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<SNIP>Why do that? Why not respond to the simple cases that illustrate the point. He can't afford to keep it. He could keep it but only in a very high damage mode. Or he can keep it with only the loss of some money.
Why play games?
We can go around this all night, so I'll put a stop to it. I'm not responding to your "case that illustrates the point" because it's nothing more than mine was. A hypothetical reason for him to be ready to dump the place. Fact is, neither of us knows the reason. Nor do we know that he can't afford it. Why not just deal with the situation as it was presented to us? He is considering walking away because it's worth less than he owes, and the monthly payment is going to increase. You want to assume he has a great and valid reason, and that he's simply doing what he must for his family. That's your perogitive, and I can't argue against it. Based on what I read, I assume he's not making a diligent effort at all to keep his commitment, but is simply copping out. Could I be wrong? Of course. But that's how I interpreted what I read.
Last edited by Bill Keegan; 01-29-2008 at 10:13 PM..
Reason: typos
We can go around this all night, so I'll put a stop to it. I'm not responding to your "case that illustrates the point" because it's nothing more than mine was. A hypothetical reason for him to be ready to dump the place. Fact is, neither of us knows the reason. Nor do we know that he can't afford it. Why not just deal with the situation as it was presented to us? He is considering walking away because it's worth less than he owes, and the monthly payment is going to increase. You want to assume he has a great and valid reason, and that he's simply doing what he must for his family. That's your perogitive, and I can't argue against it. Based on what I read, I assume he's not making a diligent effort at all to keep his commitment, but is simply copping out. Could I be wrong? Of course. But that's how I interpreted what I read.
Hey I gave you that choice - case three. Case one was he was trapped. Case two was he was almost trapped. Case three was he was not trapped at all.
You refuse. I think that is because you require anyone who beats the system to be a bad guy. Might be right...might not be. But refusing to deal with the issue tends to demonstrate a rigid view rather than clear reasoning.
Hey I gave you that choice - case three. Case one was he was trapped. Case two was he was almost trapped. Case three was he was not trapped at all.
You refuse. I think that is because you require anyone who beats the system to be a bad guy. Might be right...might not be. But refusing to deal with the issue tends to demonstrate a rigid view rather than clear reasoning.
Good night Bill
I refuse because I see a case four. Not only is he not trapped at all, but making good on the obligation is not a real problem for him at all. He knew when he bought the place that the reset would mean a new payment of whatever it will be. But because the market conditions have made his home less valuable, he's ging to get out and leave the mess for someone else.
I won't give him the benefit of the doubt any more than you will acknowledge that he's just a weasel lookin' for a way out. Unfortunately, we'll never know which one of us is right.
Good night to you too Cap.
I am sorry but you simply do not appear to understand what he did.
His "transgression" is that he ended up owning another home instead of renting one. But he had no means of avoiding the foreclosure. That was effectively certain when the market went down.
You seem to have more information than is in the thread. From what I read he did have the means to keep the house but did not want to wait for it to gain equity again. How else are they going to qualify for a second mortgage?
I bet there are some stockholders who wish they could turn back the clock on their holdings. By walking away from the house it is essentially doing the same thing. Look, real estate is an investment with risk. If you buy property or take out a loan to pay it back then you have a moral obligation to do so (unless there are extenuating and rare circumstances which make bankruptcy acceptable.) I don't care if he can get away with it legally. It is dishonest - plain and simple. It is selfish because other people will pay for his impatience and irresponsibility.
The person who started the thread obviously had some doubts as to whether this action was okay or not. Otherwise why ask for opinions from others?
I posted this thread because I wanted to acquire information on the legal consequences of his actions so I can advise him. I guess it's too late now because he just closed his 2nd home nonetheless he could still use the information to prepare for whatever consequences it will bring in the future. I know there is a moral obligation here but I, like my friend, see it as business. He can afford the first home when it resets to 5k a month but he will be losing money.
He purchase his home around 2002 for 350k with his name solely on it. He was just paying around 1300-1500 a month with an option ARM mortgage which also increased the principal of the house. He took a HELOC early 2005 on his home thinking that home prices will continue to rise. His mortgage payment rose to 2800.
The market has gone really bad and his home is appraised around the low 400's. The reality is he may not even sell his home for 400k with how the market is going and even if he sells the house for the appraised value, it is not enough to cover the 530k he owes on the house. Next month, his mortgage payment will increase to around 5k.
He wants to retire within 10 years time to a maximum of 15 years. He wants to start saving some money for his retirement as he does not have much. He does not want a 5k mortgage payment which would significantly limit his ability to save for retirement. He also does not want to live poorly. He feels that he is also a victim of the loan sharks that led him to bite on the option ARM frenzy.
So they decided to buy a 2nd home. Since his wife's name was not on the first home, his wife applied for the loan for the 2nd home and was approved. They were not sure if stopping the mortgage payment for the first home would affect his credit alone or both. So they purchased the 2nd home before stopping the mortgage payment for the first home. They got their new home for 436k with a 3300 mortgage payment with a 30 year fixed loan. Their new home is much bigger than their first home and they are looking forward to build equity in this home which they will use to supplement their savings for retirement.
If everything goes as he planned and there are no legal consequences for his actions other than having a bad credit then he might have done the right thing, financially speaking. They do not need credit because they already have credit cards and are not planning to acquire a loan in the near future.
