patrick.net

American in Japan says

>#1 Who the hell thought that 10% down and 7 years of typical principle payments (plus I have made an additional 5k or so in principle payments) would mean I would be stuck with not enough equity to sell or refinance at will?
Many people on this site did in 2005 and 2006.

fair enough... It seemed safe to me at the time though. Hind sight is 20/20 obviously.

I would figure out if the bank holds your loan and if it is insured. If they have it insured, then they probably do not care if you default. If they do hold it, then maybe in your game of chicken, you could offer some concession, like taking an auto loan and giving them a lien on the car. That way you are giving them something and showing you are serious.

dude

you are underwater.

Navy Fed holds lots of high cards.

no chance you can move back into the place?

YesYNot says

I would figure out if the bank holds your loan and if it is insured. If they have it insured, then they probably do not care if you default. If they do hold it, then maybe in your game of chicken, you could offer some concession, like taking an auto loan and giving them a lien on the car. That way you are giving them something and showing you are serious.

I do know that it is not a Fanny, Freddy loan. I do not pay PMI, and they do service it. My assumption with that is that it is on their books.

I don't really want to buy another car, but I guess they could hold my 2008 Camry's title. Now we are talking really creative.

Mr.Fantastic says

MarkInSF says

That is a statement of fact.

It’s only a fact to you because you are an idiot. You don’t understand how Banks deal with mortgages, which ones they sell, which ones they keep, the system is inherently setup for them to always win, bubble economics aside. You need to stop commenting on banks and how they do business because you simply don’t know enough about the topic to help inform people.

According to bankers interest rate risk is a reality.

For example, a long-term, fixed-rate loan entered into when interest rates were low and refunded more recently with liabilities bearing a higher rate of interest will, over its remaining life, represent a drain on the bank's resources.

http://www.bis.org/publ/bcbs108.pdf

tekkierich says

The dumb ones got negative arm 0 down loans.

Wrong...those were the smart ones. They let the bank assume over 100% of the loss. You lost your 10% downpayment + are continuing to lose $200 per month right now.

Don't you wish you would've made "less than interest-only" payments on an Option (pick-a-pay) ARM loan? You would've paid less than what the house would rent for, then if the value of the house goes down, you hand the bank the keys. And if the value of the home would have gone up...well then you could've just sold it or refinanced into a fixed rate if you wanted to stay longer. There would've been no need to play chicken...just hand them the keys & tell them to never be so stupid in the future by ever handing out Option ARM loans.

Instead, with your 10% downpayment and interest payments so far, the credit union will lose very little on this transaction.

tekkierich says

Actually what has “not worked out” is buying a house that has lost so much equity.

Even if prices remained exactly flat since you bought it, the costs of selling are so great that you'd barely break even after seven years. Like all other lessons learned, planning to own for the short term is not a wise strategy. Planning to own in the short term after continual double-digit percentage increases? No comment.

Mark_LA says

tekkierich says

The dumb ones got negative arm 0 down loans.

Wrong…those were the smart ones. They let the bank assume over 100% of the loss. You lost your 10% downpayment + are continuing to lose $200 per month right now.

I don't think I would call them "smart" for doing that, just passing the entire risk off to someone else either out of greed, stupidity, or both.

lurking says

The banker will probably laugh and tell you that you’re in a bank, not a used car lot finance department cubicle. This is especially true since a small credit union like Navy Federal doesn’t want the word to get out that you can just roll over him or play Let’s-Make-a-Deal because everyone else in town will want the same deal. I think you’ll end up with whatever the prevailing interest rate is in 2013. You rolled the dice and got yourself into this so unless you want to lose the house you will have to pay the going rate at that time.

I agree to this. It ist the bank discretion, but most likely, if you want to keep, you have to
follow the rule set by your loan.

toothfairy says

I just checked and Maryland is a recourse state so the bank will call your bluff.
If you hand them the keys they can probably garnish your wages for the amount owed.

