Interesting argument for walking on your mortgage

[thehowling]

I won't lie that the thought hasn't crossed my mind (http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html). The truth is, if I were a business, it would actually make good financial sense for me to walk away from my mortgage.

I'm jus' sayin'.

[Packmike]

That is an interesting article - thx for sharing!

[Stuck in Seattle]

I would certainly consider walking away if my home was more than 20% upside down. If a million people did this one thing would certainly happen. It would be the end of low interest low/no-collateral home lending. It should not have been happening to begin with and if he mortgage industry isn't punished and forced to pay a price for bad practices then why change policies?

Unfortunately, if Fannie a and Freddie are involved it won't make any difference to policy since tax payers are covering the losses.

[NevadaConvert]

If the only rap you have on your credit is a house foreclosure, you can qualify for another mortgage at a decent rate in about 3 years. So you're basically making a business decision to walk away from a certain amount of debt to have bad credit and have to rent for a few years. For some people, it would be a no-brainer. But in most cases you're going to need a real 20% down payment (that you can't finance) to buy your next house.

[Packalum04]

I won't say this hasn't crossed my mind. My wife and I currently own a home in Damonte Ranch, but I bought it before we were dating. So the loan is only in my name. We technically could walk away from this house and purchase another home under her name only. We are not that upside down in our home if at all, but it is an option that has crossed my mind. We love our home and the backyard we put in so we are happy where we are and we don't think it is right thing to do.

Though it is very frustrating when you are a homeowner that pays their mortgage on time and the mortgage company will not work with you to try and refinance to save you a little money.

[wolf_chatter]

I say everyone walks away from their mortgage until the banks start helping people in need. I know sooooo many good people that are killing themselves trying to make the payment on a house that is worth half or even less of what they owe and the banks, even though they get the losses back, aren;t helping at all. Makes me sick.

[renowiggum]

Best point in the article:

People who walk from a mortgage aren't avoiding the consequences of their decision, they are accepting them - surrender of the property and a credit ding.

[BustNChops]

This article is a re-cap of an article I have sent a number of people dealing with this. I think the Abstract does a great job of laying out the issue.

LINK (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467)

As someone who has dealt with this because I lost 50% of my income, I just did a short sale on my house and moved out 12/29/09. We didn’t strategically default, but we didn’t try and avoid the inevitable. This is a house that I acted as general contractor and built. We were emotionally invested in it and it was tough to leave, but in the end a business decision. I just moved into a rental and am in the process of buying a short sale property via a family member who is financing it as an investment property. It is an assumable loan (5.0%) and we will take it over in 1 - 3-years once our credit ding is fixed. It is a business opportunity for the family member as we will give them a kick back for helping us out. And in the end, we get into a great house for $200,000 less than or last one.

That is the opportunity... and it is real. It absolutely sucked that we were in that position, but no sense hiding from it.

Whether it is admitted or not, most of your family, friends and neighbors are underwater to varying degrees if you live anywhere in Nevada. Doing an immense amount of research on all this, I think things will get worse in the housing market before they get better. If you aren't in this situation yet, that is great and I applaud you. But if you are, there is a real decision to be made and I think the article lays out some valid points to consider. Nevada is a recourse state, so that is an important variable. It isn’t a simple decision. It is a lengthy process and there are games to be played.

[wolf_chatter]

about $50,000 less than I owe on it. Which for nevada isn't exaclty gruesome and I am not in any hurry to sell but I am seriously thinking about going to the bank and seeing if they will refinance at a lower rate even if the house is worth less than 100% of loan value.

I am getting to the point now where the way the banks are treating people I love has made me almost decide to screw them in anyway I can. You would not believe the shit they have pulled with my sister and brother in law.

[Stuck in Seattle]

This article is a re-cap of an article I have sent a number of people dealing with this. I think the Abstract does a great job of laying out the issue.

LINK (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467)

As someone who has dealt with this because I lost 50% of my income, I just did a short sale on my house and moved out 12/29/09. We didn’t strategically default, but we didn’t try and avoid the inevitable. This is a house that I acted as general contractor and built. We were emotionally invested in it and it was tough to leave, but in the end a business decision. I just moved into a rental and am in the process of buying a short sale property via a family member who is financing it as an investment property. It is an assumable loan (5.0%) and we will take it over in 1 - 3-years once our credit ding is fixed. It is a business opportunity for the family member as we will give them a kick back for helping us out. And in the end, we get into a great house for $200,000 less than or last one.

