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.
I guess you would get to keep all the lavish vacations and meals out and designer clothes and other luxuries you bought with all the second mortages you took out.
I can't really answer that question because I wouldn't use my home like an ATM to get underwater with my mortgage in the first place.
You can get that far underwater without a second mortgage, or using your home as an ATM. How far underwater you are, though, is a matter of opinion. For instance, Zillow assigns market values that might place you underwater, but your local tax assessor might place the market value significantly higher. Until you sell your house, it's hard for many people to know if they are underwater, or not. However, where the market has fallen sharply, and in neighborhoods where foreclosures and short sales are common, it's much easier to determine if you are underwater. And if someone bought when the market was peaking and spent more than $250,000, some of those people can find themselves $100,000 underwater, especially if they had ARM's or for whatever reason didn't accrue much equity in the intervening years.
If a homeowner owes more on their mortage than the home is currently worth, say
Mortgage: $200,000
Value: $100,000
Under water: $100,000
Would it be wrong for him/her to stop making payments and walk away?
You signed a contract that LEGALLY COMMITS you make those mortgage payments as long as the deed to the house is in your name. If you don't want to make the payments then sell the house and pay the bank if you are underwater.
People don't want to take responsibility for the fact they made a bad business deal.
If a homeowner owes more on their mortage than the home is currently worth, say
Mortgage: $200,000
Value: $100,000
Under water: $100,000
Would it be wrong for him/her to stop making payments and walk away?
yes. He would be wrong. At least as bad as the bank that foreclosed incorrectly on someone and took their home. I will probably be selling my house in the next few months, and may well come out $10k behind in the deal after closing costs and realtor fees.
I'm going to man up and take it though...because I signed the contract to buy it.
You signed a contract that LEGALLY COMMITS you make those mortgage payments as long as the deed to the house is in your name. If you don't want to make the payments then sell the house and pay the bank if you are underwater.
When you get down to it, how is that any different than letting the house go into foreclosure?
It really depends. If you view your house as an investment, than you have to ask your self if it makes financial sense to walk away. 200k to 100k is really not that big of a difference. Like others said, you have to live somewhere. Now if you owe 700K and it is worth 350K and your mortage is $4,000, but you can rent a similar house down the street for $2,000, it makes little financial sense to hold on to it.
I mean, if you signed up for a 3 year phone contract at $100 bucks a month, and you see a deal for the same plan at $50 a month, would you break your contract?
Chances are if you paid $700,000 and you house is now worth $350,000 you brought at the top of the market.
Nobody put a gun to your head and made you sign for a mortgage. If you signed then your RESPONSIBLE.
Why do people condone irresponsible behavior in society?
If a homeowner owes more on their mortage than the home is currently worth, say
Mortgage: $200,000
Value: $100,000
Under water: $100,000
Would it be wrong for him/her to stop making payments and walk away?
If they had the means to continue paying then they should pay. Property values do fluctuate and we are undergoing a declension. You think property did not devalue during the Depression and then increase again during WWII/post-war? Property ownership is long term,multi-generational. Property speculation is short term.
Should I work less if I had to take a paycut at work to maintain a position which I previously earned more?
Should I cheat on my wife because our relationship has declined?
A person should pay so long as they can pay. Not having the means to pay is a different topic and we do have laws in place for protection of the individual. No one goes to debtor prison.
That's why the government should not have gotten into any of it in the first place including getting the banks to give out loans irresponsibly.
The old way was better. The borrower had to prove he was credit worthy, the banks were more responsible in giving loans out.
Now the government is scrambling to bailout both sides and just making everything worse when it was the government in the first place that helped create the problem.
Sorry but the government didn't loosen up the credit standards banks and mortgage companies did. Also mortgage companies i.e. Ameriquest Mortgage and Countrywide Mortgage Inc. where not under the same regulations that banks were.
It is a business decision....that is all it is...from some reason to some people when a business does the same thing it is smart,when an individual it is immoral...
There are usually consequences for walking away from a business deal, such as getting sued. If the person is willing to deal with the consequences of walking away from a mortgage i.e. bad credit or the inability to get other consumer loans then so be it. But the fact remains you signed a contract and you broke it.
How are they stupid? They did nothing to cause the price of their home to bottom out. They were unlucky, if anything.
They were stupid to believe that buying a home had no risk in terms of depreciation.
There are a lot of people in America that are this "stupid" in part because many middle class Americans have been indoctrnated to believe that a home never decreases in value. They were no unlucky, they failed to realize the downside risk of their financial decision.
A home is not an asset unless it's providing income or is paid for, it's a liability.
One of the better posts in this thread. What many Americans have been falsely led to believe is that buying a home is an investment or wealth building tool. In reality a home os a place to live and THAT'S ALL.
But too many people in this country have been lead to believe they "Have To" buy a home and that "It will always apprecaite in value". That led to too many people buying homes they couldn't afford and too many people taking out home equity loans based on "It will always appreciate in value". Consumers are just as responsible as banks for the housing meltdown. The effects will probably felt for the rest of this decade.
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.
