patrick.net

Short sales are the in thing right now. If mortgage rates increase above 5%, tons on home owners will be defaulting.

bgamall4 says

buying up all the low end RE and they will try another bubble sometime.

So,I wonder what is your take on mid-high end RE?

bgamall4 says

bubblesitter says

So,I wonder what is your take on mid-high end RE?

Hard to say. I think it is in decline, because there are fewer buyers, except in high demand areas, like the SF peninsula. I think the massive purchases at the bottom explain the decline in median price.

Gary Anderson strategicdefaultbooks.com

http://www.costar.com/News/Article/Tenants-Continue-To-Rule-the-Market/139014

bgamall4 @ 7:18

Morality never had anything to do with it. It's simply a contract between borrower & lender. You would think they both should know the risk.

Damn!I think I just wrote an ebook. ROFLMAO

Call it Crazy says

Hmmm, I wonder if those borrowers were held with a gun against their heads to make them sign the mortgage note??????

Hmmm, I wonder if the lenders were held with a gun against their heads to make them sign the mortgage note??????

If not, it's an investment gone bad. The banks didn't understand the risk, so they must pay the consequences.

"Morality" LOL

Morality and Bank shall not be used in the same sentence. That's commandment #11

Ethical issues:

Some ethicists have questioned the morality of strategic default, arguing that one has a duty to make payments on debt if one is able. Others argue that there is no such moral duty, a loan being a contract between consenting adults, and noting that financial investors routinely default on non-recourse loans that have negative equity. Some argue further that there is a moral duty to strategically default, and that one should make such decisions based on one's financial interest "unclouded by unnecessary guilt or shame", as lenders who do not modify mortgages do the same, "seek[ing] to maximize profits or minimize losses irrespective of concerns of morality or social responsibility," or more bluntly stating that "The economy is fundamentally amoral." Further, obligations to honor a contract are balanced by obligations to oneself and one's family, the latter speaking in favor of strategic default, some arguing "You need to put yourself and your family's finances first," while one also has obligations to a community, which may be damaged by default.

http://en.wikipedia.org/wiki/Strategic_default

The bank will NEVER and has NEVER put any interest ahead of their own financial interest. Individuals going into a financial agreement with the bank should reciprocate.

Here is how I see it: You purchase an asset. You put down a large sum of money as downpayment and agree to pay your asset off, WITH INTEREST. If you don't hold your part of the deal, the bank takes your asset (seems totally reasonable to me). They already got your down payment for gawd's sake (along with all the payments you've made up to that point not ignoring the fact that your mortgage payment is almost entirely interest for the first few years due to how ammortization works).

All remaining details get a middle finger. It's completely amusing to me that people actually consider "morality" and ignore the fact that the financial system failed them scandalously.

The financial system needs to promote slow and steady growth. A slow and steady growth that does not lead to negative equity on this magnitude.

I don't believe breaching a contract is unethical unless that is your initial intent.

Being stupid and taking out too much loan is not unethical. It's, as I said, stupid. But the terms of the contract dictate what can happen if you default.

Realizing you can't keep up with the terms of a contract because circumstances changes is not unethical. It's unfortunate, but not unethical. But the terms of the contract dictate what can happen if you default.

Deciding you don't want to keep up with the terms of the contract is a gray area, but since the terms of the contract dictate what can happen if you default, you are simply electing to take your chances with that.

And it shouldn't be your concern if your government chooses to subsidize your loss. Nobody asked them to, and certainly you didn't ask them to. That's their dumb decision. If you don't like it, do something to change it. Elect different people, move out of the country, or riot in the streets like they used to do.

In any event, as long as you can be held accountable for your actions as dictated in the contract, you're free to take your chances with whatever decisions you make.

Every mortgage has clauses related to non payment and foreclosure. Defaulting is an acceptable option because of the contract, so how are you being unethical because you take that option?