That is the opportunity... and it is real. It absolutely sucked that we were in that position, but no sense hiding from it.

Whether it is admitted or not, most of your family, friends and neighbors are underwater to varying degrees if you live anywhere in Nevada. Doing an immense amount of research on all this, I think things will get worse in the housing market before they get better. If you aren't in this situation yet, that is great and I applaud you. But if you are, there is a real decision to be made and I think the article lays out some valid points to consider. Nevada is a recourse state, so that is an important variable. It isn’t a simple decision. It is a lengthy process and there are games to be played.
And the more and sooner people do this, the sooner home prices will adjust to a natural level of equilibrium. I've been looking closely at home prices here. My family and friends are pushing me hard to move back. I could sell my Seattle home and make close to $150k. I could pay cash for a house here (something small in the 7th Street or Kings Row area) and afford to work for less than I need to earn in WA. Unfortunately the job market is so bad down here I have no idea what I'd do to even earn $35k a year.... that's less than I was making 15 years ago.

[BustNChops]

And the more and sooner people do this, the sooner home prices will adjust to a natural level of equilibrium. I've been looking closely at home prices here. My family and friends are pushing me hard to move back. I could sell my Seattle home and make close to $150k. I could pay cash for a house here (something small in the 7th Street or Kings Row area) and afford to work for less than I need to earn in WA. Unfortunately the job market is so bad down here I have no idea what I'd do to even earn $35k a year.... that's less than I was making 15 years ago.

No Pack bar then?!?! Too bad that didn't work out.

[wolf_chatter]

And the more and sooner people do this, the sooner home prices will adjust to a natural level of equilibrium. I've been looking closely at home prices here. My family and friends are pushing me hard to move back. I could sell my Seattle home and make close to $150k. I could pay cash for a house here (something small in the 7th Street or Kings Row area) and afford to work for less than I need to earn in WA. Unfortunately the job market is so bad down here I have no idea what I'd do to even earn $35k a year.... that's less than I was making 15 years ago.

I bet even you culd earn $35k a year doing that. I am sure there are plenty of turck drivers that are into short, chubby, white guys with a drinking problem!:D

[renowiggum]

about $50,000 less than I owe on it. Which for nevada isn't exaclty gruesome and I am not in any hurry to sell but I am seriously thinking about going to the bank and seeing if they will refinance at a lower rate even if the house is worth less than 100% of loan value.

I am getting to the point now where the way the banks are treating people I love has made me almost decide to screw them in anyway I can. You would not believe the shit they have pulled with my sister and brother in law.

I think Zillow is weak in its estimates, but I wouldn't be surprised if you're around the break-even point.

Fortunately, whether you are upside-down or not also depends on whether you need to sell. Otherwise, what matters most is how much equity you have when you need to sell.

[wolf_chatter]

I think Zillow is weak in its estimates, but I wouldn't be surprised if you're around the break-even point.

Fortunately, whether you are upside-down or not also depends on whether you need to sell. Otherwise, what matters most is how much equity you have when you need to sell.

Banks have run roughshod over good people makes me want to screw them in some way.

[Stuck in Seattle]

No Pack bar then?!?! Too bad that didn't work out.
I'm going to stop in there tomorrow, but while he seemed motivated when I left for Seattle in November, he didn't respond to my e-mail when I got home. It would be a tough gig in this economy but I think I could make it work. But I'm not going to overpay. I don't know how he's making it, actually.

[wolf_chatter]

I'm going to stop in there tomorrow, but while he seemed motivated when I left for Seattle in November, he didn't respond to my e-mail when I got home. It would be a tough gig in this economy but I think I could make it work. But I'm not going to overpay. I don't know how he's making it, actually.

Where is the bar at?

[Packalum04]

I think Zillow is weak in its estimates, but I wouldn't be surprised if you're around the break-even point.

Fortunately, whether you are upside-down or not also depends on whether you need to sell. Otherwise, what matters most is how much equity you have when you need to sell.

Many times Zillow doesn't take into account upgrades in the home and completed backyards, especially on newer homes.

[CAHUSKY]

The only problem is that most loans in Nevada are "recourse" loans and the bank has every right to come after you for the outstanding balance you walk away from. Will they? Who knows, but is it worth the risk? The reality is that if they do you will be forced to file bankruptcy which will crush your credit for far longer than a defaulted mortgage would in a non-recourse situation. The bottom line is in Nevada you are rolling the dice if you walk away from your home and subject to a far greater downside than indicated in that article.

