Anybody Underwater on their Mortgage (Ira: to rent, insurance, refinance)

[ClarkStreetKid]

Originally Posted by llama8

There have been numerous recessions throughout history and this is just one more. It may feel worse than previous ones if you are affected, but overall, it will recover in a few years just like all the other ones.

If you bought your home before this mortgage crisis you shouldn't panic unless you need to sell now. Otherwise, the prices will bounce back down the road. It's really only forclosures and people needing to sell that are "under water".

Right. I remember the previous recessions but we made it through. Now I do believe that people will have to change their thinking in regards to housing and consumption. They'll have to start thinking about living in that 3 BR single bath house for 30 years and raising their families there and not thinking that they'll just trade up. Think Levittown and not McMansion.

[llama8]

Originally Posted by ClarkStreetKid

Right. I remember the previous recessions but we made it through. Now I do believe that people will have to change their thinking in regards to housing and consumption. They'll have to start thinking about living in that 3 BR single bath house for 30 years and raising their families there and not thinking that they'll just trade up. Think Levittown and not McMansion.

I totally agree. The real estate markets inflated way too much and I also believe that this is a bit of self-correction going on...not just the bad economy. Prices needed to level off because incomes were not increasing at the same rate. People need to be realistic with the times and not live outside their means.

I bought a nice expanded home in Levittown with my husband in 2006 and we could easily afford more, but we figured we wanted to be realistic and be able to weather any financial crisis. Choosing the cheaper home means we have few financial worries as opposed to being in a crisis for buying a home at the top of our budget. If one of us got laid off, we could still afford the home. I wouldn't change my decision ever.

How people were able to buy homes without putting 80% down at the top of their budgets the reason we have this mess today.

This economic downturn will force people to get realistic priorities again.

[dman72]

Originally Posted by llama8

I totally agree. The real estate markets inflated way too much and I also believe that this is a bit of self-correction going on...not just the bad economy. Prices needed to level off because incomes were not increasing at the same rate. People need to be realistic with the times and not live outside their means.

I bought a nice expanded home in Levittown with my husband in 2006 and we could easily afford more, but we figured we wanted to be realistic and be able to weather any financial crisis. Choosing the cheaper home means we have few financial worries as opposed to being in a crisis for buying a home at the top of our budget. If one of us got laid off, we could still afford the home. I wouldn't change my decision ever.

How people were able to buy homes without putting 80% down at the top of their budgets the reason we have this mess today.

This economic downturn will force people to get realistic priorities again.

My wife and I did the same thing, but we bought a condo...taxes were 1/3rd, mtc was fixed, no oil to pay for, and we can afford the mortgage on 1 salary.

However, we planned for the market to come down a bit, then sell and buy a decent sized house within our means to raise a family. With how much the market has come down, we'd have to write a check to the bank for 30K if we sold now. and that's with putting extra towards principle. I could have dealt with 5-10K, but not this much. We could rent our place and buy, but with the rental market coming down, we wouldn't be able to cover the mortgage and MTC with our tenants rent.

[newtoli]

One thing that I did hear is that they will be offering refi loans with relaxed requirements on Equity in the home.

We put $10k down, and got an 80/20 loan. Do to my husband just starting his new business 6 mo before buying, we had to go no-doc and have a high interest rate. They tried to sell us on a lower interest ARM loan, but we stuck with a fixed because we thought it was ridiculous to get a loan where your payment could change (unlike most other people it seems, haha).

3 years later, we are current on payments, never miss one. My husband now has all the tax returns to back up his business income, but we can't refi to a lower rate. If I can simply refi easily (without $10k in closing costs), I'd be happy with that. It would make me breathe a little easier in this economy. It would provide us with more money every month to pump into the economy. I see that as being one of the ways to help out the responsible homeowner.

[Jrprofess]

Originally Posted by ClarkStreetKid

And why are they living paycheck to paycheck? My wife and I always built an emergency fund of six months, then 12 months, then 18 months, and on and on. This was something we both learned to do while on the Island and going through a few downturns. Now we both can get laid off, pay off any bills and not become homeless. The fundamental problem with our economy was too many people living beyond their means figuring the money party would never end.

FWIW, We just bought a new car, a dishwasher and microwave/convection oven. Saving and living within our means during the good times has enabled us to take advantage of bargains now.

I appreciate your financial prudence and feel that we are suffering in some ways at the hands of a generation of homeowners and consumers who simply bought everything on credit, never paying cash for much. I am the son of a retired Controller, and I have had to explain on more than one occasion to my "miserly" father that plenty of my peers and current working professionals have no issue with 20k on a credit card and paying the minimum. This blows his mind. That philosophy is finally coming home to roost. And should.