Call it Crazy says

So, does the home owner hold any liability for signing the note or is it 100% the mortgage broker's fault for leading them to signing??

In a scam like this the home owner shouldn't hold any liability.

Call it Crazy says

So, does the home owner hold any liability for signing the note or is it 100% the mortgage broker's fault for leading them to signing??

Just wondering.....

The lender loses money.. the homeowner loses their downpayment and gets a shitty credit score for 5 years... possible judgements against them if they took a HELOC they didn't pay back.

I would thing most housing bears would be cheering Strategic Default as the best solution for home prices to continue crashing...

Home price declines have slowed because strategic defaults have slowed... If they pick back up again.. you will get your wish. deep falling home prices.

Call it Crazy says

The homeowner willing signs a contract and then later intentionally defaults on the contract and it's called a scam...... wow..... and the home owner should be free of any liability..... just amazing...

Again, they aren't free of liability... If they bankers want to try to squeeze blood from a turnip they can sue for the difference if the owner refi-ed or took out a heloc.

The homeowner pays by not being able to get loaned money a low rate for years to come! (They'll probably lose thousands each year due to all the high interest rates credit card companies, banks, and premiums skeptical landlords will force them to pay.. because they have a foreclosure and low credit score).

What do you want debtor's prisons to come back in style?

bgamall4 says

golfplan18 says

Whoever wrote this "cartoon" is a dolt. They just don't get it. ....

Gary Anderson strategicdefaultbooks.com

I see satire is beyond your comprehension.

Call it Crazy says

The homeowner willing signs a contract and then later intentionally defaults on the contract and it's called a scam...... wow..... and the home owner should be free of any liability..... just amazing...

You left out the part where the bankers a)colluded to drive up home prices, b)gave out predatory loans, and c)are the supposedly responsible economic gatekeepers who make sure the loans are sound in the first place.

Just point a alone would justify home owners intentionally defaulting since they were being persuaded to buy into a rigged market. Point b would justify intentional home owner defaults even if the market wasn't rigged too. Same goes for point c.

Contracts are not suicide pacts or moral agreements that must be honored at nearly any and all costs. They're financial agreements that can and are made and broken all the time depending on the financial situations of all involved parties. The banks and rich do it all the time, I see no reason to apply double standards and say that home owners shouldn't do it either.

Call it Crazy says

The bankers were just doing their jobs, selling mortgages.

Nope that isn't their job. Or at least it isn't the whole of their job.

They also have to ensure the quality of the loans and apply the "5 C's of Credit"* appropriately. That they not only did not do that but colluded with realtors, LO's, Wall St., and credit agencies to sell crap MBS's/CDO's to investors as AAA rated investments is all their fault.

Many of those investors BTW turned out to be US retirement funds.

Your failure to understand and appreciate these facts appropriately is severely effecting your judgement here and you are falling for the "personal responsibility" meme which deflects most or all the blame from the banks and onto individuals who have little or no say or control over the markets or banks anymore. They've got you playing the "blame the victim" game and you don't even realize it...

*Character, Capacity, Collateral, Conditions, and Capital.

Call it Crazy says

The bankers were just doing their jobs, selling mortgages.

If the bankers were "doing their jobs", then we wouldn't have had a housing bubble. Period.

Call it Crazy says

The bankers WERE doing their jobs, selling mortgages so they could make big profits for the bank from the interest. Get it!!!

Bankers aren't salesmen trying to get you to buy a toaster.

They are lending out their owners' money. Part of that job is to determine the risk of the loan and make sure that the profit on the loan is enough to justify the default risk. They obviously failed miserably at that task.

They did NOT do their jobs.

Call it Crazy says

But at the end of the day, YOU bought their "sales pitch/monthly payment" so now YOU are on the hook for signing the contract....

I'm not saying the homeowner is blameless. He took out more money than he should have and is liable for the downpayment plus any futher principal he paid over the life of the loan.