[NevadaConvert]

I bought a house off Wedge Pkwy in early 2007 for 432k and it's only worth around 310k now. Now that I might have to move to another city to work, I'd like to rent it out and then come back in a couple of years. But I don't even know if the rent would come close to covering the mortgage. So do I just walk and rent somewhere else? I'm upsidedown about 70k right now, and that's going to be a tough call to make. Hopefully I'll be able to stay and not have to move.

[NevadaConvert]

The only problem is that most loans in Nevada are "recourse" loans and the bank has every right to come after you for the outstanding balance you walk away from. Will they? Who knows, but is it worth the risk? The reality is that if they do you will be forced to file bankruptcy which will crush your credit for far longer than a defaulted mortgage would in a non-recourse situation. The bottom line is in Nevada you are rolling the dice if you walk away from your home and subject to a far greater downside than indicated in that article.

So far they haven't, but that could always change. They might decide to take an RIAA approach when they started suing music downloaders to set an example to scare others from doing it.

[Wolf Pack316]

The banks are helping people....at least I know they did for me and one of my friends. If you have citimortgage...listen up. Now they arent easy to get thru to and it will take some time (took me 10 months) but the outcome has been great and has allowed me to keep my house. So this is how it worked....My mortgage payment was 2000 a month on a 340,000 loan. When I finally got someone to listen to me, they set me up on a trial program (3 month) of a lower payment. I gave them all the info of what I was making compared to what my bills were. They lowered my payment to 1700 during my trial. Well my 3 months trial turned out to be a 6 months trial cause they are so slow and one part of the business doesnt talk to the other. Anyways, In December they finally call me and ask me a few questions and tell me that my mortgage modification has been approved and that I should be recieving my new loan paperwork in the mail and to sign it and send it back. So of course I was assuming that my new loan would be for 1700 a month...not a huge help...but something is better than nothing. So I get my paperwork and what they actually did for me is amazing. Here is how it all worked out. My loan is for 340,000...they basically split it in half and pushed 170,000 to the side....the other 170,000 Im paying principal and interest on at 2% for 40 years. My payment now is 900.00 a month. Now at the end of 40 years I will have to pay the other 170,000...but I will NEVER have to pay any interest on it. So what it boils down to...the bank has helped me out tremdously but at the same time they will get every dollar that they have loaned me...they just wont get as much interest that was intially agreed on. If somehow you can call I get the same thing started for you...go for it, I almost walked away from a payment I couldnt afford anymore and now I pay 900 for a 2500 sq foot house. I would have a hard time renting a small house for that. If I can give anyone some more info on what I did, please just ask. Would be more than happy to help anyway I can,

[NevadaConvert]

The banks are helping people....at least I know they did for me and one of my friends. If you have citimortgage...listen up. Now they arent easy to get thru to and it will take some time (took me 10 months) but the outcome has been great and has allowed me to keep my house. So this is how it worked....My mortgage payment was 2000 a month on a 340,000 loan. When I finally got someone to listen to me, they set me up on a trial program (3 month) of a lower payment. I gave them all the info of what I was making compared to what my bills were. They lowered my payment to 1700 during my trial. Well my 3 months trial turned out to be a 6 months trial cause they are so slow and one part of the business doesnt talk to the other. Anyways, In December they finally call me and ask me a few questions and tell me that my mortgage modification has been approved and that I should be recieving my new loan paperwork in the mail and to sign it and send it back. So of course I was assuming that my new loan would be for 1700 a month...not a huge help...but something is better than nothing. So I get my paperwork and what they actually did for me is amazing. Here is how it all worked out. My loan is for 340,000...they basically split it in half and pushed 170,000 to the side....the other 170,000 Im paying principal and interest on at 2% for 40 years. My payment now is 900.00 a month. Now at the end of 40 years I will have to pay the other 170,000...but I will NEVER have to pay any interest on it. So what it boils down to...the bank has helped me out tremdously but at the same time they will get every dollar that they have loaned me...they just wont get as much interest that was intially agreed on. If somehow you can call I get the same thing started for you...go for it, I almost walked away from a payment I couldnt afford anymore and now I pay 900 for a 2500 sq foot house. I would have a hard time renting a small house for that. If I can give anyone some more info on what I did, please just ask. Would be more than happy to help anyway I can,


Wow, that's awesome. My lender is now Chase (was Wamu).

