Posted on 05/31/2010 12:22:29 PM PDT by Lorianne
In areas hardest hit by plunging real-estate values - including the San Joaquin Valley - some people who can afford their mortgage are opting to walk away from their loan and let their bank repossess the house.
"It's very stressful to get to that point," said James Graham, a 48-year-old power-plant worker who walked away from his home in Bakersfield last fall. "You're raised up to do the right thing and pay your mortgage, pay your bills."
"But when you get to that point where it's time to walk, it's time."
It's called "strategic default," and experts say it stems from frustration with home values that have plummeted since buyers bought or refinanced at the peak of the real-estate boom, and banks dragging their heels on loan-modification requests.
(Excerpt) Read more at fresnobee.com ...
Yep, same difference with subprime loans. If Fannie Mae is willing to buy them from banks then banks will make those loans. The common denominator here is that the federal government is tinkering with the free market and screwing it up.
Again, you seem to be avoiding the question: if the property is returned according to the terms of the contract, how are they "not honoring it?"
You are living in a Frank Caprio film from 1940....
“It’s a Wonderful Life”
Nonsense. He's living in a fantasyland that has never existed.
Thanks :)
I purchased and will close soon on a short-sale house in CA. The owners were responsible people that tried for 9 months to get the lender to modified their loan (a first and second), but the lender wasn’t interested and basically didn’t respond. The sellers had to make a move financially, so with no option to modify the loans, they decided on a short-sale and to move on.
I’m a retired banker (small bank environment) and know that it can be nearly impossible to get a big lender - especially if the loans have been sold on the secondary market to modify any loan. Keep in mind - the sellers did not want to walk out - they were forced to when loan rates went up and, at the same time overtime was cut along with hours - covering both husband and wife.
Therefore, if you don’t have personal knowledge of a ‘walk away’ scenario, don’t condemn the entire segment - each one has a story to tell and in more than a few cases they are responsible people that simply could not get through to power (lenders, banks, etc.). Obama’s programs have been of little help.
This article details a specific case which is what I thought we were discussing. For all we know the borrower got a sweet fixed rate 30 year loan well within his means to pay where the specific bank making this loan didn't screw the borrower over.
And as another point of interest - I did not advocate making it “against the law” for him or Morgan Stanley to walk away from their debts nor will you find anywhere that I have. I simply said it was immoral and I don't believe you can legislate morality. I do believe there's a difference between businesses screwing each other and individuals screwing each other. Businesses are in it for a profit and that's known upfront and factored into the risk assessment while each party is trying to make a buck. Business that try to change the terms of a contract with an individual after the fact generally get hammered by a good lawyer as they should. I also DO NOT advocate bailing out lenders or borrowers period. The implied guarantee by the federal government to Freddie Mac and Fannie Mae have a whole lot to do with where we are now. It's called moral hazard - and we breached it.
When I put my name on the line its my name and I value my name. I don't abandon a situation that I vowed to honor just because I didn't foresee major hardship coming and I can conveniently blame somebody else. The truth is I'm in that situation to a degree and I'm going to do my damnedest to survive it honorably.
Absolutely correct.
I was addressing this specific case.
Where the borrower said he could still afford the loan. In this case it is greener pastures elsewhere.
The world is what we make it.
Be it a trailer part or high rises.
Make that “... trailer park or high rise.”
Did you mean to write, "If banks don't loan enough subprime loans ... " etc?
In any case, THANK YOU for stating it so rightly. I wish more people who blame the banks and the lenders for this mess would stop allowing themselves to be manipulated by the MSM and the government's sadly successful ploy to demonize the banks for a situation caused by government regulation.
About three years before the crash, a very good conservative (but that's redundant!) life-long friend of mine whose husband is in the mortgage industry told me a crash was coming for the very reason you stated. She said it was all going to come crashing down and there would be real trouble, and she said it at a time that NO ONE in the media was saying so, that I ever heard; there weren't even any rumblings.
She said to be prepared for a big housing crash; her husband either had to write loans he'd never write othewise, or go out of business because the government would withhold certain certifications for the loan operation without which it couldn't compete with other mortgage companies. It was a Catch 22 situation.
I love that Rush hammers on this often -- stop blaming the banks and start blaming government actions that forced them into making the bad loans in the first place.
Trailerparks aint so bad, when you're the badass.
It's when someone else is the badass....
There’s civil code for what happens if you rob a bank - you get X amount of time.
By having that civil code spelled out it is not an invitation to exercise it. It is a consequence for doing the said deed.
Foreclosure is similar in that it is a documented consequence (among others) if you fail to meet the obligations of a mortgage contract - AKA breach it. Foreclosure is a result of failing to meet your contractual obligations - it is not simply an option that fulfills the contract.
We had one of those. On the other hand, we had other loan people and RE agents who were careful to advise against it, as well. The problem isn't with capitalism via loan people and RE agents. The problem is government meddling that hobbles the market.
Well unfortunately the “badass” is becoming the guy at 1600 Pennsylvania avenue where the constitution and the rule of law no longer seem to apply.
That is exactly what a friend’s daughter did...highly unethical. She had a lovely house on the California coast and owed $700,000 on it. She “rented” it out, and bought another house, which had been a $l million dollar house far superior to her, and she got it for a bit over $500,000. She then defaulted on house number l. Seems to me the bank could have come after her and put a lien on house number 2, but they never did. And I have read that a lot of these bank loans have been “bundled” and sold to others so many times that the deeds are lost, and homeowners can just quit paying and if the bank can’t produce the deed, the homeowners then own the house, no more payments necessary. (Dang...I paid cash for mine...and now it’s worth l/2 of what I paid.)
Um, uh, no.
That would be CRIMINAL code.
Contracts are assumed to be freely entered into by both parties, and, upon signature, presumed to contain terms and conditions acceptable to both.
??
Ya, that seems to be the latest craze...
I wouldn’t care so much if we didn’t get stuck with the tab.
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