Posted on 02/02/2010 9:43:50 PM PST by Steelfish
Not a problem. You “made” the income but also “lost” it in the same year. It’s a wash.
money exchanging hands
^
That would be the bank payment to the previous owner, if I understand you question right
A good friend of mine just lost her house. It broke her heart, but there is no work here in FL in construction. People I know are desperate.
The thing that amazes me is that people are surprised at what is going on. I guess it comes with age, the realization that the economy goes up and down.
I’ve lived through three recessions, and when I hear people say, “but I didn’t expect the economy to go bad” - it makes me shake my head a little. I remember the early 80’s, almost everyone I knew was upside down in their mortgage.
We have a saying in my house - “Everything in life is timing” - sometimes you have good timing, and sometimes bad. It’s just the way it is. And it’s rare that you are 100% on time. There’s always that, oh, if I had only sold it two weeks later or such - but it’s life.
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Oh, but she WILL pay. You may not have to pay your mortgage lending company, but you DO have to pay the IRS. Working out a payment plan with those guys, and bingo, she is paying her same mortgage payment to the the IRS. Whatta country!!!
It is called ‘Imputed income”. It is an asset on paper only, but the IRS considers it actual income to you.
Benjamin Koellmann should buy one of the units next door in foreclosure before April , collect $6500 of “Obama money” on the new home buyer program and walk on the current unit. In doing so he would meet all his legal obligations and save himself from financial ruin.. Some here would argue that he has a “moral obligation” of some sort to continue forever on his current path ,, these people all seem to think that only one side of the contract has obligations.
That is what I get out of most of the threads on this subject too... Many Freepers that think everybody that is facing foreclosure all deserve to be, because they were stupid and greedy....
So Here is one case for you all to ponder, I would love to know where I went wrong, I believe I made prudent choices and did everything possible to avert this by trying to refinance, months before I HAD to miss payments.
This will be a little long, because you need to know all the facts...
We bought our house 14 years ago, for $70K. We had gotten into credit card trouble when we were first married and finally paid everything off, but with lousy credit numbers, the house was simply financed by the previous owner. We paid on it for 10 years and I did some remodeling along the way, and then started having roof leaks... We did not have the money to put a new roof on, so since interest rates were down, and we were paying 10%, we refinanced and pulled 20K out... We did the roof, bought a new cooler and finished up the new bathrooms that I had ran out of money to finish. We went through Ameriquest and everything was no fees (just rolled into the mortgage) up front, this was the only way we could even think about doing this and had no other option, to keep a roof over our 3 kids heads. Besides rolling in all the fees, our interest rate was 8.95% when people with good credit numbers were getting 5% loans. So fine, I was paying extra for being a high risk loan. I did not have bad credit, I just had NO credit... I drive a 77 Chevy pickup and everthing was paid for by cash and the only credit type payment I had was for the house and it was payed to the previous owner, who was not reporting to any credit agency.
I was working as a structural drafter, had been, since 1983, and for the same engineer since 1992. We decided the best thing to do, was to not add any time to our loan and still pay the house off in 20 more years, so we got a 20 year fixed loan at $1150 a month. I think the total after all the fees getting rolled in was around $95K. I knew I was getting screwed, but did not have alot of options left. This was after them trying to give us an ARM for the first 3 or 4 times they wrote it up and I finally told them they were just wasting both our time.
They also told me that my house appraised at $246K and that I could take out $100K on top of the 20K we wanted, and if we went back to 30 years, the payment would almost be the same (with an ARM), I told them no thanks. Everybody I had talked to, told me that if we made our payments on time for 3 years, that we would easily qualify to refinance and get a better interest rate. Ameriquest held the loan for a couple years and then sold it to Citibank.
Well three years later, interest rates were falling and we were just waiting for the right time to pounce and refinance again, It was a couple weeks before Christmas about 14 months ago now, and I got called into my bosses office and he said that he was really sorry but everybody was getting cut to 20 hours a week because of the lack of work. I took off early that day and went straight to my bank, WAMU to talk to them about refinancing. I told them my situation and that I was not going to be able to afford my current payment on 20 hours a week, and I was also not going to be able to get a new drafting job that payed me the $29 an hour I was making... Sure I could go get a $10-12 an hour job and work 40 hours a week for less money, but why??
We filled out all the paperwork, I had a 720 credit score by then, and got locked in that day for a 30 year fixed loan at 4 5/8% This was going to lower my payment from $1150 to right about $500 a month, A payment I could make working at Burger King if I had too. By this point, Chase had already started taking over WAMU.. their fees were double what WAMU was charging me. About a week later I got a letter from Chase saying they had bought my loan from Citibank, then within two days I got a rejection notice, saying they could not verify my identity... This really pissed me off, since I had a bank account for the past 3 years with the bank they just aquired. Well I went into WAMU and talked to my loan officer, and he said they had found some bogus excuse to deny every loan he had submitted over the past couple weeks, he thought it was because the lower fees WAMU had charged on the loan applications... but had no proof of it and he went and talked to his boss who called somebody at Chase and they said resubmit it. So we did, I got the big bundle of paperwork from Chase about a month later, on a Saturday, with a higher loan amount than I wanted and written up at 5% now... I tried to call my loan officer and could not get ahold of him. Monday I got another letter from Chase saying my application had been declined, with no reason given. I called to find out why and they said it was a bad credit risk, my house was not worth as much as I owed on it.