[BustNChops]

The banks are helping people....at least I know they did for me and one of my friends. If you have citimortgage...listen up. Now they arent easy to get thru to and it will take some time (took me 10 months) but the outcome has been great and has allowed me to keep my house. So this is how it worked....My mortgage payment was 2000 a month on a 340,000 loan. When I finally got someone to listen to me, they set me up on a trial program (3 month) of a lower payment. I gave them all the info of what I was making compared to what my bills were. They lowered my payment to 1700 during my trial. Well my 3 months trial turned out to be a 6 months trial cause they are so slow and one part of the business doesnt talk to the other. Anyways, In December they finally call me and ask me a few questions and tell me that my mortgage modification has been approved and that I should be recieving my new loan paperwork in the mail and to sign it and send it back. So of course I was assuming that my new loan would be for 1700 a month...not a huge help...but something is better than nothing. So I get my paperwork and what they actually did for me is amazing. Here is how it all worked out. My loan is for 340,000...they basically split it in half and pushed 170,000 to the side....the other 170,000 Im paying principal and interest on at 2% for 40 years. My payment now is 900.00 a month. Now at the end of 40 years I will have to pay the other 170,000...but I will NEVER have to pay any interest on it. So what it boils down to...the bank has helped me out tremdously but at the same time they will get every dollar that they have loaned me...they just wont get as much interest that was intially agreed on. If somehow you can call I get the same thing started for you...go for it, I almost walked away from a payment I couldnt afford anymore and now I pay 900 for a 2500 sq foot house. I would have a hard time renting a small house for that. If I can give anyone some more info on what I did, please just ask. Would be more than happy to help anyway I can,

Nice work. Must have been a load off your shoulders to get that call in Dec. Congrats.

I hope you had a real estate attorney look that paper work over. Citi is supposed to be one of the better companies out there making modifications at this point. But, in speaking with several banking professionals they can't believe what several banks are trying to pull off - one of the worst is BofA. "It is borderline criminal" - their words, not mine. The trouble for most others is that the interest rate change is temporary - say 1 year and then it increases in increments back to the original after 3 or 5-years. Doing this just delays the inevitable for most. The trick for you and others that are able to secure the option you were able to get done will be to a) stay in your house for 20-yrs or b) pay down that principal in a significant way.

[Wolf Pack316]

The interest rate does change...I just didnt want to bore everyone with all the details. The loan stays at 2% for 8 yrs and then moves up a percent for 2 yrs and then up 1 more percent for the max of 4%. But 4% on probably about 140,000 compared to 5 1/2% on 340 makes a huge difference. So even though the loan percentage does go up like you stated....it never goes up as high as it was and I will only have to pay interest on 170,000 instead of 340,000....thats the biggest change IMO.
I didnt have any lawyers look at it, unfortuantley was the last thing that I could afford, but I have read over it many many times and it looks pretty solid as long as I make my payments.

[NevadaConvert]

Well, if I do end up walking and they threaten to take my car, I'll send them a photo of it. It does have a nice blue paint job.

http://www.asshatnation.com/car/src/1140663928592.jpg

[BustNChops]

Well, if I do end up walking and they threaten to take my car, I'll send them a photo of it. It does have a nice blue paint job.

http://www.asshatnation.com/car/src/1140663928592.jpg

Man you liberals kill me! You're not reducing your carbon footprint with that... :eek:

[NevadaConvert]

Man you liberals kill me! You're not reducing your carbon footprint with that... :eek:

Hey, don't make fun of my car....and I ain't no libby. :D

[Packalum04]

Well, if I do end up walking and they threaten to take my car, I'll send them a photo of it. It does have a nice blue paint job.

http://www.asshatnation.com/car/src/1140663928592.jpg

I hear cow farts are worse for the environment then car exhaust. :D

[Packmike]

Unfortunately the job market is so bad down here I have no idea what I'd do to even earn $35k a year....

Start a blog!

[Nevadan]

I'm curious how many here who are considering walking on their mortgage also think that the kids who verbal to our program shouldn't back out of their commitment and go to another school?

[NevadaConvert]

I'm curious how many here who are considering walking on their mortgage also think that the kids who verbal to our program shouldn't back out of their commitment and go to another school?

That's totally apples and oranges. You're making the assumption that the typical bank lender is on the same moral footing as our FB program.....which is hardly the case. It depends on how much the bank is willing to work with you just like the coaches will work with some recruits that will allow them to commit and stay once they're in the program. The world ain't black and white....there's a lot of variables in every situation.