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Old 05-16-2010, 12:21 AM
 
Location: Cheshire, Conn.
2,102 posts, read 6,805,917 times
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Quote:
Originally Posted by dazzleman View Post
The state's mediation law passed in 2008 slowed down foreclosures but will probably not be too effective at preventing all that many of them. If you can't afford the house, you eventually have to leave. Little can change that.
NOTE: the segment on "60 Minutes" stated that many who could afford the mortgages were leaving because they didn't want to be upside-down on their balance sheets (owning more on an asset than its current market value).
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Old 05-17-2010, 01:32 PM
 
Location: Fairfield
588 posts, read 1,626,585 times
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What I don't understand is why we the taxpayers are giving $$ to the banks, for bad loans that they made and approved. Why should I foot the bill because some lender decided to give a 500k mortgage to someone making 40k/yr? Just like with any investment that the bank makes, they should be responsible for a higher risk, and therefore taking a hit when they miss. It's no different than them investing in some other financial instrument and getting a guaranteed rate of return on it. It just happens to have a physical house and property behind it.

On the flip side, as for people that are walking away from the homes, especially when they can afford the mortgage, they should be hounded for years for the difference between what the bank makes if they can sell and the balance owed by the departing homeowner. Each person should be responsible for their own actions, no matter how stupid they were. Yes - the bank should not have given the $$. But just because a drug dealer sells drugs for cheap doesn't mean you should start smoking crack. Same thing with an interest only ARM or any other mortgage that the banks were offering. And so what if your house is worth less than what you owe? It's not a blind investment - it's a roof over your head. Live with it.
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Old 05-17-2010, 05:18 PM
 
Location: Connecticut
3,535 posts, read 2,690,962 times
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Quote:
Originally Posted by toddb View Post
What I don't understand is why we the taxpayers are giving $$ to the banks, for bad loans that they made and approved. Why should I foot the bill because some lender decided to give a 500k mortgage to someone making 40k/yr? Just like with any investment that the bank makes, they should be responsible for a higher risk, and therefore taking a hit when they miss. It's no different than them investing in some other financial instrument and getting a guaranteed rate of return on it. It just happens to have a physical house and property behind it.

On the flip side, as for people that are walking away from the homes, especially when they can afford the mortgage, they should be hounded for years for the difference between what the bank makes if they can sell and the balance owed by the departing homeowner. Each person should be responsible for their own actions, no matter how stupid they were. Yes - the bank should not have given the $$. But just because a drug dealer sells drugs for cheap doesn't mean you should start smoking crack. Same thing with an interest only ARM or any other mortgage that the banks were offering. And so what if your house is worth less than what you owe? It's not a blind investment - it's a roof over your head. Live with it.
Todd,

What you wrote here makes too much sense, that's why it wasn't done. The new way to conduct business in America is to "socialize loses & privatize gains"

Anyways, a bailout of this proportion using tax payers dollars should have been voted on with a national referendum. The country of Iceland did just that for a similar situation and the citizens voted no on the bailout.

Icelanders reject full repayment to British, Dutch caught in bank collapse

I do think if we didn't bailout the banks we would in effect have a national bank. Don't know if that's good or bad, but if it's like the bank congress people in DC use, we could at least bounce checks for 1,000's of dollars and not worry about it.

House banking scandal - Wikipedia, the free encyclopedia

These are crazy times.
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Old 05-19-2010, 09:18 PM
 
Location: W Simsbury
164 posts, read 281,841 times
Reputation: 71
The rapid appreciation of house values was artificial. People were duped into thinking that a house was an "investment". I personally have no problem with a person walking away from their mortgage. You sign a contract stating that if you don't pay the mortgage, the bank takes it over. That's your agreement. If you're willing to have your credit rating get hit for that, then so be it. This notion that it's dishonorable to do so is misguided, IMO. A bank will only care about what is in their financial interest, and you as a living person with a family to care for should be most concerned about what is in your family's best interest.

I'm not seeing what Jay's seeing in terms of dwindling inventory. In fact, when we moved back to CT from PA two years ago, I wish we had the choices available then that I'm seeing out there now. There was a dearth of 200-300k homes in Simsbury at that time. We ended up buying a more expensive home and only being able to put down 15%, which meant paying PMI. Now I'm seeing a lot of homes in the 200-300k range which I would have been very happy with. But whaddya gonna do?

Anyways, I fully expect interest rates to rise and home values to not go up (and possibly go down further). Towns will feel the pinch and increase property taxes, until the homeowners who are left finally say "no more." Simsbury just had a referendum yesterday where I believe about 80% voted in favor of the Board of Ed budget and other budgets, all of which will result in a property tax increase. I guess we still have a little ways to go before people feel the pinch personally and decide that they want their local government to actually *cut* costs.

Fortunately, as others have said, CT's home values didn't seem to rise as high in the housing bubble as some other areas, so they shouldn't fall quite as far, either.
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Old 05-20-2010, 05:18 AM
 
Location: New England
8,155 posts, read 18,195,342 times
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Quote:
Originally Posted by Scott R View Post
I personally have no problem with a person walking away from their mortgage. You sign a contract stating that if you don't pay the mortgage, the bank takes it over.
No, you sign a contract stating you WILL PAY BACK THE LOAN in good faith. The bank simply has a *right* to take over the property if you do not.

