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View Full Version : Headline here: Houses are left behind to pay car, credit bills


LanaJae
03-15-2008, 08:37 PM
http://www.startribune.com/business/16712376.html

UNREAL:

Sandra and Thomas Floyd figured they'd live in the north Minneapolis home they've owned for 23 years until the day they died. But now they're joining the ranks of homeowners across the country who are keeping their credit cards and the keys to their car, but letting the house go.

"Who wants to pay the mortgage company and still have nothing to show for it?" said Thomas Floyd, whose loan now far outweighs the value of his house.

These websites names really got to me:

An industry is sprouting to help borrowers do just that. For a few hundred dollars, websites such as YouWalkAway.com and WalkAwayPlan.com promise to help you get rid of the house.

lonegirl
03-15-2008, 08:51 PM
People have been walking out on their spouses and children for years. I guess we shouldn't be too shocked that they would walk out on their mortgage.

We were raised that you take care of your responsibilities, even if it means carrying three jobs to get it done. I am always amazed at people who do not take care of their bills, but have the latest cell phone, satellite dishes and grand television sets.

I'm off my box now. Got to go pay bills. :lmao:

dvcgirl
03-15-2008, 08:58 PM
I'm not surprised....I've been reading these kinds of stories for months now. People will walk away from the house, but they can't part with the credit cards because many need them for living expenses.

I read an article today where homeowners who owe more on the mortgage than the house is worth are starting to burn their homes in hopes of a quick insurance settlement.

http://news.medill.northwestern.edu/washington/news.aspx?id=79865

LanaJae
03-15-2008, 09:01 PM
I'm off my box now. Got to go pay bills. :lmao:

I just paid mine, must be why this is bugging me more lol

I'm not surprised....I've been reading these kinds of stories for months now. People will walk away from the house, but they can't part with the credit cards because many need them for living expenses.

I read an article today where homeowners who owe more on the mortgage than the house is worth are starting to burn their homes in hopes of a quick insurance settlement.

http://news.medill.northwestern.edu/washington/news.aspx?id=79865

I wish you could see how stunned I am, this is unreal.

ceecee
03-15-2008, 09:02 PM
Well, they refinanced too many times. After 23 there is no reason you shouldn't have more equity in your house than the value is. They over extended, spent too much money on other things by refinancing more than likely. Maybe they had an ARM, no money down, who knows. A mortgage is usually paid in full in 30 years so had they not refianced it would be almost paid off.

Mickey527
03-15-2008, 09:10 PM
<<Well, they refinanced too many times. After 23 there is no reason you shouldn't have more equity in your house than the value is>>
CeeCee I have to disagree with you on this.
I have lived in the same house for 28 years. I bought it with my ex husband for $75,000. We divorced in 1987 and the divorce said I got to live in the house till my youngest was 18, he paid the mortgage and I paid the taxes. When my son was 18 in 2000 I decided to buy out my ex and since the house had increased in value I refinanced to pay off the mortgage and pay him off his 1/2. I now have a mortgage of $111,000, more than I paid for the house 28 years ago.
Things do happen to make people who have been in the same house for 25 still have a mortgage.
And of course last year I could have sold my house for $300,000. right now with the housing market the way it is I could probably get $200-250,000 if I was lucky because there are so many other houses in this town for sale.
BUT... even when I was going through cancer treatments and living off what I got from my father's will, I paid my mortgage first, before anything else. Ask my credit card companies....

LanaJae
03-15-2008, 09:11 PM
Well, they refinanced too many times. After 23 there is no reason you shouldn't have more equity in your house than the value is. They over extended, spent too much money on other things by refinancing more than likely. Maybe they had an ARM, no money down, who knows. A mortgage is usually paid in full in 30 years so had they not refianced it would be almost paid off.

We've got neighbors who've been doing that, several neighbors actually. They'd run up their credit cards, then refinance, pay off the credit cards, go on a trip, rinse, repeat.

Thankfully we live in an area here that is still desirable so the houses do sell, it just takes longer. Our neighborhood home values went down about 10-15K in the last tax assessment and you should've seen how angry people were. I was happy - our taxes went down too.

Anjelica
03-15-2008, 09:51 PM
Some folks were using (and still using) the equity in their house like ATM's - cash whenever they needed it for other items non-related to "enhancing" a home.

cats mom
03-16-2008, 12:46 AM
Honestly I think a lot of the folks who are walking away around here are those who bought in the past couple of years with little or no money down, not folks who have been in their homes long term.
(although I've seen some really frightening home equity ATM examples as well)

But here's just one example of a recent purchase with a tiny down payment on a massive loan that has been handed back to the bank:

Purchase date: 9/2006

Purchase price: $1,140,500

1st mortgage: $910,428
2nd mortgage: $227,608

Down payment: $3,464

Current asking price: 899,000

Imagine you're the "owner" of this property; it's declined in value approx. $240,000, the monthly payment is more than you would pay for a comparable rental, and you've got all of $3,464 in the place. I guess I can see the temptation.

Now assume lenders still required 20% down on the same house. The buyer would have needed to come up with $228,000. Granted they would still be slightly upside-down, but now if they walk away they know they'll never see all that money they spent years scrimping and sacrificing to save. Makes it a much tougher call.

What in the world were lenders thinking when they agreed to give folks who came up with less than $5,000 of their own money over a million dollars??
:confused3

Of course I still advocate personal responsibility... but those kinds of lending practices just make no sense at all and were a recipe for disaster IMO

LanaJae
03-16-2008, 01:03 AM
cats mom, that's a good example on a huge scale. I completely agree with you about the lending, it was just so stupid and they had to know something would give.

