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Old 08-26-2008, 03:22 PM
 
Location: Pennsylvania, USA
5,217 posts, read 4,120,793 times
Reputation: 908

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Quote:
Originally Posted by SuSuSushi View Post
Aren't getting squat? You're getting a freebie. You're getting debt wiped away. I just can't summon any crocodile tears for anyone that made a bad loan choice. I don't know your specific situation, but if you signed a ninja loan or an interest-only loan or a bad ARM...I don't have any sympathy unless you're suddenly unable to bring in any income through no fault of your own.
First of all..you are being ignorant..

Debt wiped away? Thathas nothing to do with the Fed gov't or taxes.. that has to do with the law in my state.. The property I purchased with that loan secures thedebt.. if the laws in my state ,as is the case in some states, had other laws in play, then the homeowners are NOT getting away clear because the lenders can come after them for the difference.

Secondly..how the helldo you expect someone who's house is now selling for 80 - 100K BELOW what they owe on it, thanks to market conditions,from paying incone taxes on that? That makes NO SENSE.. it's not money they ever had that they can now hand the gov't. In my case ,I would be paying twice my income putting me at a higher tax bracket and would never be able to payoff the IRs.. doesn't make any sense.

Oh.. and didn't have an interest only loan.. not all people caught up in this fit into that neat little box you like to put us all in..

The only one on here whining is you.. thinking that you arent' getting something someone else is?

Well you can have the stress, the crappy credit scores .. oh.. and i'm loosing my down payment AND the money I put in in improvements.. plus the 3000/ a month in mortgage payments at 6.95% that I made every month on time for 2 years on top of all that!!

Now are you still worrried that we're getting away "scott free" .. please
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Old 08-27-2008, 08:25 AM
 
Location: Montrose, CA
3,031 posts, read 7,876,351 times
Reputation: 1925
Quote:
Originally Posted by TristansMommy View Post
First of all..you are being ignorant..
I've never signed for a loan I couldn't pay for.
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Old 08-27-2008, 09:08 AM
 
Location: Pennsylvania, USA
5,217 posts, read 4,120,793 times
Reputation: 908
Quote:
Originally Posted by SuSuSushi View Post
I've never signed for a loan I couldn't pay for.

Yeah.. you're right.. and good for you..

I wasn't ignorant.. I was nieve and misinformed.. there is a VAST difference..

I listened to the advice of a professional I trusted ( I was told that I currently didn't qualify for a fixed because I didn't have enough credit history so my score was not sufficient being self employed with my score to get a fixed.. not a bad score.. just not great BECAUSE..get this.. I DIDN"T HAVE CREDIT CARDS.. go figure!). I was NEVER OFFERED an option for a FIXED INTEREST RATE at a slightly higher rate..

BUT. I was advised that pay my mortgage on time for 2 years and refinancing shuoldn't be a problem..

Little did I know that there were tons of bad mortgages out there that would take away the equity in my home (because I put money down AND made improvements) and would leave me unrefinanceable as a result...

So yeah. .I signed something I ultimately couldn't afford.. and now I'm paying the consequences.. HOWEVER.. it's not as black and white as you make it out to be..and unless you were in MY shoes listening to the advice I recieved you have NO RIGHT to make judgements..

Or ignorant statements like the ones you made..

Watch out.. you might get a nosebleed from that high horse you're sitting on.
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Old 09-08-2008, 09:41 PM
 
Location: Buckeye, AZ
132 posts, read 519,421 times
Reputation: 35
i've seen friends & family who is going through tough times just like TristansMommy. I don't judge but empathize with the situation. we are caught up with a bad economy & we should all have a bigger picture. "SuSUSushi" - for u to judge and mock others while there are down, I hope things never go bad for u. because this isn't a perfect world. I believe that life is like a wheel - sometimes u r on top & sometimes u will get in the bottom. God Bless!
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Old 09-09-2008, 11:13 AM
 
Location: Beautiful East TN!!
7,281 posts, read 18,731,374 times
Reputation: 2751
Default Hello

Quote:
Originally Posted by TristansMommy View Post
Um.. in a mortgage you do the same thing.. the money goes from one to another without you ever touching it... same damned concept as a credit card.. because basically credit card are money that's there for you to borrown adn pay back wiht interest.. You take your credit card.. charge it for something and take that something home with you. You never had the money. you BORROWED the money and are paying back that money with interest. You wouldn't have had that money from the credit card company UNLESS you were using it to buy something..

As for the home.. same thing.. it's not like you go to the mortgage company and they hand you $400K and now its money you have.. it's again.. money you are borrowing and paying back on interest for a good, in this case a home.