This looks to be true and makes the rest of the conversation moot. Looks like the money pit will continue to swallow cash for a long time.

MarkInSF says

lurking says

You rolled the dice and got yourself into this

Since when was buying a home “rolling the dice”? The only reason it became to risky, with the possibility of large losses and large gains, was WALL STREET, that pushed out loans anywhere they could, and ran a casino of derivative side bets on the housing market.
Stop blaming home buyers for “getting themselves into it”.

the home buyer was the last person in the chain to push the buy button. He/she was given a chance to review all the docs, to analyze his/her current financial position, and judge by him/herself the future prospect/risks.

Wall Street banks, like any service/product provider , they are always in the mind of what can they do to sell more. BUt ultimately the sale will lie in the customer. The Wall street banks were too greedy, but the customer or the home buyers were the ones who agreed to the seller's sale speech.

the home buyer was the last person in the chain to push the buy button. He/she was given a chance to review all the docs, to analyze his/her current financial position, and judge by him/herself the future prospect/risks.

Wall Street banks, like any service/product provider , they are always in the mind of what can they do to sell more. BUt ultimately the sale will lie in the customer. The Wall street banks were too greedy, but the customer or the home buyers were the ones who agreed to the seller’s sale speech.

Mr.Fantastic says

You really are a dumb ass.

I provided a sound argument for why lending long term at fixed rate is risky to lenders, and provided a reference to a paper that elaborates the reasoning.

You call me an idiot and a dumb ass and provide no sound reasoning.

I'll leave it up to readers to decide who knows what their talking about.

It's really not that hard. Somebody has to assume the interest rate risk, either the lender or the borrower. If a loan originator sells a long term fixed loan, the purchaser is taking on that risk (e.g. Fannie Mae)

MarkInSF says

It’s really not that hard. Somebody has to assume the interest rate risk, either the lender or the borrower. If a loan originator sells a long term fixed loan, the purchaser is taking on that risk (e.g. Fannie Mae)

The thing is that virtually all long-term loans are effectively owned by the govt. (which is why they didn't exist till the govt. started to buy them). So the govt. assumes the interest rate "risk", which is no risk then because the govt. needs not really borrow from anyone to cover the loan. It could borrow if possible at a profit (that is at a lower rate than it gets from the loan, e.g., 3.3% for 10-yr treasuries vs. 4.75% on the mortgage). If not, simply print. Which is what they did (called QE) to sell the 30-yr t-bills offsetting the rate risk on 30-yr mortgages.

Mr.Fantastic says

Finally, someone who gets it.
I really wish guys like Mark would just admit they know nothing about how banks actually work, and just not give any input.

So, how come all the banks are insolvent then? Didn't they sell all their loans to the government?

Fisk says

So the govt. assumes the interest rate “risk”, which is no risk

If there is no interest rate risk, they you're going to have to explain why Fannie Mae requires a higher interest rate on a 30 year fixed than on a 5/1 ARM.

MarkInSF says

Fisk says

So the govt. assumes the interest rate “risk”, which is no risk

If there is no interest rate risk, they you’re going to have to explain why Fannie Mae requires a higher interest rate on a 30 year fixed than on a 5/1 ARM.

Because the interest rate on offsetting t-bills increases with maturity
(roughly 4% on 30 yr., 3% on 10 yr., and 2% on short-term).
If you will, the buyers of treasuries assume that risk.

BTW, tekkierich, you may not think this discussion about interest rate risk is relevant to you, but it is.

You are afraid your rate will reset at 7%, but that's unlikely. Intererest rates will be held low for a long time for the simple reason that if borrowing costs go up, the GSE's (and other financial institutions) will be forced into much greater insolvency than they already are.

Mr.Fantastic says

Look, it’s two guys who know nothing about banks, the finance industry, or anything about micro economics at all.

