patrick.net

hmm.. As a Quant HF Mgr Id expect you to be a little more sophisticated with finance.

The $93k doesnt include the rental income on their condo.

Assuming its close to cash flow neutral and the wife earning potential.
I dont think their situation sounds so bad.

toothfairy says

hmm.. As a Quant HF Mgr Id expect you to be a little more sophisticated with finance.

The $93k doesnt include the rental income on their condo.

Assuming its close to cash flow neutral and the wife earning potential.

I dont think their situation sounds so bad.

Wow, that's just scarey. But I guess it's normal for many. We bring in about 165 a year -/+ and have a grand total of about 285k in debt (mortgage and student loans at about 5.375% and 4.5%). I sometimes have trouble sleeping at night. I cannot imagine having more than double that, and having or wanting kids!

toothfairy, from your reply it sounds like you may be in a similar situation as the couple in the article. tidy up your own balance sheet and perhaps then you won't feel like attacking the messenger. :-)

Thanks, cab. It will be interesting to see others' reactions. I agree with you that my straight forward recommendations are not harsh at all; people who feel "entitled" will likely react to it as such, though.

Over the past few decades "living within one's means" has gone out of vogue. It is my opinion that most of this has been enabled by the continuing drop in interest rates over the period. I expect to see some behavioral "reversion to the mean" when rates go back up and begin to approach historical averages.

I feel sorry for the couple and sincerely hope that they pull through but as time passes they are moving closer to defaulting on existing debt.

These stories boggle my mind. I am married with 2 kids, single income, pulling in 200k a year. I have student loans of about 110k at 3% that I service at $460/mo over 30 years. Other than that, I have no debt. I currently rent and have done so for the last 5 years because of the bubble that continues in socal. Even with the significant cash savings we have accumulated, I cannot fathom getting myself into that magnitude of debt just to own a house let alone two. I would much rather live beneath my means rather than do what families like these do and stress about it.

the numbers are very unclear/missing.

but toothfairy does have a point.

if they are close to cash flowing on their rental, then a $410k town home with $66k equity means ($344k mortgage debt + car loan + student loans) on $93k/year is far different than $783k debt on $93k/year.

it's not stated know how much cash reserves they have either.

if the wife starts working after having the baby (maybe grandparents are close by), then that's a second source of income and their debt-to-income might not be so bad.

Typical real estate stupidity. They'll probably get uncle sams taxpayer funded loan mod and foreclose in 10 years anyway.

where is the link to the article?

Quant HF Mgr says

These articles never fail to count "home equity" under the "Assets" section of peoples' financial situation. It says this couple has $66,000 in home equity. Bwah, ha, ha. Sure, right. Did you get those figures from Zillow? Or better yet a local realtor? Are you factoring in selling costs to liquidate all of that "equity"? Of course not. A quick off the cuff guess is that they are sitting on about half that much "equity."

Yes, the definition of equity has been twisted around. It only is for getting more debt by the lender/bank. More debt that is it...
And if equity is pegged to current market value, one that is inflated certainly will see that equity wealth go negative.

Instead of buying another home, these folks need to learn to save instead of spending. At this rate, they will not ever see what 'real money in the bank' means.

I have a sneaky suspicion that the wife is not going to agree to any logical austerity measures. She knew they were in deep debt, and she decided to have a baby. Yeah, of course it was the guy's idea first, what am I thinking? ;)

In 2008 my wife and I were in this situation but worse, after investing in 5 properties. Later on, Chicago made a bid for the Olympics. We fist bumped with pride, believing that we could sell later for a profit.

Shhheeeeeeeeeeeeeeeeeet. We had 4 rentals plus a single family home, revolving consumer debt, and 2 cars to the tune of over 1.1 million in total debt. All of this on a monthly income of 5400 take home servicing nearly 9K outlays.

By then our tenants bailed, we couldn't rent the rentals. We listed them for sale to no avail. So we tried to file bankruptcy and were eventually told we were over the 1.04 mil limit, plus the fact that the trustee and the hot chick from the Treasury Department told my wife and I that our 403b retirement contributions were "abusive", since they were so high, whatever.

I hated my wife for living up to the ethnic stereotype that we could not manage our money. I hated my wife for following the herd when everyone were buying overpriced homes. I hated my wife for having never lived on her own, learning to identify wants vs. needs. I then realized it was not her fault, but mine for not divorcing her ass. I then began to hate myself.......

Through debt-induced insomnia, I discovered this blog, Christine E. Springer, Irivine Housing Blog, and YouWalkAway blog. I found white people walking away en masse. I was shocked, then angered, then annoyed, then intrigued.

Some minorities joke that the bankruptcy laws were changed only when black and hispanics started filing. Ha, Ha, but I knew that the window of walking without real consequences would eventually close, but I couldn't pull the trigger..........just yet.

Then, the house behind me which had previously sold for 445K, sold for 38K in a foreclosure sale. My 415K home was now worth 149K and there were no buyers. I am the first to admit that I was stupid. Yet when my wife and I ran the simple amoritization table, learning our 415K loan at 7% interest resulted in nearly 1 million over 30 years......ha, ha, yeah right.

Then Morgan Stanley walked and the Mortgage Bankers Association walked. Since I am a middle child and very sensitive to inequities, I wondered whey they could walk and I could not. They were richer, bigger, and ran the world, but still no better than me. My friends, said, they are the BANK, you are just you. You can't do what they do. Slave mentality, debt mentality..................

So we walked. We were issued 1099's for each of the rentals. We paid the taxes with our newfound savings. We fought the foreslosure to a standstill for nearly 2 years and have been living rent free since. My credit is trashed but my wife's is recovering.

My real estate investmens were stupid and doomed from the start. But I saw no sense in continuing to throw good money after bad. My finances and marriage recovered. We live off over her salary and save mine. (See, we can handle money, LOL.)

I am not bragging, just telling my story. I have been criticized and applauded for walking away and squatting. I don't think what I did was worthy of applause. I think it's a necessary evil. I will have to leave one day, but I know I can legally drag out the foreclosure for another 3 years at least.

There is no way I will pay when I can walk & stay.