I'll one up ya.. atleast with a house the bank recoups the cost by taking the house back and selling it or you short sale it and they recoup smoe of the money.. With a credit card YOU have the goods that you used the borrowed money to purchase AND the bank doesn't get the money back in full (remember.. settled in less than full) and you don't have to pay income on that..

I'm not a flipping idiot.. but it still seems INSANE to tax someone on money they don't physically have in their hands.. We make our pay and the gov't skims the money off the top for taxes.. and they get that money because it's actual money that you had in your possession. Someome that is in foreclosure/short sale and owes a balance obviously doesn't have the physical money in hand for the gov't to take their piece of. Basically they are trying to take a piece of nothing that really existed in the first place.

Thank god for htis bill. If I had to pay a 1099 on the difference between what my house is selling for and the balance with all the BS it would be DOUBLE my household income, put me in a much higher tax braket (probably well over the $150K mark) and I'd owe IRS money I'd never be able to repay becuase I never had it to begin with.. forget about compiling interest..etc.

The whole thing is ridiculous.. the ONLY reason why the gov't doesn't go after forgiven debt on a credit card is because the sums are not large.. but they see $$ in bigger transactions. All that 1099 does for someone is pour salt on the wounds and make it impossible for someone to ever financially recover!!

Again. . atleast Bush did something right before he left office! They should just make it a permanent thing.
Hello Tristansmommy,
I have been following your story and I feel for ya, you are not the only one in this boat and at the time of purchase, you felt you were doing the right thing, as history in your life time taught you and the banker agreed with, if you bought the house and upgraded it, you would make money in the end in equity growth. That did not happen at the time of your sale. However, a lot of people got stuck in this current housing mess. You are not alone. I do however want to point out that you were also misinformed on what a mortgage actually is, may not be your fault and again, a lot of people believe this because their history taught them this, so I am not criticizing you by any means, just trying to help you understand.
Basically this is how a mortgage/home purchase works:
You find a house for sale at 200k that you want to buy. You don't
have 200K laying around to purchase that product (house).
So you go to the bank and say "I want to borrow 200K from you to buy this house and in return, I will pay you back more(interest) money than the 200K so it is not just an act of kindness on your part to give me the money, you will benefit as I will. I can live in this house and you can make some money for the act of loaning me the money". In all essence, this is what a mortgage is.

Lets say the person you are buying the house from does not have a mortgage, they own it out right. They don't owe anyone money.
At the closing table, the bank sends you 200k, you then hand it to the seller of the home. That seller walks away with 200k cash, not an IOU for it, they have cold hard cash that your bank loaned you to give them.
Now after that transaction (closing), that same house is owned by you AND the bank. They have put a lien on the property, which is a document that says " until you pay me back the 200K plus the interest we agreed on, we both own this home." This is their protection for getting back the money they handed you at the closing. If you don't pay back the money, they have the legal right to take that house, sell it to the highest bidder to recoup the majority of the money. But if they only get 150k, you still owe them 50K more (plus the interest to date of pay off.)
If not, they lost 50K because they handed you 200K and only got 150K back. Does that make sense?
If you do not pay that 50K back to them, it was still in your hand (if only for a minute at closing) so it is real income, it became money you used to buy something. If that bank says "ok, you don't have to pay it back to me (or I am unable to collect it from you), but I have to write it off on my taxes as a bad debt." Now the government won't let companies write off bad debts that are "secured" (in this case by the house) so in order for that bank to show the loss, they have to tell the government they turned that debt difference (50K) from a loan into a gift of sorts, which the government sees as income to you, money you made because you now do not have to pay it back. Hence the 1099, which is the document which tells the government that you do not have to pay that money back to the bank, which means it really is income.

Part of life living in this country is taxes on your income, just part of life.

Now, to get more technical, there is something called "recourse" and some states are a recourse state and some are non recourse states. Which means if you buy a house in a state that is a recourse state and you are unable to pay that mortgage loan, the bank has full recourse, which means they have the right to do everything in their power to get that money from you, garnishing your wages thoguh a court, forcng you to sell assests, cahsing in 401k's etc,including send you a 1099 for the money they can not get you to pay back.
However, if they choose to lend you money and you live in a "non recourse" state and you can not pay them back, they have to be happy with the money the recovered when they sold your house for you in a foreclosure.
This is why if you live in a Non recourse state you will have a higher interest rate off the bat than if you live in a recourse state, it is a higher risk to loan you the money.
In essence, what this new law says is that anyone who defaults on a mortgage loan (can't pay back everything there were supposed to) in the 2 year period has to be treated as if they live in a non recourse state. The government is being understanding and nice to the person who defaults on the loan. But you can see where that can not continue because if it did, we would be in a bigger economic mess than now because no one would pay back any debt and no banks would loan anyone any money for anything.
I hope this makes sense and I have written it so it is understandable.
Again, I understand and can feel for your predicament and you are not alone.
Good luck to you in the future and you can just look at what you just went through and the 100k you lost on renovations as enabling you to enjoy the house more while you lived there and as an educational expense in your life.
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Old 09-09-2008, 11:26 AM
 