Being a "Christian" as you pointed out in another thread, I find the lack of concern for honoring a contract disturbing. All over the Bible we are told to be honorable people and keep our word, our agreements, our pledge.
Num 30:2 When a man makes a vow to the Lord or takes an oath to obligate himself by a pledge, he must not break his word but must do everything he said.
To go further, we are told it's best not to get into debt in the first place because we will be a slave to the lender!
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Old 05-20-2010, 08:21 PM
 
Location: W Simsbury
164 posts, read 281,841 times
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JViello, thanks for the thoughtful reply. At the risk of boring/annoying/angering the non-Christians here, let me say that I do appreciate your perspective, but there are other persuasive arguments counter to that one which are also from a Christian perspective. This is a good blog post which argues a point consistent with yours:
It is wrong to walk away from your mortgage?

However, there are several good replies to that blog post which dissent (as well as many that agree). Here is a sampling of some of the better ones (note: I'm posting the ones I've picked in the order that they appeared and in their entirety):

Quote:
Neal Evans April 21, 2009 at 6:15 pm
Covenants generally stipulate what happens when both parties perform as they agree, as well as consequences if one or both parties fail to perform the terms of the covenant.

Consider the form of the suzerain-vassal covenant that Yahweh made with Israel at Sinai (mediated by Moses). Basically, the L-rd said ‘if you follow my law, then I will bless you and let you possess the land I promised your fathers and protect you from your enemies; but, if you do things that I hate and are an abomination to me then I will dispossess you from the land, remove my protection from you, and scatter you among the nations.” Of course, redemptive history in scripture is the story of Israel failing to live up to its terms in the covenant they made with G-d and, as promised, the L-rd did as He said he would: ejecting Israel from the land.

The mortgage covenant has a similar form. If the borrower pays according to the terms of the note, then they will own the property free and clear and the end of the term. However, if the borrower defaults, then the lender has remedies: namely, the lender has the right to call the entire balance of the loan, plus interest and fees, due in an accelerated manner or at a time of their choosing (with appropriate notification to the borrower and allowance of a reasonable time for remedy). Ultimately, the lender may dispossess the borrower and take the property as the ultimate remedy.

This being the case, it appears to me that the terms of the mortgage itself allows the borrower to ‘make full restitution’ in Ex 22:14 by virtue of the fact that the lender takes the property (assuming the property is kept well-maintained and is in the similar shape as when it was purchased).

In response to Psa 37:21, I would argue that a borrower who has to move his family and forfeit his home is not a borrower who “payeth not again”. That, including the other penalties (ruined credit, social stigma, etc.) is a high price to pay indeed.

Finally, I think this verse from Psa 37 is also relevant here:

“The wicked have drawn out the sword, and have bent their bow, to cast down the poor and needy, and to slay such as be of upright conversation.”

I think to moralize and condemn those who are in a situation where they are no longer able to service their mortgage debt is outright legalism as bad as the venom that the Pharisee spewed.
Quote:
Joe December 25, 2009 at 10:36 pm
IT’S A COLLATORAL LOAN
Neal, I was really impressed with your remarks above.

Bob I understand where you are coming from with scripture. As Christians I think we each need to study the scriptures, and pray to God for answers. I would like to address Exodus 22:14 If a man borrows anything from his neighbor, and it is injured or dies while its owner is not with it, he shall make full restitution. Please remember these are collateral loans we are talking about. I don’t know about everyone that has commented on this blog, but the bank did not give me $400,000.00. Quite the contrary they sent the money to Escrow to be deemed out appropriately and a Deed of Trust was put in my name. The bank owns the house, until I completely pay it off. As Exodus states that if I borrow a Donkey, I need to return the Donkey in as good or better fashion. I believe that based on this verse that if the borrower returns the house to the bank in as good, or better condition they are following scripture.
Psalms 37:21 The wicked borrows and does not pay back, but the righteous is gracious and gives. Again if we return the house are we not paying back. I could use this verse with unsecure loans, but it doesn’t really appear to relate to a secured loan, unless the borrow doesn’t return the house.

According to Romans 13 we are supposed to obey the law of the land. If we sign a contract that states that once we stop making payments the bank can take back the house, and pursue the borrower for a deficiency judgment. I believe we are not dishonoring God by following the law of the land.

I would like to make one point about the banks. I think we forget that the banks are very profitable with mortgages. I would like to take make an example of a 6.5% loan for $400,000.00. At first it appears that the bank is giving us a great interest rate. Let’s look at what the real interest is. Keep in mind that most people on average only keep their house for five years. At the end of five years the borrower will have paid off $31,207.88 of principle, and paid interest in the amount of $133,437.12. This comes to an interest rate of 81%. Most people don’t realize that the 6.5% interest rate doesn’t come into play until the very last payment. The bank keeps about 40% – 60% of the interest collected. This comes to approximately $66,718.56. They made this money by basically using someone else’s money. In most cases it is borrowed from government. Not a bad deal.

