Anybody walked away from their mortgage?

[Novine]

Too bad that we only bash homeowners when they consider walking away from a bad investment. People walk away from bad business investments all the time and I don't recall anyone getting all worked up and directing morality attacks on them. Is it bad for neighborhoods and communities? For some. But so are vacant strip malls and I don't see anyone running out to string up the owners of those centers.

[Novine]

"Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. Former Treasury Secretary Henry M. Paulson Jr. declared that “any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.” [[Paulson presumably was not so censorious of speculation during his 32-year career at Goldman Sachs.)"

http://www.nytimes.com/2010/01/10/ma...OB-wwln-t.html

[partyhardy]

Novine is absolutely correct...buying a house is a business deal, plain and simple. Don't let anyone spout out their self-righteous bullshit to you. You have no moral obligation to remain there if you cannot afford it, or choose not to. Of course you would have to live up to the consequences of these actions, but so be it. It'll all be over eventually.

We didn't create this mess, and I for one will be damned if we're gonna let the greedy, immoral ones who did rub our noses in it.

So keep your chin up, your head held high, and do what you can to get by. Good luck and best wishes!

[English]

Too bad that we only bash homeowners when they consider walking away from a bad investment. People walk away from bad business investments all the time and I don't recall anyone getting all worked up and directing morality attacks on them. Is it bad for neighborhoods and communities? For some. But so are vacant strip malls and I don't see anyone running out to string up the owners of those centers.

This. We need much more critical analysis of our present ways of thinking about the economy. Bravo, Novine.

[East Detroit]

Too bad that we only bash homeowners when they consider walking away from a bad investment. People walk away from bad business investments all the time and I don't recall anyone getting all worked up and directing morality attacks on them.

Two wrongs make a right?

Everyone for himself?

Yes, the new morality of the 2nd gen me-generation.

[Downriviera]

BoD, have you applied for the Obama Home Affordable Plan? Your mortgage may be lowered by as much as 50%.

[PlymouthRes]

I am pretty amazed by what I have read here, and knowing Blue personally and her situation, she and her hubby really got screwed over by mule-stiff banks that refused to work with them.

It is true that many people screwed themselves by over-buying and over-extending, but I also know BOD personally and know that he is a pretty rational individual who also is probably getting screwed by circumstance, not deed. Making these self-righteous proclamations of his financial situation without knowing all of the facts is just plain wrong and many here who have chastised him should be ashamed as at least he is seeking council first rather than just casually walking away.

We purchased our 1960's built three bedroom one and a half bath house [[1670 sq. ft.) in 1995 in the mid $100,000 range. We live in -you guessed it-Plymouth!- the supposed bastion of yuppieville. It was a modest ranch style house on an acre and one quarter. My mom got Alzheimer’s in 2000, and we put an addition on that was half the size of the original house for her [[an additional 1300 sq. ft.), added a pool, driveway and three car garage. We only re-fied each time to cover the actual cost of the improvements, not the ridiculous amounts that we were offered by some of the brokers we checked into, never abusing the cushion we continued to build.
Additionally, my mom's former house paid for most of the addition we built for her, so we added very little in the way of debt to our mortgage, as we felt we had more than enough equity and collateral than we needed.

All of this at the peak of the rise in home prices made our house appraise in 2005 in the high $300,000's. Although our home price more than doubled at the peak, we only re-financed when we could not keep up with the bills brought on by my mother’s illness and to stay abreast of the improvements we were making. In total we took less than half of the equity we had amassed, paying all of her medical bills off with that money when she passed. Every year for 13 years we made an extra payment and we had put 20% down to eliminate the need to pay PMI. We felt we were safe as I had been at my job for over 10 years and things were not that bad working for one of the big three. We were very close to paying off that original mortgage, and felt that within another 10 years we would be there if we kept on going at the rate we were.

Then things changed dramatically, causing a situation which we could not possibly foresee neither when we first moved in nor when we were re-financing. I was forced into a buyout at my job which immediately put me in a pretty untenable situation as I really was blindsided by my boss who actually set me up to save his own job. The resulting job that I was able to get [[seven months later) was for substantially less, $14.00/hr. to be exact.

I finally was able to leave that job for a better paying job in Arizona. That ended after 3 short months. They didn't see it coming either, and I held no grudges as it was "just business".

Finally, I got a job back in Michigan again; again at a reduction in pay of about $5.00 more dollars. We had some deficit, but we kept up our payments, using our credit cards to supplement the differential.

