Just Walk Away …

[Chappy]

Is your mortgage more than the value of your house; i.e., is your mortgage under water? Perhaps, it's time to consider what was once the unthinkable …

Excerpted from “Walk Away From Your Mortgage!” By ROGER LOWENSTEIN, The New York Times, Published: January 7, 2010
[SIZE="+2"]T[/SIZE]ime was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?

Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. …

Would you ever voluntarily default on your mortgage?

 

[ScummyD]

I wouldn't be against it considering I put nothing down. It's not at that point, not even close, but I wouldn't rule it out outright. I would approach the bank first, though, and see what could be done. I think they would be a lot more willing to negotiate than in times past; don't think they want yet another house on their hands.

 

[TheGirlNextDoor]

Luckily for me, my house is worth more than I owe on it.

However, I have a few friends who live in CA and have let their house go back to the bank. One couple actually tried working with their mortgage company to try and get refinanced, and they wouldn't work with them.

After exhausting several options (none of which panned out) they decided to give up and so the house went back to the bank.

That goes against everything I was brought up to do. I would not handle letting my house go into foreclosure (or voluntary surrender) very well at all. Not to mention what it would do to my credit score. Going from a Vantagescore of over 800 to under 600, would kill me financially.

No thanks.

 

[washunut]

Luckily for me, my house is worth more than I owe on it.

However, I have a few friends who live in CA and have let their house go back to the bank. One couple actually tried working with their mortgage company to try and get refinanced, and they wouldn't work with them.

After exhausting several options (none of which panned out) they decided to give up and so the house went back to the bank.

That goes against everything I was brought up to do. I would not handle letting my house go into foreclosure (or voluntary surrender) very well at all. Not to mention what it would do to my credit score. Going from a Vantagescore of over 800 to under 600, would kill me financially.

No thanks.

This is intersting to listen to. For over a year Obama and company have been railing against those horrible banks who lost all that money and we had to bail out.

Just listen to the person who said he would not mind walking about from a bad investment he made and let the rest of society clean up his mess!

Just walking away, is immoral and a large part of the financial crisis. I wish there were debtor prisons for people who " walk away".

 

[TheGirlNextDoor]

This is intersting to listen to. For over a year Obama and company have been railing against those horrible banks who lost all that money and we had to bail out.

Just listen to the person who said he would not mind walking about from a bad investment he made and let the rest of society clean up his mess!

Just walking away, is immoral and a large part of the financial crisis. I wish there were debtor prisons for people who " walk away".

What person are you referring to? I ask since you quoted my post, which did not advocate 'walking away'.

 

[Chappy]

… Just listen to the person who said he would not mind walking about from a bad investment he made and let the rest of society clean up his mess! ….

Doesn't the article address this?

Excerpted from “Walk Away From Your Mortgage!” By ROGER LOWENSTEIN, The New York Times, Published: January 7, 2010
[SIZE="+2"]B[/SIZE]ut in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.

To walk away from a bad investment is a rational, even responsible act within a capitalistic system.

 

[ScummyD]

This is intersting to listen to. For over a year Obama and company have been railing against those horrible banks who lost all that money and we had to bail out.

Just listen to the person who said he would not mind walking about from a bad investment he made and let the rest of society clean up his mess!

Just walking away, is immoral and a large part of the financial crisis. I wish there were debtor prisons for people who " walk away".

You can't suck blood from a stone. If the point came where I can't afford to maintain my mortgage, what am I supposed to do? If I don't have the money I don't have the money. How could I not walk away at that point? If I can't pay for it I can't reside in it.

 

[Dezaad]

This is intersting to listen to. For over a year Obama and company have been railing against those horrible banks who lost all that money and we had to bail out.

Just listen to the person who said he would not mind walking about from a bad investment he made and let the rest of society clean up his mess!

Just walking away, is immoral and a large part of the financial crisis. I wish there were debtor prisons for people who " walk away".

Why? Everyone agreed what would happen if the borrower didn't pay: That the bank would get the house and the borrower would have a very bad mark on their credit. The bank agreed to the loan knowing that the borrower could exercise this option. The borrower is simply exercising one of the options agreed upon.

 

[washunut]

You can't suck blood from a stone. If the point came where I can't afford to maintain my mortgage, what am I supposed to do? If I don't have the money I don't have the money. How could I not walk away at that point? If I can't pay for it I can't reside in it.

I agree with you and it is not people who are in your situation I was referring to. Sorry if you took it that way.