Location: Pennsylvania, USA
5,217 posts, read 4,120,793 times
Reputation: 908
Quote:
Originally Posted by mbmouse View Post
Hello Tristansmommy,
I have been following your story and I feel for ya, you are not the only one in this boat and at the time of purchase, you felt you were doing the right thing, as history in your life time taught you and the banker agreed with, if you bought the house and upgraded it, you would make money in the end in equity growth. That did not happen at the time of your sale. However, a lot of people got stuck in this current housing mess. You are not alone. I do however want to point out that you were also misinformed on what a mortgage actually is, may not be your fault and again, a lot of people believe this because their history taught them this, so I am not criticizing you by any means, just trying to help you understand.
Basically this is how a mortgage/home purchase works:
You find a house for sale at 200k that you want to buy. You don't
have 200K laying around to purchase that product (house).
So you go to the bank and say "I want to borrow 200K from you to buy this house and in return, I will pay you back more(interest) money than the 200K so it is not just an act of kindness on your part to give me the money, you will benefit as I will. I can live in this house and you can make some money for the act of loaning me the money". In all essence, this is what a mortgage is.

Lets say the person you are buying the house from does not have a mortgage, they own it out right. They don't owe anyone money.
At the closing table, the bank sends you 200k, you then hand it to the seller of the home. That seller walks away with 200k cash, not an IOU for it, they have cold hard cash that your bank loaned you to give them.
Now after that transaction (closing), that same house is owned by you AND the bank. They have put a lien on the property, which is a document that says " until you pay me back the 200K plus the interest we agreed on, we both own this home." This is their protection for getting back the money they handed you at the closing. If you don't pay back the money, they have the legal right to take that house, sell it to the highest bidder to recoup the majority of the money. But if they only get 150k, you still owe them 50K more (plus the interest to date of pay off.)
If not, they lost 50K because they handed you 200K and only got 150K back. Does that make sense?
If you do not pay that 50K back to them, it was still in your hand (if only for a minute at closing) so it is real income, it became money you used to buy something. If that bank says "ok, you don't have to pay it back to me (or I am unable to collect it from you), but I have to write it off on my taxes as a bad debt." Now the government won't let companies write off bad debts that are "secured" (in this case by the house) so in order for that bank to show the loss, they have to tell the government they turned that debt difference (50K) from a loan into a gift of sorts, which the government sees as income to you, money you made because you now do not have to pay it back. Hence the 1099, which is the document which tells the government that you do not have to pay that money back to the bank, which means it really is income.

Part of life living in this country is taxes on your income, just part of life.

Now, to get more technical, there is something called "recourse" and some states are a recourse state and some are non recourse states. Which means if you buy a house in a state that is a recourse state and you are unable to pay that mortgage loan, the bank has full recourse, which means they have the right to do everything in their power to get that money from you, garnishing your wages thoguh a court, forcng you to sell assests, cahsing in 401k's etc,including send you a 1099 for the money they can not get you to pay back.
However, if they choose to lend you money and you live in a "non recourse" state and you can not pay them back, they have to be happy with the money the recovered when they sold your house for you in a foreclosure.
This is why if you live in a Non recourse state you will have a higher interest rate off the bat than if you live in a recourse state, it is a higher risk to loan you the money.
In essence, what this new law says is that anyone who defaults on a mortgage loan (can't pay back everything there were supposed to) in the 2 year period has to be treated as if they live in a non recourse state. The government is being understanding and nice to the person who defaults on the loan. But you can see where that can not continue because if it did, we would be in a bigger economic mess than now because no one would pay back any debt and no banks would loan anyone any money for anything.
I hope this makes sense and I have written it so it is understandable.
Again, I understand and can feel for your predicament and you are not alone.
Good luck to you in the future and you can just look at what you just went through and the 100k you lost on renovations as enabling you to enjoy the house more while you lived there and as an educational expense in your life.


The way you explained it does make sense.. I do get why and what you mean..

