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I think the "in" thing as the other poster stated in 2009 is "strategic defaults" Strategic defaults make up 25% of all foreclosures these days. These are homeowners who can afford the mortgage but they figure they haven't put any money into the property and it's lost 100-200K or whatever so it will take 10 plus years for them to finally break even. So it's best just to walk away. Their thinking is "who cares if I ruin my credit or can't by a home in 5 years" They know real estate prices aren't going anywhere for the next 5 years so they can rebuy that similar home 5 years down the road for much less than they would have owed.
A few incorrect ideas in your post.
First) Not everyone agrees with the OP. Myself and the previous poster do not.
Second) 5 years is an unrealistic idea and you know it. They likely won't even be eligible to own a home for 7 years and when they do, it won't be on their own terms.
Third) Here in Solano County, California, the market went up 4% last month. Do I think that everywhere around the country, including Solano, will begin going back up? Definitely not, but to think that it's going to continue for 7 years is terribly unlikely. In fact, those buyers that foreclosed willingly won't have a piece of the pie when its best to buy again. They will have, in many cases, angled themselves right out of the buy-low, sell-high notion. In their weighed decision making, losing out on a future bargain was better than continuing in a bad contract.
Fourth) Continuing with my previous point, it's a business decision. There is no morality intertwined within these contracts. If it is financially more prosperous and intelligent for a homeowner to end his contract and accept the penalties, I don't blame him in the least and no one else should either. It's insanity to think otherwise.
All over the business world, contractual agreements are halted because they simply do not make sense at all for one-side (or both) to continue.
- Home and car insurers cancel on thousands of Americans every year, with checks in hand, because they don't feel that it has been prosperous for them to cover the individual, despite the fact that they originally agreed to.
- Credit card companies randomly close accounts, multiply interest rates, reduce credit limits and spending power, despite the fact that they originally agreed on different terms.
- Banks routinely refuse to accept checks from late homeowners in hopes of recovering the house, despite the fact that the home-owner was paying.
- About 8 years ago, I purchased Netzero Internet on a 6-month contract. Netzero sent me a check 2 months later with the remainder of what I had paid because they claimed I simply used it too much, despite the fact that in our contract, it said 'unlimited' use. (They just didn't know how much I loved the internet!)
- In sports (especially the NFL), a player is released from an organization despite having a multi-year contract. When he was signed, the general manager, puts a signing bonus up front, and defers his salary to the remaining years, because there are no things such guarenteed contracts and it makes more financial sense for the team to cut the player instead of swallowing the agreed-upon contract that remains. It is most analogous to home-ownership because for the player, it is time for him to find a new team willing to acquire his services just as it is time for the lender to find a new home-owner for the cut home. In some cases, the player and the bank receive more from the new contract, and often times they receive far less. That's the risk you take when you make the deal in the first place.
This happens EVERYWHERE in the business world. It's not immoral and it's not irresponsible. It's about doing what's right for you. The business world isn't always a nice place. If you can't stand the heat, then get out of the kitchen, essentially!
Enough whining! It's a business, not a damned friendship circle!
Last edited by llowllevellowll; 07-24-2009 at 12:01 PM..
Reason: Forgot the Netzero incident. HAHAHA. Classic.
- In sports (especially the NFL), a player is released from an organization despite having a multi-year contract. When he was signed, the general manager, puts a signing bonus up front, and defers his salary to the remaining years, because there are no things such guarenteed contracts and it makes more financial sense for the team to cut the player instead of swallowing the agreed-upon contract that remains.
They cut the player because he wasn't holding up his end of the contract, not performing up to standard.
Not holding up your end of the contract on a mortgage is forclosure, there is no performance problem with a mortgage contract unless you aren't paying it of course.
They cut the player because he wasn't holding up his end of the contract, not performing up to standard.
Not holding up your end of the contract on a mortgage is forclosure, there is no performance problem with a mortgage contract unless you aren't paying it of course.
You can't make a parallel if you don't know anything about my example. In the NFL, is isn't because the player isn't performing in his contract. All of the power lies within the ownership and the organization.
What occurs here and in homeownership isn't ideal. It hurts some, it helps some. In the financial and business world, you use the rules and confines that are there to make the best decisions for yourself. You can't expect an NFL owner to swallow 16 million dollars on a player he wanted for his prime years, but was able to stretch out his contract into his 'twilight' years because it afforded him more salary cap space the year he signed them when technically, he doesn't have to. And you can't blame a homeowner who didn't know what an Option-ARM was 5 years ago but does now and is struggling to make it, if he technically doesn't have to.
Last edited by llowllevellowll; 07-24-2009 at 12:03 PM..
You can't make a parallel if you don't know anything about my example. In the NFL, is isn't because the player isn't performing in his contract. All of the power lies within the ownership and the organization.
What occurs here and in homeownership isn't ideal. It hurts some, it helps some. In the financial and business world, you use the rules and confines that are there to make the best decisions for yourself. You can't expect an NFL owner to swallow 16 million dollars on a player he knew little about before he signed them when technically, he doesn't have to. And you can't blame a homeowner who didn't know what an Option-ARM was 5 years ago but does now and is struggling to make it, if he technically doesn't have to.
