American Dream 2: Default, Then Rent

[PatriciaH]

http://online.wsj.com/article/SB126040517376983621.html?mod=WSJ_hpp_MIDDLETopStories

"Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That's freeing up cash to use in other ways.

Ms. Richey's family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March. Mr. Fernandez takes his girlfriend out to dinner more frequently. "We're saving lots of money," Ms. Richey says."

 

[DawnM]

I have SO MANY opinions about this entire thing I don't know where to start.

We lived in SoCal when houses that were selling for $175K in 1998 shot up to $600K in 2004. This is for the SAME house!

It was not "real" money in the sense that there was no way it could be sustained. Banks were lending 600K out to folks who made $60K per year. The entire thing was a set up for major disaster. DH and I used to talk about it a lot. It was a house of cards.

We sold our home for 600K in early 2005. I just looked on Zillow and that same house is on Zillow for a value of 400K. I am wondering if they can even get that for the house in these current times.

The saddest part is who actually pays for all these forclosures......WE DO!

You are penalized for doing things the right way and rewarded for going back on your commitments these days.

ARGHHHHHHHH!!!!!!!!!!

Dawn

 

[ceecee]

And I imagine there will be a "bailout" for those people too!

 

[Kitzka]

Words can't even express how i feel about this article.

lara

 

[eyeheartgoofy]

So much for the image of the struggling homeowner who lost their job clipping coupons in order to keep the home and avoid foreclosure. Yep, let's stop paying on our mortgage so we can move into a nicer home with multiple waterfalls and a cascading staircase. A new $1800 dining set, keeping the BMW with a $700 month payment.

This article sickens me. There is no sense of integrity with these people. These people essentially stole hundreds of thousands of dollars from the banks. My gosh.

 

[Purseval]

They need to bring back debtor prisons.

 

[Irin997]

Wow...I'm amazed at the idiocy of some people. Now I may be wrong, but I took that article in this way:

These people featured did not stop paying on their home because they couldn't afford it. Rather they decided to stop paying their mortgage because the house down the block was renting for 1/2 the mortgage payment. I think that's complete and utter BS. And Mr. Fernandez got to keep his $700 BMW?? But walked away from his home?? Sorry bud. You bought the house, you pay for it. It's not like he lost his job and seriously can't afford it. He just doesn't want to pay for it.

 

[eliza61]

They need to bring back debtor prisons.

LOL, I don't think we've reached that point yet....

Just a few thoughts.

• Yes, these articles are extremely upsetting when so many of us are struggling to keep our heads above water.
• After spending the last 2 years volunteering with the poor, I've adopted the mantra of "there but for the grace of God, go I"
• I have no idea why people feel that some of the things they do are perfectly ok, but I believe in Karma.

I said it before on the tread about food stamps. As long as humans are involved in any program, transaction or system, there will be people who feel the rules don't apply to them and it's perfectly ok to scam others. this is not the first time this has happen, it will not be the last.

What I did find ridiculous was the statement that people are doing this quietly because it's still a stigma attached to it. Ya think? when did being a deadbeat become some thing to be proud of?

 

[PatriciaH]

I can't believe they would even let them use their picture/area in the article. I would be SO embarrassed! I know I loved the BMW @ $700 a MONTH!

 

[waltskids]

I am at a loss for words about this article!
Although I would have a few choice words for those who are mentioned in it, but they can't be said on the DIS.
I seriously hope these people never receive a dime of money from the government! I can't believe they actually talked about how they have more money now, no kidding, you are not paying on one of the biggest financial responsibilities that you have!! What a lesson to teach their children

 

[hrh_disney_queen]

This article made me nauseous. Boy do I feel stupid having my house paid in full.

 

[bumbershoot]

I have SO MANY opinions about this entire thing I don't know where to start.

We lived in SoCal when houses that were selling for $175K in 1998 shot up to $600K in 2004. This is for the SAME house!

It was not "real" money in the sense that there was no way it could be sustained. Banks were lending 600K out to folks who made $60K per year. The entire thing was a set up for major disaster. DH and I used to talk about it a lot. It was a house of cards.

I have many opinions on it too. Some conflicting.

DH and I had similar conversations about prices...as our family and friends were urging us to get into one of those easy to get mortgages, we remained firm. We knew we could NOT afford to own a home, and we refused to keep up with everyone else. And lo and behold...my dad bought a second home and then couldn't rent it properly, and they almost lost both of their homes. My MIL ended up in a BAD situation and they lost their duplex b/c they couldn't trust their son's partner who owned the mortgage (MIL could have gotten a proper mortgage, but not for the amount of both sides of the duplex, while the partner could, but only a "bad" mortgage). My one friend that I thought was smart went into a balloon payment type mortgage with eyes open, but thinking she wasn't going to live to see it (autoimmune hepatitis since she was 15...she got a transplant last year and suddenly realizes she might indeed see 40). and so on and so forth.