All that time, we never defaulted or were late, instead sacrificing everything we were used to doing and going to bare bones in everything we did [[both of us even quitting smoking!). Later I was able to land a better paying job, so we were actually beginning to catch up and make some progress when, after 2 years [[July to be exact), that job went south as well due to some pretty lousy assumptions on the part of my employer that, again, were totally out of my control but affected me directly in the worst way.

Around January of this year I aggressively began to seek ways to reduce our mortgage payments due to the fact that our home had appraised in the low $200,00's and we were now $48,000 inverted on our mortgage and just could not keep up with the payments. Our 20% down, along with all those extra payments and any remaining equity we had was wiped out in one fell swoop by the careening real estate market, again something we could not have done anything about.

I found out that our mortgage was protected by Fannie MAE/Freddie MAC and that started the ball rolling on something called a HARP loan, the supposed savior of folks that were in the same boat as we were. These were the brainchild of the socialist Obama program, something that to date has qualified less than a quarter of those who applied for them, having added a burden to the public debt that will not likely be seen through in my lifetime, in addition to adding stressed-out yelling matches with the bank representatives who were so uninformed about the ever changing rules and regulations that they could never give us a straight answer. We were given bad advice, as we did not qualify for the HARP to begin with, but were lead to believe it was the perfect answer to our dilemma when it was not [[had to be a certain amount of months delinquent, had PROVEABLE financial hardship circumstances that only someone in a third world country would qualify for, no remaining assets, etc.), none of which we ever were. After six months of BS I finally tapped out, declaring that I had been beaten down by an institution that was far better at screwing people than I.

Later, realizing the failure of their proposed HARP program, Obama and his lying cronies again invented a new program called a HARP, which was a bit better but always had the ever changing rules that the HAMP did had which finally lead me to believe that there was not one competent banker or mortgage lender on the planet [[or politician, either!). Also, to have entered into the programs as they existed would have meant that the government would have owned, not guaranteed, our mortgage and we would have almost no opportunity at ever regaining control of our destiny or our home as once it got into that "black hole" of government ownership, you will never get individual ownership back [[think GM and Chrysler here, too). You shoudl at least check into these options before walking, too.

After expressing my disappointment with the financial institution we were dealing with, via a letter to the president and CEO, we were called by the re-fi department offering us pretty substantial reduction in the interest rate we were paying [[2.5% and a almost $500.00/month reduction in the amount we were paying per month). We JUMPED at that offer and closed on the loan after much negotiating on their exorbitant loan fees and such, which put us almost at the same place that we started at before the financial fiscal, sans the 20% and 13 years worth of extra payment equity that we had accrued, but in a much lower monthly rate ultimately.

Does all of this apply to you? I don't know, but your chances are exponentially better if your loan were backed initially by Freddie or Fannie. That should be where you start. Be diligent and do not take no for an answer, realizing it will be a very long haul to the end before you get relief and that you may have to undertake similar letter writing campaigns as we did to succeed.

Otherwise, don't just walk away as you WILL be issued a 1099 for the difference that the house sells for and the loan amount you originally signed up for, despite what happened to Blue and hubby as they were extremely lucky that they were not liable due to their extenuating circumstances. It will also wreak havoc on your credit to the point where it is very likely that the only housing you will be able to obtain will be the backseat of your car. It is worth every effort to not walk away in the end, but will be a very frustrating process as you don't do that for a living and don't know the ins and outs of brokering, so try to relax as best you can.

Finally, after all has failed and the lights start going dim, there is always bankruptcy, especially reorganization [[not sure what chapter that is, perhaps13?) which will allow you to negotiate some other debt down to a payoff level less than the amounts you owe, called charge-offs, and to possibly re-structure the existing loans you do have [[including the mortgage) to a sustainable level for yourself. Many are right in stating that the banks do not want your house back due to their ever growing inventories, so there also might be hope there. They are always ready to deal, but usually more so in the eleventh hour than right away. Stick with your guns drawn and they will eventually back down, of this I am certain, as it happened to us.

Hope all this helps you and good luck, but do not ever give up. Your future financial life depends on it.

Res

[Claire]

as someone who removes derogatory items from people's credit reports for a living, i can vouch that all the statements of doom and gloom about your future credit are overblown-unless you are willing to have these items on your report uncontested.

a good, reputable [[and there are few that are both) credit repair service has about a 50-50 shot of getting a public record removed from your report if it has been there at least 2 years. less than that, the odds are worse, longer than that and they improve.

your chances if you try to contest it on your own depend on how savvy, knowledgeable and diligent you are. for most people, not so good.

So it is possible to remove a public record item [[judgement) without waiting the full 7-10 years. Its not a BK, but an old collection account that the company filed a judgement for.