I'm not going to read that link, because comparing anything to defaulting on a contract in sports is nowhere near the same as defaulting on a mortgage. It is two different things.
Why would you sign something that you didn't know what it was? I would never sign my name to a large amount of debt not knowing everything about it...
You can't make a parallel if you don't know anything about my example. In the NFL, is isn't because the player isn't performing in his contract. All of the power lies within the ownership and the organization.
What occurs here and in homeownership isn't ideal. It hurts some, it helps some. In the financial and business world, you use the rules and confines that are there to make the best decisions for yourself. You can't expect an NFL owner to swallow 16 million dollars on a player he knew little about before he signed them when technically, he doesn't have to. And you can't blame a homeowner who didn't know what an Option-ARM was 5 years ago but does now and is struggling to make it, if he technically doesn't have to.
Please give me a break with the "homeowner who didnt' know what an option-ARM was 5 years ago" stuff!
ALthough,as stated and is quite obvious,there are other players involved in this entire housing crisis to blame,the banks,the brokerage firms,etc... that is just obvious,my husband & I will NOT take any blame for our situation.
We built a home well within our means with the intention of being there for an extremely long time. Our relo pretty much came as a huge surprise and dissapointment for us,but one that was in our eyes,necessary for my husband's career that he worked very hard to obtain....
We also did NOT have an ARM AND we put down a substantial down payment! (I don't need to go into numbers here,but it was well over 40%).
The area that we built our home happens to be in an area where yes,the prices were completely inflated,but that is how it was almost everywhere for the most part.
We built well within our means.
For the person who sent me a nice little rep comment "nice rant,but struggling on a 6 figure income,pleeezzz", nice comment....
my question for you is this; would YOU be able to pay for 2 mortgages ,2 HOA fees ,2 sets of property taxes ,1 car payment,and basic life things w/out feeling that you are struggling a little bit???
As we sit and watch (2 families in particular) walk away from their homes,brag about the fact that they haven't been paying their mortgages for 1-6 months and the other for almost a year...
The only thing that will happen to these families is that they will get a little "slap on the hand" in their credit reports... that is it.
Their lives have moved on and they are living life as though nothing has happened.
For all that agree or are going through a similar situation,I do feel for you as well and hope that your homes sell quickly.
For those that will always choose to believe that it is OKAY to walk away from an agreement (of which I would NEVER do regardless), that is fine,that is your right. It is a great thing to live in the USof A right now... for you...
You know,we could walk away,we could just say "oh well, we really don't feel like paying for this house" and we could just walk away...
We would be living really,really well if we did that... but we have a conscious and it would never do that. Regardless.
If I have to get a job this Fall to help make up for some of the extra expenses,that is what we will do.
That is what responsible people do. They find a way to make it work, they don't walk away...
First) Not everyone agrees with the OP. Myself and the previous poster do not.
Second) 5 years is an unrealistic idea and you know it. They likely won't even be eligible to own a home for 7 years and when they do, it won't be on their own terms.
Third) Here in Solano County, California, the market went up 4% last month. Do I think that everywhere around the country, including Solano, will begin going back up? Definitely not, but to think that it's going to continue for 7 years is terribly unlikely. In fact, those buyers that foreclosed willingly won't have a piece of the pie when its best to buy again. They will have, in many cases, angled themselves right out of the buy-low, sell-high notion. In their weighed decision making, losing out on a future bargain was better than continuing in a bad contract.
Fourth) Continuing with my previous point, it's a business decision. There is no morality intertwined within these contracts. If it is financially more prosperous and intelligent for a homeowner to end his contract and accept the penalties, I don't blame him in the least and no one else should either. It's insanity to think otherwise.
All over the business world, contractual agreements are halted because they simply do not make sense at all for one-side (or both) to continue.
This happens EVERYWHERE in the business world. It's not immoral and it's not irresponsible. It's about doing what's right for you. The business world isn't always a nice place. If you can't stand the heat, then get out of the kitchen, essentially!
Enough whining! It's a business, not a damned friendship circle!
Yes I understand business is business. But there recourse and non recourse mortgage loans depending on the state you live in.
I make way too much money (according to Obama and the US government) and my friends make too much money. We live in recourse states. If we default on the loans, the bank will go after our assets or our future income.
I don't understand why banks don't go after poor people who default on their mortgage loan obligation. They need to issue them deficiency judgments and keep on renewing them every 10 years until they file for bankruptcy or pay back the money.
Obama needs to invent a 1% surtax on those that have their homes foreclosed on government backed mortgages. That's how you raise money and have a good deterrent against fraud.
In terms of strategic foreclosures, I am talking about the 25% that do it. The government doesn't learn from their mistakes. I doubt many homeowners "walk away" from a home if they had invested 10-30% downpayments. They need to regulate the amount of downpayment. If people have any skin in the game, they will be less willing to walk away.
