Posted on 02/02/2010 7:37:29 PM PST by Lorianne
Yet in Florida, many people are living in their homes two years or more without paying a dime on their mortgage. This is because of the backlog of foreclosures, but also because lenders do NOT want to take possession of the home (which is essentially worthless compared to the mortgage).
There are many mortgage contracts where the deal is you pay OR you give back the house.
In that case, people who walk are fulfilling their contract. They are giving back the house.
These are also the states that tend to be “non-recourse” -— meaning they cannot go after the homeowner for a deficiency judgment if the house does not sell for enough to cover the debt.
I don’t know how these clowns can look themselves in the mirror after walking off from something they bought with eyes wide open just because it’s underwater now. Tough. That’s called life. They still get to live there, they can still afford it.
Home ownership has become perverted into something it’s not. It’s a place to live, not a primary retirement account. People who think otherwise have their priorities screwed up.
hmmmm...could merely legislate that all interest payments...say since 2000....be applied to principle.
a “controlled’ dollar devaluation...isolated to the home market...
'Most troubling' how, in the case of illegals? Do you believe we owe them something their 'homelands' don't, such as perhaps, free housing and our jobs?
In some states, the homeowners are engaging the banks in exactly that contract.
In a non-recourse state (eg, California), if you’re walking away from the first mortgage used to purchase an owner-occupied dwelling, you’re exercising your option to get out of the contract. And guess what? You paid for that option in your mortgage terms in places like California.
Banks are no more trustworthy on their contracts. It appears you missed Morgan Stanley walking away from loans on $8 billion in commercial real estate in San Francisco last December. To quote Morgan, “it wasn’t a default or foreclosure” — they gave ownership to the lender to get out of their loan obligations.
Translation: it was a ruthless default. Jingle mail writ large.
So if the banks do it, why shouldn’t the little borrowers do it?
Banks have been pulling this crap of morality and “you’ll wreck your credit” and other bluster and BS now for two years. It isn’t working. Want to know why?
Because we’ve figured out that they’re two faced liars, frauds and whores for the next fast-buck deal.
What brought about this crisis in the first place? Lenders making loans to people with bad credit. That’s what a “sub-prime” loan is. A loan to someone who cannot qualify for “prime” credit. So the threat that someone with “bad credit” cannot get a loan was already proven false. Sure, the borrower might pay more, but if there is one lesson to come out of this mess, it is that banks will lend to everyone with a pulse - no matter how bad their credit. So the threat that “you’ll wreck your credit” has already been gutted by the bankers before we got to this point.
If they followed the terms of the contract, why shouldn’t they be able to look at themselves in the mirror?
Eventually the banks will make them pay. Right now they do not want to flood the market with forclosed homes. Gov bailout money is buying them the time. Sooner or later the charade will end. Those homeowners will eventually be kicked out and if they still have a job or money in their savings accounts, the banks will sue and take it from them to make up the shortfalls in the sale of their foreclosed property. Remember the banks in order to survive have to pay back their government loans and service the bonds which they got money to survive the meltdown are due. At that point it is dog eat dog, bank versus homeowner assets.
The same thing hapened here in Anchorage - 1984 to 1987 (saved by the Exxon veldez spill, of all things0
Al but two banks in Anchorage failed from bad realestate loans.
House values went down by 2/3 or more and 30,000 peoplemoved out of a city with only (IIRC) 165K population base.
The fedgov was nowhere to be seen.
We survived. at of lives got wreaked - but we survived.
Today, home prices are fairly stable, banks having leaned that lesson once - no stupid loans from locals, plenty from Outside outfits tho....
Walking away destroys their credit. So where do they go to live and how do they pay? Assume that they are here legally.
From the article: "The difference between letting your house go to foreclosure because you are out of money and purposefully defaulting on a mortgage to save money can be murky."
I'm no attorney; obviously default is covered in the contract. But if you believe that, just because it is envisioned in the contract, it is an honorable thing to do, we're coming from different worlds and I will have to respectfully agree to disagree with you.
As I said up-thread: Banks do this all the time. Go look at Morgan Stanley’s ruthless default on a huge chunk of commercial real estate in SF only last December.
Banks like to play this “morality clause” with homeowners. Let me ask you this: Has anything the banks have done in this cluster-(*&^ been honorable?
Let me give you an instance of honorable behavior by a lender. Ever wonder why so many US farmers are wed to John Deere equipment?
Because when the Dust Bowl and Depression hit, a lot of farmers could no longer afford to pay Deere for the equipment they had on payment plans. Deere could have been the typical “we’re taking the equipment back!” sort of outfit. But no, Deere said “If you go out of business, WE go out of business. Pay us when you can, as you can. We’ll get through this together.”
And so they did. Deere finally got the last of the Depression-era debt paid off by farmers in the 1950’s - a full 20 years later. But they got paid the vast, vast majority of their outstanding debt.
Today, we see banks lying to everyone and their pet monkey about:
- credit quality
- terms
- restructuring terms
- profits
- assets and liabilities
They obviously have no honor, no business ethics and no scruples.
They’re in no position to lecture anyone about morality. Quite frankly, I couldn’t care a whit if more people used ruthless default on the banks. The bankers are learning the hard way that what goes around, comes around.
And, as far as the threats they keep making about “wrecking credit ratings” — the homeower comes out of the situation better if they default on the note while they were current than if they allow it to go to foreclosure. If you can see in the future that you have no way to continue paying the note, you’re better off to default while you’re current and keep some of your cash, than keep paying the note until you’re destitute, you default into foreclosure and now you’re out of money to boot.
