Could you walk away from your mortgage.

[bgohre]

I know there are a lot of people who are in trouble with their mortgage due to no fault of their own, but I feel the majority of people brought this on themself. My MIL is one. She got a loan for a $280,000 farm house with no job and no income. She had sold a house and had plenty of money, but threw it all down the drain.

She decided she really didn't want to work full time and just let her home go into forclosure. She never even tried to get a serious job to pay for the house. As a matter of fact, she was offered several good paying jobs but turned them down. I guess responsibility just isn't a trait that she wanted.

So now the rest of us have to pay for her irresponsibility. Thanks!

 

[summerrluvv]

A bankruptcy is different than just walking away from the home. The later gets one a 1099 and taxes in many cases.

Never said it was the same thing. I was explaining what can happen if folks are upside down on their mortgage and have more than one mortgage. instead of "walking away" they get rid of the 2nd (and 3rd if applicable).


Here is the link to the IRS and The Mortgage Forgiveness Debt Relief Act of 2007 for those interested.

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

 

[Brancaneve]

I may get slammed for saying this, but to me it is almost like stealing. If you buy a house..it is your responsibility to pay for it. I understand how many people are upside down with owing more than the house is worth. But...they still bought the house...they should do everything they can to pay for it.

Are there a lot of instances where people have lost their jobs and can't simply continue making their mortgage payments? Of course and for those people I feel awful. Sometimes it is simply impossible for people to continue to do so.

I'm talking about these fools that have over extended themselves with big fancy homes and fancy expensive cars that cost almost as much as a house and all the fancy expensive toys in the house. Should they be allowed to walk away...NO WAY!! Sell all the other crap they have to make those payments. Why the heck should the rest of us (society) pay for their mistakes.

I know several people who walked away from their home and for them, it was a huge relief, a new lease on life, so to speak. However, what gets me is that many people used their equity line to purchase cars, timeshares, high end goods, etc. and they all got to keep those things for free. Is that stealing? It's such a great idea, I might just buy myself the Maserati I've always wanted and say good-bye to my house!

 

[big_red_s]

I know there are a lot of people who are in trouble with their mortgage due to no fault of their own, but I feel the majority of people brought this on themself. !

I would normally agree with you except for the fact that 55% of the people who got ARM loans qualified for a 30 year fixed mortgage.

That shows that this whole mass was scam by the financial institution / Wall St. to make a quick buck. That and that a good friend, a programmer for a large bank, was assigned to work in the late 90s on a project which target senior citizens for baloon loans (later it clicked in my head).

There are many people at fault here, but when you pay and put your trust in a financial professional to help you out get through the confusing mass of the banking industry, regulations and many options not even the experts understand - the last thing you expect them to do is to sucker you in to an impossible arrangement.
Just like you trust your car mechanic not to cut your breaks.

 

[Chicago526]

I would normally agree with you except for the fact that 55% of the people who got ARM loans qualified for a 30 year fixed mortgage.

That shows that this whole mass was scam by the financial institution / Wall St. to make a quick buck. That and that a good friend, a programmer for a large bank, was assigned to work in the late 90s on a project which target senior citizens for baloon loans (later it clicked in my head).

There are many people at fault here, but when you pay and put your trust in a financial professional to help you out get through the confusing mass of the banking industry, regulations and many options not even the experts understand - the last thing you expect them to do is to sucker you in to an impossible arrangement.
Just like you trust your car mechanic not to cut your breaks.

Ditto!!!!

Take these NIJA loans (No Income, Job, or Assets). I should feel sorry for bank that lends hundreds of thousands of dollars to someone with NOTHING to their name and no ability to pay it back? Cry me a river. A fool and their money are soon parted and these banks were fools to the extreme.

Walking away from a house for no other reason than you just don't feel like paying for it is wrong. But so is lending money to people with no means of paying it back. I call it a wash, though those walking away will likely (and should!) find it hard to qualify for loans in the future.

Lending money is ALWAYS a risk, and lenders always factor in a certain percentage of defaults, bankruptcies, and foreclousures in their bottom line. That so many defaulted all at once was in large part a problem of their own making.

 

[bumbershoot]

But how can they qualify for that stuff? Even a renting situation they generally check your credit don't they? Several years back in the first IT bust, DH was out of work for a LONG time. We weren't sure if we could keep the house. Thankfully at that time we at least owed less than it was worth, but I still wondered if we lost the house if we'd even be able to find somewhere that would rent to us.

Most landlords just want to know why.

6) For ugly credit, we want the applicant to fully explain the issue(s)
. . . reasons for any bankruptcy
. . . reasons for any slow-pays
. . . job loss, income loss/reduction etc

That has been our experience.

Sometimes the landlord just wants a bit higher security deposit. Sometimes they don't. But they want to know *ahead of time* that they are going to find less than stellar stuff on the credit report, and if so, they want to know who your previous landlords were so they can find out your rental history.

