patrick.net

It is "scarry" how fast decision from supreme court is affecting americans life. Not long ago, John Robert and his friends decided corporation also possess the right of freedom of speech just like individual american so the corporation can throw as much money into campaign contribution as they want. Now, americans are already equate themselves in making financial decision just like corporation.

shultzie says

sometimes i think I’m the fool for staying out of debt and not buying into the mania, running up bills, getting all the toys and then declaring bankruptcy…

Yea - me too.

I can't control anyone else's behaviors - but I can control mine. I do my best to pay my bills, remain solvent and live within my means. It's difficult to see people who aren't paying their house payments leave for cruises & Hawaii vacations - one woman I work with said that she "deserves" the vacation because when she has to pay rent after she's thrown out she won't have any vacations for awhile. They're jacking up every credit card they have (applied for a couple extra before they stopped paying the outrageous house payment) and buying toys, computers, etc now because they won't be able to afford it later.

I can sleep at night - even if I don't have a new intelligel mattress like theirs.

kimtitu says

I think what goes around comes around. Banks are robing taxpayers and giving out big bonuses. I guess this is one legal way of people robing the banks back.

They're not getting back at the banks, they're robbing from their fellow citizens, the ones who ARE being responsible. The banks don't give a shit if the bubble-buyers pay back their loans or not; they're making up the difference and more from the taxpayers.

elliemae says

shultzie says

sometimes i think I’m the fool for staying out of debt and not buying into the mania, running up bills, getting all the toys and then declaring bankruptcy…

Yea - me too.
I can’t control anyone else’s behaviors - but I can control mine. I do my best to pay my bills, remain solvent and live within my means. It’s difficult to see people who aren’t paying their house payments leave for cruises & Hawaii vacations - one woman I work with said that she “deserves” the vacation because when she has to pay rent after she’s thrown out she won’t have any vacations for awhile. They’re jacking up every credit card they have (applied for a couple extra before they stopped paying the outrageous house payment) and buying toys, computers, etc now because they won’t be able to afford it later.
I can sleep at night - even if I don’t have a new intelligel mattress like theirs.

I may be wrong, but I venture to guess that these people don't sleep very well. 'Intelligell mattress' or not. How can anyone have any peace of mind while awaiting the sheriff to come and give them the boot? If it's one single guy, I suppose he could just grab his stuff and run on the fateful day, but what about a couple or, worse still, a family with children? The sheriff comes to the door to padlock the house and throw them all out and what do they tell the kids? Grab your toys and run? No, I think these people must be shell~shocked by all the stupid decisions they made.

But, then again, perhaps that is just my wishful thinking and maybe people no longer care what their children are exposed to and how the trauma of eviction might affect a little kid.

Amen, brother!

shultzie says

sometimes i think I’m the fool for staying out of debt and not buying into the mania, running up bills, getting all the toys and then declaring bankruptcy…

I am right with you on that sentiment but rather than get caught up in the moral dilemma, just enjoy being debt free and in control of my own destiny. It is funny my kids think I am "hecka rich" but all it is being able to keep or spend as I choose. All those people walking are not walking towards a free life.

WillyWanker says

I may be wrong, but I venture to guess that these people don’t sleep very well.

It is really depend on the personality.

I cannot live like that with the constant fear that I will be thrown on the street anytime.

All those people who bought expensive homes, with subprime loans, but who are now living rent free in them by defaulting on their loans?

Plenty of folks i know have fixed rate loans they are unable to afford. They are paying on homes that are dinky in size.

The "the housing bubble" is from the inflated prices on homes and not from type of loans. It seems many including the media, and government "twisted" the bubble exclusively to the "bad loans", but the bad loans in reality are the result of the inflated prices. Many "expensive homes" in the Bay Area arent really expensive homes or mansions, but rather your ordinary 50s rancher near 1500 sq ft...heck many were well near 200-250K before the bubble, but peaked 700-800K. For many its not that "they bought more home than they could afford" , but simple over-commited themself with grotesque prices.

At the root of the problem, is the question of home prices. What was true back in 1999-2000 is still true today.. its not worth that much!

thomas.wong1986 says

Plenty of folks i know have fixed rate loans they are unable to afford. They are paying on homes that are dinky in size.

Actually, a careful buyer will run into a problem too.

For example, you make $100k a year, and can afford $50k per year on the mortgage.
The bank gives you a 3% 5 year ARM. At 3%, you can buy a $1.5 million house. Instead, you got a $1 million dollar house and the payment is $30k.

5 year later (today), the bank changes the ARM to 7%. That is $70k a year.

You can get a 5% fixed rate 30-year loan. However because of underwater, no other bank will give you that loan.

The buyer can afford that house 5 years ago and today. Somehow, this buyer has no choose but default.

Also in 2005, because the house price goes up fast, you want to buy the largest house possible so the gain will be greater.

thomas.wong1986 says

For many its not that “they bought more home than they could afford” , but simple over-commited themself with grotesque prices.

Over-committed themselves = bought more house than they could afford. No difference. Whether it was an ARM or a fixed-rate loan, if they bought a house based on what they hoped they'd be making in a couple of years, or in the hopes that they could sell for more and "move up" in a couple of years they over-committed.