Disneylush
03-16-2008, 02:19 AM
It is just one sad story after another and the even more sucky result of this is the empty homes that then sit ... then gets broken into... then your neighborhood just goes down hill.

amaycatbaker
03-16-2008, 05:54 AM
My husband and I watched this coming years ago. We decided not to have credit cards and mortgages, we were 25 when we made this joint decision.

Separately we both did not have credit cards before then too, because we both did not like the "open loan" that the cards were, and the interest rates. The cards were offered to 18 year olds:scared1: in college and both my husband and I before we met would throw out the card application that were left around campus.

A cash budget can be restrictive but you don't carry large amounts of debt. I have to admit though, I am paying off my next Disney vacation slowly, through Disney of course.:goodvibes

dvcgirl
03-16-2008, 08:15 AM
Well, they refinanced too many times. After 23 there is no reason you shouldn't have more equity in your house than the value is. They over extended, spent too much money on other things by refinancing more than likely. Maybe they had an ARM, no money down, who knows. A mortgage is usually paid in full in 30 years so had they not refianced it would be almost paid off.


Well, in some areas a person could have put 20% down on a house with a 30 year fixed mortgage and end up owing more than the house is worth.

mickeyfan2
03-16-2008, 08:53 AM
Well, they refinanced too many times. After 23 there is no reason you shouldn't have more equity in your house than the value is. They over extended, spent too much money on other things by refinancing more than likely. Maybe they had an ARM, no money down, who knows. A mortgage is usually paid in full in 30 years so had they not refianced it would be almost paid off.

::yes::

Kay7979
03-16-2008, 08:56 AM
I read an article today where homeowners who owe more on the mortgage than the house is worth are starting to burn their homes in hopes of a quick insurance settlement.

http://news.medill.northwestern.edu/washington/news.aspx?id=79865

That's a quick ticket to prison, not to an insurance settlement!

mickeyfan2
03-16-2008, 09:00 AM
Well, in some areas a person could have put 20% down on a house with a 30 year fixed mortgage and end up owing more than the house is worth.

Sure it could happen. A person who could save 20% down might have also saved an extra 10% more to be able to do a short sale. The person who put 0% down is not a saver and would walk away with 30% being lost by the lenders. This results in foreclosure. The first is far more desirable for the economy.


That's a quick ticket to prison, not to an insurance settlement!

Think of the nice accommodation they are getting for free. ;)

Kay7979
03-16-2008, 09:05 AM
We've got neighbors who've been doing that, several neighbors actually. They'd run up their credit cards, then refinance, pay off the credit cards, go on a trip, rinse, repeat.

How stupid and "live for the moment" can some people be? Don't they ever want any equity? Don't they ever plan to pay off their mortgage? Do they want to be paying on a mortgage at 60?

The way I see it, most of the population will be living off "reverse mortgages" in their old age, if they have any equity by then, then the bank gets the house when they're dead. Depressing.

mickeyfan2
03-16-2008, 09:13 AM
How stupid and "live for the moment" can some people be? Don't they ever want any equity? Don't they ever plan to pay off their mortgage? Do they want to be paying on a mortgage at 60?

The way I see it, most of the population will be living off "reverse mortgages" in their old age, if they have any equity by then, then the bank gets the house when they're dead. Depressing.

Actually the bank does not get the house. The bank is owed the money of the original contract. If you died soon, the bank makes $$. If you live far past the terms of the loan then you make $$. The estate has the option to either pay off the loan and keep the house or sell the house and pay the bank off. The remaining money is kept by the estate.

RM loans tend to have high fees and only return a small amount compared to the loan. The bank is not stupid. The person is usually better to sell the home and rent. The attraction of these loans is to the elderly who are in the "I will leave this home when I die." group.

dvcgirl
03-16-2008, 09:19 AM
Sure it could happen. A person who could save 20% down might have also saved an extra 10% more to be able to do a short sale. The person who put 0% down is not a saver and would walk away with 30% being lost by the lenders. This results in foreclosure. The first is far more desirable for the economy.




Think of the nice accommodation they are getting for free. ;)

Oh, I know that many of those walking didn't put a nickel down and likely used a risky mortgage product to finance those homes. All that I was pointing out is that housing prices have fallen so far in some regions that it is conceivable to be a person who did everything right, and still ends up in trouble.

Either way, there are big bailouts and likely more "stimulus" coming from the government. None of which we can afford mind you. All of which will likely make things worse down the road. It may not be for another 5 years or even 10 years, but things will certainly end up worse.

On Friday, the Federal Reserve rescued Bear Stearns. The headlines said that JPMorgan was also involved, but they were only the conduit to the Fed's Discount Window. They simply carried Bear Stearns toxic CDO paper to the window as collateral, the Fed laundered that into a loan which JPMorgan then carried back to Bear. Bear Stearns would have access to their own special "primary dealers" window which opens on March 27th, but they couldn't wait that long....that's how dire their situation was.

This is our money being used for this folks. And it will be our money that is sent to "distressed homeowners" to help write down the principle, or used by the government to buy equities, or refinance these homes.....any number of program ideas being floated across the floor of congress these days.