I am talking about people who can afford to pay the mortgage but choose not to because their investment went South.

 

[washunut]

What person are you referring to? I ask since you quoted my post, which did not advocate 'walking away'.

The response was not meant for you. It was the post just above yours, clicked on the wrong person when responding.

I am an old foggy but no excuse, I need to be better with the computer.

 

[Dirty Harry]

Doesn't the article address this?



To walk away from a bad investment is a rational, even responsible act within a capitalistic system.

Exactly. No one is looking out for your interests but you. You have to make the best decision for yourself and your future. Corporations do it in a heartbeat.

 

[Dezaad]

I agree with you and it is not people who are in your situation I was referring to. Sorry if you took it that way.

I am talking about people who can afford to pay the mortgage but choose not to because their investment went South.

I am referring to people who are perfectly capable of paying, but choose not to. No where is there a law or agreement that they have to continue paying if they don't want to: As long as they are ok with the consequences, they are making a rational choice to do what is best for them financially. I agree with their choice and it is the one I would make, and I wouldn't think I was doing anything immoral.

 

[Kushinator]

Breaking a contract can have dire consequences. Take marriage for example.:thinking

 

[DeeJayH]

It is called a strategic default. if one is underwater by 5-10% or some other nominal amount, that can be recouped over the next few years, there is no reason to consider it.

However I have a friend I have been counseling and even suggested this to them. They are a young married couple in their late 20's. They bought their house, not only with an 80/20 no money down loan, but they walked out of closing with a few grand. (symptom of how wrong things were going)

Their purchase price was $132,000 with a PITI ~ $1200/month

now their house is worth less than $50,000. They are over $80,000 underwater
they can rent a bigger house than they currently have, for 1/2 the mortgage payment.

to me it is a no brainer to default. What would be best for them would be if they could get the Bank to do a shortsale as that hurts your credit less than a foreclosure. However the banks are lobbying to have this change, so Short Sales are not as attractive, and secondly, an overwhelming amount of time, a foreclosure is more profitable for a bank.

I oppose courts restructuring mortgages to keep underwater homeowners in their homes
I oppose the tax credits for home buyers

But i approve of Strategic defaults in cases such as above, where it will probably take DECADES to recoup their losses.

How much money would each homeowner have gotten, if all the various bailout moneys went to them, instead of the 'too large to fail' institutions?

 

[cpwill]

Is your mortgage more than the value of your house; i.e., is your mortgage under water? Perhaps, it's time to consider what was once the unthinkable …

Would you ever voluntarily default on your mortgage?

If you mail the bank your keys, the bank will re-sell the house (not caring how much it brings) and then sue you for the rest. and probably win.

you could shortsell the house, and depending on how you were working with the bank you might or might not have to pay the difference.

ultimately the house's value is irrelevant. you aren't paying for the house you are paying for the loan; and you owe that money by a contract which you signed of your own free will.

have a minimum 20% downpayment, get a 15 year fixed-rate mortgage, purchase housing where the monthly payment is going to be about 25% of your take-home pay, systematically pay extra on your mortgage, do not use consumer debt, and always have 3-6 months of expenses saved in an emergency fund (though i'd lean towards 6).

follow those basic responsible steps and you are safe from 90% of what life will throw at you, financially.

 

[cpwill]

I am referring to people who are perfectly capable of paying, but choose not to. No where is there a law or agreement that they have to continue paying if they don't want to:

uh, yeah there is. it's called contract law.

 

[DeeJayH]

uh, yeah there is. it's called contract law.

no there isn't, otherwise there would not be consequences to breaking said contract

A huge percentage of florida market are upside down homes
Miami Condos are doing so bad, even the banks do not want them so the owners are staying 'rent free'

other part of a strategic default, is saving money prior to eviction/sale
in florida typically we are looking at a 9 month foreclosure process these days. if you are not paying your mortgage, than you can save a pretty large nut for when you move out. Also, I have had many foreclosure attorneys say if you stop paying the mortgage, cancel your insurance as well. But I do not feel comfortable about that part, no matter how much you can save, to me it seems like a naked short sale: Limited gain with unlimited loss potential

 

[cpwill]

no there isn't, otherwise there would not be consequences to breaking said contract

you don't consider being sued and having the courts seize your wealth a consequence? you won't go to jail, that is true; but there are legal consequences (as their should be) to breaking a contract.