Look it's a troll

Tekkierich - for what it's worth, you're credit union may be willing to negotiate your rate. Have you tried calling them yet?

I'm not sure how much differently a mortgage from a car note would be treated if held in house by the credit union, but I bought a used car a few months ago. Because it was used, the local credit union would give me a rate of 6.9% (even with 800+ credit score), the dealership offered me 4.25%, so the credit union said they would match it.... When I went into the credit union with the paperwork (after driving the car home), they brought it down 3.75% after talking with the branch manager.

The only reason I took a loan out, was because they were offering $100 cash if you took out a new loan with them (no strings)... So I took out the loan, collected the $100, and paid off the note. I robbed a bank :)

Anyhow, rather than stressing out about it, or role playing scenarios in your head, just call or stop into your local branch and see what they can do for you.

Too early to worry. With BRAC coming to Aberdeen and Ft. Meade, your house could get back to your purchase price by 3/2013. I think that mortgage rates will stay low till then because housing nationally will still be weak.

Consider the tax benefits of selling your property. Because it is a rental property, the rules are different (I.e. Capital loss deductions DO apply, unlike in the case of your primary residence). This could be a huge offset to your actual loss.

tekkierich says

Tenouncetrout says

tekkierich says

We have moved about 80 miles away to York, PA for a job and a little more “wholesome” atmosphere to raise our children in.

Nothing more wholesome than two stressed out people “mother eph’ing” each other over bills.
That’s what you get for not being happy with you got, and for thinking your kid is more precious and special than everyone else.

This is an uncalled for flame.

It wasn't a Flame it was the damn truth. I'm sick of hearing about yuppie losers that think their evil spawn are any more precious than my evil spawn. So they get in way over their head, and use their kids as an excuse to hide behind their disastrous financial direction, by claiming they are doing it for the schools. Then they have to work so hard they don't have a minute to notice their kids are going down hill at the new school, because they have been left to their own devices, to grow like weeds and kick it with who ever. That's if the financial truth doesn't put the kibosh on the whole affair.

Like losing the job that made the move possible, then losing the house in the swanky neighborhoods, that these Halfwits were ill equipped to pay for, and the Manager at their job, that they hated in the first place was the only thing standing between them and their McMansion in Burbdale with the schools where the kids teach them selves and the lunch lady gives out scholarships in the fortune cookies.

We need a new mantra...

"Think Small!"

Tenouncetrout says

It wasn’t a Flame it was the damn truth. I’m sick of hearing about yuppie losers that think their evil spawn are any more precious than my evil spawn.

You don't know my story one little bit, so get of your high horse. Our baby doesn't go to child care, my wife works about 20 hours a week mostly on the weekend. I work from home. My almost three year old goes to preschool three days a week. So we see our children plenty thank-you.

Our move was both more wholesome and less costly. The wife has a shorter commute, the rent we pay nearly matches the rent we receive. We are better off tax wise by several hundred dollars a month in PA rather than Maryland.
My disabled mother on a small income will be moving into an apartment near us, and will benefit greatly from from one bedroom apartments going for $500 in safe areas near bus lines, rather than $850 plus.

The house we live in is double the size of the last one, and has room for the family gatherings we are rapidly becoming the central part of our extended family by hosting. It is very important to us to host family from all over the country at Christmas time.

Oh, and wholesome, yeah. The idea of raising my children around PA Dutch country is much more appealing than near the factories and chemical plants that were five miles from my last house.

Please worry about the environments of your own children, and I will worry about mine.

bayview6 says

Too early to worry. With BRAC coming to Aberdeen and Ft. Meade, your house could get back to your purchase price by 3/2013. I think that mortgage rates will stay low till then because housing nationally will still be weak.

The Maryland house was close enough to Meade that we got some BRAC families looking at the place both for rent and purchase last year. Aberdeen is a bit far to have a direct affect.

