More California homeowners walk out on mortgages

Fresno Bee ^ | 27 May 2010 | Tim Sheehan

[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.

[Freedom_Is_Not_Free]

I’m with you. A lot of debt needs to be destroyed, but that isn’t happening and the consequences will be dire.

I was with you at the time with Ex-Texan, NV Dave, HYDROSHOCK and others saying the housing bubble was not real, it was temporary based on funny money. I was there screaming that people who missed the bubble shouldn’t buy, and I kept getting an avalanche of responses, “Rent is throwing your money away”, and “best time to buy ever!”

It took forever to bring these people on board, and we never did. They were only capable of learning first hand after it was crystal clear that the bubble had burst.

Then I said housing was going to hit the economy and they said no. I got out of equities and into all cash in December 2006, and even after the market was down 10%, I got the standard “correction is over, best time to buy stock ever”.

For a solid year I said we were in the worst financial crisis since the great depression, and all I got from people, besides you and a slim handful of others named and guys like politickit and a few others, was I was a DU plant talking down the economy, a doomer and gloomer.

I’ve been right there with ya.

I didn’t buy my house until 15 months ago, after the Sacramento area fell 45-50% from peak. I bought even knowing I was going to take at least a 25% hit on my purchase price. I keep hoping it isn’t a 50% hit, but that is not out of the question. All I can say is, I have a 5% loan, I love my neighborhood and my house, and I’m going to be here a good long while.

Yes, houses have to stabilize at real valuations. Thing is, Obama and Bernanke are trying to re-inflate and I’m not convinced they can’t do it. In fact, I’m becoming very convinced they can prevent deflation and push us into a terrible inflation, possibly a hyperinflation.

I guess we’ll see.

[Finny]

How much of it was shell game, and how much of it was the market at work? Inflated prices got that way because people were willing to pay that much for the home as a shelter and/or an investment. The “shell game” would have been smashed early on if that perceived market value wasn’t there. I don’t think there was a shell game.

[Graybeard58]

What incentive is there to stay? Some sense of duty that you signed a contract with the bank? Lemme tell you, I’d get over that real quick. There’s a remedy in there for people who no longer want to continue in the contract. They’re simply making use of it. What’s the big deal?

It's not a "big deal", if one has no ethics, honesty, morality, integrity etc. No big deal at all.

[JRios1968]

Ah. That's the answer to my question. Pretty rotten.

Yeah, but if you ask some here, I'm the one who's rotten...

[Dianna]

How much of it was shell game, and how much of it was the market at work?

Probably 50/50, but without the influx of buyers at the bottom pushing prices up, none of it would have happened.

Many people were only willing to "pay those prices" because they never intended to actually pay them. The whole scam was get in for as little money as possible, pay as little as you can monthly, and wait 18 months for the value to go up significantly and then sell it to the next sucker who comes along. What other end-game could there be when you're barely paying the interest?

[DB]

It sounds like we live not to far from each other.

[DB]

Hey, in the last couple of weeks I've been called a long list of nasty names...

Anonymity turns kitty cats into roaring lions these days...

[DB]

AKA house flippers...

[truth_seeker]

“It seems that the ability to escape bad mortgage decisions has become another entitlement. With the already crushing weight of existing entitlements, new entitlements are even less sustainable.”

The entitlement “relief” goes to the borrower and the lender.

The banks and their highly paid experienced and wise managers, lost little.

The borrowers are penalized for a few years.

And the full economic cost goes to our grandchildren, if they pay off the national debt to our Chinese and Japanese creditors.

The ball has been kicked into the future, at taxpayer expense.

[SkyPilot]

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.

People should be required to put 20% on any mortgage - PERIOD! That is the way it used to be. This would put a quick stop to all this "walk away" garbage. You wouldn't see 22 year old couples on HDTV telling some bimbo real estate agent that their "budget" for their first home is "$875,000 to $925,000" either.

