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

[LanaJae]

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]

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.

 

[dvcgirl]

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]

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

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]

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]

<<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]

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]

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]

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??


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]

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]

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]

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 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.

 

[dvcgirl]

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]

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.

 

[Kay7979]

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]

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]

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]

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]

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]

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.

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.