Meanwhile, we pay someone else's mortgage and live in a much nicer place than we could own!

We're very glad we didn't get into any of those stupid mortgages that our friends thought WE were stupid for NOT getting.

And now we're watching the home prices come back down to human levels, and our chances at owning something have gone back up.


The article is up and down, too. They do say that the choice that *some* people are making is setting the stage for helping the economy get better. But then there's the moral stuff.

The flip side of those losses, though, is massive debt relief that can help offset the pain of rising unemployment and put cash in consumers' pockets.

For the 4.8 million U.S. households that data provider LPS Applied Analytics estimates haven't paid their mortgages in at least three months, the added cash flow could amount to about $5 billion a month -- an injection that in the long term could be worth more than the tax breaks in the Obama administration's economic-stimulus package.

That's a lot of money per month!



Someone mentioned karma...i do believe that the woman interviewed for this article, the one that left her home and is now renting a nicer one, lives across the street from the one with the moral objections, the one who is paying a few mortgages even though he's not renting them for enough money to cover the mortgages. My buddhist hubby would say that that is some interesting karma, to have neighbors like that...they might both learn good life lessons from each other.

I can't imagine just leaving a mortgage like that...but I can't imagine being clueless enough to get such a horrible mortgage to begin with! If someone said "you can own that but you're paying 3700 a month", and that amount would hurt my finances, I would walk away! And that's just what so many of our family and friends were NOT doing, while calling US stupid. I am happy to have NO mortgage rather than a horrid mortgage, and that's just what those around us didn't believe.


But then the accuracy of the article is called into question when they say "season tickets" for Disneyland. There's no such thing, they are Annual Passports. The realization that a WSJ reporter would make such a fundamental error, and one SO easily researched, makes so much of the article suspect for me...



And then the biggest issue for me, and this isn't from the article but from what people everywhere complain about...WHO CARES if the selling price of one's home is currently less than what one owes...that's life, when you get a loan for something. Did we just walk away from our car when our loan was 5K more than its value? NO. We kept paying. And now we own 2-3K under what it would sell for. You just keep paying until you've done it. I think people are really hurting their brains needlessly, to keep checking the value of their home and getting annoyed that it's worth less than what they owe. Just keep plugging away, table your ideas of moving; it'll be OK, just keep paying what you owe.


Told you I have conflicting feelings.

 

[eliza61]

Do you ever wonder why these folks are not upset about what they are doing?
Our mindset in this country has shifted. We talked about this when the industry first collapsed. We are no longer a nation of "save for a rainy day"
or "save your money until you can afford some thing" . We are now a nation of bigger is better, spend to stimulate the economy now, if it doesn't work for you now let it go and move onto some thing else. For the last 30 years this has been our mantra so why are we shocked that people have learned this lesson well.

Every body claims they live frugally (well maybe now we are because we are forced to) but builders were not building 3000 square mcmansions because they liked pretty houses. They built them because every one was told "you work hard, you deserve a huge house".

Look at the popular shows young girls watch. "my sweet 16" where families drop the equivalent of some countries gdp on a birthday party. Most of the girls in my sons senior class, have coach, louie vutton and prada bags . So you're telling me after this we can really expect them to make good financially decision. My personal favorite is when the kid gets a brand new car and the mom says flat out they can't afford it but he's a good student!!
Uhm, we did we start rewarding basic behavior? I fully admit I'm 50, when I was in school you didn't get a new car for being a good student, you got to live one more day without your parents strangling you.

Sorry guys, we (this generation) made this bed ourselves, now we get to sleep in it. Unfortunately its going to bite the ones' who did the right thing in the back side.

 

[NVDisMom]

So much for the image of the struggling homeowner who lost their job clipping coupons in order to keep the home and avoid foreclosure. Yep, let's stop paying on our mortgage so we can move into a nicer home with multiple waterfalls and a cascading staircase. A new $1800 dining set, keeping the BMW with a $700 month payment.

This article sickens me. There is no sense of integrity with these people. These people essentially stole hundreds of thousands of dollars from the banks. My gosh.

I read this article this morning and thought nearly the same thing.

 

[Colleen27]

What really sickens me about what these people are doing is that it will inevitably lead to a tighening of the rules that will destroy people like our dear friends who "walked away" from their home a little over a year ago. They couldn't possibly have kept it on drastically reduced income after a string of layoffs, so they stopped payments and took advantage of the fact that foreclosure isn't instant to save for moving expenses and a deposit on the home they're now renting. It wasn't a decision they took lightly, but since foreclosure was inevitable and back then (before this became a national crisis) the bank wasn't at all interested in helping them keep the home, they felt they had to get a step ahead to ensure some measure of stability for their son's sake.

If enough people walk away as a way out of being upside down, the laws will end up changed so that the banks can come after them for the difference between the mortgage and the market value, and the unintended consequence of that will be to saddle people who genuinely had no options other than foreclosure with debt that will prevent them from ever getting their financial house in order.