Good Credit borrowers are defaulting (incentive, foreclosures, 6%, mortgage rates)
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I was reading in this mornings paper that "a wave of foreclosures sweeps up good credit as recession hits once-ideal borrowers who are now fueling defaults." It says that 6% of good credit borrowers behind on fixed rate mortages, I'm sure this is partly in due to people losing their jobs. I wonder whats going to happen next year when subprime loans and Alt-A loans reset. It's sad when you get the proper loan, have all your ducks in a row and still lose your home to foreclousure because of the high unemployment. People are running through their savings because it takes so long to find a job once you get laid off.
There have posts here recently from people that have good credit and don't seem to realize that NOT PAYING YOUR MORTAGE is a about the worst sin you can commit in the ol' book of credit.
If you are in money trouble you MUST stop using credit, and you MUST protect your assets. If you have to CHOOSE between getting behind on an UNSECURED debt (like a credit card) or staying current on a MORTGAGE (or even a car loan) there is NO QUESTION that the lesser evil is to short the payment to the credit card!
People are being misled by thinking there is some 'magic plan' to allow people to get out of mortgage debt -- JUST NOT TRUE!!!
Location: Halfway between Number 4 Privet Drive and Forks, WA
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Quote:
Originally Posted by iluvcj
I was reading in this mornings paper that "a wave of foreclosures sweeps up good credit as recession hits once-ideal borrowers who are now fueling defaults." It says that 6% of good credit borrowers behind on fixed rate mortages, I'm sure this is partly in due to people losing their jobs. I wonder whats going to happen next year when subprime loans and Alt-A loans reset. It's sad when you get the proper loan, have all your ducks in a row and still lose your home to foreclousure because of the high unemployment. People are running through their savings because it takes so long to find a job once you get laid off.
Subprime is over...do you mean Option ARM's and Alt A's?
If you are in money trouble you MUST stop using credit, and you MUST protect your assets. If you have to CHOOSE between getting behind on an UNSECURED debt (like a credit card) or staying current on a MORTGAGE (or even a car loan) there is NO QUESTION that the lesser evil is to short the payment to the credit card!
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Chet, it depends on what you consider an "asset". Many people are choosing to pay off their credit cards (in order to maintain that credit line) over a mortgage payment.
The reason is simple. Many of those same people did the no money downpayment and are know 100-200K "underwater" on their home mortgage (asset). They know they have zero chance of recovery from declining asset (home). So they choose to save their credit card's line over their home.
It's very simple.
Say their mortgage payments are 2K a month. They know their struggling to make mortgage payments will eventually drown them. They have no incentive to keep their "home" because they never put any money into it. They were glorified renters to began with.
So they go up to 12 months without paying mortgage. Therefore saving 24K in critical cash reserves. They live off their credit cards and after that 12 months is over and they finally lose their home, they can use that critical cash reserve to rent an apartment/another home.
They know most banks will not go after them because they are insolvent financially.
It's just survival for most people these days.
I'm talking about people who will not qualify for Obama's home mortgage program. They either lied on their income or make too much money and have lost hope on any recover for their underwater mortgage.
I don't doubt there are those with large "negative equity". It is a shame that such people have turned what ought to be HUGE positive asset into a major financial liability.
You are probably correct that among some of these people "hording cash for rent" is a survival tactic. I tend to think that this is still "stupidity effect" as the STUFF they did put on their credit cards is almost certainly in the "worthless junk" category that no one would pay more than cents on the dollar for on craiglist / ebay.
My suspicion is that almost all of these people COULD HAVE netted a decent selling price for their home had they just been a BIT more cautious.
Chet..it's not really their "asset" while they have a mortgage. It may not even be an asset at this point to some people if the value is less than the mortgage; now it's a liability.
I don't doubt there are those with large "negative equity". It is a shame that such people have turned what ought to be HUGE positive asset into a major financial liability.
You are probably correct that among some of these people "hording cash for rent" is a survival tactic. I tend to think that this is still "stupidity effect" as the STUFF they did put on their credit cards is almost certainly in the "worthless junk" category that no one would pay more than cents on the dollar for on craiglist / ebay.
My suspicion is that almost all of these people COULD HAVE netted a decent selling price for their home had they just been a BIT more cautious.
A sad lesson...
So true and with mortgage rates rising, the majority of sellers that didn't sell in the last couple of months are now priced in forever....as they watch the prices of their competition get lower and lower....
So true and with mortgage rates rising, the majority of sellers that didn't sell in the last couple of months are now priced in forever....as they watch the prices of their competition get lower and lower....
People used to say, "You can't expect to sell for the 2006 price." Now you can't expect to sell for a 2007 or 2008 price, either. Twelve months from now, the 2009 price will be too high.
Well, at certain point this becomes like "counting stars" doesn't it? Science tells us that there must be a finite number of stars at even given point in time. Some are young stars, created just a brief time ago, but many more must be stable middle aged stars and some very small number of stars must collapse / burn out at any instant.
Houses built and paid for at their peak are STILL presumably about as up-to-date as one could hope for, the vast majority of houses are neither particularly 'new' nor remarkably old. Some small number of houses are so obsolete that they only way to reclaim their value is by dismantling and starting over.
Really not too much about... Over time all these things work themselves out.
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