I personally know several people who have walked away from houses when they were having no trouble making the payments. In most of the cases the value on their home dropped to less than what they still owed and they made the decision to do a “short sale”. There are many Realtors who specialize in short sales. The Realtor arranges a sale for less than what is owed to the bank, and coerce the banks to accept less money than what they are owed.
One of my “friends” found a younger girl friend and divorced his wife of twenty seven years. To pay off his ex-wife he refinanced the house with a local credit union. A couple years later he decided that the house wasn't worth as much as he owed and had a short sale arraigned. He makes around $130,000 a year and his new wife makes around $100,000. Their payments were around $2000 a month on the house. They could have rented the place for $1500 a month, but they were told that the short sale wouldn't mess up his credit for more than a couple of years. The Credit Union took it in the shorts and my “friend” walked away with his ex-wife paid off and no payment on the debt.
Why the banks agree to arrangements like this from people who can obviously afford the payments I don't know. It is not right and it is hurting the rest of us.
My brother-in-law got reassigned to a different military base after he got back from Iraq. Unfortunately, they bought near the peak of the market so they couldn't sell their house because it is now worth half what they paid. They are living hundreds of miles away renting their house to a series of dead beats who have messed the house up. They are renting a crappier place where they now live because they can't buy another place because they owe so much on the place that was close to where he used to be assigned.
My brother and sister-in-law make a heck of a lot less than my "friend" and his new wife but they are determined to stick it out because they believe in keeping their word. They say the mess they are in is their own fault for not renting to begin with, but I remember how excited they were to buy their first house. There is a big difference in the way people look at this type of situation.
Why the banks agree to arrangements like this from people who can obviously afford the payments I don’t know. It is not right and it is hurting the rest of us.
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Since this was with a credit union it is likely that it was a legit loan .. however in 96% of the cases the banks did not lend their own money and the actual “table funder” (the REAL lender) is not listed ANYWHERE on your documents invalidating the loan AT INCEPTION. The “loans” were sold BEFORE the closings and converted to securities where the income stream was divided off ,, seperating the note from the obligation/security instrument (mortgage) .. this invalidated the “mortgage” in a second way. This isn’t 1985 and this isn’t your fathers mortgage market.. The banks played dirty and took a gamble ,, that gamble sank the economy but I can’t think of any reason to continue to believe their lies.. We can’t recover as a nation until the truth is acted upon in this arena.
Why the banks agree to arrangements...
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In most cases the banks have $00.00 in the loan ,, the actual true lender is remote and the bank’s fastest path to cash is to take the security (house) and sell it , they don’t like doing a short sale as it keeps them involved ,, the real lender gets NOTHING... they are cashing in by suing the securitizers but they want to stay uninvolved with the FRAUD the banks are commiting in order to foreclose..