Posted on 01/11/2010 2:43:10 PM PST by blam
Americans Walking Away From Mortgages
Politics / Credit Crisis 2010
Jan 11, 2010 - 07:56 AM
By: Andrew Abraham
It seems now almost acceptable that Americans can walk away from their mortgages. Why not? So many are upside down, owing more money on a house than the house is actually worth.
Many Americans are just walking away and renting virtually the same homes for half or a third of their previous mortgage payment.
What does this mean for the banking industry? How healthy can these banks really be with non performing loans both on the residential side and commercial side? How real is this stock market rally? My proverbial question… what has really been solved? Has everything been delayed for a further down turn? Trend followers and commodity traders that have much experience do not try to predict the future.. but it seems very evident.
There are bearish signs percolating in the stock market such as the CBOE put call ratio looks toppy…there was a huge uptick reading over 1500+ which is usually sign of a top as well as there are less and less bears… except Jim Chanos and calling China a bubble ready to burst ( 1,000 times greater than Dubai). Jim Chanos has not been wrong all the much… He has become a billionaire by calling tops in the housing market, Enron and many others.
The NY times reported on this the other day. They stated the housing collapse has 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. Can you imagine how much money the banks can be losing on this…
[snip]
People who think they can just walk away are in for something of a surprise. When the house is foreclosed and auctioned for less than you owe — they’ll sue you for the difference, and they’ll win. They’ll garnish your paycheck and force you into bankruptcy. They’ll make your life miserable for the better part of a decade.
SnakeDoc
“Why not? So many are upside down, owing more money on a house than the house is actually worth”.
...one reason would be that it destroys your credit. Better to sell with a “short sale” and only destroy your credit for 2 years or so. Better yet, call your mortgage company and tell them you need 6-12 months at a reduced payment. They’ll usually do it if they feel you’re going to default. (BofA won’t)
Contract law went out the door with obama’s GM takeover and fascist treatment of share holders.
Our system of law, thanks to obama the community organizer, rests on nothing
Just declare Housing to be a Right and put a 40% tax on Cadillac mortgages.
This connects to another liberal “solution.” See http://www.youtube.com/watch?v=ivmL-lXNy64 .
I’ve known several people who declared bankruptcy and were able to keep their homes, but not have any debt. One person is a business owner in Manning, SC who got accumulated several hundreds of thousands of dollars in debt to a few businesses and instead of paying them, he went to bankruptcy court. He and his wife live in a very nice 3 story house, and he still owns his business. I’d say he has laughed his way to the proverbial bank.
lol they cant pay anything if they dont have a job...so what good is re financing going to do....and most are odd man out in the new green job market...joke
"Over $47 billion of prime and Alt-A RMBS collateral is due to recast over the next 12 months from an IO payment to a fully amortizing payment. This recast exposes borrowers to an average payment increase of 15% and possibly higher if interest rates increase. Over the next two years, a total of $80 billion of prime and Alt-A loans, and a total of $50 billion Subprime loans are due to recast."
Sure they’ll win- if people who do this for finanacial reasons are a minute percentage of the market
But what if 10% or 20% or more of borrowers choose to walk and mail them the keys
Try enforcing deficit judgements in liberal courts that see every mortgage payer as a victim of TARP-fed big business
the world as we knew it, the world of contract law- is dying
And if the talk about hyper-inflation caused by the government’s out of control money printing comes close to what they are predicting, the current mortgage amounts will (in real dollars) be greatly reduced and the re-entry into home ownership will become out of reach for most who now own these upside down loans.
There was a time not too long ago in our country where a debt was a solemn obligation that no real man (or woman) would ever welsh on. When you walked away from a debt you made yourself a liar and your word was now of no meaning.
Now a debt is an item of inconvenience, and the debtor, whose assets you availed yourself of (whether treasure, services or goods) you took is an evil person who is to be scorned and avoided — by society itself!
Make no bones about it: walking away from a debt makes you a liar AND a thief.
“People who think they can just walk away are in for something of a surprise. When the house is foreclosed and auctioned for less than you owe — they’ll sue you for the difference, and they’ll win. They’ll garnish your paycheck and force you into bankruptcy. They’ll make your life miserable for the better part of a deca”
Depends on the state that you are in. For instance here in Kalifornia with the owner’s FIRST mortgage, relief is limited to foreclosure. Now that second or third mortgage is a different story.
In Chapter 7, you can keep your house and cars so long as you re-affirm the mortgage/ car loan (i.e. continue to pay). You can’t keep the house and just wipe away the mortgage.
However, if a house is already foreclosed and auctioned — there’s no house for you to keep. You’d be bankrupting the judgment debt owed based on the morgage company suing you for the difference in the mortgage amount and the foreclosure auction value.
SnakeDoc
Nowadays, people don’t consider their word to be worth anything.
In the proverbial words of Sgt. John McClane ...
“F***in California ...”
SnakeDoc
If it can't be made right, the financial institution who got stuck holding the bag needs to learn the hard way what holding the bag means, even if they bought the mortgage from another financial institution in a bulk package of loans. The money they make off of the good loans will have to pay for the bad ones. If that doesn't work out. Other work that the financial institution does will have to pay for it. If that doesn't work out, close your doors and let FDIC sort it all out. Also, find something else to do for a living since they obviously suck at making deals and counting money.
>>“Why not? So many are upside down, owing more money on a house than the house is actually worth”.
...one reason would be that it destroys your credit. Better to sell with a “short sale” and only destroy your credit for 2 years or so. Better yet, call your mortgage company and tell them you need 6-12 months at a reduced payment. They’ll usually do it if they feel you’re going to default. (BofA won’t)<<
Nobody has mentioned you are TAXED on the difference between the residual loan value and the amount received on a short sale as this seen as income. And rightfully so, since it is. So if you owe $300K and do a short sale of $250K, the $50K is seen as normal income. There have been discussions in congress about ending this, but it hasn’t happened. You can walk away from a mortgage, but not a tax bill — those IRS guys mean business.
The status of your house’s value relative to its mortgage(s) should be irrelevant — it only becomes an issue when you sell. If you are a renegade like me and buy a house to LIVE in, it doesn’t matter what its value is (fwiiw, it dropped from 5X the purchase price at the height of the bubble to only 3X of the purchase price — only about 10X what I have left to pay since I have never taken any equity out and refinanced just to get a lower rate and shorter term).
Not if you file for Bankruptcy before you walk away and include the house in the filing.At least thats the way it used to go,I know someone who did just that and didn`t owe a single penny afterwards.
That is true. The bankruptcy itself will make your life rough for a decade or so ...
... but, that isn’t what the story is about. People are just packing up and leaving — not filing bankruptcy and leaving.
SnakeDoc
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