[reddog289]

I haven't yet and really don't want to. Yet my "Little Brother" did.His credit sucked. If I was in his shoes I would have done the same thing. Sad thing he was getting the place back into shape 6 months before he left and the new "owner" keeps it up better then him.
I try not to think about it when I pay my mortgage as I will do as long as income permits. But when I found out the house 4 doors down from mine sold for $19,000 and I paid $130,000 +.If my wife had better employment and better credit I think I would walk away.Let her have that bank note. When I bought my house in Jan 07 We thought we got a deal, Damn if I had only held off for a year . But thats life. I will pay till I can't then start packing
And as for anything I would look into getting into someplace rural away from the neighborhoods, Urban or Suburban, I myself have been getting tired of hearing how my neighborhood is going south.Sure we have vacant houses, sure thing about the punk kids who live the Hip Hip life, But everything catches up to you at some point. I bought my house to live in, Thinking about it now I should have just went racing.

[firstandten]

Two wrongs make a right?

Everyone for himself?

Yes, the new morality of the 2nd gen me-generation.

No !

but I think the point of Novine's post is don't hold the homeowner who generally has less control and leverage in any financial transaction to a higher standard than the business owners who do the same things and many times much, much worst.

[mpf]

[COLOR=#333333]I am pretty amazed by what I have read here

Wow, sorry to hear of such difficulties. Excellent advice for those who need it, glad to hear you kept the house.

[English]

Most responsible adults of this supposed "2nd gen me generation" do pay their bills and believe in fulfilling their responsibilities. As someone looking to purchase my first home next year, I am sympathetic to the good people who have gotten burned. Folks seem to think that people can predict job loss, catastrophic illnesses or other life changes. I suppose that the "most responsible thing to do" in the view of those who defend predatory lenders is to NEVER EVER BUY A HOME because you can't predict the future.

[Mikeg]

Beware of short-sale 'flop'

By Lew Sichelman, United Feature Syndicate

WASHINGTON — Lenders lose an estimated $310 million annually in undervalued short-sale transactions, according to a study released earlier this month.

But desperate homeowners lose millions, too, especially when unscrupulous loan brokers, real-estate agents and lawyers are involved. And make no mistake: Those unprofessional professionals are often involved as well.

[read the rest]

[LodgeDodger]

people need to stop looking at their houses as cash machines. You buy it because you want to live there.

Does anybody look at their car and say, hey, it's depreciated so much, but i'm still paying $300 a month...i can get a new car, much nicer, and be paying the same note. Why don't i just stop paying and dump it?

+100

...........

[MizMotown]

This is what I don't understand, why didn't the bank just sell it to YOU for the 75k?

That is what is really crazy to me. The bank doesn't even WANT to work with home owners unless you have an aggressive lawyer. It really doesn't make sense, but hey, they got the bailout money!

I know someone who owes 85,000 on a condo. The orginal prices was like 120,000. The market value of condo's in this community has dropped drastically. One just sold for 20,000 and it's bigger and better than his. He offered the bank to pay the market value of this condo even though he has moved to a new residence. [[which is interesting people are getting mortgages before their old house go into foreclosure?) The bank could still make out on this deal. I will be amazed if this condo sells for more than 6000-7000. It is located in Inkster.

Another friend went through the same thing. Had a 300,000 loan. The bank wouldn't even talk to her. They were just waiting a short time for her husbands disablility to kick in after 2 years of waiting. House ended up selling in Livonia for 116,000.

It all complete insanity if you ask me.

[DetroitPlanner]

People need to realize buying property is a risk. It will have liabilities with it. It will not always be considered an asset. In fact when you sign your mortgage you agree to pay two to three times the amount of the price of the home over time. Your chances of breaking even when you apply interest paid on mortgage, taxes, insurance is slim. Your best bet is to save your dough or to buy a house less than what you can afford then make double payments. Yeah its not cool to be living in an 800 square foot house while your friend all have McMansions, but in the long run you will have more financial security. Besides you can only lose $100k on a $100k house. If you buy a $300k house then you can lose more than $100k with just a bad market.

[kryptonite]

Kryponite kinda sounds like he just wants a bigger house for less money, even though he can afford what he has and likes it. If everybody did that, we'd all be screwed. Plus, I'm not sure who'd give him a loan for that larger house after he defaults on his current one.

Not at all, my current house is the right size for me. What disturbs me is that larger houses in my immediate area are selling for less than 1/2 what mine cost. My house still needs a few upgrades, plus my income is stagnant. IF I would leave this house I would downsize.

I am six years ahead on my mortgage payments, I carry minimal debt. But still I see realities.

I am dealing with cancer, although currently I am doing well, more house would be disastrous for me.