I read a funny quote the other day. Just as there are no atheists in foxholes, there are no libertarians during a financial crisis. All of the free market capitalists are the first to scream for government intervention when their money is at stake.

eliza61
03-16-2008, 10:51 AM
People have been walking out on their spouses and children for years. I guess we shouldn't be too shocked that they would walk out on their mortgage.
We were raised that you take care of your responsibilities, even if it means carrying three jobs to get it done. I am always amazed at people who do not take care of their bills, but have the latest cell phone, satellite dishes and grand television sets.

I'm off my box now. Got to go pay bills. :lmao:

Lonegirl,
You hit the nail right on it's head. I really don't understand why we are amazed. The last 30 years we've become this giant "Me, me ,me" "now, now, now" consumption generation and all of a sudden we're surprised? We've got govenors alledgely cracking down on prostitution all the while he's paying $300/hr to have one and we're surprised when people don't live up to their responsibilities?

What scares me is the young people I work with. $500 prada, gucci and coach pocketbooks but don't have $500 in the bank. Parents who will buy a teenager a brand new car because they graduate from H.S. but don't have a penny saved for college or retirement. Do we expect them to turn around miraculously and be responsible homeowners?

Off my soapbox now. :surfweb:

CarolA
03-16-2008, 11:26 AM
Since the Budget boards konws all... And everyone who gets in ANY trouble is the "other guy who did it wrong"

Why am I upside down?. I put the 20% down, don't have one of those crazy mortgages, have never re-financed, have never taken a home equity loan, have a VERY reasonable size home (1600 square feet) etc..

(Could be the market... NAH must be the consumer's fault LOL!)

Now, I am not "walking" away. I don't need to sell and figure in a few years it will rebound (and I am really not in too bad of shape, I could SELL for the remaining mortgage it's just not going to recover my costs much less make a profit right now)


I point this out to say that some of the talk on here is a little extreme.

mickeyfan2
03-16-2008, 11:31 AM
Since the Budget boards konws all... And everyone who gets in ANY trouble is the "other guy who did it wrong"

Why am I upside down?. I put the 20% down, don't have one of those crazy mortgages, have never re-financed, have never taken a home equity loan, have a VERY reasonable size home (1600 square feet) etc..

(Could be the market... NAH must be the consumer's fault LOL!)

Now, I am not "walking" away. I don't need to sell and figure in a few years it will rebound (and I am really not in too bad of shape, I could SELL for the remaining mortgage it's just not going to recover my costs much less make a profit right now)


I point this out to say that some of the talk on here is a little extreme.

You are exactly why these extreme mortgages are a bad idea.

A house is a long term investment and not something to flip or use as an ATM machine. Investments go up and they go down. On needs to be able to ride the roller coaster wrt investments, including the house. Too many people say housing cannot go down. Well it did in the later 80s and it is doing it now. The ones who were upside down in the 80s and who stayed and paid their mortgages found in a few years they were back to the pre-slump price and then it was up from there.

The ones who are innocent are the ones who do the right thing and then had to sell. If it was for a job transfer, they might be able to get the company to help with the closing and some of the loss.

Kay7979
03-16-2008, 12:01 PM
Since the Budget boards konws all... And everyone who gets in ANY trouble is the "other guy who did it wrong"

Why am I upside down?. I put the 20% down, don't have one of those crazy mortgages, have never re-financed, have never taken a home equity loan, have a VERY reasonable size home (1600 square feet) etc..

(Could be the market... NAH must be the consumer's fault LOL!)

Now, I am not "walking" away. I don't need to sell and figure in a few years it will rebound (and I am really not in too bad of shape, I could SELL for the remaining mortgage it's just not going to recover my costs much less make a profit right now)


I point this out to say that some of the talk on here is a little extreme.

You have the right attitude. Values do come back. While it's depressing to owe more than the house is worth, you didn't do anything wrong, as you say, and this will be a temporary situation. It might take a few years, unfortunately.

The point is that people are always told that their houses are an "investment" and that isn't really true. People should think of their houses as a home not an investment. For the most part, a house is a liability. It costs you to live there, and does not spin off any income unless it's a multi-family or you are renting it out. Eventually, it may sell for more than the person paid for it, but by the time you figure in inflation, and all the money spent on taxes and maintenance etc., generally the profit is not huge. That's why it was obvious that something was not right when in some areas of the country housing prices were going up 20 or 30% per year. That's not typical or logical. It was an unsupportable abberation, which is being proven right now as values go back to normal levels.

CarolA
03-16-2008, 12:07 PM
You are exactly why these extreme mortgages are a bad idea.

A house is a long term investment and not something to flip or use as an ATM machine. Investments go up and they go down. On needs to be able to ride the roller coaster wrt investments, including the house. Too many people say housing cannot go down. Well it did in the later 80s and it is doing it now. The ones who were upside down in the 80s and who stayed and paid their mortgages found in a few years they were back to the pre-slump price and then it was up from there.

The ones who are innocent are the ones who do the right thing and then had to sell. If it was for a job transfer, they might be able to get the company to help with the closing and some of the loss.

Once again I am AMAZED!!! Apparently I did it all wrong:rotfl:

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine":rotfl2: I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)

Nancyg56
03-16-2008, 12:10 PM
Since the Budget boards konws all... And everyone who gets in ANY trouble is the "other guy who did it wrong"

Why am I upside down?. I put the 20% down, don't have one of those crazy mortgages, have never re-financed, have never taken a home equity loan, have a VERY reasonable size home (1600 square feet) etc..

(Could be the market... NAH must be the consumer's fault LOL!)

