Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
If a bank files a mortgage foreclosure lawsuit against a homeowner, doesn't that basically mean that the homeowner couldn't or wouldn't pay the bank? So doesn't that basically mean that the homeowner has financial problems? I always thought that a foreclosure means someone has money problems.
If a bank files a mortgage foreclosure lawsuit against a homeowner, doesn't that basically mean that the homeowner couldn't or wouldn't pay the bank? So doesn't that basically mean that the homeowner has financial problems? I always thought that a foreclosure means someone has money problems.
In the past, it has usually meant exactly that. The owner couldn't pay the bank because they didn't have the money.
However, in recent years, following the boom, many people are doing what they call a strategic default. They are so far upside down on the house (ie they owe much more than the house is worth today) that they convince themselves that they shouldn't have to continue to pay the bank. So they simply walk away, taking the credit hit, and go rent something for a few years.
For a while, some were even getting away with what was called a "Buy and Bail" meaning that they bought another house (often bigger than their own, for less money) moved into it, and then let the old one foreclose, figuring they could then take years to rebuild their credit while living in a house with a lower payment. Practices like this are why lending rules are so tight now.
So while foreclosure use to indicate financial trouble, now it often just indicates a financial decision, to cut losses and run, and take the years required to repair your credit. Whether that will turn out to be a good decision in the long run, only time will tell. (Edited to say: Yes, sometimes it still means the person is having financial trouble too...lots of unemployed people out there these days)
If a bank files a mortgage foreclosure lawsuit against a homeowner, doesn't that basically mean that the homeowner couldn't or wouldn't pay the bank?
Generally, yes.
So doesn't that basically mean that the homeowner has financial problems?
Generally, yes.
I always thought that a foreclosure means someone has money problems.
Generally, yes.
Attempting to flesh out all the permutations and possibilities that the "generally" aspect of those answers...
can esily run you far afield. Lacerta has pointed out a few of the directions you could run off toward chasing that bird.
In the past, it has usually meant exactly that. The owner couldn't pay the bank because they didn't have the money.
However, in recent years, following the boom, many people are doing what they call a strategic default. They are so far upside down on the house (ie they owe much more than the house is worth today) that they convince themselves that they shouldn't have to continue to pay the bank.
Please excuse my ignorance, but this stuff is confusing to me. So, you're basically saying that people who are in this situation either can't afford to pay or they can pay but just don't want to?
If they owe more than the house is worth, it sounds like they couldn't afford to pay their monthly bill to the bank (or whoever).
It seems like if they have the money to pay (even if the money is in property) that they should pay rather than letting the bank have the house.
Quote:
So they simply walk away, taking the credit hit, and go rent something for a few years.
Are you saying that they rent because they can't afford to buy something? Isn't that just throwing money away? If they own other houses (that they rent to people), it seems like they should just live in one of those houses instead of renting.
Please excuse my ignorance, but this stuff is confusing to me. So, you're basically saying that people who are in this situation either can't afford to pay or they can pay but just don't want to? Yes or Yes. Either of those are possibilities.
If they owe more than the house is worth, it sounds like they couldn't afford to pay their monthly bill to the bank (or whoever).
It seems like if they have the money to pay (even if the money is in property) that they should pay rather than letting the bank have the house. They should, yes, but many are making the decision not to. They have the money, they have good paying jobs, they are making the conscious decision to stop paying, simply because the house is not worth as much as they owe on it, and they feel like it will take too long to build the equity back up.
Are you saying that they rent because they can't afford to buy something? Isn't that just throwing money away? If they own other houses (that they rent to people), it seems like they should just live in one of those houses instead of renting. They rent because they messed up their credit and now can't credit qualify to buy another house for several years. And yes, if they own another house, they could move into it if it was vacant, but obviously not if they have a tenant in a lease. But many people in this situation do not own other homes.
Thanks for the help. I really appreciate it.
My responses in red
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