I had a friend move out 2 months after we signed a new lease on a bigger, MORE expensive apartment b/c she couldn't do the extra money (it was HER idea to move, she sweettalked our manager into letting us end our lease early and start a new one). I moved heaven and earth to find a roommate so that my rental history would be pristine and perfect.

We also did not fall victim to MAJOR family and friend pressure to buy over the last few years. We ALMOST bought back in Spring 2007 in S. Florida ... major pressure from our parents that we were throwing away money in rent wth a baby on the way and major pressure from our "friends" who also were DH's business partners. We didn't cave and while for about 5 years we felt like the "losers" still renting ... we are now so far ahead of them. We got a sweet deal on an awesome house in a wonderful town that we don't see moving from for a long time. DH left that job for a HUGE career oppurtunity and we moved back home closer to family ... if we had caved then we would be "one of those people". We feels so lucky and blessed that we followed our guts and stood strong in our rental apartments!!

Same with us, and like Bumbershoot said, we had a lot of peer pressure on us too, especially as a newly married couple back then. I'm SO glad we didn't, and we're seeing my MIL go through all this crap because she bought into it, bought a house that wasn't worth crap for well over $200k.

We need a support group!

And an offshoot within the support group for those of us being pressured by people who, it turned out, wanted us to buy just so they felt better about buying in a bad way!

Almost every one of those who were pressuring us ended up having those awful mortgages. My dad was fine in his house, bought the house next door, had some neighbor disputes and couldn't fix the water in the house (property line problems in his rural woodsy area) so he coudln't charge the renters anyway...they almost lost BOTH houses. My MIL and her family completely lost the duplex they were sharing with BIL and partner b/c the partner held the mortgage and stopped paying on it for a year. Another friend who has EXCELLENT credit and a terrific job has had to struggle with her balloon payment/refi this year, and I had NO idea she would have gotten into one of those types of loans! It goes on and on.

What gets me is, these people will still have to pay back the money, right? I mean, a mortgage company isn't going to just "forget" that you owe them $100k or so. They'll track you down eventually, what happens then??

Discussion about a different recent article focusing on CA mentioned that there are some states where they canNOT come after you. That's why people in *those* states are able to do this.

Owning a home is a luxury not a right and some day people will realize that.

But gosh, everyone's been telling us, through the media and big speeches and so on, for YEARS that owning a home is part of the "American dream". If it's American that means it's a right, right? Wrong?

I don't understand at what point the "appraised" value of a home became such a concrete figure to people. You decide how much a house is worth to you the day you buy it.

Exactly!!!!

I paid $250 for my Wii, I'm not running back to Target demanding that they pay back my $50 because the current price dropped or else I will steal the $250 from them and leave the consul in the parking lot... It makes no more sense with a house than with any other merchandise you buy.

Agreed! Gosh, I don't even take part in after the fact price matching...I was happy to get a refund b/c the price had lowered during an exchange for a coat that was defective, but I would never have expected that to happen.

 

[battricia]

I don't think being "underwater" in your mortgage is an excuse to not pay. I seriously don't understand that mentality at all.

 

[Golf4food]

Living in NJ most of my life, and currently living in Middlesex County (the same as the author of the article) I have to say that IN NEW JERSEY walking away from your mortgage might be a sound financial strategy.

Of course it depends per individual, but our property taxes here are insane. People aren't struggling to pay the mortgage as much as they are struggeling to pay taxes, fees, tolls and whatever else the NJ government is throwing at us (by the way, just so they can spend like drunken sailors).

My property taxes went up 20% this year and in a few short years (2-5) the average propety tax in NJ will top $10K.

I have to admit that simply putting the keys in the mailbox and walking away has occured to me - but I'm not that kind of a person, yet isn't the economic system in the US is based on us cheating one another?
Getting as much money as we can with giving the least amount of value.

By the way - the day that my property taxes will be higher than my mortgage payment (for many NJ households it already is) is the day that I will most likely walk away.

That's the kicker for us. We had a home purchased in early 2007 when our rent was up for renewal and was going way up in price in a bad neighborhood for a small place. We bought the house for about the same cost and none of the hassle of renting. We have since moved again but can't get rid of the old house, which is in great condition, because the market has dropped so far - we owe at least $25K more than the property is currently worth. Still making payments on it for almost a year now, no bites, no renters. We could afford the mortgage just fine but the insurance is crazy expensive, and the city keeps raising taxes and creating new fees. About $300 per month of our $1000 payment on that house is now escrow for taxes and fees and HOI. It's insane.