Now, I am not "walking" away. I don't need to sell and figure in a few years it will rebound (and I am really not in too bad of shape, I could SELL for the remaining mortgage it's just not going to recover my costs much less make a profit right now)


I point this out to say that some of the talk on here is a little extreme.

This happened to us. DH purchased the house when values were high, put down 20%. When we married we put a lot of money into the house and still it went way down in value. We were never upside down but boy we were close. It was hard. Not too far from us there was a small development and the homes there sold for around $750,000. When the market tumbled the ones not sold were worth about $250,000. I have no idea how those folks handled that mortgage fiasco but was grateful we were not in the same boat.

mickeyfan2
03-16-2008, 12:20 PM
Once again I am AMAZED!!! Apparently I did it all wrong:rotfl:

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine":rotfl2: I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)

I worded that first sentence wrong. The rest did not apply to you. I was trying to explain why the extreme mortgages are so wrong.

You did not use the extreme mortgages and you did it the right way but you were still hurt by this. Sorry I worded it incorrectly.

Gillian
03-16-2008, 12:22 PM
Yeah, what CarolA said.

There was another thread about this not long ago. The focus, I believe, was Michigan. Somewhere were lots of people were out of work, there were no new jobs to be had, house prices were dropping like crazy (and didn't seem that high to begin with, at least to me), and there are foreclosures in every neighborhood. That also got ugly.

It can happen to anyone if the circumstances are right/wrong.

loco4dis
03-16-2008, 12:33 PM
I think the lesson in this housing crisis is that it's a really good idea to buy LESS house than you can afford, and re-mortgage only to get lower interest rates. It seems like most of the stories I hear like this are from people who either bought more house than they could afford (living on the edge) or refinanced to get cash for other expenditures like high credit card bills (also living on the edge). I think I benefited from having a dad that was out of work a few times, because it was really important to me that our mortgage be manageable if something happened and we only had one of our incomes. The irony of it all is that with home prices so depressed, more and more young couples will get into more house than they can afford now, so I don't see an end in sight. And as an aside, I sure wish the public schools took teaching personal finance as seriously as they take teaching algebra (I mean, who uses algebra after high school anyway?:))!

dkbunches
03-16-2008, 12:57 PM
We live just north of Phoenix, AZ and are in one of the worst declining markets. People bought when house prices were soaring and fully believed they were going to keep doing so. One of the neighborhoods 5 miles south of us has 1500 houses for sale, 700 of which are foreclosures, or ones where people just walked away, and that number is rising daily. These are homes that are only 2-5 years old, some less. People owe hundreds of thousands more than the houses are worth and have no equity so they just walk away.

Bothers me to see people think like that, we also were raised to believe you take care of your responsabilities, but we live in a society of wanting it all, and believing you deserve it, whether or not you can afford it. My daughter just turned 10, and my little one just turned 4, but they are already learning the value of money, and saving, and not spending more than you have. Got to teach them young!

Kay7979
03-16-2008, 01:12 PM
There are people who are not at fault for ending up "upside down" and I do feel very sorry for them. If someone bought right at the peak in many markets in California, Florida, Las Vegas, etc. their timing was unfortunate. These markets were driven so high by speculators buying multiple houses and day-trading them like stocks, and fraudulent mortgage companies getting people loans who should never have qualified, that the entire market was just wacky. Prices in some of these areas have declined by 15% last year and another 15-20% is projected for this year. Even with a large downpayment, people who did nothing wrong aside from buying "at the top" are under water.

I remember watching shows a couple years ago on HGTV like "House Hunters" and the couples had put off buying because prices were so high, but after another two or three years of increases, they gave up and bought. Not their fault. Bad timing. Bubbles always last longer than you think possible, and the housing bubble was no exception.

I don't believe in people walking away from obligations. A huge percentage of people that are in trouble did stupid things and created their own problems, but not all of them. Bad monetary policy from the Fed, the lack of proper regulation of the mortgage industry, and other factors created this nightmare, so I can see why some people believe the government should take some responsibility in mitigating the disaster now. The problem is in sorting out the deserving and the undeserving. It really isn't possible. Plus, any aide by the "government" is really aide by "us the taxpayers." There is no practical solution.

labgeek
03-16-2008, 01:13 PM
I can say that the banks are not really learning their lesson either in some cases.

My DH and I bought our home in 2000, put 5% cash down, and financed remaining. We didn't have time to save up as much as we wanted as we lived in a small 2bedroom appt we were renting and were pregnant with second child. So we went ahead and bought ahome. In 2001 we refinanced when rates dropped to about 5% and took the loan from 30 to 15yr, instead of the cash savings on the monthly payment. We do have a home equity loan, set up on 20yrs (it was originally for home repair (moldy kitchen and mice) and to pay off a credit card (charged up when I tried to stay home with my sick son). We then refinanced the loan to take out the remaining equity in the home instead of a business loan for DH's business. The business pays for a % of that loan. Anyways, we went to the bank a couple weeks ago in hopes of refinancing the home in order to home and home equity together to make one loan on a 10yr fixed loan so it would all be paid off in ten years. We didn't do it, the monthly payment was going to be more than we could do right now on just my salary. But, they kept on trying to talk me into doing a 30yr loan for it all and that way I could just pay the minimum payment when I was short of cash, but they would tell me what I would need to pay extra in order to pay it off in 10 yrs. No thank you. That's how you get in trouble. We have made enough bad decisions as it is (should have never stayed home, my emotional feelings overruled my head, as much as I wanted it, we just couldn't financially do it at the time).

