Deciding whether to default on a mortgage should be made as a business decision — the same way the nation’s most admired capitalists such as Donald Trump make business decisions, according to Brian Korte, principal of Korte & Wortman, P.A.
Korte was the featured speaker at the Central Palm Beach County Chamber of Commerce’s breakfast meeting held Wednesday, March 6 at the Poinciana Club. He spoke about how foreclosures affect not only individuals’ homes, but neighborhoods, cities and businesses as well. With offices in West Palm Beach, Tampa and Tamarac, Korte & Wortman specializes in foreclosure defense.
But while each individual who struggles to pay a mortgage must look at the problem from a personal perspective, business owners and city leaders need to understand it as a community problem, he said, pointing out that West Palm Beach and Lake Worth have some of the highest rates of foreclosure within a county and state that ranks tops for foreclosure.
Korte explained that he counsels each individual to look at foreclosure as an economic option, determined by variables that include how far underwater a home might be and whether the person is using savings to pay the mortgage. Never should morality enter the decision, he said.
“I hear people every day say, there’s a moral obligation to pay your mortgage. You may feel a personal morality to pay your debts, but nowhere in contract law is there a morals clause,” Korte said. “In the business world, we admire people like Donald Trump, who frequently renegotiates his debts or files bankruptcy to erase them. If Donald can do it, so can the ‘average Joe.’”
The solution, Korte said, is not contained in the proposed Florida legislation to expedite foreclosures, though. Lenders already can expedite foreclosures in many cases and choose not to do so. In addition, almost half the homes taken back by lenders in Florida are being kept off the resale market, comprising the so-called “shadow inventory,” he said.
“If the banks were to recognize all the current foreclosures by their market value, their assets immediately would drop below their liabilities, and they would be shut down by the FDIC,” Korte said. “So the solutions being proposed to speed up foreclosures are at odds with bank regulations.”
Korte said business and civic leaders should push for a solution that allows lenders to write down principal mortgage amounts without fear of insolvency. “Without that kind of a solution, we’re going to continue to see foreclosures as a major drag on our cities and businesses for years to come,” he said.
Above: Brian Korte with the chamber’s MaryLou Bedford and Jaene Miranda at the foreclosure breakfast presentation.