BRAC does have my hopes up a bit, but they were squashed so hard last year trying to move that I am careful with my emotions.

repo - your car is out of registration. The stickers go in the mo & yr boxes. You better watch out, someone at the IRS may be trolling this board for suspected illegal activity. Once the DMV can teach their employees to use computers, they will be doing the same.

Walk away. If you were a business and had to make a business decision it would be a no brainer. The bank made a deal with you. They already got 7 years of interest worth. And if you stopped paying, as a collateral they get a house. Let them have it. This is business. Don't get emotianal about it.

YesYNot says

repo - your car is out of registration. The stickers go in the mo & yr boxes. You better watch out, someone at the IRS may be trolling this board for suspected illegal activity. Once the DMV can teach their employees to use computers, they will be doing the same.

In California we're required to have front license plates, this is that. Front license plates don't have registration decals, only rear ones do.

Seems to me that you gambled, and lost 50K. Now pay up! I'd sell the house before it becomes worth even less (and around here houses are getting cheapr by the day).

bayview6 says

Too early to worry. With BRAC coming to Aberdeen and Ft. Meade, your house could get back to your purchase price by 3/2013. I think that mortgage rates will stay low till then because housing nationally will still be weak.

Sounds like realtor talk to me. I really don't think BRAC is going to have nearly as big an impact as the newspeople around her keep saying. It's going to be bigger in Aberdeen.

zzyzzx says

Seems to me that you gambled, and lost 50K. Now pay up! I’d sell the house before it becomes worth even less (and around here houses are getting cheapr by the day).

Not really.... I bought a place to live in and lost 75k so far. Unfortunately I don't have another 25 - 50k sitting around so that I can pay for the privilege of selling.

She is a RN, I am an IT security guy. When we bought our house we pulled about $120k combined, now we are at about $140 - $150, and have two kids.
In March of 2006 we bought our house for $325k.

I want to sit a cross the table from a loan officer and say “No I will not pay 7%. I will pay 5.75% or I will give you the keys right here, right now”.

------------------------------

Dont worry about it. I think they will offer you 5.75 or so down the road.
Your purchase is only 2.2x income. So not much risk there for the bank.

zzyzzx says

bayview6 says

Too early to worry. With BRAC coming to Aberdeen and Ft. Meade, your house could get back to your purchase price by 3/2013. I think that mortgage rates will stay low till then because housing nationally will still be weak.

Sounds like realtor talk to me. I really don’t think BRAC is going to have nearly as big an impact as the newspeople around her keep saying. It’s going to be bigger in Aberdeen.

-----------------

Brac @ ft meade will not be done till September. Don't expect a tidal wave but rather a rising tide over several years (at least 6) as the commuters from DC get tired of the 3 hr commute and either retire or move. Probably it will be the private sector folks plus the new Cyber Command that will really jump start the area. New construction of SFR and townhouses is currently underway in Odenton. No, I'm not a realtor. Aberdeen since it is a small area so it will see a more rapid result.

The forecast is about a 3% rise in prices in 2011 in the ft meade area. Not huge but at least it is in the right direction.

tekkierich,

To be rid of the house would require a short sale. The gov. has a program called HAFA that you'll probably qualify for. You'll need to be creative with a hardship case but I'm sure you can think one up.
See the details here, you also get $3,000 to move.

http://www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx

You'll need to complete the sale by the end of 2012 to be eligible for the Mortgage Forgiveness Debt Relief Act of 2007 on your Federal taxes. You may also have a State level relief act as well so look into it. Also speak with your CPA to determine if your 2nd will qualify (if you have one)

Also Google the effects to your FICO. If you think you'll need to finance a large purchase in the next 3 years (car etc) do it before hand. Also keep your credit cards and all else current and it'll rebuild faster.

FHA allows for a home loan 3 years after a deed in lieu or a foreclosure and 2 years after a short sale. You can get the details on the FHA site.

shrekgrinch says

Mr.Fantastic says

Look, it’s two guys who know nothing about banks, the finance industry, or anything about micro economics at all.

