Housing Crash Forum
posted for patrick.net reader J
I’m in an underwater house right now and am saving up cash for my big escape. When things truly bottom here and prior to hyperinflation hitting, I am going to buy another place for less than half of what I paid for my house back in 2005. After getting the keys to the new place, I will then send my lender jingle mail for the house I am currently living in and would become a slave to if I stay in it…
Us underwater folks that still have good jobs and the cash needed to qualify for a second house can wait things out until 2012 and not have to pay taxes on the loss. You probably already know this and it may be posted on your site somewhere, but according to the IRS website, legislation was passed in October of 2008 that extended the Mortgage Forgiveness Debt Relief Act through 2012. In my case this actually encourages me to send my lender jingle mail.
See bottom of this article:
http://www.irs.gov/irs/article/0,,id=179073,00.html
It is mentioned again in this artice:
http://www.irs.gov/individuals/article/0,,id=179414,00.html
They need to stop jerking with interest rates so that house prices can
truly reach the bottom.
Best Regards,
J
98 comments on “Planning Perfect Escape From Underwater House”
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Joined: 1 Jun 2009
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It’s highly unlikely that you will be able to get financing for house #2 if you are seriously underwater on house #1 already. Banks are currently averse to lending to deadbeats.
Your best thinking is what got you into the mess you are in, so perhaps you should reconsider how “perfect” your ideas are.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
I was easy to get approved for house #2. Now I’m simply waiting it out for even better deals to surface - and we are bombarded by indications that prices will continue to fall as inventories rise.
812 credit score, $200K in cash, $100K in investments (401Ks, Annuities… 75% of which can be used as “reserves” when applying for a loan) - hardly a deadbeat…
My worst thinking was putting 20% down on the house I am currently living in (purchased in 2005) thinking that the worst case would be its value would fall by 15% (and if then, only for a few years). Instead of living with this loss/mistake, I am going to doing something about it. I’ve been working 60, 70, and sometimes 80 hour weeks over the past few years in order to build up my cash (I am a self-employed engineer).
Sure, I could toss that $200K at this house and bring my principle down to what the house it worth, but then I’m chasing a sinking ship. Starting afresh in a deeply discounted house makes more business sense. And save the moral chastising – my lender (American Home Mortgage Servicing) told me the following after they verbally abused me for 20 minutes on the phone, “Sir, the truth is, we might have been able to modify your loan if it was not for us coming out of a recent bankruptcy.” Go ahead and start another thread with that concept – “you better pay what you owe us, but we won’t pay what we owe to others.”
What I’d really like to do is just keep saving cash and buy a house outright one day; however, I don’t think the timing will work - hyperinflation will likely hit before I save up for the full purchase price of the homes in my area.
Joined: 1 Jun 2009
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Comments: 1
Well well, Mr. Nomograph! I think J represents MILLIONS of folks who believed the lies of the NAR and our local politicians who get more power only when property taxes go up. I am also in a similar position to Mr. J , but with a little side note. The NAR and Wall street housing bubble cheerleaders extracted overa trillion dollars from us true believers who sipped from the bowl of poinsioned soupo we were offered. HOUSE prices NEVER go down! The stock market is ALWAYS good and will “return” to higher levels, but just wait a few hundred years. I don’t know how many human investors will live to see these stock increases. Back to the point! I stopped paying my house PITI 36 months ago, and saved the money (PITI) that I would have paid to the Mortgage thieves. Well, add it up1 I still have my high paid job (not a banker Realtor or other scoundrel), and I have amassed $36,000 PER YEAR IN SAVINGS. THAT IS 36K X 36months= $108,000 to buy my next house. BUT THIS TIME NO MORTGAGE! No more lying bankers with their hands in my wallet, no more whining Realtors. A cash deal PAID FOR BY THE money they would have shaken out of me. By the time this mess is over, sellers will be begging for cash deals, especially when mortgage rates go back up to 9% per year. I see my pending foreclosure as an opportunity to save, relax and watch the “big boys” sweat it out. “My” house has ALREADY DROPPED 70%, HHMMM WHAT HAPPENED TO THE REAL ESTATE PROFESSIONALS WHO PROMISED ME THAT NOW IS HE BEST TIME TO BUY—AND IF YOU DONT BUY NOW
Joined: 1 Jun 2009
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Sticking it to da man.
thelittleguylobby.org
Joined: 22 May 2009
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I didn’t think 2005 was the peak in California so where do you live that home prices has fallen 50% from 2005 levels? I can understand falling 50% from 2007 levels but I am having trouble with 2005.
Unless you have a mortgage that is about to flip to a painful rate I can’t see the point of leaving right at this time and losing the power of your $200K. The loss of equity is a paper loss at the moment and while the price may never recover I would be concerned about parting with cash right now. I would suggest that buying right now is risky.
From a cash flow point of view it probably would be smarter to rent. There is still too much uncertainity and people’s expectations are not exactly inching up. Safer to buy on a real uptick than trying to guess the bottom.
Assuming you aren’t going from frying pan to a fire, the only worry is your credit score in case you need a new car, credit card or some other financing over the next few years. This may not apply to you but some employers check credit score as part of a hiring process.
Are you sure you don’t have a recourse clause in your mortgage docs? It’s one thing for a mortgage company to not bother to chase a person with no money but you might be worth chasing. Especially when they realize you bought another home.
Even if the numbers look good you need to examine all areas of risk before the key drop off move.
Joined: 1 Jun 2009
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Good luck, cashmonger. You’ll help me, a renter, by lowering house prices when the bank is saddled with your current house. As long as my taxes will pay for bad banks, I want to recoup some of that money by getting a house cheaper. I too fear eventual inflation. I love deflation so far; seems to be great for the average consumer who can manage to stay employed.
Joined: 1 Jun 2009
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If you think now is the time to buy, go ahead, you’ll be kicking yourself in the read end a few years from now, IMO. You will be simply jumping from a house that is currently underwater, to a house which will soon take on water and sink too. . . .
And by the way, a note to nomograph. Being underwater does not mean someone is a “deadbeat”. It just means they bought an asset at a higher price than said asset is worth today.
At this time, 24% (almost 1 in 4) Americans with mortgages are “underwater”. That statistic has gone up from 20% of Americans in just a few months time.
For those of you tempted to buy now, you will want to read the following just released PDF by T2 Associates.
The graphs and charts point to a much further decline in Housing. And like the authors point out . . . when housing prices finally meet the longterm trendline of the Case Shiller medians, it doesn’t mean prices will stop falling. T2 shows you charts of other assets and markets which sailed right through their trendline support . . . some dropping another 30-40% or more.
Housing is a giant crapshoot at this moment. Unlike stocks which you can buy and unload in the click of a mouse, when you buy a house today, you run the risk of sitting on an asset which will continue to decline with a shrinking pool of people who can find loans to buy it off you.
Keep in mind too that 70% of foreclosures on banks’ books at this moment are in “Shadow Inventory”. When those are added in, and as more Option ARMs and Prime borrowers walk away from their current underwater homes, will this pressure home prices up or down?
