Posted on 02/08/2008 2:09:27 PM PST by bshomoic
Who will pay the mortgage when the homeowner walks? You
Sean Olender
Friday, February 8, 2008
California's housing market may be entering a scarier phase: the point at which homeowners walk because the house isn't appreciating, not because they can't afford it. Banks are worried.
. . .
Bank of America CEO Kenneth Lewis said, "There's been a change in social attitudes toward default ... We're seeing people who are current on their credit cards but are defaulting on their mortgages ... I'm astonished that people would walk away from their homes."
If income indicates ability to pay, down payment is an incentive to pay - skin in the game.
In California, lenders are generally barred from getting money from a defaulting borrower. The lender gets the house and that's it, even if the borrower has $1 million in the bank. Only judicial foreclosure allows the lender to get the borrower's other assets, but it's slow, expensive and encourages a defense of loan origination fraud. Buying a house with little down is like having your cake and eating it, too. If the house appreciates, you keep the riches; if it doesn't, you walk and lose only what you put down, often nothing. It's wrong to insure such losses with taxpayer money.
(Excerpt) Read more at sfgate.com ...
Both political parties were complicit in this fraud, but for different reasons. The party of business, the GOP wanted to create an ‘ownership’ society and thus help their buddies on Wall ST. The Dems wanted to open up housing for the ‘disadvantaged’, namely minorities and those with poor credit and no money for a dwon payment. Both parties had a vested interest in this Ponzi scheme because both parties’ constituents benefitted from Greenspan;s east credit. NO down, No doc, interest only loans were designed to scam the taxpayer by giving out loans to people who could neveither afford the house they were buying, or who would never have qualified for a loan in normal past underwriting standards.
The rebate bill which raises loan limit for Fannier and Freddie is just pouring more fuel on the fire, and the taxpayer will be left holding the bad for the huge defaults just down the road. The $ is being crushed precisely because the world is on to our scam, after all they bought a lot of the CDO’s and now they are next to worthless.
Thank you for the advice, Larry! I plan on paying an excessive amount of money toward my principal each month. I’m on the “Dave Ramsey” plan toward debt-freedom. I figure I’ve got 17 years on my 30 year mortgage if I make payments according to my finances. I feel good about it, and I have a lot of aspirations. It’s good to be a single guy, too, I suppose.
Don't listen to this horrible advice. Take out a home line of credit and use it to buy a 50 inch plasma TV (you can use your tax rebate check to buy a Blu Ray DVD player to go with it). Then go buy yourself a nice shiny 4000 pound SUV thatgets 9 miles to a gallon and requires premium gas. When things turn out badly, you can cry for the Gubment to come save you.
If I wanted to sell, which I don't, (I really hate cold) I'd wait a year or two before even considering it.
Sign with confidence on Monday, and save the pen for your trophy case. You earned it. In 15 years you'll treasure it more than the fist-place Pinewood Derby trophy you have in there.
Property taxes are pretty high in TX, aren’t they? I’ve seen 3-4% of assessed value, but my recollection is hazy. Do you have a reference you could furnish? TIA!
What about Private Mortgage Insurance? Not one word about this being mentioned......every one of those loans made with less than 20% down had to carry it, those that provided the insurance can bail these suckers out. Not the tax payer.
What fun for you! You will love owning your own home. After closing on our first house my husband and I drove right over to it, unlocked the door, walked into the living room and jumped up and down and cheered. What a feeling.
No longer the case.
The housing market collapsed many decades ago due to values inflating beyond the means of everyday people to purchase them. It has since been propped up with creative financing. Many decades ago, home loans were unheard of. In the 50’s, 10 year mortgages were the rule, but over time stretched out to 15 years. Next came 20 year mortgages and now 30 years. During the most recent boom, we saw more 40 year mortgages and even a few at 50!
Think this is bad? Just wait till they come out with 15 year car loans.
>> We plan on going to SoCal and sit on the sidelines in a rental for a year and then jump back in but with 1/2 the mortgage payment and twice the house.
That sounds like a plan to me... hope it works out for you!
>> Do you have a reference you could furnish?
Well, you can have a look at this giant chunk of flesh they just tore out of my butt with their teeth and claws... would that work for you? :-)
But seriously, I just put the calculator to it... our tax burden (all jurisdictions tax / appraised value) worked out to 2%. (Austin area)
Dude, you need to read FreeRepublic a LOT more... We just had a thread here where you can give up sex for 6 months and get a 50" plasma TV!
Use the home loan not for a TV (you're not gonna get any nookie if you're married, or you DON'T have a 50" TV already - what a loser, everyone KNOWS that a big TV is a chick-magnet) but something more important like a Kegerator or a massaging recliner to enjoy that TV...
I've heard the same from some relatives. I don't feel that going into this. Maybe I will. Of course, at 28, I've lived in my parent's home for most of my life except 4 years of college and 3 years in an apt locally. I guess 3 out of 4 is close enough.
Nonetheless, thank you for the well-wishes. I was brought up as a fiscal conservative. I have no credit cards and only student loans and an auto loan to finish paying. After that, it's lump sums into the mortgage. I plan to spend every dime of my money to pay off the house before 30 years. I plan to marry someday (maybe), and it would be a great home to raise at least one kid. We'll see what happens.
I reject your reality and substitute it with my own, in this particular case. Let the welfare mothers bilk the system. When I own all my stuff, I'll be the one laughing!
When bankers were wise and acted responsibly and in the interest of their stockholders, foreclosures worked more in their favor than the borrowers. But what we have seen is that banks have become greedy and not acted in their stockholders best interest and it may be that we have too many loans in which there was more irresponsiblity on the part of the lender than the borrower. He cannot blame the borrower for what was a terribly unsound and risky business plan, and that was lending money on home values which had far outpaced the borrower's income and ablity to pay.
The insurers have been smashed. That is just one piece of the problem.
Maybe we’ll be going back to the days where mortgage lenders expected 20% down.
Good luck with your new home. I’ve never been a home or property owner. I raised two kids by myself and could have used a home back then since we moved quite a bit. But I could never afford it. Now that I’m 60, retired, and my kids have been gone for years, I have no interest in owning anything. Too much responsibility. My rent is very cheap and I’m comfortable.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.