Walking Away from the Home Mortgage

[Ultrarunner]

Originally Posted by brussel sprout

We are living the lives of indentured servants.

The goal of the system is to keep us in as much debt as possible.

The more debt we acquire, the more interest we pay.

The interest goes to pay the wealthy, who have become the modern day feudal lords.

How about opting out of the System?

[eastendbill]

Originally Posted by Philip T

Just got back from California on a project. This topic interests me so I chatted the various locals about some of this. Here is what I heard often that NEVER gets reported in the stories we hear -- many of these folks went in seeking earnest honest loans they could repay in good faith.

The buyer did everything by the book and by the numbers. However, what would happen to them, is at closing there would be a "crisis" totally created by the bank/broker. Someway, somehow, the bank/broker could not come through with the deal they offered, but instead would "have to" place the buyer in some sort of ARM and/or what we now call "liar loan." (no document loan, just sign here, we have to close today.)

The standard routine was that the low cost entry loan was promised to be replaced by the originally offered loan in a year or so. Some of these buyers even got these replacement terms in writing. A year later, the original loan terms would be refused by the bank, and they would try to stick the buyer (now owner) in the crooked "bait and switch" loan that had came out at the closing. That bait-and-switch loan had already been re-sold to some holding company on its fake future value of increased rates and returns.

Once may be an accident, a few dozen times some local incompetence or accidental misrepresentation. But in the thousands this is blantent fraud on the part of brokers and banks. The banks that have done these scams on these people have created serious damages to the buyers/owners and even total innocents who just own property in areas were this was done.

So far most folks just seem resolved to being f'ed. Or at most just f'ing the bank back via defaulting and walking away. Being more of a jerk, myself, I would probably run the bank/broker through court as a pro se (no attorney expense) for misrepresentation with the intent of them just giving me the house as compensation for damages to get me to go away. If they defended it, I would bump the cause of action to intentional fraud and go for triple damages against the bank/broker.

When some sharp lawyers figure this out as the Class Action it reeks of becoming, the banks are going to be destroyed.

After 25 years in the mortgage business I can tell you two things: First, as a broker I would make almost TWICE as much on a full doc, prime loan that I would on a NO-DOC Subprime loan, so the supposedly innocent borrower probably was buying a house he couldn't afford to begin with. There would be no reason to bait and switch anything. Secondly, if homebuyers didn't insist on keeping up with the Jonses by having two SUV's and a house bigger than they could afford, they wouldn't be facing foreclosure right now. The investors who were greedy and wanted to make quick buck in real estate are the second biggest culprits.

But you know what? This foreclosure market is a FANTASTIC opportunity for those who wanted to buy before the market spike up but didn't want to over-extend themselves. Bravo. Now a real family can buy a real home for a real price that is affordable. If you have bad credit or are losing your job, please don't buy a house right now.

[lemon drop]

Originally Posted by eastendbill

Now a real family can buy a real home for a real price that is affordable. If you have bad credit or are losing your job, please don't buy a house right now.

Well, yes, maybe, except for the fact that houses still aren't that affordable in most place. Many people ARE losing their jobs. And lenders are making it a lot tougher to get any kind of credit right now.

[KevK]

Originally Posted by 01Snake

Say bye bye to your credit.

Most of these folks probably already said bye bye to their credit. But if the bank sells the property at a loss, they can come after you for the balance.

[Philip T]

Originally Posted by lemon drop

Well, yes, maybe, except for the fact that houses still aren't that affordable in most place. Many people ARE losing their jobs. And lenders are making it a lot tougher to get any kind of credit right now.

jmho . . .

Housing has JUST STARTED to drop. The bottom is still a LONG way down.

The largest lumps of ARM resets is just starting now It runs March 2008 through June 2008. The foreclosures hit about 3 months past that. Piled on top of the surplus on the market already. By Fall and Winter 2008 and into 2009 the market will be fully dropping out everywhere.

You are correct that the unstable jobs, and flaky banks will make cash or barter the only practical way to buy.

[Daddys///M3]

Originally Posted by lemon drop

Well, yes, maybe, except for the fact that houses still aren't that affordable in most place. Many people ARE losing their jobs. And lenders are making it a lot tougher to get any kind of credit right now.

Actually, they are not. If you are referring to the kinds of loan programs that got us into this mess to begin with then, yes, it is harder to get a 100% SIVA loan now than before (actually it's impossible) or any kind of subprime loan at more than 80% loan to value. However, to get your conventional conforming 30 yr fixed with 10% down is no harder than it was 5 years ago or 10 years ago. Same thing applies to FHA. As a matter of fact, many believe that FHA is still too lax in it's underwriting standards. 97% loan to value, not FICO driven, better rates than most conventional loans, and reduced MI coverage to the tune of 0.5% of the loan amount (plus the MIP of 1.5% financed). Add to that the fact that collections do not need to be paid off (but may need to be explained), you can be 3 years out of FC and 2 out of BK, and as long as you have a solid 12 months payment history you can very well be approved for an FHA mortgage. You don't even have to be in the same line of work for 2 years! And gaps in your employment history may be allowed with a sufficient letter of explanation.

If you're talking about credit cards I would say that you are wrong there as well. I have been offered close to $75K in credit in the last 2 months. Of course I turned most of them down (I did need a CC for business so I took one with 0% APR for 12 months and a $15K limit, strictly for everyday business expenses). I guarantee I could still walk into a car dealership and purchase a car with no money down without proving my income as well (done it 3 times in the last 5 years).

[RRBC]

Originally Posted by KevK

Most of these folks probably already said bye bye to their credit. But if the bank sells the property at a loss, they can come after you for the balance.

I was under the impression that if the bank sells the property as a loss they can use that as a tax write off and the person/s who walked away from their mortgages had to apply the same amount as (taxable) income.