The commercial lending business has gotten smart on this. I am looking into investing in a 10 million dollar multi-use center. There are 10 of us investors. We all planned on putting 50K cash each for a 500K downpayment. Now the lending industry wants up to put up to 1 million cash for this property.
1. For the person who sent me a nice little rep comment "nice rant,but struggling on a 6 figure income,pleeezzz", nice comment....
2. As we sit and watch (2 families in particular) walk away from their homes,brag about the fact that they haven't been paying their mortgages for 1-6 months and the other for almost a year...
The only thing that will happen to these families is that they will get a little "slap on the hand" in their credit reports... that is it.
Their lives have moved on and they are living life as though nothing has happened.
That is what responsible people do. They find a way to make it work, they don't walk away...
1. People need to realize a six figure income barely doesn't mean that much anymore. It was a simple term in the 1980s. And inflation with time has pretty much erroded six figure income as being "rich" or well off.
There's a big difference between earning 150K and earning 800K. That's why Pelosi and the Democrats are backtracking on raising the taxes on the rich because Nancy Pelosi know very well 150K salary in LA or SF (her home state of California) isn't considered very well off.
2. Those walking away put nothing down, interest only pay option ARMs etc. Trust me, if they had put 50-100K downpayment and even if their home is now 200K underwater, psychologically they would feel the need to "protect their initial investment".
But we never learn. We will never learn. How in the world can markets allow Lehman Bros. to buy a commerical real estate holding company for $2.2 billion in "equity" plus provide debt for the purchase of a real-estate investment trust, Denver apartment landlord Archstone Communities, for $22.2 billion
You see that I put the word "equity" in bold and italics. Because Lehamn barely put any cash into the deal. It was all of this "fake" equity. They did not put 2.2 billion cash. It was all fuzy math. They had no stake in the game. That's why they are done. But those running the company sitll were able to collect their big bonus during the boom but didn't have to give anything back.
Location: Halfway between Number 4 Privet Drive and Forks, WA
1,516 posts, read 4,589,894 times
Reputation: 677
Quote:
Originally Posted by aneftp
I don't understand why banks don't go after poor people who default on their mortgage loan obligation. They need to issue them deficiency judgments and keep on renewing them every 10 years until they file for bankruptcy or pay back the money.
And never be able to buy another home until the judgement is paid off. Forget about this waiting 7 measley years for the foreclosure to be removed from your credit report. If there were tougher penalties for "walking", we wouldn't be in this big of a mess with housing. Period.
Now, there are two different types of walking. Those who have lost jobs and can't afford their mortgages. The loss of jobs is directly/indirectly related to the housing downturn.
The ones that irk me are those people the OP are referring to. She has my complete sympathy, and furthermore is correct in her observation of the slack arses that *don't* want to pay and decide to walk. (Not those that simply *can't*)
Please give me a break with the "homeowner who didnt' know what an option-ARM was 5 years ago" stuff!
Well, that "stuff" is why we're in this situation. Lenders and agents pushed these types of mortgages to people, who most often before that conversation, had no idea what they were, and were told and convinced that they could afford them because, "look, look at this low payment." And what are the chances they'd reset at a much higher percentage? Do you think they got the facts from the banks? Come on now. And it's the buyers fault? Yeah, by default it is, but really? Again, I don't blame a soul for defaulting, willingly or otherwise.
Quote:
Originally Posted by NYMD67
We also did NOT have an ARM AND we put down a substantial down payment! (I don't need to go into numbers here,but it was well over 40%).
Would you have defaulted if you hadn't put 40% down, and instead, had put 0% down? My guess: probably. Most people didn't put any money down - a reason their payments were so high. Could you have pulled it off?
Better yet...
Quote:
Originally Posted by NYMD67
That is what responsible people do. They find a way to make it work, they don't walk away...
No, the reason you didn't walk away is because YOU put 40% down! Or is that just coincidental? It isn't about being responsible, because who are you responsible to? Yourself and your family or a lender who doesn't care who you and your family are? You do what's 'responsible' for you and your family, and you stayed because you couldn't afford to lose that 40% you put down, and if you claim any other reasons, you're not being honest.
So, get off your high horse and make the best of your situation and stop denegrating all of the folks who weren't as lucky or shrewd as you. Consider yourself lucky. In a few years, your property will bounce back and you'll feel better about life in general.
Location: Halfway between Number 4 Privet Drive and Forks, WA
1,516 posts, read 4,589,894 times
Reputation: 677
Quote:
Well, that "stuff" is why we're in this situation. Lenders and agents pushed these types of mortgages to people, who most often before that conversation, had no idea what they were, and were told and convinced that they could afford them because, "look, look at this low payment." And what are the chances they'd reset at a much higher percentage? Do you think they got the facts from the banks? Come on now. And it's the buyers fault? Yeah, by default it is, but really? Again, I don't blame a soul for defaulting, willingly or otherwise.
Yes, let's point the finger at someone else instead of taking responsibility for our own actions...better yet, actually (gasp) *reading* an important document such as a mortgage before signing our names...
I have no respect or tolerance for people that can't accept responsibililty and make excuses. Gag me.
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