Now check out this just released PDF . . .
http://moremortgagemeltdown.com/download/pdf/T2_Partners_presentation_on_the_mortgage_crisis.pdf
Joined: 1 Jun 2009
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If you think hyperinflation is on the horizon, then why would you buy another house? Better to keep that cash and have it earn whatever interest rates you can get than plowing into another house where the best scenario may be break even for years. Home prices are falling at the same time there are historically low mortgage rates — what happens when those spike up?
This demonstrates the upside down nature of the current system. He would be much better off had he got 100% financing on the house, then he could walk away.
Joined: 19 Sep 2007
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Comments: 42
Hey, everyone, Calif. RE cycles take 8-12 years to go from top2bottom or bottom to top. This BAD Recession will take about the same 8-12 years to bottom out. So, if the top was 2006-2007, the bottom should be about 2014 to 2019.
I would wait to buy/invest until the prices remain the same for 2-3 quarters! Like 1995-1998. People forget that the bottom is the bottom when prices stop dropping and “stay there” for 2-4 quarters.
So, save your CA$H, and RENT till the market BOTTOMS in 2014, then start shopping. It’s been only 24-30 months since the top of the market!
I have experienced 6 cycles, 3 top and 3 bottom moves.
Real Estate moves slowly, so be Frugal & Cheap and buy low and sell High!
PS: my last 198 sales from 2001 to 2007 averaged only 2 years hold, 1165% gross profit and a monthly gross return of 48%. Can we say BIG IRR?
Joined: 1 Jun 2009
Posts: 4
Comments: 65
Sacramento, CA suburbs. Things peaked here in early 2006. I wish I had gotten the 100% or 103% financing. I do not think now is a good time to buy (despite what the Realtards are saying). repo4sale and rocktrueblood - thank you for the facts and figures. This is good stuff to chew on.
Joined: 1 Jun 2009
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Good thinking. Having been in mortgage banking for the past 16 years, let me tell you; If the bank thought they could get ahead financially by putting the screws to you, they wouldn’t hesitate. This was a business deal and the bank knew their risk when they entered into it. There are way more exploding loans waiting out there than anyone talks about. Don’t jump in too soon. The punishment period for FHA is only 3 years after a foreclosure, so if you stop paying now and rent for 2 years after the year it takes the foreclosure, you’ll be even more money ahead.
Don’t see how hyperinflation is possible, though. I think inflation only happens if we inflate wages, otherwise people just stop buying stuff and no inflation. I don’t see how wages can inflate when we have the great equalizer called ‘outsourcing’ that will send 1 job to India for every 10 that get a 10% increase.
Joined: 19 Nov 2007
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Dear potential Deadbeat,
Just to clarify things, you are currently not a deadbeat. Instead you are a gambler who purchased a home that you will either pay off or not pay off. If you do not pay it off you will be a f-ing deadbeat.
There is no way that you should be allowed to buy another property when you refuse to meet your obligations on the first one. What do you think they would do to you in vegas if you welched on a marker, give you another? No, they would sue your ass(in the old days you would become part of the desert landscape)
Let me tell you why you are such a scumbag. First, instead of using common sence in 05 you decided to buy at the peeak of the market, helping to drive housing prices out of control. Second, let me guess that you took out some type of loan other that a thirty year fixed. Am I correct? If I am correct, that means that you gambled that the price of houses would continue to rise and historic low interest rates would last for the next 5 to 10 years. Third, you are going to f-ing welch and because of that I will have to pay for your gambeling loss by having to pay more fees when I obtain a mortgage and higher takes because the banks need bail out dollars. Fourth, while you refuse to pay for yor what you promised to you are going to buy another place and drive up prices again.
Who knows you may currently be a deadbeat as well…..have you stoped paying your mortgage? If so then you are a Looser!
Not that the banks were without blame by giving loans to people who have no spine or follow through on their commitments. However, the problem we have is that there is no stigma anymore for a-holes that do not pay their debts. The banks should start a website that show who is behind on their obligations and who welched on their commitments. I would love to know where you live as I would put a sign in fromnt of your house letting your community know to never loan you anything you f-ing looser.
J, I would love to hear your response to the questions posted in this comment……
s
Joined: 1 Jun 2009
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tb, page 52 of the PDF rocktrueblood supplied describes the decrease we have had here - we peaked in late 2005.
Joined: 1 Jun 2009
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dear morrsean (morron sean?),
You can go right ahead getting screwed by washingon and wall st if you like but I’m with J on this one. If the banks can walk away from their obligations why should the average Joe be held to any different standards. It’s a business decistion, nothing more nothing less. Get a grip and get a life.
Average Joe
Joined: 1 Jun 2009
Posts: 4
Comments: 65
morrsean, my LENDER has refused to pay ITS debts - like I mentioned in a follow up post, THEY are coming out of bankruptcy. Please read all of the posts before offering your opinion. If you want to call people a-holes, be sure to spread it around to the banks, Wall Street, the NAR, and all of the mortgage brokers as well.
If you are such a model borrower, why are you in a housing bubble forum? I am in here for some real answers and advice - ideally ones that are backed up with actual data.
As far as you or my community trying to bully me into feeling guilt for considering buying and bailing, these are the same people who made sure we paid top $$ for our house when we moved here. I’ve since talked to the Realtard/owner who sold us this house and he claimed that our neighbors helped to pressure him into raising the asking price not once, but twice at the time we bought it. I’m not blaming them - I bought the house. Just laying out the facts.
I have a 30 year fixed. I am currently on my mortgage and can afford it. I have no credit card debt either. One doesn’t get a 812 credit score by missing payments.
Joined: 6 Feb 2009
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This sounds like a epiphany from a drunken stupor. Go back to sleep. Last call was four years ago. There’s nothing left to do now but sleep it off.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
rocktrueblood,
I want to thank you again for the PDF you furnished. Pages 62-65 do a great job describing what I see coming. The entire document is very relevant and well done.
I’ve seen the tiers of defaults work through my community in the past few years. In 2007 there were a dozen homes for sale on each street in the low to mid-priced section of the community. Then in 2008 you started seeing the mid-priced section fill with For Sale signs. Just this weekend I drove through the custom homes area and was dumbfounded at how many For Sale signs I saw – on one street in particular (5) multi-million $$ homes in a row were For Sale – 3 of which were holding Open Houses. Meanwhile the low to mid-priced section only has one, maybe two For Sale signs max on their streets – those areas have already been flushed through once – exactly as the data within the PDF reveals.
Thanks again,
J (aka cashmonger)
Joined: 1 Oct 2007
Posts: 0
Comments: 3
I am with Morrsean on this one.
When you look at this from a macro perspective, the banks are failing BECAUSE a-holes like the OP are walking away from their mortgages. All these “investors” realized they are not making money, they start puling out and the whole thing falls down like an avalanche.
There was a study that showed that most people who get behind willfully choose to not pay their mortgage. Lifestyle changes, like a job loss are not the culprit. While prices were still appreciating, they showed that people still found a way to pay their mortgage.
His argument boils down to “other people are deadbeats, so Im not going to pay either!” He may not feel culpable because he was not the one who precipitated the landslide, but make no mistake, cashmonger bought in an inflated market with the hope to make money. He epitomizes the ugly american.