I still stand by the fact that it's just ridiculous anyway. Let's just say that we didn't have this housing mess..but a family that met with hard luck, say an illness .. who looses their home because they need to pay for medical, can't work..etc as a result..but then the house sells for less tan they owe (although does't really occurr as often in a healthy market or even a normal market I'm sure) well...now they are in severe debt from medical bills, lost their home, haing trouble working and to add insult to injury the government wants to tax money they don't have.

I do get what you are saying. But it just seems ridiculous, is all. Interest and penalties compound quickly and unless someone goes out and sells a kidney..my goodness..

I do not think that making that permanent would cause a financial diasaster. The ramifications of a foreclosure are severe enough to really keep people from avoiding that.

Just seems that laws written in this country are sometimes ass backwards.. for example.. I inquired about finling a Chapter 13 to force my mortgage company to remodify the loan (because they were refusing to fix my interest rate or keep it where it was) but was told that it wouldn't work.. however, if this home were my SECOND HOME like a ski chalet that would be a different story.. HUH? Okay.. so a family that owns 1 home can't get a forced remodification but a rich dude with more than one home will loose 1 home but his "ski chalet" would be safe? Just seems like something else written by the rich to help themselves and screws the rest of us..LOL..

Not that that example has anything to do with the 1099 example. I'm just grateful that they have that law passed.. or this situation would just leave me NEVER able to financially recover!


thanks again..
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Old 09-09-2008, 11:46 AM
 
Location: Beautiful East TN!!
7,281 posts, read 18,731,374 times
Reputation: 2751
Quote:
Originally Posted by TristansMommy View Post
The way you explained it does make sense.. I do get why and what you mean..

I still stand by the fact that it's just ridiculous anyway. Let's just say that we didn't have this housing mess..but a family that met with hard luck, say an illness .. who looses their home because they need to pay for medical, can't work..etc as a result..but then the house sells for less tan they owe (although does't really occurr as often in a healthy market or even a normal market I'm sure) well...now they are in severe debt from medical bills, lost their home, haing trouble working and to add insult to injury the government wants to tax money they don't have.
I do get what you are saying. But it just seems ridiculous, is all. Interest and penalties compound quickly and unless someone goes out and sells a kidney..my goodness..

I do not think that making that permanent would cause a financial diasaster. The ramifications of a foreclosure are severe enough to really keep people from avoiding that.

Just seems that laws written in this country are sometimes ass backwards.. for example.. I inquired about finling a Chapter 13 to force my mortgage company to remodify the loan (because they were refusing to fix my interest rate or keep it where it was) but was told that it wouldn't work.. however, if this home were my SECOND HOME like a ski chalet that would be a different story.. HUH? Okay.. so a family that owns 1 home can't get a forced remodification but a rich dude with more than one home will loose 1 home but his "ski chalet" would be safe? Just seems like something else written by the rich to help themselves and screws the rest of us..LOL..

Not that that example has anything to do with the 1099 example. I'm just grateful that they have that law passed.. or this situation would just leave me NEVER able to financially recover!


thanks again..
In the bolded above scenario is a great example of what disability income is for, the government set that up just for that reason. Or what bankrupcy laws are for, for those to recoup after major uncontrolable life issues. There are programs and help out there for those who have a situation just like that.
It keeps those folks from losing there house because they can not pay the mortgage. Having a house that is worth less than when you bought it is a whole different ball game.
Lets say, someone bought a house for 200k using a mortgage and trashes it. Breaks all the windows, lets the plumbing continue to leak all over the place and damages everything. Then they stop paying their mortgage. The bank forecloses, do you think they are going to be able to sell that house for anywhere near the 200K they loaned out for it? Heck NO!
Why should the bank just have to eat that money? Because that was the risk they took when they loaned the money out?
Remember, you and the bank are joint owners (partners) in the deal and you are both looking to gain from the transaction, you a house and hopefully to have it gain more value the longer you own it and hopefully when you sell it, you can pay off the debt AND walk away with some cash plus enjoy living in it in the mean time. The bank hopes you will pay them all that interest and not a minute sooner than the loan term. it is a gamble and if it works out, Win/win.
Now, if it doesn't happen that way, the house looses value, why should one of the partners get to walk away scott free and they other have to eat the debt?
Remember, throughout the time you have been living in and paying for this house, you have been able to decuct the interest you pay to the bank on your income taxes and the bank has been having to claim that interest as income and paying taxes on it.
You can not decuct the interest you paid on a credit card or car even though who you pay it to does have to claim it as income.
That is really why it will not be a long term thing, no one benefits except those who borrow the money so why would anyone loan it? Can you imagine what would happen to our economy if no one borrowed and loaned money?
It IS sad but our country kind of built itself of loaning and borrowing money.
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