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No matter how pretty a ribbon you put on it this still stinks, if you default on your first mortgage to get the other place, your greed becomes everyone elses problem. Don't sit there and think for one minute it would just be the bank's problem it is everybody's problem then. It is past on to the taxpayers and anyone who banks. All those extra fees we are paying is because of people who had no business moving to a different house.
I hope anyone who has used these tactics to get a house I hope the banks use every means possible to proscute them to the fullest extent of every law available to them. Yes then I will have to pay for the jail stay but at least justice to the rest of us who feel obligated to pay the bill we create will have been served.
Off topic but....all those fees we are paying?
Gimme a break. Those fees are going to pay the million dollar salaries of top execs, which they have come to expect, and the massive 5 and 6 figure bonuses.
Wonder what the income disparity is between a teller, branch manager etc and the top "bank" echelon.
Now the loss of property tax revenue...yes you are right but prop taxes are resetting in most places bsed on the lower values even while the majority stay put in their homes. So who is really at fault for the massive drop in tax revenue and the steep budget cuts....
Oh yeah, I forgot...those same 1-3% of IRS AGI tax filers who sliced and diced and bundled credit default swaps, pushed poor and minority home purchasers in bad loans, etc, etc. Now the former Countrywide executive was a billionaire and still is a billionaire while the rest of us bail them out.
I don't know if a buy and bail is considered mortgage fraud in and of itself, but in order to qualify for the "buy" part, you usually have to lie on your application and THAT part is mortgage fraud.
It was so common for a while that lenders had to put a bunch of new rules in place to prevent it. So you might be able to financially qualify for both mortgages and still not get approved. (Oh, and you have to qualify with no rental income counted) Even if you do get approval, for the second home, you may have to put a substantially higher amount down.
And yes, people do get in trouble for mortgage fraud all the time. You could even serve jail time for it. As for the banks, they have some time to come after you, and several of the big banks have said that they are going to focus their energies on those who did strategic defaults and buy and bails.
As someone else said, I too know someone with over a million dollars in existing rental properties, with substantial money in the bank (enough to pay cash several times over) and a credit score in the 800s, who was turned down for a mortgage recently.
In recourse states you don't "let the other one go" -- the lender comes after you!
Believe me when I say the law firms retained by the mortgage services and lenders have every reason to track your purchase of a "new" place, show that to the court as evidence of your financial health and then get a judgment for the obligation which has been defaulted...
I agree that it is probably not the best thing to write a check at closing to cover the shortage for a sale, but the alternative is to have the lender come after your assets. Or stay put.
Chet gives the best advise so far pertaining to your situation.
What you are referring to is a strategic default, being you are young, on time with your payments, and financially stable. You don't gain that much financially by defaulting. In the long run it would possible cost you more in aggravation and higher payments. Not to mention your credit taken a noise drive.
Because Ohio is a judicial state the lender can pursue a judgement against you. If not now, possibly in the future. Then you would have to consider filing for Bankruptcy.
I'm a foreclosure consultant dealing with home owners in 49 states. I have talked with people that would beg for a situation like you have. My advise is to stay put, at least not to strategically default on your current loan. In the big picture it will cost you more.
MS - Thanks for the info. We own 2 rental properties and our primary. With all the good deals out there, definitely considering a new purchase to be used as our primary. Given the real estate climate, we want to make sure of our options in the event our tenants bail on us.
davehalo - I totally get where you're coming from.
lacerta - there's no need for us to commit fraud in order to purchase a new property. Thanks for the feedback tho.
Are all 3 of the mortgages or loans on those properties paid off? If you have been able to purchase your home, and acquire the rental properties, you have done well. I would assume you have a good to excellent credit score, and a good working relationship with a bank. If you can't rent, sell, or trade the house you are in to get to the other house I hope you stay put. And maybe in this crazy market we are in, the owner of the other house would consider a trade for your property.
winterbird - didn't know you also had rental props. that makes a SS, strategic default, etc even less appealing. if the rental market is close to your current mortgage payment and (1) you like the other place better and (2) can qualify for a loan to purchase it....then rent your current place out.
i hope to turn around after a FC in august this year and should be able to purchase by mid-summer next year (there are options for improving your credit score after a FC).
if you hang onto your current prop and rent it, even if there is a slight loss (say <$2-300 per month) and you can handle the loss then you have a great tax write-off.
in the mean time, you collect rent and when you are ready to retire all your props should have value in them and be a nice retirement fund
mortimer - in my 4th post i acknowledged the possibility of repercussions on those walk aways.
davehalo - I hope it works out for us as we near retirement that way. We carry mortgages on the properties but they are definitely comparable to the rents in most of the surrounding area. I have an uncle who ended up filing bankruptcy when the market tanked. He was carrying mortgages and 1/2 of his tenants stopped paying due to layoffs.
We ended up being landlords b/c the properties aren't moving right now. I don't like the pressure of being a landlord. Although my tenants have been great and pay on time. Good luck with your purchase next year. I have a couple of friends who foreclosed over the years and it's not so hard bouncing back. That's a good thing.
mortimer - in my 4th post i acknowledged the possibility of repercussions on those walk aways. <snip>
Ohio allows deficiency judgments but the judgments are void two years after the sale date. Also, the property cannot be sold for less than 2/3 of the appraised market value.
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