We have no intention of walking away, but if push comes to shove, I would do it. Banks don't care about us, we're just numbers on a page they can gouge for money - like when they jack up interest on credit cards for no reason, charge crazy fees for transactions or penalties, etc. If we are nothing but business to them, perhaps it is time they were nothing more than business to us (which is, I think, the point the auther of the article referenced by the OP was making).

 

[battricia]

I also want to add about the american dream. My SO and I were also told that owning a home is always better, etc. We have owned 2 homes and the last home we sold in nov. 2008 we lost money on (luckily we put money DOWN so did not have to pay out of pocket). We've been renting since then and I cannot tell you how much less stress I feel knowing that we don't need to pay for a new roof, a new furnace, a new water heater, leaks in the basement, etc. etc. and even more so, knowing that if we have to leave it is not going to bankrupt us.

I also do not believe for a minute that this housing crisis is over, so while we could purchase a house, I feel like it is still a huge gamble, one that I don't want to take.

 

[Ava]

We were looking to purchase a home in early 2007 & were approved for a mortgage that was over 6 TIMES our annual income. When we got the letter from the mortgage company saying how much we were approved for our mouths about dropped open. Needless to say there was no way we'd take out that much, as we could never have afforded the payments. I still don't know what kind of funny math was used to decide we could afford that much mortgage!

We never did end up buying back then, and are still renting. It has it's annoyances, but it's allowed my partner to stay at home with DD.

To reply to the OP, I don't think I could ever walk away from a debt like that, unless I had completely exhausted all other options. I don't know how anyone can walk away from a home just because they're underwater and still sleep at night. I'd probably start having nightmares about the "evil tax man" coming to get me, lol.

 

[a1tinkfans]

One in 4 borrowers are now underwater in their mortgage (the house is worth less than the mortgage).

I was reading a really interesting article from a regular guy who works at the wsj who is in the situation.
http://finance.yahoo.com/real-estat...of-an-underwater-homeowner?mod=realestate-buy

Anyway,
he suggests a link called www.payorgo.com which evidently will calculate should you continue to pay your mortgage or simply "walk away".

I don't know why but I just found the idea of someone actively suggesting people not pay their mortgage really distasteful.


http://www.payorgo.com/

Many moons ago, down in Texas, same thing happened.....people literally upped and left their homes...just abandoned them..the ECONOMY was a HUGE impact....

I am all for SYMPATHY and EMPATHY for those that due to hardship/illness/unforeseen things can no longer make the bills of homeownership............

BUT

MANY MANY people simply bit off WAY more than they can chew AND they PAID more than the real worth because they "had" to have that house.....They knew they should not do it, but dangle the keys in their face and promise the moon and people really made some BAD choices............those people now walk away and leave their debt for others to take up the slack...the homes/mortgages left behind impact ALL of us as a society...it all just piles up and nobody wins in that situation.

So again, I do "feel" for those that due to loss of jobs, medical etc....
BUT I honestly do believe that the majority of these situations could have been avoided with some SOUND "hard" financial decisions (Like I just cannot afford it!) versus the "I work so hard, I deserve this" attitude that seems to be prevalent in our society as a whole....many took mortgages on top of another mortgage (I know 2 people that did this and they are LUCKY that they can still afford to live in their homes despite the "devalue" of it; they'll ride it out).... the economy changes and people SINK, very very sad situation!!!

 

[LoraJ]

That's the kicker for us. We had a home purchased in early 2007 when our rent was up for renewal and was going way up in price in a bad neighborhood for a small place. We bought the house for about the same cost and none of the hassle of renting. We have since moved again but can't get rid of the old house, which is in great condition, because the market has dropped so far - we owe at least $25K more than the property is currently worth. Still making payments on it for almost a year now, no bites, no renters. We could afford the mortgage just fine but the insurance is crazy expensive, and the city keeps raising taxes and creating new fees. About $300 per month of our $1000 payment on that house is now escrow for taxes and fees and HOI. It's insane.

We have no intention of walking away, but if push comes to shove, I would do it. Banks don't care about us, we're just numbers on a page they can gouge for money - like when they jack up interest on credit cards for no reason, charge crazy fees for transactions or penalties, etc. If we are nothing but business to them, perhaps it is time they were nothing more than business to us (which is, I think, the point the auther of the article referenced by the OP was making).

Why would you punish the bank if your taxes go up?

 

[cats mom]

<snip>

Discussion about a different recent article focusing on CA mentioned that there are some states where they canNOT come after you. That's why people in *those* states are able to do this.

<snip>

Yep, CA is a non recourse state. What that means on original purchase money transactions is that the collateral is the property secured by the note, and in the event of a default, the only recourse the lender has is to reclaim said collateral. (take the house back)

Of course re-fi's and HELOC's are a different matter, and lenders do have full recourse on those loans. Whether they actually persue folks for a deficiency is another matter altogether, and with so many lenders taking so many different approaches right now, it's impossible to say what they'll do.

