A coworker was telling me a story of someone he knew who lives in a city hard hit by the exuberant housing bust. At the peak in the market they’d bought this big beautiful house. It cost a lot. Really big mortgage. Huge monthly payments due for thirty years.
After the housing market collapsed, they found another house a block away with the exact same floor plan. They bought it for a small fraction of the price of the other one. Small mortgage. Tiny monthly payments for twenty years.
Then they let the first house go into foreclosure. Sure, it dings their credit rating for seven years, but they’re tens of thousands of dollars ahead.
How much is 7 years of bad credit worth to you?
My co-worker pointed out that he would never do such a thing himself. He believes it’s immoral.
If you’re the CFO of a corporation that owns that first house, however, it’s your fiduciary duty to turn it back to the bank. Investors can sue you for wasting their money otherwise. For corporations, sticking banks with bad debt is not unethical. It’s good business.
All I can say is, Vote for Giant Robots!