Of course, Barney Frank and Chris Dodd would not hear of this simple solution. They used every excuse in the book to stop "liar loans" and requiring cash deposits on home purchases, including charging that it was "racist."

[riri]

That house is ridiculous looking. Ofcourse, it looks like that so they can fit it on a 7000 square foot LOT and people can feel like mino-Paris Hiltons. Real mini.

[qwertypie]

As a person who professionally bought and sold real estate for 30 years, I don’t need a tutorial on the nuts and bolts of the fine print. However, the fine print exists (and metasticizes) because of people who look at the underlying promise as something to be gamed, not kept.

As I wrote before, ugh, and please don’t contact again.

[DB]

Actually, I don’t think 20% would have been enough under the current situation (now, one can argue we would have never been put in this situation in the first place if people were required to put down a real down payment) because home prices have dropped significantly more than 20% in many places. With a 40% drop in value, the loan is still upside down and one can still walk away to greener pastures.

[Chunga85]

Quoted from a previous post:

“Usually what happens is - the homeowner in default just walks away, shamed, and allows the foreclosure process go uncontested.

What would you do if you if something happened in your own situation?”

Please give this some thought and tell me what you would do.

Not picking fights here...just curious.

You can use the “Foreclosure of the Week” game. If you follow the link the post is interactive with actual links supporting the facts involving the De Lima home.

http://www.foreclosurehamlet.org/profiles/blog/show?id=4164911%3ABlogPost%3A1096&commentId=4164911%3AComment%3A1122

[DB]

I don’t understand the question in light what I already stated.

What is the “something that happened” specifically?

Got very ill, lost my job in such a way that there was no realistic hope of continuing with my obligations?

If that were to happen I’d try to negotiate with who I owed the money to. If that failed I would sell my property to pay back the loan, in my case I owe less than the property is worth. If I owed more than property is worth and had no other means to repay the debt I’d lose my property and be badly shamed in the process. At that point it is out of my control and I have to accept the consequences because there are no other choices.

The case in the article, the subject of this thread, is not that situation.

[DB]

You did see my post #192 to you didn’t you?

[Chunga85]

You would do this even if you found that your “lender” used your mortgage and note to illegally make a profit?

[SkyPilot]

the loan is still upside down and one can still walk away to greener pastures.

I am sorry, but any way you slice it, that "walk away" to greener pastures is irresponsible, unethical, and immoral.

If you don't want to believe me, take it up with God.

Psalm 37:21, Ecclesiastes 5:4, Proverbs 22:7

Moreover, this "walk away" mentality has helped create this mess we now find ourselves in.

There is lots of blame to go around. The Democrats forced and blackmailed lenders to give loans to minorities and other groups that could not afford the loans they were taking out. But, the fault is also with millions of people who joined in on the scam.

I can, and do, sympathize with people who just hit rock bottom financially speaking. The couple who both lost their jobs are in no way culpable the same way as someone who can still afford their mortgage payment to repay their debt, but just decides "What the hell?" and does as you advise.

People that bought more home than they could afford with interest only loans were gamblers, not responsible home owners. On top of that, this is home ownership, and a mortgage is a major commitment. This is not some basketball game you bet on and try and change your bet at halftime because your team is behind.

Since when did a mortgage become a short sale stock option, or a roulette wheel? It is this short sighted mentality that has to change.

I don't understand, nor do I sympathize, with people who see their loan underwater, and decide to chuck the whole thing even if they can still repay the loan and make their payments. These people screw other people (meaning everybody else). You have to realize this. Other people who need loans in the future are screwed by their behavior. Investors are screwed by them.

There was a time when Conservatives didn't underwrite irresponsible behavior. I wonder what happened to it.

[Chunga85]

This is the biggest RICO case on earth.

Have a look for yourself....

http://mattweidnerlaw.com/blog/2010/05/irs-form-938-i-have-no-idea-if-this-is-important-but-it-sure-is-curious/

[DB]

You are preaching the choir...

Go back and read my earlier comments and get back to me.