It doesn’t “destroy their credit.” Sure, there’s a credit hit.
But as we learned going into this thing, the banks are whores. They’ll lend to anyone with a pulse. They’ll just increase the rate on the loan.
That’s what the whole sub-prime market was all about.
The effects of default on a mortgage are overblown. And, quite frankly, the banks brought this situation on themselves. In a BK now, it is easier to walk away from a mortgage than non-secured revolving credit. You can NO LONGER walk from student loans. So in effect, thanks to the 2005 Bankruptcy “reform” legislation, the bankers have created a situation where student loans are most senior, followed by credit cards and then followed by auto loans and mortgages. You’ll have a car repo’d sooner than a bank will foreclose on you.
So mortgage debt has now become the most junior debt. And bankruptcy attorneys, debtors, etc know this.
As I keep saying, the banks brought this on themselves. People should be wary of asking for things, lest they get what they want.... good and hard.
You'll get absolutely no argument from me on that. But bad behavior by one actor does not excuse bad behavior by another. The word "whore" comes to mind to describe lenders, buyers, and especially congress in this whole fiasco . One did not have to have an advanced degree in finance/economics/etc. to see the train wreck coming.
Your Deere example is an example of a seller *and* buyers with scruples. The buyers didn't try to run from their loans for a quick/easy financial gain, and Deere, wisely, did not try to put the screws to them.
OT: I made the cutting templates for several models of Deere combine side frames in the late 70s and early '80s. I have fond memories of the company.
The bankers are learning the hard way that what goes around, comes around.
Well we'll see about that. As I am positive you've noticed, and most of the fools who vote democrat seem to *not* notice, Wall Street is in the rack with every politician extant. I will admit it surprised me a little when a committed Chicago marxist like 0 jumped in bed with them, but there you have it.
Anyway, I stand by what I wrote. As much as I would like to hammer the "Titans of Wall Street" as the WSJ likes to call them, I can't see myself walking away from a loan I could afford to pay simply because it was expedient at the moment and the bankers deserve it. Call me an idealistic fool, Mrs. Felis has already called me worse tonight.
> So where do they go to live and how do they pay?
I would presume that they would become renters, perhaps with a large security deposit. Landlords are already well acquainted with the problem of deadbeat tenants. There are remedies, I’m told.
You’re right that one needn’t have a degree in finance/economics/MBA/etc. I have a degree in engineering, a field where we can’t lie with numbers because Mom Nature has a way of being arresting officer, DA, judge, jury and executioner in the blink of an eye for those who try to lie with numbers. Economists like to think that theirs is a scientific field, when in fact, it is no more scientific than sociology or psychology: these fields pretend to be science, but in fact they have no predictive skill, no hard accountability for their theories, etc.
If someone claiming to be an engineer came up to me, telling me that he had found a way out of the law of gravity by clever use of mathematics, I’d haul his ass up to a roof, hand him a pad and pencil, then throw him off just to see if he could prove it on the way down.
This level of accountability is lacking in finance and economics. They come up with new crackpot theories every day, with no accountability whatsoever.
When I read into such twaddle as CDO’s — what a load of crap. They’re nothing but obfuscation piled on top of lies with mathematics for derivatives, trying to turn a cow pie into a gold nugget. That these instruments were given “AAA” ratings was absurd. When I finally understood what these things were, that’s when I became smart about what was coming - and that was in early 2007. When I was hearing Bernanke and others claim that this would be “contained” to sub-prime... I threw my head back and laughed like a hyena. Then I started selling, and didn’t stop selling until December 2007.
I’m not going to call you an idealist (or anything else). My beef is with the bankers trying to lay the morality guilt trip on people who ruthlessly default - and make no mistake, the bankers are out there trying to lay this morality play on people. Obviously two wrongs don’t make a right, but when a banker tries to get all preachy to people - especially after what we’ve been through (and what we still have in the offing for the US taxpayer), I’m not in a mood to listen to any of it. If they want people to honor an obligation, then they’d better set the example - and they’ve utterly failed to do this.
For example: When cisco had to have layoffs in 2002, the CEO John Chambers said that he’d be paid $1/year until such time as the company turned a profit again. Was he hurting? Heck no. And he said as much, quite forthrightly. But he was quite clear that he didn’t think that the CEO should pull down a six-figure salary when the company was losing money. That’s an example - so when Chambers would come down inside the company and say “We need to cut” — people cut expenses, and didn’t bellyache about it, because Chambers had already set the example.
Banks and bankers could be doing this, but they’re so out of touch with the real world that they’ll continue to pay bonuses, claiming that they “would lose talent” without paying these bonuses, and on top of that, clowns like Blankfein will claim that they’re “doing God’s work.”
Employees that helped set up the US financial system to fail possess no talent discernible to anyone but those in the financial sector, and therefore are not worth retaining. If every one of these “talents” walked off the job tomorrow, the banks would be no worse off if they brought in a busload of howler monkeys who spent the whole day flinging dung at each other.
Can you provide a reference or source for this statement? In general, everything I read shows that banks pursue a judicial foreclosure less than 1% of the time in California, and they can only do that on loans that were refinanced - not on purchase money contracts. In the vast majority of the cases, they do a trustee sale (non-judicial foreclosure), even on recourse loans, because doing a judicial foreclosure costs a lot, takes a lot of time, prevents the bank from selling the property for a year, and generally winds up with the borrower declaring bankruptcy anyway, so the all of the wasted time and money is never recovered.
In general, banks only pursue a judicial foreclosure if the borrower has a lot of other assets to seize. But if you have news stories or recent cases that show otherwise, I'd love to see them.
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