Without ethics is a person really a person? I say not. Lets carve up his body and sell it to transplant patients. I bet all his organs are worth more than his cash savings.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
Chris,
Your closing line is alarming. Based on life experiences, usually the folks that openly judge others and accuse them of lacking ethics are the ones with skeletons in their closets. That said, what is ugly is the fact that millions of people lied on their mortgage applications falsely stimulating values into unsustainable prices. I personally did not realize that incomes were so low until the carnage began. Now that the blinders are off and the truth has emerged, I’m left holding my…well…you know while all of the folks that got into houses they couldn’t afford have already split town so to speak leaving you and I (the taxpayers) holding the check. Being in the 33% tax bracket, I myself will be paying for mine and other people’s mistakes for years.
You would be mistaken to assume I thought I was going to make money on my house. What I wanted is what I got - a nice house in a good school district that I can afford. I had no intentions on flipping it or making money on it. Like I mentioned previously, I put down 20% and factored the possibility of a 15% reduction in value. Little did I know I would be looking at a 45%-50% reduction.
BTW, I hear the Detroit Lions need a new Quarterback - good salary, great benefits, and you only have to work one day a week - Monday.
Joined: 1 Oct 2007
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Absolutely no skeletons in my closet, ethically. If your house was appreciating, you would still be making the payment. You have justified to yourself that an unethical action is justified because other people did the same. That some people overstated their incomes is not the issue. The vast majority of people who walked away, did so by choice. Its other losers, like yourself who are to blame.
Looked at like an investment, you did not research the quality of your investment. No differnt than a stock that people dump when they realize it is overvalued. (It doesnt matter that many investors bought on margin.) Had you looked at Case Shiller in 2005, maybe you wouldnt have jumped into the market. Because you are in the “33% bracket”, you are in a unique position to game the system by buying another house before dumping the other one on taxpayers. And further justify your actions because you pay more taxes than an average person.
What a piece of shit.
I think it’s worth noting that the only reason Patrick published your letter is because it is provocative. If you had said you were going to be a good citizen and take the loss, it wouldnt have been noteworthy. You had to have expected this response and yet are trying to defend your choices. And I think you derive some satisfaction from the fact that you are in the “33% bracket” and can afford to do this, which is why you enjoy talking about your plan, openly without fear of retribution. Small time sociopath.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
I am still making the payments and saving money at the same time Chris - if you took the time to completely read the threads, you would know this. Good luck trying to ignite guilt by name calling and riding on your supposed ethical high horse. The system has consequences Chris - I will take a credit hit. There is nothing you can do about the fact that I have cash and may use it to my advantage here. What if I walk away and rent? Are you going to rail on me for that idea? You sound like the type of person who is only happy when you see other people fail.
Cash is king and banks were greedy and stupid for enticing people with theirs.
When did you buy your house and why do you troll on housing bubble forums trying to guilt others who have different opinions than yours?
Joined: 1 Jun 2009
Posts: 4
Comments: 65
One of the reasons I posted this was to get more data. rocktrueblood provided what I am considering the most valuable, consise, and relevant collection of data that I have seen regarding the current housing situation - so I have gotten what I needed out of this thread.
The various opinions have been very interesting to read; however, I generally shut down once name calling starts – it really doesn’t bring anything productive to the table.
Best of luck Chris.
Joined: 1 Jun 2009
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Comments: 1
I totally agree with Chris on this one. People who walk away from their debts/commitments are f-ing deadbeats. Whether you thought you would make money on your house or just wanted a nice house in a nice school district doesn’t matter. Like Chris said, if you welched on your debt in Vegas…..you’d be part of the desert lanscape.
end of story!
Joined: 15 Jun 2007
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Comments: 1183
cashmonger,
Good sir, I salute you as a true patriot, and, as a taxpayer, am grateful for your service to country with the 20% down that you put in the first loss position. The Fed and banksters are doing everything they can to avoid price discovery. At this point, I believe it is appropriate to exercise your implied put option and rid yourself of the albatross. I would warn you to be extremely careful if your purchase another home and need financing to make sure you do not commit fraud on the loan documents. Your new lender (and, quite possibly, old lender) will be very interested in “other indebtedness” and what you plan on doing with the home you are currently living in. At the very least, I imagine you would need to make a “good faith” effort to rent it out (and then let it go the jingle mail route when you can show it was a bad investment). I would most definitely get a legal opinion from a lawyer to make sure you have your bases covered so that AHM cannot go after your assets (however, unlikely). If you go the cash purchase route, you definitely have a lot more freedom to maneuver.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
Wow, this ignited some emotions. Here is how this made it to the forum. I emailed Patrick with original post on Friday. I thought he would find the IRS information useful. He replied asked me if he could post this anonymously. I told him to go ahead.
The “story” is true, including all of the facts and figures. I’ve worked hard building up this cash (all the while paying my mortgage) only to watch my lender go into Bankruptcy (look up AHMSI for yourself) and turn around and tell me to go ahead and keep ponying up. It is like a renter paying his rent while the landlord doesn’t pay his mortgage. This is the ultimate paradox in my mind.
The folks with the Vegas desert landscape references sound like they have the Hitler mindset in wanting to bury the millions of people that have ever defaulted on their debt.
Joined: 1 Jun 2009
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Comments: 1
When did banks stop lending to deadbeats?? It was all the rage a few years ago and helped get us into this current mess.
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
Why do so many readers think that there is some moral obligation to pay the bank? The mortgage agreement is simply that they get the house if he stops paying, not that he pay no matter what.
Banks are not people. Banks have no morality. They would kill you and eat your liver if it were legal.
Hell, if it were legal and the bank didn’t kill you and eat your liver, their shareholders would sue them for failure to act in the best interest of shareholders, which is the legal obligation of management.
Joined: 6 Jul 2008
Posts: 3
Comments: 69
Mountain View, CA
I’m in the exact same situation as you Cashmonger.
If our employment situation takes a turn for the worse, we’re going to bail and take our cash with us. Start fresh back in a “normal” east coast state that isn’t already bankrupt like Caleefonia. Jingle Mail…I like that.
Joined: 1 Oct 2007
Posts: 0
Comments: 3
Patrick- Because we were brought up, and instinctively know, that people need to pay their debts or society fails.
Let us hope that he is not able to find anyone to originate a new loan for him. If he is 30% underwater already, they may do the math.
Patrick, I think your morality is confused. Last post on this POS site.
You are now advocating the kind of thinking that caused this whole mess. Greed thinking. Selfish thinking. Me thinking.
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
I agree that people should be honest and trustworthy, and that contracts should be honored. Democracy should be honored too.
The bank knowingly wrote a “put option” on the house into the contract. They are in the business of lending, so they are not innocents. The wrote the consequence of not paying into the contract, and cashmonger plans to freely exercise that option in accordance with the law.
The bank made a bet with cashmonger, not a religious covenant. The bank lost the bet. No morals were violated — until the banks went crying to Washington DC.
Society fails when Wall Street places members high in the government and uses that influence to force the rest of us to pay off their own failed bet: privatized gain, socialized risk. “Our” representatives represented only the banks. Once you know the whole game is rigged, society is mortally wounded.
