After researching the matter, I found a writeup on the Vieira's story, entitled Profiles: Family Won't Give Up. I found out that this was a purchase mortgage-- the Vieiras are claiming they bought a home for $243,000 more than it was worth, and blame a fraudulent appraisal by the bank who made their mortgage, instead of blaming themselves for overpaying.
The thing is, when the bank gets an appraisal, that's for the benefit of the bank-- to make sure that the value of the collateral covers the amount of money they are lending. It's the bank that is damaged by an inflated appraisal-- if the borrower defaults, as happened in this case, the collateral is not worth as much as it was purported to be, and the bank will have a larger writeoff. The borrower saw the property and knew what the price was. If they had paid cash, there wouldn't have been a bank appraisal.
Should they have known all this? Well, there's the fact that the Vieiras were appraisers themselves, owning a "successful real estate appraisal business"! I find it hard to believe that the Vieiras were ignorant of the fact that some appraisers would work with the numbers to ensure that an appraisal would conform to a desired purchase price.
But anyway, the Vieiras stopped paying on their mortgage-- not for any financial hardship or inability to pay, but because the appraisal was allegedly inflated:
"Knowing the mortgage was fraudulent, we just couldn't keep on paying," Nuno said, adding that they stopped making mortgage payments in September of 2009.
This is what a classic strategic default looks like:
"Despite the foreclosure, both of us still maintain near perfect credit scores," Vieira said, "but due to something that is completely not our fault, we can't take advantage of the low mortgage rates now and switch to a 30-year fixed. It just creates so much uncertainty in our life."
They can still send their son to private school-- bet that isn't cheap!
They send Leo — a first-grader with a fourth-grade reading ability — to a private school, despite the good public schools in the area. "We can't send Leo [to the public school], because I don't have the time to help him with his homework or to track his progress in school," she said.
And why doesn't she have time for her son, you ask?
Now Vieira spends an average of five hours a day, seven days a week, in a legal fight with Wells Fargo over the mortgage fraud issue.
If the Vieiras' story were presented in a story to highlight strategic default and contrast it with foreclosure out of true hardship, it would not be that remarkable. But that is not the case. The site on which the article appears is entitled "What went wrong: The Betrayal of the American Dream". The article that tells their story is presented as a profile of "those hardest hit by the foreclosure crisis". This is being presented as if I am supposed to feel sorry for the Vieiras!
If folks strategic default, that is their decision-- I wish that people would feel a strong obligation to pay their debts if they can reasonably do so, but if the law allows for it, and it is to their advantage, I can't say that I blame a person for a strategic default. The banks screwed up badly during the housing bubble-- including in their appraisal process-- and I see strategic defaults as chickens coming home to roost in a sense. But when someone overpays for a second home, strategically defaults on their mortgage, and then not only has the audacity to blame the bank for the fact that they can't refinance because of a mark on their credit report, but makes a full time job out of pursuing the bank over a loss that they have already stuck the bank with, I end up almost feeling sorry for the bank CEO. Almost.