You can put whatever color of paint you want to on a pile of dung, but at the end of the day it still is what it is. You said a few telling things in your last story that makes the stench from that colorful patty particularly foul.
1. Your friend wants to retire in 10 to 15 years. Guess what? So, do I (and probably you do too.) My plan is to save for it, make judicious choices and live beneath my means until I get there.
2. Your friend bought a bigger house. Nice, he walks away from the smaller one and shows his remorse and evidence of learning from his mistakes by upgrading his lifestyle. Karma is a waitin' for him. Rest assured!
3. So nobody gets hurt, huh? Just big bad bankers. I am sure you are smart enough to figure out that this is not true. What happens to his old neighbors (who are sucking it up) home prices when yet another foreclosure hits the market. You guessed it, their home value goes down. Now, what if that neighbor's kids need braces, college education, medical bills, or some other $ from equity to finance a perfectly legitimate need. Oh yeah! Their equity is shot because your neighbor wants to retire in a larger home in 10 years.
I am sure everybody here who thinks that this is okay because he is just taking care of #1 is just glad he isn't their neighbor. Oh yeah! Maybe he is!
Last edited by threeactingup; 01-30-2008 at 01:29 AM..
Reason: grammar
Has no one here ever heard of a 1099-C? It's a real bit**. I read a lot of posts on this
forum, but I wonder why no one ever mentions this bit of prime legislature.
Kudos when "your friend" pulls off getting the new house. I'd love to see his face though when a 1099-C shows up for $80K+ and drives the amount he owes the IRS to $20K+ this year. Then "your friend" can come on here and complain about how the IRS is screwing him over.
This will not apply.
First, you do not pay taxes on "borrowed" funds, which is what this guy did, borrow funds against the mortgage. Then on top of this, the government recently made the "mortgage forgiveness losses" non taxable, when you lose your home due to forclosure.
They do not need credit because they already have credit cards and are not planning to acquire a loan in the near future.
Solano
What some folks may call the "trickle down effect" could result in the current credit cards your friend has increasing in the interest rates. Because once the FC hits his credit report not only will his score go down but when his current credit cards do their "review" of his credit report they will tag him as a high risk and can increase his rates.
The lower credit score could also mean higher insurance rates and if he should decide to change jobs his future employer a negative credit report could affect his getting the job. Especially in the financial field.
Also another thing to keep in mind is during the FC process a specialist will be reviewing the mortgage file as well as his credit report.
These are a few things they will be looking for:
1. Has he bought another property or are there any "inquires" from rental agencies on his credit this he has sidestepped by buying the other house in his wifes name.
2. Is he current on everything else he is paying ie credit cards or auto loans
3. Has his listed employer changed.
4. Are there any joint accounts on his credit report.
5. Has he called looking for option because of a severe financial problem
What they are looking for and what I would of determined if I had this come across my desk when I was working as a Foreclosure specialist is the following:
The fact that there are no inquires for new living arrangements and he has to live somewhere and seeing joint accounts would lead to the fact that maybe he is married and since his name is the only one on the original mortgage hmmm could they of bought a house in her name?
The fact that his income is on the original app(and from you saying that he could of afforded the $5k )it is probably a high income.
So now you have someone who makes a lot of money(job info hasn't changed) is paying current on any credit cards or auto loans doesn't "appear" to be paying rent or another mortgage and has never mentioned a financial problem.
I and probably any other foreclosure specialist would "flag" this account as "suspicious" so that when the Judgment of foreclosure is granted and the house is sold at Sheriff sale or through their REO dept for less than is owed that lien is filed against him for the difference. Yes the new law says they don't have to pay taxes on the difference but that doesn't mean that it "goes away"
Depending on the state laws some liens can be renewed for up to 20 years.
There is also the chance again depending on the state laws that the mortgage company could pursue a garnishment against his wages.
Sure some folks are going to say the bank probably won't go through all of this trouble but unless you can guarantee 100% that they won't I would not want the risk of the "trickle down effect"
First, you do not pay taxes on "borrowed" funds, which is what this guy did, borrow funds against the mortgage. Then on top of this, the government recently made the "mortgage forgiveness losses" non taxable, when you lose your home due to forclosure.
Actuallly.. forgiveness of the mortgage in foreclosure IS taxable as is forgiveness in a bankruptcy debt.
However, Bush signed a bill probably about a month ago that made the bankruptcy and mortgage forgiveness debt not taxable.
I only know this because he did sign that bill.. i"m following closely. . .as I could very well loose my home too.
And.. I would have done what this guy did if I could.. but alas I can't.. but I would have.. only because I'm looking out for MY family (although I don 't want to retire.. too young.. I just can't afford the increase and will loose the house when it goes so high).. just like the banks/corporations don't care about me and are only looking out for themselves.. I will only look out for myself.
If the bank, however, had been willing to work on changing the terms of the loan and the interest to a fixed that he could afford, he wouldn't have done this. I wonder if he tried that option first.. I"ve been tryng with my mortgage lender since September.. but haven't gotten anywhere with them.
I won't give him the benefit of the doubt any more than you will acknowledge that he's just a weasel lookin' for a way out. Unfortunately, we'll never know which one of us is right.
Stunningly, I was wrong. (Not stunning that I can ever be wrong, but stunning that in this particular case we learned what appears to be the truth.)
Will ya say weasel with me now?
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Still more info on the case