Joined: 1 Jun 2009
Posts: 4
Comments: 65
I will add that I too lost the bet. I lost the $140K I put down on this place - that money will never be seen again. If I keep this mortgage propped up with my cash, my recently BANKRUPT lender makes out like a bandit - reaping the rewards of my hard work. What Chris is essentially asking for if for the banks to have zero risk.
Joined: 2 Jun 2009
Posts: 0
Comments: 7
Dont you see….Society needs to fail*. Its broke. The faster and more people willing to help it along the better.
*Note: not actually fail, but a better examination of the laws and regulations need to be done to catch up to the 20th century. Old ways of thinking caused this….and are perpetuating the problem.
Joined: 6 Jul 2008
Posts: 3
Comments: 69
Mountain View, CA
I have a follow up question relating to this one. I put 10% down ($85K) and covered the other 10% with a HELOC 2nd mortgage. What are the implications of walking away from the second mortgage? I think my place will be worth less than $350 when the bottom finally comes. As long as my S.O. and I are employed, we will keep it and keep paying. But one lost job and we’re done.
Like Chris, I didn’t realize that so many liar loans and option ARMS were poisoning the system back in 2005. I thought incomes were truly supporting the crazy prices here in the Fortress. Based on the # of listings on MLS now, I can see that the pain is coming on strong here in MV/LA/LAH/PA. There is a storm coming, and it is just starting to drizzle.
Joined: 2 Jun 2009
Posts: 0
Comments: 36
It is extraordinary the anger these posts generate. The ones claiming the moral high ground have to be hugely in debt to have these attitudes. The terror some posters show at having their access to debt reduced (credit score) is telling.
You don’t owe society a lifetime of labor to buy a place to sleep at night. The idea is comical.
As a businessman who has operated in several countries and has owned businesses since my teens (a long time ago!) I have learned painfully that ANYONE will do what they perceive to be in their best interests regardless of “moral” constraints. I have been conned by little old ladies, deeply religious people, family and close friends. Human nature is to look out for number one.
Yet another interesting feature of this thread is that all the angry voices use death threats, swear words etc to describe a contractual discussion. If you retreat to your inner ghetto when faced with a situation you are not thinking rationally.
Cashmonger when the time is right walk - if only to annoy these debt slaves. My guess is that you are more cash rich than the combined cash assets of your wannabe firing squad.
Joined: 2 Jun 2009
Posts: 0
Comments: 3
“Banks are not people. Banks have no morality. They would kill you and eat your liver if it were legal.”
I strongly disagree with this. Everybody can blame da man by generalizing about gigantic corporate “banksters” all they want. Some banks are run by people.
My father has run a local bank for many years, in an area where there was no real estate bubble to speak of. His bank did not engage in crazy loan practices, nor did they offer any of the adjustable rate products that have ruined people. Knowing that I live in California, he starting warning me about impending doom several years ago, and strongly advised against getting caught up in what he described as a disaster waiting to happen.
Now, the downward pressure on the economy, coupled with the irresponsibility of other banks, has seriously compromised his business. People are defaulting on traditional loans. They can’t make payments because they’ve lost their jobs. This has forced layoffs at the bank. Once more, banks aren’t lending to each other, which is further crippling his business.
I’m not asking that the man be given some sort of award, but I’m tired of hearing generalizations about “banksters”. If it sucks that somebody loses their job due to the financial meltdown, then it also sucks that banks that never strayed from traditional lending practices are also paying dearly for this mess.
As far as walking away goes, I don’t think it’s anything to brag about. It may be the best choice for an individual household, but somebody else will pay the price. Nobody has to feel sorry for bad banks receiving the keys in the mail, but they might think a little harder about who ultimately picks up the slack in that equation. It ain’t the bank. It’s all of us.
I agree very strongly with what appears to be the underlying theme of this site. Our economy is fueled by debt, and now it’s destroying us. That said, banks AND the people that took out those loans are equally responsible for this mess. If somebody believes what the NAR tells them, then they shouldn’t be eligible for a loan in the first place.
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
OK, many local banks are much like people, and deserve respect for not being evil like Countrywide et al. My mistake for overgeneralizing.
I still maintain Countrywide would eat your liver and deserves no respect though.
It’s a brilliant idea to present quotes from Robert Shiller and the NAR on a simple quiz, and reject all lending to people who actually believe the NAR quotes!
Joined: 30 Apr 2007
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Comments: 3169
Went to open houses on weekend in Los Altos around the golf course area, dead. Everyone else other than us were neighbors checking out each other. The only house that got any meaningful traffic was one that was priced ~$1.5M. Many houses were still priced in 2006 wishful terms with outdated 1990s appliances and deco expecting a fool to come along to pay $2M.
One of the agents was very frank with us, she said that nobody as of lately was able to obtain any loan beyond $729K regardless of circumstances. Nobody. The max one could loan was $729K, jumbo conforming. So anyone buying $1.5M+ property essentially needs to come up with close to $1M down payment. Obviously there are not lot of these left, and if someone is that cash rich, he is probably not that dumb. So the price offered to these $2.xM properties are ridiculous, people are lowballing 30% off all the time.
$1M dollar loan seems like the thing of the past.
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
What surprised me was, a lot of the previous buyers of Los Altos or Los Altos Hills just a few years ago were taking out million+ loans. I always thought that these people must be rich to be able to afford Los Altos Hills, maybe they are not. If I were buying a $2.5M property, I would either buy it all cash, or take out $1M max loan for tax reason. There is absolutely no way that I am going to take out $1.5M super duper jumbo loan just to satisfy my ego.
It seems like that a good portion of the $2M+ buyers need $1M+ loans to close, how sad.
Joined: 2 Jun 2009
Posts: 0
Comments: 3
I seriously hope that the original poster doesn’t mean by saving up, another form of saying “not paying my mortgage until the bank kicks me out” but I know that most people who are underwater do continue to pay their bills on time, and try to stretch out their homes for as long as they can.
But a loss is a loss and people that got into it have to realize the loss, because its equitable.
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
Hey, OO, I don’t have the energy to find the thread where you commented on the demise of starchitect pre-fab firm MK Designs (Patrick… Please give us back a main thread!). Thanks for the field reports from the South Bay (especially the non-English press translations). FWIW, here’s a little summary I did of MKs “cheapest” product compared to Clayton Homes I-house.
mkLotus: $175k/700sq.ft. = $250 /sq.ft.
i-house: $75k/723sq.ft. = $104 /sq.ft.
Think the Oracle of Omaha may have another winner on his hands.
Joined: 2 Jun 2009
Posts: 1
Comments: 82
I thought the Clayton Flex I and II would make an awesome vacation pad or granny flat. The I house is a little too mobile home-ish for my tastes.
Joined: 17 Feb 2009
Posts: 0
Comments: 19
Waiting, excellent post!
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
Sorry the search function doesn’t search comments yet. You may mean this comment by OO:
http://patrick.net/forum/?p=350#comment-171243
I will fix the search function soon. Other people wanted more threads, so it’s hard to balance all the requests…
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
I’ve also got some data from another agent re: Los Altos aka the fortress of the fortress.