The bank even called me twice after I declined that option, to just make sure I hadn't changed my mind.

I know this is not related to housing, but in a way it is, my DH told me about his friend from fantasy football, that paid for his daughters college (4ys) on all these different credit cards. Paid only minimums and took out cash advances on one to pay minimums on the others and then after she graduated, he declared bankruptcy.

Kay7979
03-16-2008, 01:18 PM
I know this is not related to housing, but in a way it is, my DH told me about his friend from fantasy football, that paid for his daughters college (4ys) on all these different credit cards. Paid only minimums and took out cash advances on one to pay minimums on the others and then after she graduated, he declared bankruptcy.

Wow, that has to be the epitome of irresponsible. It sounds like he planned the whole thing from the start with the intention of declaring bankrupcy. I know they have tightened up bankrupcy laws, so Im not sure how this will play out for him. Unbelievable.

labgeek
03-16-2008, 01:30 PM
Wow, that has to be the epitome of irresponsible. It sounds like he planned the whole thing from the start with the intention of declaring bankrupcy. I know they have tightened up bankrupcy laws, so Im not sure how this will play out for him. Unbelievable.

It does doesn't it? That means that he actually planned this at least 2 yrs ago, if she got a AA or 4 yrs if she got a BA/BS. That is pretty much before the economy and housing market and job markets took their plunge.

And, here I am chomping at the bit to pay off my disney vacation that I put on my Disney card (points purposes only :goodvibes ). Except disney still owes me 100.00 where they said they would waive the 100.00 cancellation fee since I am not cancelling my vacation, just moved it to AAA since it saved me 250.00. So as soon as it shows, the check is in the mail.

eliza61
03-16-2008, 02:18 PM
Once again I am AMAZED!!! Apparently I did it all wrong:rotfl:

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine":rotfl2: I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)


Pretty much. Don't let it bug you. You can always start a "I hate Dave Ramsey thread" and really bring out the flames. ;)

cats mom
03-16-2008, 02:36 PM
Once again I am AMAZED!!! Apparently I did it all wrong:rotfl:

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine":rotfl2: I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)


Yikes!
I didn't read mickeyfan's response as a slam to you at all. :confused3
I think he/she is saying much the same as I did in my earlier post.
We're slamming the crazy lending policies.

And speaking for myself only... the people who agreed to them and signed on the dotted line too. After all a home is generally the single largest purchase most folks will make. Does that not warrant serious consideration and some number crunching and financial planning, no matter what the crazy mortgage guy is telling you?

Yes, some people did everything right and are still upside down right now. The thing is they are generally in much better shape to hang in there and wait for a turn around, and have much more incentive to do so, than people who used the creative financing products.

ie: in my earlier example those folks are upside down by $240,000 with a personal investment of only $3,500. Try to convince them that they should stick it out. (We are in a still declining market in CA btw)
While I have no idea what their income is... I do know the general stats for this area, and I'd say it's a safe bet that they didn't have the $224,750 yearly income necessary to keep up with their nearly $7,500 monthly payments either.
Many people here were betting on the crazy price increases continuing forever. Believe me, we heard it all.
:rolleyes:

On the other hand if they HAD done everything right they would be down by maybe $12,000, with manageable monthly payments, as well as a sizeable downpayment at risk. Not nearly as likely to walk away in that situation.

LanaJae
03-17-2008, 03:52 AM
How stupid and "live for the moment" can some people be? Don't they ever want any equity? Don't they ever plan to pay off their mortgage? Do they want to be paying on a mortgage at 60?

The way I see it, most of the population will be living off "reverse mortgages" in their old age, if they have any equity by then, then the bank gets the house when they're dead. Depressing.

This is one of my neighbor's quotes: I'm always going to be paying "something" to live somewhere, so if I can afford the payment, I'm going to take whatever cash out that I can.

I imagine this played out well in his mind during the 7 years when all someone had to do was stick a "for sale" sign in their yard and then pick the best of 5 buyers the next day. Seriously, I bet it'll be 15-20 years (if ever) before he can catch up to owing what it can be sold for.

rockyroad
03-17-2008, 09:16 AM
Things are bad.

I drove around in an area near here where there are homes that are being lived in as well as new houses.

So many are for sale.

I saw three open houses on the same street.

And it is scary.

I saw a news show about the pets that are being left in the foreclosed houses.
They showed a real estate agent going into houses where people leave their furniture, kitchen equipment, and their pets.
The show I saw focused on Ohio, but it looks like it is happening everywhere.

http://abcnews.go.com/Business/IndustryInfo/story?id=4211173

And even if you have your house paid off, which is great, things still happen.
Two years ago my great aunt died.
The farm, which had been in the family for over 100 years, and all the furnishings in the house and the house itself went to pay her medical and care expenses. Auctioned.
I wanted to go to the auction, but it happened before I even knew...
All my dad got was a cardboard box with some photographs.
His grandmother was an artist; he got one painting that had been badly damaged.
The rest of her paintings were auctioned.
And it is not like the paintings were valuable to anyone but family.

I know that my great aunt intended for the farm to go to my dad.
Things don't always happen like they should.

I'm just saying that even though a person may have lived frugally and carefully, it all may go anyway.

dvcgirl
03-17-2008, 09:43 AM
You have the right attitude. Values do come back. While it's depressing to owe more than the house is worth, you didn't do anything wrong, as you say, and this will be a temporary situation. It might take a few years, unfortunately.