Pffft's comment is comforting though. A house like a car is a necessity, even when it depreciates. The days of a house being an investment may be history.

[gazhekwe]

We bought our first house at a price we could just barely afford on my husband's job. I got a job after a year and things were better. Then, after another year, husband lost his job. We went to the bank that held our mortgage. In those days, that was the neighborhood NBD, if you can believe that. We asked for some temporary modification on the payment or some kind of temporary relief until husband could find a job. No dice. I cried and everything. Still no dice. They did give me a Kleenex.

Well, hubby fixed up his lawnmower, and we spent for 500 leaflets, and we leafletted our neighborhood, Green Acres and Sherwood Forest. He got enough work to keep us going for the summer, and in the fall, he got his job back. Yay, Union!

There are ways to survive. At least with no job, you have time to do something else. Lawn work was great because it was 'under the table' so to speak, all good. Leaf work is coming up, you need a good blower, a big tarp and some way to carry the leaves to the mulch pile.

PS, these days I cannot believe we had so much trouble with a payment that was under $400. Times have changed, big time.

[Novine]

"the new morality of the 2nd gen me-generation."

What "new morality"? Business has always operated in this fashion. The only difference is that homeowners were expected to operate under a different standard that applied to no other financial transaction.

If I own a stock that looks like it's tanking, I don't run through some morality exercise before deciding whether to sell it or not. If I can get a better deal for my phone service, I don't wring my hands over the morality of changing phone plans. The last thing that should be entering your decision about financial issues is your emotions. But that's exactly what people like you are doing. You're interjecting emotional arguments into a financial decision. I guess you can pretend that you're holy than the rest of us. But I'm sure I can undermind your moral highground with a few questions about how you make any other financial decisions in your life.

[pffft]

Losing one's job, having a devastating illness [[or that of a loved one), these are all terrible things that might force you into foreclosure. But if you're not forced into it, if it's just a matter of tightening your belt and hanging on until things improve [[Michigan's housing prices will jump in 2014, they're saying) then walking away from a mortgage because your investment has depreciated is wrong. Like stocks...the market goes down, the market goes up. It doesn't affect you unless you choose to sell now.

[bailey]

Plymouthres.- Not trying to make light of your situation, but I'm trying to understand what it is you are upset about with govt mortgage assistance plans... you deride it as socialist, yet you seem enraged that you didn't qualify? If it was so offensive to you in the first place, why did you apply?

Also, I would think the fewer that qualify the better as then it is truly used by those in the most need.

[Corn.Bot]

No real intention of walking away from our mortgage except in an occasional fantasy. In January 2003, we refinanced our house to use equity for upgrades and to assist with a child's college education. Approval was based on spouse's income which annually at that time was 2/3 more than mine. In February 2003, spouse learned his job was being offshored; and by June, he was out of work. We used most of his severance to pay off revolving and installment debt so that our only bill outside of utilities and insurances was Sallie Mae and a monthly mortgage payment that was now fully 50% of our after-tax household income.

Fast-forward to 2010, with spouse chronically un- or underemployed and me still working at my same job at a marginally higher pay rate [[COLA increase averaging 1.5% over 7 yrs). We are still paying the relatively monster house payment. Had occasion to apply for a small loan recently and was told debt-to-income ratio was too skewed. Like I didn't know that, LOL. But we've never once made a late house payment, not in over 30 years of owning homes.

There is no way on God's green earth our mortgage holder would ever consider right-sizing our mortgage because of that. Heck, if we re-applied for a mortgage now, we would not come close to qualifying for our present home even if they valued it at its present underwater level of worth and not our current actual mortgage numbers.

The concept of walking away does not make me cringe as it once did. If my income drops further, or if I'm hit with a serious financial emergency, I would certainly put my monthly house-note money to better use than paying the mortgage.

[Novine]

" Like stocks...the market goes down, the market goes up. It doesn't affect you unless you choose to sell now."

I hate to burst your bubble but the idea that housing prices are going to return anywhere near what they were a few years ago is fantasyland talk. It may take decades for home prices to return to pre-bubble levels and for people paying mortgages on homes bought at peak prices, you might as well burn the money in the fireplace. Here's a good reality check on what people believe and what the numbers say.

http://yglesias.thinkprogress.org/20...-expectations/

[East Detroit]

"the new morality of the 2nd gen me-generation."

What "new morality"? Business has always operated in this fashion. The only difference is that homeowners were expected to operate under a different standard that applied to no other financial transaction.