Mar 08 for sale 60 pending 22
Mar 09 for sale 107 pending 7
Mar 08 avg sold price $2.06M
Mar 09 avg sold price $1.50M
Mar 08 avg sq ft price $788
Mar 09 avg sq ft price $652
Now, here is the biggie
Sold price/asking price
Mar 08 100%
Mar 09 88% (woohoo)
Who said that the fortress has not cracked?? The high end fortress seems to be cracking much faster.
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
EBGuy,
actually MkLotus is a rather high end model for her, her cheapest model with the first adopter built in Seattle already cost more than $250 a sq ft. I talked to her firm on and off for a few months doing feasibility study, and there is simply no way I can make the numbers workjust to build a 2200 sq ft home (the calculation came out to be around $650K on a perfectly flat piece of city land with all utilities already piped in, with NO upgrade).
There are a few more modern prefabs I talked to in the Bay Area including the CleverHomes which also seem to be charging in the same range. I don’t expect them to survive either. Another I talked to is one in Sacramento (need to search for my notes), which in the process of conversation just dropped off from the face of earth.
Joined: 28 Apr 2007
Posts: 0
Comments: 627
OO,
If you find a prefab that actually makes sense above the 1500-1600 sq ft range, good on you! It seems like tiny houses are great prefabbed, and moderate houses are okay, but once you get into the 4 bed size, the cost benefits disappear and start getting MORE expensive than stickbuilt. (But with less chance of cost overruns.)
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
sfbubblebuyer,
thanks to EBGuy’s tips, I just called up i-house to enquire about their situation, and it turns out to be very exciting. They are opening their demo site in Sacramento on June 15 and I will definitely drive there to take a look.
They are by far the cheapest prefab modern out there (everything else is 2x at least). Grant it you get formica counter top (which I am sure you can upgrade to stainless steel or whatever fancy stuff you want), the price tag is just amazing. At that price level, I am going to order a backyard cottage first (if I can get approval from the city) as a test.
So apart from the base price you see, the transportation cost per module is $5800, plus state sales tax on the whole price tag. There is no stupid “buttoning-up” cost like MKD which could run hundreds of thousands. They basically deliver a box entirely finished to your site, and you deal with the hook up with utilities. They basically cut the involvement of contractors to the least, and that is precisely how prefab houses should be done.
Now the only work is to convince your city.
The good thing about it is, I can build a house in phases. Instead of getting 2500 sqft all at once, I can build 1500 at a time, and wait for later smaller modules to add on to. I-house seems very viable.
Joined: 3 Jun 2009
Posts: 0
Comments: 2
Patrick,
Im glad I came to this site. Like Cashmonger, I too bought in 2005 and now my house is down 50%. I have the cash (not as much as cashmonger) to buy another with a large downpayment. I would like very much to send the keys of this one back to Citigroup, as it”s a sinking ship also. I’m mortified, however, of losing my good credit. I took out a 30yr conventional loan on this property and everyone assured me (family also) that prices in S. Florida would NEVER go down.
Over the past weekend I was outbid on an offer I made on a short sale. Now that I read your site, I think it was all for the better and it’s wise to wait and see how much lower home prices sink.
Joined: 3 Jun 2009
Posts: 0
Comments: 1
A mortgage is an agreement, with a written and mutually understood arrangement if the promises are broken. There is no moral argument here, the risks and rewards were mutually agreed upon.
Joined: 24 Aug 2008
Posts: 0
Comments: 6
OO,
Cool. Hopefully you end up with an ISS and not a MIR. I hope you don’t get ideas to hoist your prefab with hot air balloons.
Prop13 will get trashed soon forcing the house rich and cash poor to move away from the Fortress. This will be the trigger for the severe down leg in the upper tier housing. More taxes. It’s coming.
You may be able to buy a 1/8 acre lot for a fraction of the $750K average, and expand your home as your needs increase.
Joined: 25 Nov 2008
Posts: 1
Comments: 18
“Prop13 will get trashed soon forcing the house rich and cash poor to move away from the Fortress. This will be the trigger for the severe down leg in the upper tier housing. More taxes. It’s coming.”
I wish this were true. However, IMHO, at best, certain legs will get kicked out from under Prop 13, but at a basic level (e.g., owner-occupied homes), it will stay with us for a long time.
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
More gossip about the Cupertino murder.
The stabbed woman has a corrupt commie dad in Beijing who did money laundering through daughter, and that was how they were even able to come up with the down payment for their first house in Garden Gate in 99, only 3 years after they came to the US.
Then, after they cashed out on the first house in Garden Gate, the woman’s dad laundered more money to come up with more shortfall of the down payment for Cupertino, and apart from the gardener, other subcontractors were having similar issue with her not paying, not because of lack of money, just because she was mean.
Then it seemed that her getting stabbed is just a matter of time, if she were not stabbed by the gardener, she probably would have gotten stabbed by one of her subcontractors. I just can’t say that I feel sorry for her or her family at all.
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
Now the only work is to convince your city.
Good luck with that. One thing I really like about the I-house website is the “pricing transparency” (which, I think, will be come a watchword in the post-bubble economy). They list all the upgrades and you just click away to find out how much it would cost. Let us know what you think after your “field trip” to the Sacramento site. While I like that I-house, I still think some of its mobile home lineage shows through (make no mistake, though, it is a modular house). Hope they have good success and push other prefab builders to reduce prices and make their designs more plug and play. I could definitely see using this for the mythical “vacation home”; I heard a rumor that land prices are decreasing
Joined: 16 Jun 2007
Posts: 7
Comments: 2349
Thanks for that insight, OO. I tried float this idea with an agent at an open house 2-3 months ago, but said agent insisted the loans were not a problem.
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
EBGuy,
the sales contact at i-house told me that they are right now getting seismic engineering code compliance with Santa Clara county, which seems to be their first focus of the Bay Area, probably that is also why they set up a demo site in Sacramento. To me the greatest concern is to get city approval, but I am thankful that MKD has done lots of legwork, so MKD models built around the Bay Area can serve as precedents that we late comers can point to when we try to obtain permit.
What I really want to see, is the entry of Japanese prefab builders like Toyota homes and Muji homes into this market. Toyota homes are very modular, use high grade materials and all have a very efficient floor space design, plus their homes must be seismic proof too, although codes may vary. The entrance by Clayton is certainly exciting news because they have deep pockets and can reap scale economy much easier than others, and if we can attract international players like Toyota homes, price can definitely come further down.
Joined: 28 Apr 2007
Posts: 0
Comments: 627
I totally want a Toyota home beside which I can park my Tacoma!
Joined: 19 Mar 2009
Posts: 4
Comments: 4
Right now, for Fannie Mae and Freddie Mac loans, you need 30% equity in your current house to qualify for a loan on another property…or, you need the income to be able to qualify for both mortgages (total debt to income not to exceed 43%).
Your best bet might be to walk now, then rent for 3-4 years until you can get another fannie/freddie loan again. That should be about the bottom of the market anyway.