Unfortunately, in some areas I think it will take far more than a few years for home values to come back. I think a decade is more like it....

Chicago526
03-17-2008, 11:39 AM
I think the lesson in this housing crisis is that it's a really good idea to buy LESS house than you can afford, and re-mortgage only to get lower interest rates. It seems like most of the stories I hear like this are from people who either bought more house than they could afford (living on the edge) or refinanced to get cash for other expenditures like high credit card bills (also living on the edge). I think I benefited from having a dad that was out of work a few times, because it was really important to me that our mortgage be manageable if something happened and we only had one of our incomes. The irony of it all is that with home prices so depressed, more and more young couples will get into more house than they can afford now, so I don't see an end in sight. And as an aside, I sure wish the public schools took teaching personal finance as seriously as they take teaching algebra (I mean, who uses algebra after high school anyway?:))!

This is what I've done in my two home purchases.

Well, the first home wasn't less than I could afford, it was exactly what I could afford! I was 25, single, with no dependants so I could afford a bit more risk. 3% down on a condo purchased at $108k, the montly payment (with taxes, homeowners, PMI and assesment) was less than what I could rent a comparable apartment for (and an apartment wouldn't have had an attached garage!). I sold it in 4 year for nearly a 50% profit!

Then DH (I'd since met and gotten engaged to my now DH)and I rolled that into a 20% down payment on a small (1300 sqft) single family home. If we both lost our jobs tomorrow and could only work 40 hours a week at McD's we could afford the house. We'd have to stop payments on our truck and CC's, but we could do it, and if we both got 2nd part time jobs we'd even be able to make the truck payment, at least long enough to sell it and get out of the loan. We'd be able to hang on long enough to get back on our feet and catch up. Our credit would be trashed but we'd eventually come through to the other side, either by being able to sell the house once the market comes back and clear our debts, or by paying it all off bit-by-bit the hard way.

But that's the worst case senario, the odds of both of us losing our jobs at the same time is astronomical, we are in two unrelated fields in an area with a very diverse economy. One of us getting laid off? Sure, but not both. The way things are set up we'd be able to keep going and pay everyone. We'd be eating a lot of Ramen and hot dogs, but we'd make it until the layed off spouse found decent work again. And in two years the truck is paid off, and in three the CC's should be gone, so we'll be in an even better situation then. In a few years if a job loss happens, while it would be hard it wouldn't be a disaster, not even close.

I understand those that don't understand mortgages or CC terms, some things that are easy for one person to "get" is imposible for the next, it's nothing to do with inteligence, just the way our individual brains are "wired". My DH still doesn't get why when I pay off the CC due at the end of this month why it still has a balance. I've explained I'm paying off last months purchases and this month's will be billed next month, but he doesn't get it. But he's just as smart as I am, just in a different way (he could sit there and tell me how the space shuttle works while I look at him with a blank stare, for example!).

But I'll never understand those that don't stop and figure out what they can afford, and then think about what will happen if their income drops. What actions will they need to take, what bills they'll need to let (possibly) slide and which ones MUST be paid, what help may be available from family in a short term emergency, at what point they'd have to sell assets (homes, cars, etc) and start over with an apartment and a job they can walk to. You may not understand the banking industry but everyone should understand they need a plan "B" if it all falls apart.

mjantz
03-17-2008, 12:05 PM
I think the lesson in this housing crisis is that it's a really good idea to buy LESS house than you can afford, and re-mortgage only to get lower interest rates. It seems like most of the stories I hear like this are from people who either bought more house than they could afford (living on the edge) or refinanced to get cash for other expenditures like high credit card bills (also living on the edge). I think I benefited from having a dad that was out of work a few times, because it was really important to me that our mortgage be manageable if something happened and we only had one of our incomes. The irony of it all is that with home prices so depressed, more and more young couples will get into more house than they can afford now, so I don't see an end in sight. And as an aside, I sure wish the public schools took teaching personal finance as seriously as they take teaching algebra (I mean, who uses algebra after high school anyway?:))!

I totally agree. Although, I will say that we've made a decision not to refinance at this time for any reason. We can pay our mortgage right now & I'm worried if we did decide to refinance we'd end up with an adjustable rate mortgage. Plus, we'll probably sell this house in 3-5 years & I want to build as much equity in it as possible. Both of us have incredibly stable jobs & recent positive developments in both our jobs lead us to believe that we're not going to be laid off so we feel pretty safe right now.
I will say, however, that I am very, very glad that we under-bought & went for a not-new house as opposed to a brand-new McMansion. We may not have a lot of house but we can afford what we've got.

crisi
03-17-2008, 12:42 PM
Once again I am AMAZED!!! Apparently I did it all wrong:rotfl:

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine":rotfl2: I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)

Honestly, some people deserve the judging. Others were a victim of circumstance. The problem is that the budget board often grabs the wide brush.

This happened in the 1980s in Hibbing, Minnesota and other towns in the Iron Range. Mining dried up. No other industry. What choice were people left with other than to leave their homes (no one around to buy them, few jobs) and try to start a new life somewhere else. Those people I have a hard time judging. They lived what they believed to be a responsible life based on what they knew to be true, that the mines would provide them jobs until they retired.