I've heard some speculation that a whole new cottage industry may spring up to go after folks who defaulted, possibly even years after the fact. We'll see. I'm not sure if/how time limits apply on full recourse loans.


It's amazing to me how many people seem to feel that loan mod's, walking away, etc. are OK. It's all blamed on the economy in general and it's like there's little if any stigma associated with it anymore. Crazy!

 

[Ava]

It's amazing to me how many people seem to feel that loan mod's, walking away, etc. are OK. It's all blamed on the economy in general and it's like there's little if any stigma associated with it anymore. Crazy!

I think it all comes down to the sense of entitlement that so many people have these days. For some reason they think they deserve to have nice things without having to work for them. They "deserved" that expensive home, even if they couldn't really afford it. This goes hand in hand with the thought that their actions should not have any consequences. It's the same attitude that makes people think they can run up huge CC bills and then just not pay them. Which also goes hand in hand with thinking luxury goods are a need.

Yesterday when I got home from work I saw a notice stuck to the door for one of our neighbors (apartment building) from the cable company, saying their service was about to be discontinued and they needed to make a payment to keep it on. Their account must be several months in default for it to get to the point of a notice stuck on the front door. My first thought was, cable TV is not a need - just cancel the service! I'd rather not have cable than default on a bill and have that on my credit report.

 

[Purseval]

Yesterday when I got home from work I saw a notice stuck to the door for one of our neighbors (apartment building) from the cable company, saying their service was about to be discontinued and they needed to make a payment to keep it on. Their account must be several months in default for it to get to the point of a notice stuck on the front door.

My cable company shuts off your cable the day it's overdue, no notice it's just gone. We had ours shut off 3 months in a row because they kept messing up our automatic payment option. Pretty darn annoying, too

 

[eliza61]

It's amazing to me how many people seem to feel that loan mod's, walking away, etc. are OK. It's all blamed on the economy in general and it's like there's little if any stigma associated with it anymore. Crazy!

That's what struck me also. I mean they have websites that help you walk away from your loan. I think that is what I find disturbing, it's becoming OK as if it's no big deal.

 

[bgohre]

When it comes to being "underwater", this is how I see it.

Unless you sell, you're really not "underwater". The economy and the housing market will turn around and when it does, home values will go up. But to simply say, "well, I'm underwater so I might as well default" is crazy in my opinion. Stay in your home, ride it out and pay what you agreed to.

My wife and I bought a home about a year ago. Home prices had fallen a bit and we knew they would fall a little further. So we bought our house knowing we will be there awhile and when we are ready to sell, our home will be worth more. Right now we would be considered "underwater". But 5 years from now or 10 years from know I don't believe we will be.

 

[meriface11]

i just read the article and realized i went to college with the author. i am glad he's not walking away!

 

[Ashlotte]

We are house hunting and recently went to look at a house that was a short sale (meaning the bank is willing to forgive the loan if the house sells). It was approved to be sold for $400,000 (after being on the market for over a year starting at $585,000) in a nice neighborhood where things were selling for over $600,000 during the bubble. Anyway, the owners had been in the house since it was built in the early 90s and had paid low $200,000s for it. I didn't really understand why it was a short sale if they bought it for so little compared to its current value. Our realtor told us even though they had bought it for $200k, they had taken out several extra mortgages on it and now owed $640,000!! That is just irresponsible on so many levels. Not just the homeowners who used it to basically get $400,000 in free money and then walk away, but the bank who kept giving it to them. Just ridiculous.

 

[disneymom3]

Back in the "bubble" days, they didn't bother checking your credit. ANYONE could walk in and purchase a home with NO money down, NO proof of income, NO credit check. It was insane. You would have people making less than 25K purchasing 350K homes that they could never realistically afford to pay for, no less maintain (taxes, repairs, etc)

Yes I qualified for one of those. Actually we were already in our house and DH lost his job. I went to our mortgage guy and said that we wanted to keep the house but we couldn't afford the payment, what could we do? He qualified us for a lower rate on stated income alone. I thought that was nuts but I sure wasn't complaining about a lower mortgage.

Even now rentals are not as stringent as purchasing. Look at it this way, I have a rental property. I have to pay a mortgage on it, so if I don't have a tenant in that property I'm paying that mortgage out of pocket. So some times I may be less strick on their credit score as a bank. I will check work history (can they hold a job, or bounce place to place) I will also look to see if the bad payment is a recent thing (maybe due to a layoff or medical problems) or if they have had problems paying onto for the last 10 years.

That makes sense. So, if I moved to your state and had a fairly crappy credit score but had say $50K in the bank, would you rent to me? We are looking at that possibility if DH can get us out of MN work-wise. We will NOT be walking away from our house, we aren't upside down anyway but I would do a short sale if nothing else. (Or actually, I wouldn't move if we were.)