At that point I had $4K in savings and we were squeezing by on 20 hours a week, but then I started getting only 5 or 10 hours a week, and by June, savings was gone and it was either go buy food and pay utilities or make the house payment... I opted to feed my family and keep the lights on. It only took a couple months after I could not make my payment before I finally got to have a conversation with somebody at the bank. By this point I had already filled out mortgage modification paperwork 3 times, (with my loan officer from WAMU, going into business for himself doing loan modifications and submitting mine for me for free because he felt bad about the way I had been treated) but when the calls started coming from the bank they had no record of it. I did this 3 more times over the phone with chase, each time with the current person saying they had no record of me attempting any modification of terms. After about 4 missed payments I get a notice of intent to foreclose with a flyer in it that was an invitation to an “event” at a local branch... I went in and talked to a guy face to face... he told me the same thing, there is nothing indicated on your file about any modification... So we went through all the numbers once again. By now though, I had been worried about losing the house and not having a dime to move on, so I had started working as a landscaper, handyman, maintaining foreclosed homes... and with 10 hours a week at my regular job, had almost replaced my income for a couple months, but still owed about $5k in back payments, there was no way in hell I was putting another dime into this place until I knew I was going to be able to keep it. So now as it stands, I am stuck in a 8.95% loan with payments at $1150 for 16 more years...
The thing is, I signed a note for 89K... that is what I owe and that is what I am perfectly willing to pay, all I am asking for is a current market rate interest rate and 30 years and we would be done. No government programs or anything... but the problem as I see it, The bank has no incentive to work with me, because if they can get my principal written down to the $45K that they say my house is worth, then the government will cut them a check for the $44K they wrote it down by, so they leave me twisting in the wind in the mean time. I was supposed to have an answer in 60 days about 120 days ago now.
If given the chance, I would still sign a revised note, today for $89K at 5%, even knowing my house would only bring less than $50K if I sold it now, which is really sad, because after many hundreds of hours of work and thousands of $$$ spent, it is worth less than it was 14 years ago...
Maybe I need to send this letter around to some newspapers and make it an Open Letter to JP Morgan Chase and it’s stock holders... this just does not make good financial sense to me to foreclose on a house and take that big of a loss, if they don’t need too. Especially doing the work I do now, and seeing houses getting trashed continually and gutted by tweekers for a few bucks worth of copper that costs 10’s of thousands to repair!
Kenyanism, too!
I know a German woman who is about to walk away from her mortgage and return to Germany to care for her elderly parents. Simply, she's going to walk away and let the bank have it back. Whatever she's supposed to be taxed or whatever she owes won't matter once she returns to Germany. What a mess.
People in the third world live in huts in some of the warmest places in the world, for example the Phillipines. They seem to have as many kids as they want. Americans, have debt, mortgages high stress jobs etc. The weather in North America SUCKS to boot, except for parts of CA. I ask who is the luckier group?
No.
In freepers minds the real estate appraisers and bankers bear the loss for attempting to saddle consumers with a debt that they had every means of knowing was vastly higher than the collateral in question was worth.
If you go back, you will find I have been predicting this state of affairs since I have been on this site. Since the housingbubble keyword was instituted, I often predicted it with pictures.
Anyone who ever studied Austrian school economics knew this was coming. Bankers, (As a group, not every individual banker) knew this would happen eventually.
This is not some catastrophe that just randomly happened.
I've lived in the Philippines.
Since your friend's property was a rental, I don't know what the rules are. But for folks who lose their home through foreclosure, currently the government “forgives” the taxes due on the forgiven debt.
As well, if handled through bankruptcy, this sort of thing can be avoided anyway.
But with regard to the current article of this thread - folks walking away who might be able to pay their mortgages - bankruptcy offers less than for folks who are truly up against the wall financially.
sitetest
If she actually kept the property, then the income would be there on paper.
Well, that’s good that you did, but I didn’t, and neither did a lot of others. It seemed obvious that the market was running hotter than it probably should’ve been, but I was personally expecting a cooling off period, not a full-blown meltdown.
Hindsight is 20/20, and I’m sure there are more than a few here who didn’t see it coming who want to act high-and-mighty over those of us who seized the opportunity to buy a house. This may come as a shock to some, but houses don’t cost what they did in the 1950s. Save up for 20% down on a house? Are you kidding me? Have you seen what that would cost?
Now, the easy loans fiasco still wasn’t an excuse to buy more house than you could afford, but when you couple high housing prices and the obscene job market right now, some people have to make some very hard choices—”survival” or “mortgage.” There is a strong contingent here on FR who thinks that you’re worse than Lucifer himself if you choose to say “screw the house, the bank can have it—I gotta feed my family and myself somehow.”
Sorry, I don’t see it that way.
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