But other people have been funding a life they can't afford out of their house. My ex-sister in law (and therefore, by allowing it, my brother in law) did just that for years, then went bankrupt and sold their home (fortunately before the market softened). Her (and him) I can blame. Two people who own four motorcycles, a large RV, a $300,000 house and horses on $60k a year (to be fair, originally she worked and their income was twice that, but when she got laid off she didn't find an equivalent job - nor did they change their lifestyle - and to be fair the other direction $120k isn't enough for the lifestyle they had) and remortgage their home three times in six years....yeah, that was stupid.

crisi
03-17-2008, 12:50 PM
I think the lesson in this housing crisis is that it's a really good idea to buy LESS house than you can afford, and re-mortgage only to get lower interest rates. It seems like most of the stories I hear like this are from people who either bought more house than they could afford (living on the edge) or refinanced to get cash for other expenditures like high credit card bills (also living on the edge). I think I benefited from having a dad that was out of work a few times, because it was really important to me that our mortgage be manageable if something happened and we only had one of our incomes. The irony of it all is that with home prices so depressed, more and more young couples will get into more house than they can afford now, so I don't see an end in sight. And as an aside, I sure wish the public schools took teaching personal finance as seriously as they take teaching algebra (I mean, who uses algebra after high school anyway?:))!

When we built our house (10 years ago) we were given the advice by someone I do respect - "buy more house than you can afford, at your time of life, your incomes will only increase." Well, our incomes did increase and we could have afforded more house, but our expenses also increased - we added kids. We built a house that was worth about 2/3rds of what we qualified for. We were able to pay it off in seven years or so - and now put the mortgage into college funds (hope they don't collapse, but I'm nine years from college, they will likely recover even if they do). I'm financially conservative, so the idea of maxing my mortgage was something I didn't want. And I became financially conservative at the school of hard knocks, when my first husband left me holding the mortgage and car loan on my first house and first new car.

But I have cousins that bought at the height of the mania - because they believed that given the trending, if they didn't buy NOW, they'd never afford a house. Even if it was a huge stretch to buy. They bought starter homes with potential for too much money, but they were cheap homes at the time. I think about it and think of Rockefeller, who sold all his stock holdings before the 1929 crash when the shoeshine boy was investing in the market....

ZPT1022
03-17-2008, 05:23 PM
If we both lost our jobs tomorrow and could only work 40 hours a week at McD's we could afford the house.

I highlighted this part because it shows the right attitude in general. If things happen that you didn't plan on (Because no one WANTS to lose a job), you do what you have to do to make it work.

This is a work ethic that sadly, many people do not share. My cousin is now married to this guy, and last year he lost his job. He then proceeded to sit on his butt for 7+ months. He finally started looking but nothing was good enough for him. For the record, the previous job was nothing elite.

We could never understand this. They have a child together, they have an apartment together. Where's the personal responsibility??

She had asked me to watch the kids when he got another job so I got to hear all about what was (or was not in most cases) going on with the job search. I get that if you lose a job you might want to make a new beginning doing something else, really, I do. But in the meantime, while you are waiting for the "perfect" job, you get a job. Any job. Dunkin Donuts, McDonald's, SOMETHING. You do not, as a grown man with children to support, sit on your butt.

Didn't give up smoking, or cable, or anything else either. So now he's finally got another job but he's declaring bankruptcy because surprise surprise, he couldn't keep up with payments being out of work for 7 + months.

I guess I've been needing to vent that for a while. It bugs the crap out of me. We work so hard to do everything right and watch people like that coast through life without a second thought.

It made me really happy Chicago526, to see someone who shares a similar value system :goodvibes

Nancyg56
03-18-2008, 09:15 AM
While I agree that people need to stay within their means it is beyond my comprehension that financial institutions can offer the amount of financing and not know that this is way too much. Doesn't the lender bear any responsibility? When we bought our home lenders were only allowing what was a reasonable amount but these days seem to have disappeared. My son went around with his spread sheet because he had an amount set he would allocate towards his home yet his bank approved him for so much more. I have no doubt that had he gone to a mortgage company the amount would have been even more.

My younger son had initially been approved for a no document loan, so he was able to move back here without worries that he could get financing for the house. Well things began to change and he was told he needed a $12 an hour job. Are you kidding me? I was appalled that anyone would be told this, in our area that was nonsense.

Thankfully my sons are not financially irresponsible and they bought their homes as their home, not an investment. They also have had my DH, whose advice is financially conservative. There are so many others who don't have the benefit of sound advice from family or friends and must rely on these bankers who are not looking at the people but the commission. I believe that there is a lot of room for blame here and it does not all fall on the homeowner.

Chicago526
03-18-2008, 09:18 AM
I highlighted this part because it shows the right attitude in general. If things happen that you didn't plan on (Because no one WANTS to lose a job), you do what you have to do to make it work.

This is a work ethic that sadly, many people do not share. My cousin is now married to this guy, and last year he lost his job. He then proceeded to sit on his butt for 7+ months. He finally started looking but nothing was good enough for him. For the record, the previous job was nothing elite.

We could never understand this. They have a child together, they have an apartment together. Where's the personal responsibility??

She had asked me to watch the kids when he got another job so I got to hear all about what was (or was not in most cases) going on with the job search. I get that if you lose a job you might want to make a new beginning doing something else, really, I do. But in the meantime, while you are waiting for the "perfect" job, you get a job. Any job. Dunkin Donuts, McDonald's, SOMETHING. You do not, as a grown man with children to support, sit on your butt.

Didn't give up smoking, or cable, or anything else either. So now he's finally got another job but he's declaring bankruptcy because surprise surprise, he couldn't keep up with payments being out of work for 7 + months.