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
This reminds of a pretty good rant by Duke a couple of months ago.
This isn’t just a bad job market - it’s the popping of a “human capital bubble.” Wall Street and its assorted reckless offshoots didn’t just squander much of our capital; the financial industry also sucked up human talent for the better part of a decade that should have gone somewhere else. It’s the human equivalent of those empty subdivisions in foreclosure that never should have been built.
FWIW, I’m designating this our “community building thread” (justme asked “what thread are we on?” somewhere in the threadosphere. I say this one.) Sigh, I miss the old format ;-(
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
What was it about the old format you liked more? The fact that there was always a main “current” thread?
Joined: 16 Jun 2007
Posts: 7
Comments: 2349
Patrick,
Yes, at least that was what *I* liked.
Joined: 16 Jun 2007
Posts: 7
Comments: 2349
OT: This just in: Orange-man Mozilo charged with securties fraud
http://marketwatch.com/r.asp?g=F6EC862CE68C4219B37FA51FB75C8744&d=bnbt
Joined: 30 Apr 2007
Posts: 0
Comments: 3169
I like the old format better as well.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
I am in a similar, but different situation from Cashmonger, and would love to hear the thoughts of forum members. I got married in September of 2007. My wife bought an investment property in 2005. She bought the house for $225,000 and was swindled into an atrocious loan (one mortgage is a 5 year interest only ARM for $184k, the other is a conventional 30 year fixed for $41k at over 8%).
In July of 2008 we bought the home we plan on spending the rest of our lives in. While we have been able to come close to covering the first houses mortgage through renting, I am becoming more and more convinced that this house is a ticking time bomb due to the imminent reset of the ARM in Feb. 2010. We are unable to modify the loan under President Obama’s plan as it is not our primary residence, and the lenders refuse to refi due to my wife’s lack of equity.
Let me be perfectly frank, we can afford to pay both mortgages if need be without the assistance of a renter at the present time. However, this house has been a pain in the ass to deal with and will get dramatically more expensive when the ARM resets. If we put all her assets on my books, can we walk away from the house safely? Or will her lenders have lawful recourse to pursue our new house even though it is totally in my name? Can they pursue other assets like stock accounts if they are totally in my name?
Joined: 16 Jun 2007
Posts: 7
Comments: 2349
Geithner might be upside own on his home loan?
http://finance.yahoo.com/news/Geithner-faces-sluggish-apf-15419661.html?.v=6
Joined: 25 Jun 2007
Posts: 1
Comments: 276
Old format would be better if you had an interesting topic to discuss. New format could have a lot of topics that could be of interest to lot of different folks. That would atleast bring in some interest.
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
The main things that changed are allowing everyone to post, and having multiple concurrent threads going. The idea was to attract everyone from the old phpbb3 forum over to here, and just have one place where people chat.
You can always just look at the latest comment on http://patrick.net/forum to see where people are chatting.
Let me know what would make it easier or more pleasant to use: p@patrick.net
Joined: 25 Jun 2007
Posts: 1
Comments: 276
justme,
TimmyG will find some creative ways to stick it to tax payers. I wonder with his salary, can he afford to pay his mortgage?
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
can he afford to pay his mortgage?
Hopefully he will not try to deduct the interest from the entire $1.25million loan amount. Then again, he is the Treasury Secretary…
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
Patrick, you might try a hybrid approach that is similar to the old format but allows thread creation by all. Instead of mixing up the order of the threads at http://patrick.net/forum, always put the most recently CREATED one at the top, with maybe a link from the patrick.net home page (you can still change the date stamps when updated, just don’t rearrange). That way, topics can proliferate, but those of us who come for the community can congregate on the newest thread. In some ways, this is how socketsite is structured (but thread creation is done only by the admin).
@gks, Are you in California (or another non-recourse state)?
Joined: 3 Apr 2005
Posts: 429
Comments: 1230
Menlo Park, CA
One problem with that is the nursing home forum. Most of the topics are already created (one per nursing home). So I want the one with the most recent comment to pop to the top.
I can see that the rearrangement of threads could get annoying though. So I have conflicting interface requirements.
A link from the home page is an excellent idea. Will do.
Joined: 20 Jun 2007
Posts: 3
Comments: 1372
She bought the house for $225,000 and was swindled into an atrocious loan
Was the loan your wife got different from the loan she signed for? Was she told she was getting a 4% fixed while buried deep in the fine print was the interest only ARM? Was this “investment property” one she originally intended to flip (or rent until the reset and flip) so she did not care about any aspect of the loan except nothing down and low initial monthly payments? Didn’t care about the $184k loan being interest only ARM as it kept the payment low for now, and didn’t care about the $41k being over 8% as it allowed the home to be bought “nothing down.”
I can see how you might not want use your own assets to cover a bet she made prior to your marriage, the bet being that the house price would shoot up before the upcoming ARM reset. However, moving her assets to “your books” so she can walk away from that bad bet sounds like “swindling” itself, if not outright fraud.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
The swindle, in my view, came from the fact that a predatory mortgage broker talked her into an overly complicated loan, which provided him with a nice fat fee at the expense of my wife getting a sound responsible loan. Should she have been more diligent in her research prior to signing the papers? yes (but she trusted the guy). Did she intend to sell the house after a few years? yes… Would I be inclined to hold onto the house and rent it out in perpetuity if it weren’t for the toxic loan she was sold and the imminent reset of the ARM?…. a big YES.
However, any feelings of guilt I might have had about walking away are severely diminished by the get rich quick at any price, and anyone else’s expense, attitude exhibited by those in the business of making loans. Did she make some mistakes? absolutely, but I am loathe to see her suffer because some asshole mortgage broker sold her a crappy loan with his best interest in mind, with no thought given to the consumer.
Joined: 20 Jun 2007
Posts: 3
Comments: 1372
gks,
If one wanted to get a “nothing down” loan for an investment property in 2005, it could not be done with any kind of “responsible loan.” Unless, of course, by finding a house with a recent VA loan and a willing seller.
Your wife was not the victim. The banker provided her with the product she wanted for the nothing down investment deal. Had the banker offered a fixed mortgage at the prevailing rate with the caveat of a 20% or more down payment, would your wife have found another lender that would give her the zero down? It does not appear that your wife made a mistake, lacked any due dilligence, or was tricked by a lender. It appears she accepted the conditions of the loan on the expectation that rising house prices would provide the great payoff. The short term nature of the gamble made low initial payments and nothing down more important that what would happen after loan reset. After all, like so many flippers, she planned to have cashed a big profit by then. And I hope, that unlike many other flippers, your wife did not claim “owner occupant” on the loan paperwork to facilitate getting the nothing down financing.
That aside, since you appear to have a good income, and if you cannot walk away, I hope you are able to quickly pay down the ARM and 8% fixed with earnings, savings, or with proceeds of other financing. That house may make a good investment over the long term after all.
