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edit: Do you also think the banking CEOs, who gamed the system every bit as much as this young couple, should be required to pay for their theivery??
The loan should be between the lender and the borrower. If the banks gave oiut money recklessly, then they should lose. But at the same time the banks should use whatever means within the law to get the borrower to repay, the bank is also responsible to it's shareholders.
The best thing would have been for loans to have continued to be given based on credit worthiness and a 10-20% down payment on the house. Yes it's a two-way street and neither side should be bailed out.
I guess you would get to keep all the lavish vacations and meals out and designer clothes and other luxuries you bought with all the second mortages you took out.
I can't really answer that question because I wouldn't use my home like an ATM to get underwater with my mortgage in the first place.
Easy; take your home equity out in a major loan to go buy a big Motorhome just prior to your retirement then realize a massive depreciation on the motorhome along with the economy going bust and add the 5 year sub-prime note you had suddenly maturing and now your mortagage payments are double or even triple.
You can't afford to put fuel in the Motorhome, mush less pay the insurance and other stuff that goes withowning one of those things. So now you're stuck with a motorhome you cannot sell or even give away and you've re-mortgaged your house up the ying-yang to fund all this stupidity.
A very common story with these high dollar RV's being dumped on consignment lots by the thousands to languish and rot while the owners go back to damage control over a house they probably had paid off before they went bonkers and jumped in the deep end to now face the specter of having to pay astronomical mortgage fees for a house that was free and clear. STUPID!
Not immaterial and unimportant. If these people could not honor their obligations they should never have signed the contract.
Gotta disagree with you here. A mortgage is a secured loan, the property being collateral. If the banks - who, after all, were supposed to be the professionals in this entire debacle - issued loans based on an overoptimistic estimation of the collateral's value, they made a poor decision.
It's right there in the contract: If you can't pay, the bank gets the house. Well, guess what happened. The borrowers couldn't pay, the bank got the house, everything went by the book. Perhaps the bank was the foolish party, here?
I'm not disagreeing that - as usual - it's us dumb-ass middle-class taxpayers who, once again, gets to pay the tab, and it's pretty infuriating. But I don't get the ire directed at people who actually live up to the contract - as in "Sorry, we're broke, here are the keys." I frankly think there was an entire industry who should've put the brakes on.
When I bought my house, I was a first time home buyer, and only made a small down payment. And, a couple years later, I took out an equity loan to help my mom buy her house. So now, I still owe about 75% of the original purchase price.
Unfortunately, the property values in my neighborhood might have dropped more than 25%. The biggest reason for this drop in price being all of the nearby houses that have gone into foreclosure because people walked away... (I do have sympathy for those who ran into legitimate problems, and could no longer pay their mortgage)
Now, to complicate the issue, I recently bought a second home to restore and move into. I bought this home on land contract because the house needs too much work, and the banks won't lend on it. As part of the land contract, I have a balloon payment due in 2 years.
The plan is to fix the second house up, move in, refinance it to pay off the land contract, and sell my current house. But, I've done the math, and discovered that I could just stop making payments on my current home, and have enough saved to pay cash for the balance of the land contract on the second house when it comes due in 2 years.
But, I feel the need to do the right thing, and will continue to make the payments on my current house until it sells.
I guess you would get to keep all the lavish vacations and meals out and designer clothes and other luxuries you bought with all the second mortages you took out.
I can't really answer that question because I wouldn't use my home like an ATM to get underwater with my mortgage in the first place.
It would depend upon where you live. Here, in the SF Bay Area, I have MANY friends (myself included) who put well over the normal 20% down on their homes and are now 100k+ underwater. NONE of them took second mortgages, etc.
I bought my home for over 1 million dollars, in July 2005; just about the height of the real estate boom. I put 32% down and I have a "normal," 30 yr, fix rate mortgage. I've been paying, on time, since that time. Housing has taken such a drastic cut, my house is about 200k underwater. I've not taken a second mortgage, home equity, or anything else on my house.
Absolutely it's wrong. It's legally wrong and morally wrong.
If you make a promise to pay off a loan, you are an immoral thief if you walk away.
It is a business contract,nothing more.
Just because it is a business contract for your home doesn't change anything in regards to morality.
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