I guess I've been needing to vent that for a while. It bugs the crap out of me. We work so hard to do everything right and watch people like that coast through life without a second thought.

It made me really happy Chicago526, to see someone who shares a similar value system :goodvibes


Oh, we aren't perfect by any means! We have debt, we've made a few not so great choices. But we do try to at least think things through a bit. And we've both worked since we were in our early teens, I think we'd get bored after a week or two of no work. Besides, I'm sure we could find something a little better than McD's, I was just using that as an example, we could take a huge cut in pay, just about down to minimum wage, and still keep the house (as long as each of us worked 50-60 hour weeks) and like I said, the odds of both of us losing our jobs at the same time are quite high. We would have to stop paying the CC's for a while to do it, but it could be done. Hopefully it won't ever come to that, unemployment would cover us until we could find something better than minimum wage, but if it ran out before we found something, then I guess we'd be flipping burgers!

ZPT1022
03-18-2008, 09:34 PM
Oh, we aren't perfect by any means! We have debt, we've made a few not so great choices. But we do try to at least think things through a bit. And we've both worked since we were in our early teens, I think we'd get bored after a week or two of no work. Besides, I'm sure we could find something a little better than McD's, I was just using that as an example, we could take a huge cut in pay, just about down to minimum wage, and still keep the house (as long as each of us worked 50-60 hour weeks) and like I said, the odds of both of us losing our jobs at the same time are quite high. We would have to stop paying the CC's for a while to do it, but it could be done. Hopefully it won't ever come to that, unemployment would cover us until we could find something better than minimum wage, but if it ran out before we found something, then I guess we'd be flipping burgers!

LOL, of course no one is perfect, us especially. We've certainly made our share of bad choices, especially in college with credit cards. But we just seem to have the same work ethic- a week or maybe two off to regroup is one thing, but months and months of doing nothing - eek! DH even kept saying to me "I'd be bored out of my mind within a few weeks, I don't understand how he can stand it". And no, I can't really imagine ever actually working at McD's but it's more the "do what you have to do" sentiment, kwim?

disneymom3
03-18-2008, 09:49 PM
cats mom, that's a good example on a huge scale. I completely agree with you about the lending, it was just so stupid and they had to know something would give.

Yes the lenders had to know something would give but what about the people who bought a million dollar home with $3000 down? Not attacking you,just using your post as a jumping off point. I mean, who could have ever thought that was a good idea???

I would love to move right now as DDs school is quite a drive, but I never thought about leaving my house behind. Of course, with this drive every day I pretty much feel like I live in my car anyway.;)

LanaJae
03-19-2008, 01:02 AM
Yes the lenders had to know something would give but what about the people who bought a million dollar home with $3000 down? Not attacking you,just using your post as a jumping off point. I mean, who could have ever thought that was a good idea???

I would love to move right now as DDs school is quite a drive, but I never thought about leaving my house behind. Of course, with this drive every day I pretty much feel like I live in my car anyway.;)

Absolutely agree with that too. I blame buyers before I blame lenders, but you can find people who did that who will say something like "at the rate values were increasing, I thought I would double my money in 2 years." I could have the same philosophy at a casino! (and we know how that would turn out)

OT now, but I'm seeing the housing crisis play out again with vehicles. Tonight on TV I heard this commercial 5 times...

"Got a job? Got just one dollar?" You could be in a new car with just one dollar down!" "No credit? No problem, all you need is a job and $1 down."

arminnie
03-19-2008, 11:32 AM
There was another thread about this not long ago. The focus, I believe, was Michigan. Somewhere were lots of people were out of work, there were no new jobs to be had, house prices were dropping like crazy (and didn't seem that high to begin with, at least to me), and there are foreclosures in every neighborhood. That also got ugly.

It can happen to anyone if the circumstances are right/wrong.And if it does - well just deal with it and go on. Lots of bad things happen to good people.

And I am speaking from EXPERIENCE. I owned 3 homes in Texas in the early 80s. (I'd been transferred a lot). I put down 20% on all of them. Rents and property values both were cut in HALF as was my salary.

Had to cash in my retirement, IRA, savings and pay LOTS of taxes including on the amount of a short sale in one instance. It took a long time before I was out of debt.

I guess I'm irritated that everyone now is expecting a bailout. No one gave a damn about Texas, Oklahoma, Colorado and Louisiana when we were dying in the early 80s and the rest of the country was flying high.

I learned one very important lesson - NEVER buy something as an investment that requires feeding. If I'd invested in stock that had crashed I could have just left it in an account to recover eventually. Not so with real estate - even w/o a mortgage there are taxes, insurance and maintenance.

eliza61
03-19-2008, 11:49 AM
I guess I'm irritated that everyone now is expecting a bailout. No one gave a damn about Texas, Oklahoma, Colorado and Louisiana when we were dying in the early 80s and the rest of the country was flying high.

I learned one very important lesson - NEVER buy something as an investment that requires feeding. If I'd invested in stock that had crashed I could have just left it in an account to recover eventually. Not so with real estate - even w/o a mortgage there are taxes, insurance and maintenance.


This made me chuckle :goodvibes My teenage sons who don't quite grasp the definition of saving a buck are driving me especially crazy with the "can I have" this week.

There are many financial gurus that think the bailout is a huge mistake and believe it is a natural resetting of the ridiculous housing market. It's an election year, both parties want you to feel warm and fuzzy so you'll vote for their guy, so they throw these half baked solutions out there.