Get used to it. Especially with Tatoo.
As for the poster, he’s screwed and too bad. After being a lifelong renter who endured ridicule as such by all the ’smart people who have mortgages!’ I now get to say, “Sorry sucker, perhaps if you weren’t one of the now-proven-stupid-people…”

Haha.

Most people won't get those. It's interesting an accountant gave you that advice. Because you don't know what the interest rate is at the time the mortgage "balloons". One problem "all" of you have. You filled out a 1003 saying you would occupy that house as your primary residence. They could "call" the loan on you. For renting out an owner occupied house. That's called the "acceleration clause".

The "acceleration clause". Means that the entire mortgage becomes due and payable at the time you do something they really don't like. Its in the documents you signed at closing. Every single mortgage written is like that. So I really don't have to see them. Rentals are very risky in a lenders eyes. Because it is not your primary residence. Then you have potentially two mortgages. Or two payments. They look at it like a second home. You can walk away from that easily and keep your primary residence. They are stuck with the other house you could not afford.

When you go to play "chicken" with the lender. If they find out you have a renter in the house your supposed to be living in. You could have some problems. You need to look into the fact. That when you bought this you had a rate on an SFR. You are now the owner of a NOO. house.

You could be dead in the water at this point. There are triggers that will let that lender know its NOO. Then your rate is definatly going up. NOO rates are way higher than SFR rates. Not only that the requirements for a NOO are different. Like the LTV (loan to value). They have to do rental comps. If they can't find those your in for a long wait. If they catch you trying to refinance a NOO to a SFR. Thats real trouble and can be expensive not to mention the fact your facing the acceleration clause. I would not take back to the same lender. If you are going to attempt something like that. So you are unless you move back into that house. Really looking that ballon straight in the eye. No pun intended. I would not want to be you. More trouble than its worth.

bayview6 says

The forecast is about a 3% rise in prices in 2011 in the ft meade area. Not huge but at least it is in the right direction.

Ummm higher housing prices is a bad thing, just like higher food and energy prices. I'd call a 3% price increase a move in the wrong direction. I'm also curious as to what's considered the Ft Meade area. I'm not thinking that your MD house is in not particularly close to Ft Meade or Aberdeen (I suspect Dundalk or Essex).

For the locals.... the house is in Northern Pasadena MD with a view of a tributary off the bay. It would be a 25 - 30 minute commute to Meade.

WRT the NOO issue. I acknowledge that. I tried to do my refinancing before I moved out. If I had not been in negative equity the loans I was looking at would have required residence for 6 - 12 months from what I understood. I would have stayed for the duration needed to complete the loans

This is why I think my rate will not be good in two years. I will guess I will need 105% - 120% LTV and I will be a NOO, plus my gut thinks rates are going up. However, hopefully I will have a demonstrative tenant history for 2.5 years. "Doing the right thing" might be impossible.

zzyzzx says

bayview6 says

The forecast is about a 3% rise in prices in 2011 in the ft meade area. Not huge but at least it is in the right direction.

Ummm higher housing prices is a bad thing, just like higher food and energy prices. I’d call a 3% price increase a move in the wrong direction. I’m also curious as to what’s considered the Ft Meade area.

Agreed. Don't know anybody who thinks rising prices are in the "right" direction unless they can cognitively displace that the cost of living is increasing and buyers are going to get squeezed. Do we hope that automobiles become more expensive? Water, gas and electricity?

klarek says

Agreed. Don’t know anybody who thinks rising prices are in the “right” direction unless they can cognitively displace that the cost of living is increasing and buyers are going to get squeezed. Do we hope that automobiles become more expensive? Water, gas and electricity?

Klarek--that's a bit of a dumb analogy. Housing is not truly a consumable good. You can't compare it to water, gas, electricity, or candy bars for that matter. It's not a pure investment, but people who own houses plan on reselling them at some point...