Posted on 09/21/2011 5:23:49 AM PDT by TigerLikesRooster
The New Face of Foreclosure: Strategic Defaults
By Laura Rowley
Published September 19, 2011
Gene Kessler, 67, may be the new face of mortgage default. The tech industry retiree is in the process of walking away from the home he purchased for $166,000 in 2004 in a small town 75 miles southwest of Minneapolis.
Its value has plummeted to $111,000, wiping out Kessler's $45,000 down payment and leaving him with a mortgage that's more than the home is worth. He stopped paying the loan six months ago, and estimates he'll have to vacate by March 2012.
(Excerpt) Read more at foxbusiness.com ...
P!
He should at least be obliged to pay the mortgage for the number of months he lived in the house after defaulting.
Sounds like good business sense.
http://community.nasdaq.com/News/2011-09/why-i-decided-to-walk-away.aspx?storyid=93609
Not according to him...
He’s a jerk, imo.
Here is what I don’t get: this guy has to live somewhere, right? The loan is surely at a low interest rate, and probably for 30 years. The guy is 67 years old, for cryin’ out loud! Why go to the hassle of moving, probably paying as much or more as rent, and screwing up his credit? He’s gonna throw it all in because “somebody” says the house is worth “X” dollars less than he paid for it?
I don’t understand!!!
everyone doesn’t have a bunch of corrupted friends in high places to buy them a home like pobama did
IMO he should never be allowed to get a loan again.
The business decisions of a 67 yr old are much different than the business decisions of a 47 yr old
This demographic is not stupid, and at this age, self preservation ranks right up there as a form of honor.
They look at the govt policies crashing our economy and obama’s redistribution policies- including forays into the housing market on behalf of selected classes- and feel released from a sense of obligation to keep playing by the rules in a game that no longer exists, if it ever did
Bad news for the marxists and their corporate cronies
Watch for more Mr and Mrs John Galts to take their pension and retirement savings, walk away from 30 yr mortgages and ridiculous property taxes, and rent condos or doublewides in low cost-of-living sunbelt states
The revelation he hasn’t been introduced to is the fact that (1.) he’s going to be required to satisfy the shortfall, (2.) he’s going to toast his credit, and (3.) he will find that he is going to have a hard time finding a rental with bad credit. As you said; he’s gotta’ live somewhere. Usually, this is looks like a good opportunity to someone who wants to move but can’t sell their home.
IMO, but the time you’re 67, getting a big loan should never again be on your horizon of things to worry about
I don’t understand all of that, plus I don’t understand how there was a housing bubble of that magnitude in a small town 75 miles outside of Minneapolis. Maybe I should go read the article now, but that just floored me. Coasts? Florida? OK, that I could understand. But in general, it seemed to me that there was little bubble in flyover country.
Did my home depreciate in value? Yes, it did. Is the neighborhood staying the way it was when we moved in? No, it's changing.
Do I abandon my obligations, cut and run from my neighbors? Heck no. I pay my bills and work with my neighbors to turn things around again.
It's selfish jerks like this guy who leave responsible folks holding the bag.
If you are going to live in your home until you die, what difference does its value make? The value of anything is only relevant if you intend to sell it. Now, if he can’t afford the mortgage payments, that is a little different, but not much. If you can’t make your payments, again it doesn’t matter how much your house is worth, you can’t stay. The only issue will be the size of the deficiency judgment against you.
There must be another reason for his moving out.
purchase $166,000 less down payment $45,000 leaves a mortgage of $121,000 @ 5% interest - probably $600 per month.
He should pretend he has been renting the home for $1200 a month to soften the depreciation.
Makes no sense to lose the whole kit & kaboodle.
I don’t know about satisfying the shortfall. I know a couple who just did a short sale on their home. They bought at the height of the bubble, sank a good amount of money into the house, then both had job losses. To their credit they didn’t sit around and wait for foreclosure while taking advantage of the situation. They told me they felt morally obligated to short sale, if they could.
So they did manage to sell, the bank forgave the shortfall (to the tune of $60,000 I think) and their credit score is now ruined. These folks had done it right by putting a large down on their property, and counting the fix up costs they told me it costs them about $40,000 per year to have lived in that home. But they were happy to get away with no lien and their conscience in tack.
Problem in Florida was properties took about a 50% dip, so your $260,000 house is now worth $130,000 and even if you put 20 percent down, you still took a $70,000 hit before you figure “fix up” money into the mix.
Pretty common scenario here for people to be waaaay underwater...there but for the grace of God...we bought over 20 years ago, but seems prices are heading back down near what we paid for the house back then.
———Sounds like good business sense.-——
How so?
As of now he has lost nothing. The loss is all on paper, not real. He must live somewhere. A default means that at 67 he will be renting for life, no more mortgage loans to a bad risk.
If he is destitute and can’t make the payments the action is justified but if not, to walk away does not seem to be good business sense.
If destitute, he has no choice and no real say in the matter.
By walking away he is locking in his loss of the down payment. There seems to be an underlying assumption that the home’s loss of value is permanent. In five years he should be able to recover.
As mentioned, his mortgage has got to be much less than what rent would be. Plus part of that mortgage payemnt goes toward principal, and he can deduct the interest and taxes.
Here’s the answer (BTW he is not destitute -read the whole article;)
“I was looking for a way to get back to a larger city, and this was the only way I could get out of this house,” says Kessler, who paid $800 to YouWalkAway.com to help guide him through the process known as strategic default. He’s anticipating a move to a warmer climate and a more active art and dating scene in Santa Fe, N.M.
Interesting commentary...we are in the same boat...bought house 15 years ago, put in about 50K since and are at the breakeven to a small gain now with no mtg. So, we could take our money out now and have lived rent free, except for taxes and interest, and in my mind not as far under water when these are considered as I could have been had we “stepped up in home values a few years ago”. Coincidently, the rebuild cost on this place now is exactly what the market value would be so I suspect that was always a good measure.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.