A huge percentage of florida market are upside down homes
Miami Condos are doing so bad, even the banks do not want them so the owners are staying 'rent free'

Miami, the California coast, and a few other area's are what really drove the general rise in home value; it's not surprising how far under they are.

however, the fact that some banks aren't pursuing delinquents doesn't mean that that is not an option open to them.

in florida typically we are looking at a 9 month foreclosure process these days.

:lol: that's wonderful. i'm so happy the government decided to play in the mortgage market. talk about a decision that has been completely free of negative consequences.

if you are not paying your mortgage, than you can save a pretty large nut for when you move out. Also, I have had many foreclosure attorneys say if you stop paying the mortgage, cancel your insurance as well. But I do not feel comfortable about that part, no matter how much you can save, to me it seems like a naked short sale: Limited gain with unlimited loss potential

well, yeah. you're bank eventually will come after you for the difference if they think they can get it. if the property is damaged with no insurance, that difference becomes larger.

 

[DeeJayH]

let me ask you cpwill, would you really honor a contract even if it was going to be a losing investment for the entire 30 years of the contract.

My friends, mentioned above, obviuosly purchased at the peak. with such a major loss, and the fact (IMHO) that we will not see such runaway gains again for a long time, means in all likelihood, after 30 years, they will break even maybe, if not still be underwater.

why should anyone bear such a burden, especially when lenders write off losses ALL THE TIME

stick with 'the contract' and you are screwed for atleast 10 years, if not the full 30

walk away, and you only have to deal with the fall out for 7 years

do a short sale, and your credit is only screwed for 2 years, IIRC
but you can bet the lenders are lobbying hard to increase that

seems like a No brainer to me, Sad state of affairs, but still a no brainer

and I blame Barney Frank who is, to this day, looking to commit the same sins

 

[Strucky]

You can't suck blood from a stone. If the point came where I can't afford to maintain my mortgage, what am I supposed to do? If I don't have the money I don't have the money. How could I not walk away at that point? If I can't pay for it I can't reside in it.

I reached that point 8 months ago,getting laid off and having hours cut killed me financially.The damn mortgage company didn't even try to work with me until I went into forclosure....And even then they sat on my paper work for 3 months only to tell me I had to resubmit everything.

Oh well,I still have until May before I gotta be out.

 

[Ockham]

I would find it personally repugnant on principle, so no. Wouldn't consider it. I'd file bankruptcy first.

 

[DeeJayH]

I reached that point 8 months ago,getting laid off and having hours cut killed me financially.The damn mortgage company didn't even try to work with me until I went into forclosure....And even then they sat on my paper work for 3 months only to tell me I had to resubmit everything.

Oh well,I still have until May before I gotta be out.

sad but true

most lenders will not talk to you until you are 3 months behind typically
if you are trying to do a shortsale due to financial hardship, get ready to play the waiting game
if an offer is submitted on an Aurora Home Loans house, they will not even respond to the offer for 4 months MINIMUM. So you keep your house in good condition, you get a buyer with solid credit willing to pay fair market value, and you are left in the wind for months. I have no pity for the losses homeowners leave on the banks. None whatsoever. On a real estate site I belong to, there are over 1000 Blogs trashing Bank of America

if you want help getting what you deserve help-wise, not only should you contact your local representatives (govt) but I have heard of great success when you contact the BBB, both yours and the one in the Lenders area. I have heard of getting a vice president calling you within 48 hours of complaining to the BBB. the VP assigning ONE specific person to your file for the duration of hte process, unlike the average joe who has to go over everything, with someone new, everytime they call about the file

If you would like, I would be happy to recommend a local Shortsale/foreclosure specialist, if one exists in my contact list in your area.

 

[DeeJayH]

I would find it personally repugnant on principle, so no. Wouldn't consider it. I'd file bankruptcy first.

whats the difference besides semantics?

you are still breaking the contract

 

[DeeJayH]

also lets not forget, this is strategic defaults. You have the ability to pay, but chose not to, due to the tremendous loss in value compared to the value of the mortgage

Ergo Ockham NO BANKRUPTCY OPTION

 

[Antagony]

There is a British comedian, whose name I can't quite remember, who jokes that he bought the most expensive house on his street at the most expensive time to do so and it is now worth far less than he owes on it, but he's decided to take the radical step of just continuing to live in it! His point, of course, is that that is an option which is often overlooked. But as long as you can afford the mortgage then what is the problem? The modern trend has been for people to believe that the primary purpose of buying a house is to turn a profit, rather than making a home. Perhaps a re-evaluation of that purpose might not be such a bad thing.