If I were King and Tyrant in 2005, your wife would not have been able to get a zero down loan. I would have made it illegal for any institution to loan more than 80% of the purchase price of a owner occupied home, and no more tha 50% of the purchase price for investment property. The purchaser would have to prove the down payment was not borrowed elswhere (such proof used to be a standard home loan practice). Since the gov is on the hook to bailout the collective foolishness of banks, it is only fair to set some rules.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
I’m going to have push back on your supposition that she was sold the loan she wanted. Yes, she bought this as an investment with the intention of flipping it in a few years (ironically enough, to use the proceeds for a down payment on a house after she got married). However, she had enough money at the time for a 20% down payment, and fully expected to have to put that amount down at closing. It wasn’t until this oily broker talked her into a zero down, interest only ARM that she moved away from a traditional 30 year fixed to an exotic mortgage.
I hold the mortgage broker, and lending institution responsible for pushing these convoluted loans on consumers, and I feel bad for people like my wife who were persuaded by lenders with no fiduciary responsiblilty toward their clients to accept loan terms with time bombs baked in.
In general I agree with you that many flippers gobbled up exotic mortgages with their eyes wide open. This is not the case, however, with many, many consumers whether they were buying a single investment property or a primary residence. I think the lender consumer relationship was abused terribly by many during the boom.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
And I wholeheartedly agree with you about setting strict guidelines that would have precluded a loan like the one my wife received from ever being written!
Joined: 26 Sep 2008
Posts: 4
Comments: 36
This thread was interesting in that no one differentiated between non-recourse and recourse states. I think the locals here in my recourse state of NY would feel quite differently about the breaking of a contract being guilt free. Perhaps state laws guide each poster’s philosophy?
Also as discussed in other housing forums ad nauseum, there is the fear of what happens once foreign investors or clueless pension fund reps that once bought up our MBS realize the contracts their investments are based on aren’t worth the paper they’re written on. How is Uncle Sam going to reverse the fact that the actually insolvent Fannie/Freddie are the mortgage holders of last resort?
And with that last thought in mind you’re going to double down with a new purchase now, J?
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
This thread was interesting in that no one differentiated between non-recourse and recourse states.
I’ve been trying to get out of gks where he lives, although, since this was an investment purchase, I’m not sure how much that matters. As California has the one action rule, I guess they would have the option of “playing chicken” with the bank (hey, it worked for Casey Serin). gks, WHERE IS THE INVESTMENT PROPERTY LOCATED?
Joined: 4 Jun 2009
Posts: 0
Comments: 10
I live in VA, Investment property is in MD. I don’t know the answer to whether or not MD or VA are recourse states or not.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
Recourse state status gets back to my original idea of shelterring assets under my name to preclude the bank from being able to go after them.
Joined: 28 Sep 2007
Posts: 0
Comments: 167
One problem with that is the nursing home forum. Most of the topics are already created (one per nursing home). So I want the one with the most recent comment to pop to the top.
I can see that the rearrangement of threads could get annoying though. So I have conflicting interface requirements.
A link from the home page is an excellent idea. Will do.
Threads should be listed in order based on most recent comment timestamp - that way the most active threads stay at the top.
Joined: 19 Mar 2009
Posts: 16
Comments: 98
I just wanted to point something out that others might have missed:
While it does make me a little mad that cashmonger wants to get out of his contractual obligation by walking away, the fact that he is making this rational decision actually HELPS us renters. Hear me out for a sec.
When cashmonger bought into the bubble property at the height of 2005, his buying interest helped push home prices higher than they would have normally been. This hurt a lot of folks like me that were diligently saving at the time and hoping to buy soon.
Now, when he makes the rational decision to walk away, his foreclosure has the opposite effect on the market, driving home prices down as other properties must compete with the foreclosure price on his home.
So, I think we should hold our outrage for a bit. Sure, he made a poor decision back in 2005, but by walking away from the property now, in some small way, he is helping the housing market return to normal levels. It’s something like real estate karma.
Now, what I disagree with is buying another home right now. You really should take the credit hit, rent for 3-4 years until the foreclosure is off your record, and then buy again. Not only will you be doing the right thing(tm), you’ll also be buying in at a much more affordable time.
If you buy right now, chances are you’ll be catching another falling knife that will just make you underwater again. Do you really want to piss away your downpayment all over again?
Joined: 8 Jun 2007
Posts: 24
Comments: 167
Egg Harbor City, NJ
I really have to laugh when I see a post about someone who has the money to pay there mortgage, but they feel they would be better off just walking away. Let’s clear this up once and for all, banks don’t HAVE to write off bad debt. They can take you to court and sue you for every penney you owe them. While it’s true often times they don’t, the cost of a lawsuit and the fact that most of the people they foreclosure on don’t have a pot to piss in. Getting someone’s pay garnished for 50 bucks a week for the rest of there lives really isn’t worth the hassle to the banks. But if you have other assets, Stocks, other properties, money in the bank, the bank can get those assets seized to satisfy any judgements against you.
I boggles my mind people believe they have some god given right to just walk away from any situation if it doesn’t benifit them. If you signed on the dotted line, your responsible, end of story. I didn’t know or some sob story that the bank shouldn’t have approved your loan in the first place isn’t a valid excuse. I hope some of these bankers have the common sence to sue these deatbeats that can afford to pay. If I owned a bank, I would never write off any debts, I come after you, if you had to pay me back 20 bucks a week forever, I’d get it.
Qoute “Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.”
This benifit only kicks on if the bank decides to Forgive the debt, Read my Lips, THEY DON’T HAVE TO. They are under no obligation to forgive any debt ever. The only reason they do is a financal decision, if it’s more profitable to take you to court, I beleive they will.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
TechGromit,
How does what you’re arguing jive with recourse and non recourse states? If you live in a non-recourse state, is it your understanding that banks can pursue your assets, or future assets when you walk away from a mortgage?
In addition, are you saying a bank can seize the house you walked away from, and then go after assets in the amount of the mortgage you left on the table?
Joined: 26 Sep 2008
Posts: 4
Comments: 36
I was looking for a list of all 50 states and how they approached a walk away. I found some interesting details but only about 18 states were on the list. Does anyone else have a better source?
Here’s what I got. Considering there were quite a few posts correcting the author after the original list was published I’d take this info w/a grain of salt.
http://www.mortgagereliefformula.com/recourse/
scroll past the video for actual list and commentary
Joined: 25 Jun 2007
Posts: 1
Comments: 276
Senate Renews Push to Expand Homebuyer Tax Credit to $15,000
Just when you thought it couldn’t get worse, it does.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
missgredenko,
The website you provided offers some interesting wrinkles to the recourse, non-recourse debate. First, it appears that a lender can pursue a deficiency judgement against a borrower in non-recourse states if they do a judicial foreclosure (meaning they do the foreclosure through the courts as oppose to privately). While this is fairly uncommon since most people walking away from their homes have little to go after, it sounds like a bank would be more inclined to do so if you have significant assets.
Also, even in non-recourse states, if you have 2 mortgages, the holder of the 2nd mortgage can pursue a deficiency judgement because the borrower is only protected in his/her dealings with their primary lender.