If I own a stock that looks like it's tanking, I don't run through some morality exercise before deciding whether to sell it or not. If I can get a better deal for my phone service, I don't wring my hands over the morality of changing phone plans. The last thing that should be entering your decision about financial issues is your emotions. But that's exactly what people like you are doing. You're interjecting emotional arguments into a financial decision. I guess you can pretend that you're holy than the rest of us. But I'm sure I can undermind your moral highground with a few questions about how you make any other financial decisions in your life.

Quite doubtful, given your poor excuse for analogies. Selling stocks and switching services are not the same as "walking away" from a financial loan contract you signed. Totally ridiculous.

Thanks for making it personal though. Perhaps your emotional response indicates some level of morality underneath your "everyone for himself" exterior. I suppose that "oh, credit will be clear in 10 years" is also in your vocabulary.

[PlymouthRes]

bailey-

You are indeed asking a very legitimate question, and are not making light of my reply at all. It's all good.

My point in bashing these programs is twofold. First, they are constantly changing the parameters of the requirements so that the banks that are really trying to help people can't even figure out how to use them to these poor folks advantage, and the run-around you get leads most to absolutely give up in frustration because they really aren't able to figure out all the red tape for themselves. I'm pretty well educated and read a ton about these programs, but the people that offer them [[the OBAMA administration and his crooked cronies) never really intended them to work for the majority, only the minority, which is pandering to the least affected people by only approving the minority of the applications, not really helping anyone as they should be.

I happen to think that whatever politician is in charge would screw up the same way, but he is the guy I hold responsible the most at the current time because he is in charge and has proved to me that he is only interested in himself, not the rest of us. His jobs programs are in the shitter, and things are getting worse every day for the middle class, as he has taken the most out of our hides and the rich just keep getting richer, the poor keep getting poorer, not ahead or even as he is always lying about. He has proven to me that he is a failure, continuing to rape and pillage while doing NOTHING substantial to help reduce the national debt and get people back to work, which should be his ONLY goal as he is pissing on those who elected him like a drunk after a long nights binge.

I'm as sick of him already as I was with Bush and the entire Republican Party at the end of his reign. He would do well to follow in the footsteps of Roosevelt, enact the WPA and CCC programs that would at least maintain his dignity in the handouts he keeps offering up By the way, Roosevelt’s programs only lasted 18 months and people were happy to be contributing, which helped their self esteem instead of them being beholden to "the man" as so many are now). It's the same old analogy of feeding a man a fish, vs. TEACHING him to fish so that that man can learn to sustain himself rather than depend on the few who are barely making it to carry his load, too. At least our infrastructure would be put back into a bit of order by doing that instead of pissing what little money is being received away on perpetuating what got us into these problems to begin with. At least people that are unemployed could have some pride in what they were doing rather than to be a burden on an already diminished system.

Secondly, I am not "enraged" at the programs themselves, just the application of them and their success. As far as me not qualifying, yeah, I was pissed, mostly because of the contradictions and constantly moving requirements, as I said, but I worked HARD and got things straightened out myself. Obama and his agenda did NOTHING to help me out, so I did it myself.

I would submit to you that there is no proof that what he is doing is working at all, and we are still in that LONG, dark tunnel with that singular light coming straight at us and nowhere to go. It will take eons of time just to pay off the public debt that he has amassed with the car and bank industry bailouts and their rampant favoritism to big business, let alone actually doing anything to reign in the social programs and proposals that I am sure he will enact in the future, as his track record clearly shows him to do. He IS a socialist, and to imply anything other than that is a bit disingenuous, if not a flat out fabrication. Mussolini was hung by his people for screwing them, and his policies didn't work for the common people as well. I firmly believe that we should not "hang" Obama, as his record is clearly being seen by all, and he will be his own worst enemy when election times come around next time. I believe that in the end, he will be as much a failure as the first George Bush, and will be a not very well liked one term president. At least that is my SINCERE hope.

America, as a whole, does need to wake up and stop living the extravagant lifestyles they think they are entitled to. The minimalist approach went out the window with the last generation as people today have an entitlement attitude that is perpetuated by guys like Obama and the "we will take care of them all" mantra. If it were coming out of his pocket, or any other politicians pocket, I wouldn't be so pissed but they are going to hit all of us in the middle with their pie-in-the-sky ideals and we and our children and grandchildren will be paying for their folly long into the next millennium at the rate we are going.

The five scariest words I've ever heard in my life from the government is "we are here to help". What a crock of Shit. They are in it only for themselves and no one else, and will never fool me with their ridiculous rhetoric.

You should read a good book that I went through recently called "The Creature From Jekyll Island" and then you might understand a bit more of why I see things so badly skewed toward the rich and righteous. It will enlighten you, I guarantee.

Take care and hope I answered your questions.

Res