The winter months in Michigan can be, and usually are, rather dreary. During our annual holiday visit to metro Detroit, along with the usual lack of sunshine, we had experienced the joy of pouring rain on Christmas day. Fun. Of course many can get used to such weather, and some will even claim to like it. For some reason many Michiganders complain all winter about snow.  Some even claim to prefer cold, damp weather to dry, cold weather. Many say, “well, at least it’s not snow!”, whenever it rains. Because soaking wet and cold is apparently so much better. Besides, snow is the only thing that covers up the brown grass, bushes, trees, and all of the mud that we get to experience a good four, or more, months of the year. But, if someone claims to like it, who am I to judge. Whatever makes you happy…

On the plus side, we enjoyed the usual things during our visit to metro Detroit. We spent time with family for holiday brunches, lunches, and dinners, as well as at a memorial for my grandmother who had recently passed away at the age of 98. We ate and drank at some of our favorite metro area restaurants and bars, and caught up with Friends. We also got to enjoy a Red Wing’s game, as we watched Detroit beat the Colorado Avalanche.

In the weeks leading up to our trip back to Detroit, we scheduled some drywall work to be done prior to our arrival. Over the eight years we’ve owned the home we’ve gutted the bathroom and kitchen. And by gutting, I mean we ripped out absolutely everything. In the bathroom we had to stand on floor joists as we laid new sub-flooring. In the kitchen we spent days ripping out old underlayment covered with nasty, worn out linoleum made to look like bricks. In both rooms everything went. The bathroom got a new cast iron tub, all new plumbing, ceramic floors and tub surround, as well as new insulation and drywall. The kitchen received all new cabinets, appliances (other than the fridge), and new oak, hardwood flooring. We also replaced insulation and drywall in two bedrooms, refinished all of the old, existing hardwood floors, as well as the new kitchen flooring, after ripping out disgusting, rental house carpeting. We patched holes in the foundation leftover from the cement forms. All of this was done by us, with the rare helping hand of a professional plumber or electrician. The only thing we didn’t play a major role in installing was the new furnace and air conditioners.

We did as much as possible ourselves because we didn’t want to take out a loan on our house. We didn’t believe that borrowing to fix up our rather modest ranch house was a smart move. Instead invested a lot of sweet equity, saved money in envelopes, and always paid all bills in full. The only exception was the twelve months, same as cash, credit card Ikea gave us. We did take advantage of a free year long loan. Of course we paid this off in full before the deadline. We had also purchased a house we could afford, even on one income should one of us lose our jobs. And this happened shortly after buying the house. My wife’s company was purchased by good ole’ Barry Diller, and was promptly laid off. I quit my job a few years later to try my hand at self-employment. We never had to stretch to afford the house. We were never house poor. We even paid extra on the measly $666 dollar mortgage each month in a effort to pay down the principal.

While we did see hardship coming to the metro Detroit area, we didn’t have the renovations finished soon enough to sell when we new we should. And while we saw the writing on the wall, we certainly didn’t know it would get as bad as it did. Upon arriving home we worked hard on finishing the basement on our house, not really knowing the extent of the value lost in the previous six months. Sure we new it had lost value, but all told, it’s probably down 40% or more from it’s peak value. We were told by our real estate agent that we really needed to finish the basement, and so we were intent on it…until we realized what kind of shape we were in. Instead of throwing good money after bad, we began to think in terms of damage control. We may as well burn a pile of money on the driveway. Or perhaps put a pile of money on the driveway. At least that would generate some interest in the place.

Now I constantly read articles like:

Underwater Mortgages Hit 11.3 Million

Strategic Defaults

Debtor’s Dilemma: Pay the Mortgage or Walk Away

Strategic Non-Foreclosure Becomes Official Policy

Freddie Mac: “Potential Large Wave of Foreclosures”

After learning that we were hopelessly under water, we dropped all tools and stopped work on the house. Strategic default, the new term for walking away even though you’re currently good on your payments, became a very appealing thought. We moved for work, and we can’t, and don’t want to, go back. Two years of paying the mortgage on even a cheap house (that we don’t live in) is a huge amount of money that is not saved for retirement (not that I ever expect to actually retire), or for the unthinkable potential need for a future debilitating illness, or for other future needs.  The money becomes locked away, in a sense, prevented from being used for more useful in the economy. Even though we bought way less than we could afford, never borrowed against it, and did all renovations ourselves, we are still faced with the possibility of owing $30,000, if we can even sell the house. This is perfectly plausible scenario even though we did everything “right”. And now the mortgage and banking industry wants me to think of my legal obligation as a moral obligation. The legal documents say it all. They state in the terms what we owe, what the collateral is, and what happens if we fail to pay. There’s no mention of heaven or hell, good or bad, right or wrong…only terms of agreement, and potential penalties should one side fail to uphold their end of the bargain.

I don’t like the idea of walking away, and we’re doing what we can to avoid it. But at some point we need to, once again start saving the large sums of money needed for our future. The longer we hold off, the worse it becomes. Even the moral compass in my head is weak compared with pending problems of a future with too little saved. Which potential scenario is worse? The one were we walk away from a legal obligation with a bank? Or the moral obligation were we fail to take care of ourselves and our families, without relying on public handouts?