Right now there are many people who are experiencing the fact that they owe more on their mortgages than their home is worth. Not only that but with the continued plunge of real estate prices they may not be able to recoup the amount they owe on their home for years and years, if ever. Housing and mortgages are upside down, big time.
It?s a tough place to be for an individual or a family.
But right now there are corporations that are in the same boat. In fact, just last week in Manhattan, Tishman Speyer Properties walked away from 11,232 Manhattan apartments because they couldn?t pay their mortgage. And their mortgage far exceeded the value of the property.
Far exceeded, as in the fact that Tishman Speyer Properties paid $5.4 billion to acquire the property in late 2006 and the current value of the property is just a measly $1.8 billion.
So Tishman Speyer Properties walked away. They turned the property back to the bank so as to avoid bankruptcy. As a corporation it was considered to be just good business. After all, they couldn?t make the payments and the value was no longer there.
They may suffer a small ding to their reputation but they still have $33 billion in assets with real estate including the Rockefeller Center and the Chrysler Center in New York and dozens of other properties in various cities throughout the world.
Essentially they will walk away with impunity, few repercussions if any and they will be able to continue ?Business as usual?.
But a residential homeowner who is in the same position cannot expect the same. Not only are there societal pressures pushing a homeowner to stay and uphold their obligations but if they do walk away they face 7 years with bad credit showing on their report, (which prevents them from ?business as usual?), possible tax implications and the shame of a foreclosure.
Even if the property was no longer worth what they owed, there was no expectation that it ever would be worth what they owed again or not, and even if it was in their best financial interest to give it back to the bank.
Apparently with mortgages and foreclosures there is a double standard. Unfortunately it is ordinary people who suffer the consequences while the corporations go unscathed.