I think each individual needs to search their heart and see if walking away from their house will hurt their relationship with God. If this is the case, then by all means do not walk away. God cares about our relationship with Him, I don’t think he cares about our finances.
I have some other thoughts/questions as well, but it's late and I'm tired, so I'll try to follow up with those later. I do just want to quickly clarify that it was not my intention to encourage people to walk away from their mortgages, or that I thought that it was something that should be treated lightly.
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Old 05-21-2010, 06:57 AM
 
Location: The brown house on the cul de sac
2,081 posts, read 4,120,151 times
Reputation: 9305
Quote:
Originally Posted by Scott R View Post
I personally have no problem with a person walking away from their mortgage.

you as a living person with a family to care for should be most concerned about what is in your family's best interest.
I don't agree with this at all. Walking away from your debt because it was a poor investment for you is morally wrong.

And, if someone truly cares about their family's best interest it would be to set an example and live morally, integrally and honestly and teach those values to your children.

It takes a very selfish person to walk away from their debt simply because it was a poor investment.

IMO, people reap what they sow...
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Old 05-21-2010, 07:15 PM
 
Location: Central Virginia
834 posts, read 1,941,497 times
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Look I'm not advocating anyone walking away from your mortgage. But I'm anal about my credit like that. It does annoy me that we all pay the price for greedy buyers who just HAD to buy before they were ready.
BUT as for moral obligations? Where were the banks' morals when they were giving huge mortgages to people on disability, people who barely spoke english, people not remotely qualified to buy a house? What about bubble mortgages or ARMS? It took greed on both sides, the buyer and the banks to create this mess. And don't get me started on the investors and speculators driving up the prices on homes. I know CT didn't see what other states saw but living in Florida during the boom, I saw the greed from everyone from the builders, the buyers, the banks, the towns giving out permits thinking only of raking in more property taxes and not caring that the roads and schools could not handle the population growth.
I cannot even think about the amount of money we lost on our house when we sold it to move here. ugh. But if someone is thinking of "walking away" from your house, I'd think twice about that. You have to live somewhere and unless you want to rent for the next 10 years and have trashed credit, I'd find another solution. Most mortgage companies are working with homeowners these days to avoid having another foreclosure on their hands.
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Old 05-21-2010, 08:05 PM
 
Location: Fairfield, CT
5,529 posts, read 8,184,647 times
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Quote:
Originally Posted by Yankeerose00 View Post
Look I'm not advocating anyone walking away from your mortgage. But I'm anal about my credit like that. It does annoy me that we all pay the price for greedy buyers who just HAD to buy before they were ready.
BUT as for moral obligations? Where were the banks' morals when they were giving huge mortgages to people on disability, people who barely spoke english, people not remotely qualified to buy a house? What about bubble mortgages or ARMS? It took greed on both sides, the buyer and the banks to create this mess. And don't get me started on the investors and speculators driving up the prices on homes. I know CT didn't see what other states saw but living in Florida during the boom, I saw the greed from everyone from the builders, the buyers, the banks, the towns giving out permits thinking only of raking in more property taxes and not caring that the roads and schools could not handle the population growth.
I cannot even think about the amount of money we lost on our house when we sold it to move here. ugh. But if someone is thinking of "walking away" from your house, I'd think twice about that. You have to live somewhere and unless you want to rent for the next 10 years and have trashed credit, I'd find another solution. Most mortgage companies are working with homeowners these days to avoid having another foreclosure on their hands.
I agree. While it's distasteful to walk away from a financial obligation, and it carries consequences (and it should), many banks made loans they had no business making.
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Old 05-22-2010, 06:32 AM
 
Location: New England
8,155 posts, read 18,195,342 times
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Quote:
Originally Posted by dazzleman View Post
I agree. While it's distasteful to walk away from a financial obligation, and it carries consequences (and it should), many banks made loans they had no business making.
Right. But on the other hand, the people had no business signing the papers either.

It really is a chicken or the egg thing.

For me, I tend to side on personal responsibility. There are a TON of things in this world that can be abused if a person so wishes. Food, drink, shopping etc. Do we blame the restaurants for serving food to a 500lb guy? Do we blame the package store for the drunks? Do we blame the stores for selling huge screen T.V.'s to people on state assitance?

The problem for me is that the government got involved. In a free market, the fools who signed the paper and the fools who loaned the money would BOTH go down in flames and the responsible people and responsible companies would be doing just fine. Now the government is taking OUR money (the responsible people) and bailing out the fools. Madness.

Peoples Bank is a perfect example. They are one of the healthiest banks in the nation right now. Why? They didn't get involved with any high risk loans and are flush with cash right now. They are trending WAY below the national average in troubled assest ratio.

Nevermind the fact the government AGAIN got involved and put pressure on banks to make these risky loans. The responsible banks said no. But like drug dealers, if one person won't sell...another will.

What bleeping business does the government have telling private industry who they "should" be taking on as customers? And what business does the government have getting into the private mortgage industry? (Over 50% the nations mortgages are government held with just Fannie and Freddie alone!)
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