Many realwhores pushed this method of buying. Mortgage companies pushed the highest commission loan. People drank the kool aide and Wall Street packaged these into toxic securities. Investors got screwed. Everyone says it's not their fault.

Now most realwhores are out of work. Mortgage companies closed, owners indicted. Banks bailed out. Some Wall Street companies out of business while others are paying huge fucking bonuses. Investors who were scammed lost everything. Everyone says it's not their fault.

xenogear3 says

WillyWanker says

I may be wrong, but I venture to guess that these people don’t sleep very well.

It is really depend on the personality.
I cannot live like that with the constant fear that I will be thrown on the street anytime.

I feel obligated to thump my nose at your reply because it is so simple minded.
Or perhaps you are trying to scare the village idiots, then shame on you.
No one can just throw you out on the curb without due process of eviction - a fairly lengthy timeline.
Anyone that can google can learn all about this process without ever paying a dime for it.

I think that, for some people, the fear of the great unknown is unsettling. But many - who educate themselves via the interweb - realize that the process takes at least a year and plan accordingly. My sis lost her house and she was in the first group.

But to be honest, she didn't "lose" her house. She refinanced it into oblivion and could still be in it if she hadn't done so. I figured out that somewhere in her haze of subprime refinancing, she paid about $50,000 in pre-payment penalties.

elliemae says

I think that, for some people, the fear of the great unknown is unsettling. But many - who educate themselves via the interweb - realize that the process takes at least a year and plan accordingly. My sis lost her house and she was in the first group.
But to be honest, she didn’t “lose” her house. She refinanced it into oblivion and could still be in it if she hadn’t done so. I figured out that somewhere in her haze of subprime refinancing, she paid about $50,000 in pre-payment penalties.

My favorite is, "Lost a home to foreclosure."
First, you don't own the house, the lender does. Try not paying on your last mortgage payment and see what the lender will do.
Second, it is not a home - just a house.
Lastly, foreclosure is the end result of not paying your lender. It isn't like being hit by a tornado.

What I said, you cannot be forced out til after the foreclosure/title transfer.
There are many ways to be foreclosed upon, like being in a loan mod trial or while in the short sale process. The banks could sell the house without telling you. But they still must evict you which can take 30 - 60 days in CA.

kt says

My favorite is, “Lost a home to foreclosure.”

kind of like: CALIFORNIA BUDGET CRISIS.

didn't see that one coming at all. It was like getting hit by a bolt of lightening. An act of God you might say.

"The Fools are the ones that pretended they could get away with the lending practices to deceit the american citizens, when now there is a class action lawsuit filed against them - remember "karma is good".....

kt says

My favorite is, “Lost a home to foreclosure.”

Kinda like gambling losses. Gamblers know exactly where their money went, they gave it away.

We are enforcing laws left and right but there is no laws to check if the person who is strategically defaulting has money to pay the mortgage or not. If the person has money and is not paying back, shouldn't it be a crime?

But don't you think at some point in the near future, the gov and IRS will start looking into these matters when things get to a breaking point? I think when the national deficit gets so unmanageable that the gov starts looking to make any cuts, they will start to go after those who defaulted strategically even though they could easily pay.

theres nothing illegal about defaulting.

People keep acting like defaulting is NOT living up to the terms of your loan. Indeed, getting foreclosed on is exactly what is in the mortgage terms, and is an acceptable way to exit the contract. You either A) Pay off the full amount as described in the mortgage or B) Allow the bank to take possession of the house.

The people that are jerkholes are the ones trashing the house when they get foreclosed on. THAT is illegal.

I know several people who have houses way outside of the greater metro area who bought another house much closer in that costs less than their old ex-urb house, then cheerfully mailed the bank the keys. It was the smart thing to do. And the morally correct thing. They're helping the banks reassess risk management practices from the recent go-go-go days. If we don't get back to 20% down full doc loans as the standard practice, this will happen again. And we won't get back to sane underwriting until we stop trying to 'help' the banks.

The Original Bankster says

theres nothing illegal about defaulting.

That's the point. It should be made illegal.

dadab,

dadab says

The Original Bankster says

theres nothing illegal about defaulting.

That’s the point. It should be made illegal.

Sure, but only if we get to put every person who works at a company that goes out of business in jail, too. Oh, and jail everybody in Greece for them going into default.

It's remarks like yours that makes me despair for democracies.

sfbubblebuyer says

Sure, but only if we get to put every person who works at a company that goes out of business in jail, too. Oh, and jail everybody in Greece for them going into default.

It’s remarks like yours that makes me despair for democracies.

if there were such disincentives then the bubble who have never been made in the first place.

You're right. If everyone believed that legal contracts would and could be tossed out by the government and people thrown in jail for the temerity of following those contracts, we wouldn't have a bubble. We'd have tyranny and, I'd like to believe, mass revolts.

We don't need to have debtor's prison. Just have home loans be recourse loans. If you get in trouble and can't pay your bills, you file bankruptcy. That's why we have bankruptcy law. Why should homeowners be considered a special class of people whose decisions don't have consequences like everyone else's? If people knew they were gambling with their OWN money, they'd be a lot less likely to gamble.