But regarding your months and months of savings. I am up to about 5 months of savings, and working dilligently on the 6th (and any severance would be another 3 in my case), but I do not think it is unreasonable to envision a young couple, who came up with the 20% down payment, not having that emergency fund in the first couple of years of their mortgage. That tends to be a very "house poor" time period, and does not necessarily mean they were completely irresponsible. Many long-time homeowners when I was first looking in '99 waxed nostalgically about how they could barely afford a broom to sweep their new home's floors when they first got a house, but things improved over time. The one plus for the people who have paid their mortgages and done the right thing has at least been the opportunity to refinance in some cases at a very low rate, and in my case I was able to drop the term. But that also has a lot to do with how much equity you have, etc. Best of luck to everyone struggling. This recession is different than anything I have seen.

[Samrai309]

Originally Posted by newtoli

3 years later, we are current on payments, never miss one. My husband now has all the tax returns to back up his business income, but we can't refi to a lower rate. If I can simply refi easily (without $10k in closing costs), I'd be happy with that. It would make me breathe a little easier in this economy. It would provide us with more money every month to pump into the economy. I see that as being one of the ways to help out the responsible homeowner.

Are you able to send any extra money to your principal on each payment? Or are you able to split your mortgage into two payments a month (every two weeks) and then send some extra (even a hundred bucks) to the principal on each payment? Theoretically, the extra payments, however much or little, (preferably to match your principal component on your mortgage),the savings in interest each time you do this will cut your fixed mortgage's length over time, serving you the same as a refinanced loan at a lower interest rate....unless I am just misinterpeting how the entire thing works.

[LocalX]

This nightmare is just beginning. The majority of the people who a drowning even if they refinaced to 0.00% owe so much on their principal they will never be able to repay their loans. By bailing these people out will they be come automatic financial geniuses? My big question is what they are doing for the people who make their payments on time month after month and made the sacrifices to ensure that it would happen. The fact being that I now have to pay for my neighbor’s bigger house with the extra bath ect. Ect. Burns me up.
Remember Government bailout = YOUR TAX DOLLORS!!!!

[Samrai309]

Originally Posted by LocalX

This nightmare is just beginning. The majority of the people who a drowning even if they refinaced to 0.00% owe so much on their principal they will never be able to repay their loans. By bailing these people out will they be come automatic financial geniuses? My big question is what they are doing for the people who make their payments on time month after month and made the sacrifices to ensure that it would happen. The fact being that I now have to pay for my neighbor’s bigger house with the extra bath ect. Ect. Burns me up.
Remember Government bailout = YOUR TAX DOLLORS!!!!

I saw an interesting interview on one of the news shows the other day. There was this economist panel on and they were talking about economic fundamentals and if the stimulus bill would work and all that stuff. Anyway, this one economist had something worked out and he said that if you gave every american 300k instead of paying for this stimulus bill, which he felt would not work, think about the potential--americans could pay down their debt, refinance their loans, banks would have all this capital that would be injected, etc etc....overall purchase power and fiduciary responsibility and behavior could change. He also said it would cost less overall to give each American this money instead of the stimulus bill's projected cost. Of course there are fundamental economic disadvantages to any scenario that is/was talked about but it was an interesting concept nonetheless. Definitely would help with mortgage issues even for people who pay on time and have been responsible.

[ClarkStreetKid]

Originally Posted by Jrprofess

But regarding your months and months of savings. I am up to about 5 months of savings, and working dilligently on the 6th (and any severance would be another 3 in my case), but I do not think it is unreasonable to envision a young couple, who came up with the 20% down payment, not having that emergency fund in the first couple of years of their mortgage. That tends to be a very "house poor" time period, and does not necessarily mean they were completely irresponsible. Many long-time homeowners when I was first looking in '99 waxed nostalgically about how they could barely afford a broom to sweep their new home's floors when they first got a house, but things improved over time. The one plus for the people who have paid their mortgages and done the right thing has at least been the opportunity to refinance in some cases at a very low rate, and in my case I was able to drop the term. But that also has a lot to do with how much equity you have, etc. Best of luck to everyone struggling. This recession is different than anything I have seen.

I agree and it's not easy when first starting out, but it's really something that has to be done. We did it the same way you're doing it, one month at a time. Heck, even a week at a time is positive growth and worth the trouble. Growing savings/emergency fund should be factored into the weekly/monthly budget, and that includes when figuring out what you can afford for a monthly mortgage payment.

Things that a young couple may think about going forward; put off buying and continue to rent, move in with mom and dad for a year or two saving every penny (almost a Long Island tradition back in the 80's), try to move to a place where you can save.

[Jrprofess]

Originally Posted by ClarkStreetKid

I agree and it's not easy when first starting out, but it's really something that has to be done. We did it the same way you're doing it, one month at a time. Heck, even a week at a time is positive growth and worth the trouble. Growing savings/emergency fund should be factored into the weekly/monthly budget, and that includes when figuring out what you can afford for a monthly mortgage payment.

Things that a young couple may think about going forward; put off buying and continue to rent, move in with mom and dad for a year or two saving every penny (almost a Long Island tradition back in the 80's), try to move to a place where you can save.

This post just reminded me of my year spent in my mother in-laws basement...(shuddering)...everybody has to sacrifice at some point .