadcast networks ignored consumers' responsibility for debt.