To the Suckers of Freerepublic Who Have Paid Their Mortgages On-time

loansafe.org ^ | 2/22/2010 | Vanity

[rumrunner]

So, after waiting for more than five years to finally buy a house that I thought was fairly priced in socal, and having paid out about $150,000 in rent over that time period, I'm about to close on a short sale.

The banks/investors (BofA, Citi) are going to "lose" about $400,000 on the house. The guy that's selling the house never lived in it. He never put a dime of his own money it. He will still have his own house in a different part of the county. He will keep that house. He is out nothing.

I did a little digging about short sales and came upon this gem this month:

Guy buys a house in Florida. $290k mortgage. Takes out a Heloc of $140,000. Uses it for his S corp business. He asks that his loan be modified. Citi says "sure". He settles the entire Heloc for $15,000 and the Heloc is now extinguished. Yes, 10% on the dollar. He still has his business and other assets.

This was his reply in that forum:

"WOOOOOHOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!! I just got my letter!!!!! $15,000.00 or 10% whichever is greater!!! I just settled 140K for 15K!!!!

THANK YOU xxxx You guys are the best!!!! I'm sooo happy right now!!!!!!!!!!!!!!!!

I was never behind on my 1st or 2nd. My credit is still good, the only remark will show paid in full but less than agreed on my credit file."

[usconservative]

Wait until the tax bill comes, isn't that treated as income for tax purposes?

Yep, the bank 1099's him for the difference as the IRS considers it "ordinary income."

Now when in my life did I ever think I'd be cheering the IRS against assholes like this guy?

[eyeamok]

Until the end of this year there is no tax due on shorts.

[RegulatorCountry]

Don't forget PMI. The bank loses nothing.

One of the "innovations" that led to so much trouble, was allowing buyers to finance a second to pay the downpayment on the primary mortgage. This became popular because the interest on both was tax deductible, whereas PMI was not. So, no, PMI was/is not necessarily there to cover the bank's losses.

[rumrunner]

Most will receive a 1099, but it won't be included in taxable income.

Mortgage Forgiveness Debt Relief Act of 2007 changed all of this for most homeowners (home had to be the principal place of residence, among other requirents)

[usconservative]

The bank risked it’s own money and lost. There is nothing whatsoever immoral about what the lendee on the home loan did.

ABSOLUTELY INCORRECT!!!! The bank may have risked it's own money initially but us tax-paying, hard-earning producers who actually make this country WORK were the ones who ended up footing the bill and bailing out these banks and dead-beats.

That's what pisses me and people like me off. I've lived up to my word and contracts, paid my bills on time and am getting F*CKED by the U.S. Government in favor of a bunch of lazy-ass welfare RATS who've learned how to game the system and get away with it.

Now THAT'S the stuff that revolutions are made of. Keep stomping on us honest folks and eventually we're going to turn. When we do, I guarantee you it's going to be ugly.

[Trailerpark Badass]

I don't know what penury is but obviously it's your back door excuse for whatever..........

Penury is grinding, extreme poverty, with no way out, or what one might consign his family to if he continues paying on a mortgage he can't afford.

As for calling me dishonorable, I don't think you understand what contracts are.

[TSgt]

LOL Viking!

We won’t be building for a couple years but would like to build a Heritage Log home: www.heritagelog.com

I told the Heritage rep that we wouldn’t build when we had the necessary cash to obtain the construction loan. We would build when we had enough cash to make our monthly mortgage payment what I wanted it to be.

We found a great piece for about $1600 an acre with full utilities including DSL because I need my FR! ;-)

[John.Galt2012]

Fair enough. I fully support State’s Rights! And I had also forgot about the whole PMI thing as well. As I recall PMI is basically to insure the full mortgage amount in the event that unforeseen circumstances preclude the borrower from paying back the loan.

[FreedomPoster]

I try to look at the big picture on this stuff.

It is frightening as hell.

[RobRoy]

>>Based on your previous statement, I wouldn’t trust your handshake any more than I trust Obama..<<

Then you don’t fully understand my previous statement.

[FreedomPoster]

I haven’t Googled or anything, but I’d bet $10 right now that California is a no-recourse state.

[RobRoy]

Two words: Secured loan. But for real estate it goes deeper than that. We all know you can not walk away from a car loan, for obvious reasons.

You are right about the Promissory note. That is why I try to include the caveat that my position only applies to loans where the local contract law allows contracts written in certain ways to be simply “two option” loans. And most of them are. When one gives the keys back they are merely taking option “b”. It’s kind of like exercising an option to buy (on a lease) when prices have skyrocketed or choosing to not exercise it when prices have collapsed. It is not about morality. It is about contract law.

[RobRoy]

I agree with that.

[RobRoy]

>>The bank may have risked it’s own money initially but us tax-paying, hard-earning producers who actually make this country WORK were the ones who ended up footing the bill and bailing out these banks and dead-beats.<<

I agree with that statement, but it is not relevant to the two words you preceeded it with. That part is not part of the agreement the borrower made with the bank.

In your post is the kernel to why I bought my farm in central Kentucky (with 20% down, I might add). When the Sh## hits the fan, and I firmly believe it will, I’ll at least be growing my own food and raising my own beef - and have an 80 mile buffer of people armed like me between my place and the urban hordes.

Yeah, that is tongue in cheek. Sort of... ;)

[John.Galt2012]

My first mortgage had a pre-payment penalty buried deep into it (hidden, btw, on purpose IMO). Boy, that was a good lesson for a 20 something year old getting his feet wet for the first time. Never repeated that mistake.

Just curious...was that mortgage through a private individual?

[RegulatorCountry]

If you find any takers, go for it. You’ll be $10.00 to the richer, lol.

[Oatka]

Looks like there will be a LOT more people walking these next two years. This chart has been shown before, but it wouldn't hurt to see it again and brace yourselves.

[usconservative]

That part is not part of the agreement the borrower made with the bank.

As I had no part in the agreement with the Bank and the borrower, why should I be stuck footing the bill?

We see the results of moral hazards and "too big to fail." If the banks were indeed "too big to fail" they could've (and should've) been forced to absorb the loss in the first place.

[Eagle Eye]

Considering the number of stories like this across the country, I seriously doubt that your credit will be terribly damaged.

Bankruptcies and foreclosures are a lot more common than ever before and are almost normal.

I’ve witnessed three neighbors evicted and several others leave on their own in the last two years. As a matter of face, my current house is a foreclosure I bought 2 years ago and there are others in the neighborhood.

And no, this isn’t a bad neighborhood. Mine is 4/3/2 2400ft.

If lenders really truly stop lending to all those who have had bad marks on their credit in the last 10 years, there won’t be many customers for them anymore.

[wireplay]

Just curious...was that mortgage through a private individual?

No, through a mortgage company and we had to sign almost a foot of paper. We were young, in our first property, and didn't catch it. They also buried it tight which led me to believe it was purposeful. Bottom-line, we took a loss on property #1 because we sold in under 5 years. Not a big loss, but a loss. Our mistake BTW, I blame no one else, but we read everything now before closing.