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 ...
So typical of the deadbeat buyers who helped cause this mess.
There are many to blame including the politicians, lenders, regulators and ratings agencies. I know liberals that will always pounce on the lenders for fraud and stupid lending, and they are right, the lenders should be blamed for their role. When I say that buyers were also to blame, I get nothing but arguments.
The guy in the story, Graham, could be the poster child for the deadbeats who helped this problem blow up to crisis stage.
He buys a home for $162,000 and refinances the crap out of his home ATM until he owes $320,000. Tell me this deadbeat isn’t a poster boy for the idiot buyers that helped cause this mess. Had he not refinanced over and over, partied, and lived high by sucking equity out of his home at every opportunity, then his $162,000 home would have ended up being worth $171,000 today.
Yet so many people scream to let deadbeats like this jackass have his loan “modified” so he can get off scott free for partying and playing and living high off his home ATM to the tune of over $160,000. Meanwhile, I saved every penny for my playing, paid as I went, and didn’t have near the lifestyle I’m sure this jackass enjoyed off of his home ATM.
We're pulling animals from shelters in this valley weekly and bringing them to the northwest to find homes. Unemployment here is staggering, and the economy is dead.
My neighbor is way under water on a big house he bought right at the peak here in Yuba City. He isn’t walking away from the home, and it is getting tough for him to pay. They house needs paint badly and he has no savings to paint it, but he is still making payments on the huge loan he has on the house. He must be close to $125,000 under water on the house.
So well-stated that it needs to be bumped topside.
The government was insisting that banks find a way to loan to people who couldn't afford regular 30-year mortgages. Subprime loans increased demand for housing. The inflated prices weren't based on assets, just a shell game of re-finance the ARM until the values grow high enough that you can sell because Lord knows, you ain't ever going to make enough money to pay the mortgage note in full.
How do we "win" when people are throwing hundreds of thousands of dollars into a asset worth only a fraction of that? The opportunity cost is enormous.
Closed in down in 08 :^(
Should have went short on WA Mu - they were passing out money like drunk sailors (Nothing wrong with drunk sailors tho’)
Unless I am reading it wrong, the The Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007, extended to 2012, allows homeowners to walk away from their home loans in non-recourse states with 100% complete debt forgiveness.
Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
IRS.gov, The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
Exactly.
This is the story behind the story in all these media sob stories for the last 18 months. They rarely mention 2nd and 3rd loans off of accrued equity.
Now, I’m sure there are some legitimate hard luck stories out there ... but in most of them the Home ATM was the main problem.
Frank Caprio? Who is that? Is that the famous producer/director father of popular actor Leonardo DiCapra?
This is the natural and logical result of bailing out the bankers and fanny freddy all while not doing squat for taxpayers.
I don’t agree w people doing this, but the govt set the example and people are acting accordingly.
Well then, even more reason that the banks should not be surprised at the result(s). The final impediment was the tax consequence, and that was really a consequence only for those in the higher income brackets who were already paying taxes.
Two and three years ago, I can’t remember how many Freepers I responded to who were saying “if you didn’t buy at the peak, you CAN’T be in trouble. I tried hard to teach them that it wasn’t just buyers in 2005/6, but people who bought 10-20 years earlier but sucked all of the equity out of their homes, time and again, with every rise in valuation.
People inherited homes, free and clear from deceased parents, and refinanced them until they were under water. People free and clear after paying off 30-year mortgages were doing the same thing.
I was trying to explain the scope and scale of people underwater due to the widespread practice of many homeowners taking all of the equity from their homes to remodel, pay for kids college, travel, buy nice cars, party, play, furnish homes, put in pools, go to the Superbowl.
It was prolific. I am not at all surprised that 20% or more of homeowners are under water. This went WAY beyond those who bought at peak, due to a huge segment of the home-owning population treating their rapidly appreciating homes as a no-limit, no pain ATM.
Idiots.
Then they come crying “I’m a victim! Lender screwed me and won’t help me out! Boo hoo hoo!”
You and me are paying the bill. All of us who saved and behaved responsibly. All of us. Just once I would like to get on the dole... but I have a duty to God and I’m not a allowed to swill at the trough of greed & easy money at my fellow man’s expense. It is un-Christian enough I am gloating about it. I need to stop doing that, but I get SO FURIOUS at having go pay for deadbeats over and over.
I don’t see my money as money. I see it as time. I see it as “how much time did I have to toil at work this year that was stolen from me to pay for some deadbeats or bank bailout or any of 100 ripoffs.” So I get furious.
Stealing my money is bad. Stealing my time is unforgivable.
True.
The deal was for a loan to be given and for it to be repaid. The contract contains language for what happens after the promise is broken, but the fact remains that a scumbag broke a promise.
Your rationalization for a scumbag is spoken in used-car-salesman-ese and falls flat. Ugh.
Some of us were warning that this was going to happen back in 2004-06 when other so-called conservatives were rooting for the "economic growth" that was basically just a big sack of overheated anal gas.
Now it's time for everyone to value their assets at market, and take their writedowns like grown men. Sucks, but there is no alternative.
I hear you. I feel the same way. Worse, I sometimes feel we are shmucks for playing by the rules.
These stories literally make me ill.
... in a proportionately very tiny percentage of places, pretty much exclusively in very specific regions on the coast in areas with primo climates.
Yet 45 miles as the crow flies north-east of the spectacularly dramatic (and dramatically pricey) San Simeon/Hearst Castle-Cambria area and only about 35 miles north of the heart of the Paso Robles wine country ...
... $65,000 will get you a nearly 16,000 sq-ft 3-bed, 2-bath corner-lot 1948 home that appears to have been pretty well maintained (the original pale-lemon and dark green 1940s bathroom tile with the outset sink is very cool) and which probably has hardwood floors in the living room beneath the wall-to-wall carpet, as one of the bedrooms has nice-looking old hardwood floors. It's a short sale. In Santa Barbara County, if you know where to look, you can get a pretty big, fairly new house mere miles away from spectacular sand dunes and a vast beach for around $200,000 or less, and older homes go for pretty much the full range of the $100,000s. It's in an old agricultural and train tracks area. Even on the coast of California, it's all about ...
Location, location, location.
Your inane conflation of contract law and "morality" is just one more indication of why this site is just a shadow of what it once was.
Ah. That's the answer to my question. Pretty rotten.
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