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 ...
You think this guy’s won’t?
These are a result of artificially inflated home prices.
Banks puffed up rates to sell the notes.
The contract is the contract. The land and house was the guarantee. The banks are now saying they don’t want their guarantee? makes no sense.
unless, the valuations on these house are even worse than they are letting on. so in that case the house prices should crash HARD to 10%-20% of what was the peak.
You hypocrites can have a field day with this one...from the left-wing Wall Street Journal...
What’s good for the Goose is good for the Gander.
Divide and Conquer!
By Emily Peck
So we’ve discussed the ethics of individual borrowers walking away from their mortgages. (Some say we’ve over-discussed it.) If it’s immoral, as some would say, for a borrower to walk away their mortgage, is it any different for a bank?
Morgan Stanley is doing just that. News reports on Thursday said the bank plans to give back five San Francisco office buildings to its lender–just two years after buying them at the top of the market.
“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”
Sound familiar?
The husband and wife would have to go to the hearing not just the wife. Something is missing in that story.
They can't really say much. But the folks here who want to stand from on high and judge others will do just that.
I’ve said this before, I’ll say it again:
When banks and bankers are in this situation, they default. Businesses and banks look at these situations, when *they* are in them, with no morality or reputation issues taken into consideration. They’ll default on a loan and hand back the property when it is in their best interest.
So why should the typical homeowner do any differently? The bankers are used to being able to convince people that paying back their mortgage is a ‘moral’ issue, when it isn’t. There’s no morality in business tort law. There was a contract signed, and as long as the borrowers abide and comply with the terms of the contract, they’re within the law.
I give you this example:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLYZhnfoXOSk&pos=5
No, idiot, burning the house down on your way out is BREACH of contract.
they stole nothing.
The bank has the property as a guarantee. The bank recieves the house and the contract is fulfilled.
I’m a hypocrites because of what exactly?
Yep, it will take a hit.
And if you’re in a situation where you default on your credit cards or student loans, you suffer a worse hit to your credit than handing in the keys on a house while you’re current on payments, ie, ‘ruthless default’ on a house.
The banks *asked* for this outcome when they elevated other forms of debt to be more punitive in default (or impossible to default on) in 2005. They must have thought this was the preferable outcome, because they practically wrote the “bankruptcy reform” bill.
Banks did their part by selling these people money. If they make risky gambles and loose, they still owe the money they borrowed. If the investment grew in value, these people would not feel obligated to pay the bank more.
How about the people who are keeping the house and striping off the second mortgage via a ch 13 bankruptcy?
They keep the house, keep the first mortgage, but jetteson the second mortgage. (just as the constitution allows)
Calling people names because YOU don’t know the law is pretty ironic. Repossession is a legal remedy for lender against the borrower’s failure to honor a mortgage contract. Failure to honor the contract is called a breach of contract.
When a contract is no longer a contract and you can just walk away from it, the economy suffers more than it already is suffering.
When people do this and add more homes to the list of homes that are for sale in a buyers market with no buyers, they only add to the problem of sinking house prices. The house price slump further reinforces itself due to contracts broken by those who choose to get out at someone else's expense.
This is not a victimless exercise...
I’m just old fashioned I guess...
My word means something.
If I give my word to do something I’ll do my best to honor it, even when conditions change and it is more painful than expected to follow through.
I refuse to read the article to you but I’m pretty sure you just posted this out of one side of your mouth....
“Talk about “thick headed”.
Did you even read the article?
They guy CAN afford the house payments. There’s no threat of “debtor’s prison” and there is somewhere for this guy to go - to his home HE purchased.
Are that clueless?
The contract he signed does not say “or return the house”...
The house is collateral if he fails to live up to his obligations as in BREACH OF CONTRACT along with other legal remedies.”
Hogwash.
Being able to walk away from the contract is in the contract. If the banks weren’t happy with that, they shouldn’t have signed the contract or they should have required more collateral than the house and land.
The government shouldn’t have inflated a housing bubble. They shouldn’t have sold us a phony bill of goods for a decade. But they did. Now, we’re all going to be paying for it whether this guy keeps paying his inflated mortgage or not.
Correct. The default on the note was the breach of the contract, and the repossession of the house, along with loss of any equity (or down payment) on the house/note are specified as the remedy of that breach.
In a non-recourse state, the prevailing legal environment is such that the lender can only recover the house (and any equity therein) as restitution for the breach of the contract. That would be California.
In recourse or judgment states, the lender can recover more (up to and including attachment of earnings) for the breach of the contract. This would be a fair number of states, especially in the mid-west and states with low numbers of minorities agitating for “affordable housing.”
The banks making these mortgage loans in CA KNEW that “non-recourse” was the legal environment in California. It was well known, and for longer than the last 10 years. We can see from mortgage rate statistics that the banks priced in this risk at about 80 basis points on the loan rate.
Now, we can argue that the banks completely and stupidly mis-priced the risk here - and I’ll take the side that they completely mis-priced the risk. But the risk was well known and fully in evidence when they wrote the contract. The banks chose in this non-recourse environment to write mortgages with little to no money down, to people whom they didn’t vet very carefully (if at all), and now they’re getting the hard results of ignoring and mis-pricing risk.
This is the article:
http://www.fresnobee.com/2010/05/27/1948302/more-california-homeowners-walk.html
You know, the title of the thread thingy...
Not what you posted.
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