It seems that mortgage lenders have more options than previously thought to go after a borrowers assets, and a mortgage contract is more than simply a loan secured by the house the money was used to purchase…
This makes me even more keen to hear thoughts about stacking good assets (primary home, stocks, bonds, savings, etc.) with one half of a married couple and bad assets (read underwater investment property with a toxic mortgage) with their spouse in order to spin off the house while protecting everything else. Think of this as the “good bank-bad bank” scenario oft discussed in the press for dealing with worthless mortgage backed securities, but on the individual consumer level… Thoughts?
Joined: 20 Jun 2007
Posts: 3
Comments: 1372
From sa’s link:
Senator Johnny Isakson, a Georgia Republican, is introducing a bill today that would increase the tax credit to $15,000 and remove income and other restrictions on who can qualify
WTF? Maybe even a current homeowner can get the credit and not just a “first time buyer.” Maybe it can be used to buy rental property. Anything to reinflate the bubble, I guess.
Joined: 25 Jun 2007
Posts: 1
Comments: 276
Anything to reinflate the bubble, I guess.
That’s the key point. It’s no surprise Bond market yields are moving higher.
On the same note:
House approves ‘cash for clunkers’ plan
The House on Tuesday approved a “cash for clunkers” bill that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles.
Heck, if we are going to have a deficit of 1.8T what’s another 100B. These are just numbers.
Joined: 10 Jun 2009
Posts: 0
Comments: 1
In all fairness. I never understood why you had to be a first time buyer to qualify for the credit. As long as the house is a primary residence why not encourage owners who bought 15 years ago and want to trade up or down to get back in the market. And if you bough 3 years ago and are down 30% you won’t be buying this year no matter what.
Now I don’t really think that that any credit is a good idea. I also wonder if anyone can think of examples of the government directly encouraging regular citizens to make such a large investment into such a volatile asset? We can argue to what role the government should be protect people from bad / risky decisions, but actively encouraging it? I also wonder what to what degree people purchasing houses today expect the government to make sure they don’t lose money.
Joined: 8 Jun 2007
Posts: 24
Comments: 167
Egg Harbor City, NJ
That’s exactly what I’m saying. Reading further into the issue, some states prevent or limit deficiency judgments, but I highly doubt that if you have other significant assets that the courts will not allow the bank to pursue a lawsuit against you. Also there is nothing preventing 2nd mortgage lien holders from pursing you. I don’t have a link to provide, but I’ve read this is becoming a lot more common, banks filing lawsuits deficiency judgments against people. It cost them as little as $600 to file the paper work with the courts. This would require you to get a lawyer to defend yourself at the very least. Also bad mortgage debt is sold to other companies by banks for as little as 5 or 10 cents on the dollar to companies that specilize in debt collection. So if the bank doesn’t hunt you down, chances are some ABC debt collection company will do the dirty work of suing you. This of course all depends on the fact you have assets to sieze, it’s doubtful they are going to waste time with trail park trash and other marginal borrowers. But borrowers with money, Beware!
Joined: 8 Jun 2007
Posts: 24
Comments: 167
Egg Harbor City, NJ
I’m a little puzzled how you expect this to work. When your married your assets are automatically pooled. While it’s possible to have assets divided up so that if the wife brings in 100k in stock into the marriage and the husband 100k in debt, to keep those accounts seperated, what ever assets they purchased together (ie a house) they are both responsible for the debt. There’s no way to spin off join assets to one of the other without settling the original debt. So if a house is purchased together, the only way to spin that debt to your wife would be to refinince the house in only her name, and it’s highly doubtful that a bank will appove that, unless she has a sizable salary to cover the mortgage. Also any assets earned while your married are pooled together, any savings or stocks are common assets there’s no way to just put it into one person’s name to protect it for creditors. The creditors would just have to prove that you earned that money together, and they could grab it, in a court judgement.
One final thought. One thing you have to keep in mind is your personal finacial position in the world. While in a perfect world it’s death to you part. But if my wife listed all the debt under my name and kept all the assets in hers, if she were to decide that her life would be so much better if she wasn’t married to this guy buried with so much debt anymore, I would have placed myself in a very bad position. Having spent my whole life building up assets only to give it to someone that ends up dumping me. Very unwise move in my opinion
Joined: 26 Sep 2008
Posts: 4
Comments: 36
gks,
It is interesting isn’t it? Personally, I’d be consulting my real estate lawyer for the finer details of the options at this point as each area and perhaps each lender may handle things differently.
The author had some interesting comments on short selling on the website’s video too.
As far as the asset stacking, I’d say w/the rate of divorce over 50% that situations just a prime set up for leaving someone in a nasty financial hole. If my dh came home and suggested it I’d start checking his blackberry and looking for lipstick on his collar.
Joined: 4 Jun 2009
Posts: 0
Comments: 10
I completely agree with missgredenko and techgromit that it certainly puts one member of the marriage in a highly vulnerable state, one which I would be highly dubious of being in myself! Also, I’ll have to password protect my blackberry before mentioning this possibility to my wife!
Suffice it to say I’m curious about what is possible. The more I research this topic, the harder it seems to be for consumers to extricate themselves from onerous loan provisions. I’m just spitballing options, this scenario obviously being the most extreme.
Techgromit, in my situation, my wife bought the house before we were married and I have not added my name to the deed or loan. However, we did jointly buy our primary residence and your point about common stock and savings is well taken.
I’ll have to consult a real estate lawyer and see what he/she has to say about possibilites. I’ll be sure to share any interesting nuggets I glean.
Joined: 8 Jun 2007
Posts: 24
Comments: 167
Egg Harbor City, NJ
Interesting situation. I’m not a lawyer, but since the debt was incurred by your wife before you were married, I would guess a creditor would have trouble seizing assets that belong to two people. That’s not to say they have no recourse, but this complicated matters for them. A pre-nuptial agreement does nothing in preventing a creditor form collecting, this agreement is between the married couple and isn’t binding to other parties. While not strictly related to you case, this link provides some guidance on the issue.
http://divorce.clementlaw.com/tags/credit-card-debt/
Joined: 4 Jun 2009
Posts: 0
Comments: 10
From Tecgromit’s link:
“Whatever agreement you and your wife reach about the responsibility for the marital debts, it is not binding on your creditors. Regardless of how you and your wife apportion the debts, your creditors can enforce their contracts against whoever is principally liable. If the obligation is in joint names, the creditor can attempt to collect from either or both of you.”
Extrapolating from divorce law (which is a little macabre in this situation) this passage would seem to infer I am protected if I hold all the assets in my name….
I’m definitely going to sit down with a lawyer and do some war gaming on possible options. Thanks for the link techgromit.
Joined: 15 Jun 2007
Posts: 0
Comments: 1183
@gks Wow, no one action rule for your wife. As you’ve probably figured out by now, in Maryland: Lenders have a period of three (3) years to file for a deficiency judgment, but it is limited to the balance of the loan in default after the foreclosure sale proceeds have been applied. Hmmm, wonder if lawyers fees, brokers fees, etc. are deducted from the “sale proceeds”.
Joined: 28 Sep 2007
Posts: 0
Comments: 167
I think this varies by state. I found this posted awhile ago. Site seems to be down now but I pulled a PDF of it:
http://www.one-ring.net/pics/The%20California%20Foreclosure%20Rules.pdf
This is not legal advice, IANAL, etc.