Why should homeowners be treated like they are chained to a debt, when corporations and financial "innovators" are allowed to shed debt like an inconvenient exoskeleton with ease? I believe in egalitarian society and everyone should be equal before the law. Since we have elevated corporations to "personhood" over the years, what's good for them should be good for us. Otherwise we just admit we are all sharecroppers and start pledging oaths of fealty to JP Morgan or Goldman Sachs. Recourse loans were common before 1920's. During Great Depression lots of people however not only lost their property but found it sold for pennies on the dollar and STILL had debt hanging around their neck. The rise of non-recourse loans after that was precisely a reaction to predatory lending and the stultifying societal effects of recourse loans which dragged down debtors who were not allowed a quick fresh start.

I actually am supportive of the idea of recourse loans however, mandatory for SECONDARY PROPERTIES. This might discourage some of the stupider speculators. There's a whole host of freebies I think we toss to people that own multiple properties that they do not occupy that need to go.

sfbubblebuyer says

dadab,
dadab says

The Original Bankster says

theres nothing illegal about defaulting.

That’s the point. It should be made illegal.

Sure, but only if we get to put every person who works at a company that goes out of business in jail, too. Oh, and jail everybody in Greece for them going into default.
It’s remarks like yours that makes me despair for democracies.

My point is why can't the bank go after the money bag the guy holds?

The Original Bankster says

sfbubblebuyer says

Sure, but only if we get to put every person who works at a company that goes out of business in jail, too. Oh, and jail everybody in Greece for them going into default.
It’s remarks like yours that makes me despair for democracies.

if there were such disincentives then the bubble who have never been made in the first place.

And we would be living in a world where you'd have "Big Brother" on your flat screen television watching you all day.

I'm sure that Kim Jong Il would agree with you.

dadab says

sfbubblebuyer says

dadab,

dadab says

The Original Bankster says

theres nothing illegal about defaulting.

That’s the point. It should be made illegal.

Sure, but only if we get to put every person who works at a company that goes out of business in jail, too. Oh, and jail everybody in Greece for them going into default.

It’s remarks like yours that makes me despair for democracies.

My point is why can’t the bank go after the money bag the guy holds?

That's far different than claiming they should be illegal.

If the bank holds a recourse loan, they CAN go after other assets and encumber the person who defaulted on the mortgage requiring bankruptcy to remove debts past their assets.

I have NO PROBLEM with banks doing that. However, if it's a no-recourse loan, the banks have NO RECOURSE beyond what was agreed to in the loan documentation.

And there is nothing inherently evil with a no-recourse loan. Banks complaining about defaulters when they built in zero downpayment and no risk aversion into their underwriting are idiots. Those banks NEED to fail. You shouldn't let a bank get away with that kind of stupidity.

I am no angel, but I cant believe that people wanted to buy a mortgage for $6000 for a house that rents for $3000. You can instantly see that there is no way you will ever be able to make your payment, also it about 100% certain that you will not see positive cash flow within 2 decades.

1. I think that the banks that did this should let the foreclosures hit their books, and then the Fed Govt will make a slightly sweetheart deal on these losses, once they happen.

2. Then people who walk away get a strong penalty, people who voluntarily turn in the keys get a foreshortened "grace" 5 years of bad credit. People who did HELOCs and bought expensive items must sell those items as proceeds, and if they do, they get a 20% tax cut on the losses.

3. Pass a law that you must have a 10% downpayment under the CRA, FHA, VA, and Private Funding. If you dont want to save the 10%, you cant pay your mortgage, so then you rent.

4. If you did 1-3 above, there would have been a bigger transient in the system, but you would have gotten it out of the system.

What Obama's doing now is making whole all of the players who did this Subprime thing in the first place. Its utterly illegal, contempable, and the opposite of capitolism in my mind. Let the bad loas clear, encourage correct financial behavior, and punish all of Obamas friends at Goldman (yeh, right!)

I think there should be a distinction between foreclosure and bailout. Frankly, I could care less that a bank lost money or had to take a loss on an investment. If the homeowner benefited (this time), than fine with me. I wouldn't lose sleep over how my neighbor ran his/her financial life or what they decided to purchase.

I take great issue with the taxpayer being dragged into this arrangement to "cover" for everyone's mistakes. Big banks are not going to change the way they do business over some perceived moral indignity on our part. However, if they risked their funds and lost big time, then heads would roll and new "policy" would change the landscape for all lending.

IMHO, if there were no bailout, we would have dropped into a huge recession while banks went hari-kari for their mistakes. At the same time, we would have recovered significantly faster without the billions being spent and would not be facing state and local governments seizing up over lost revenues.

There seems to be some confusion over what a mortgage is. It is contract, not a moral honor code. The contract says the bank gets the house back if you default. You are contractually obligated to give the house back when the bank forecloses. You are NOT contractually obligated to pay "because it is the right thing to do"

What if the shoe was on the other foot. What if I made every payment on my 15 year mortgage but the last payment was lost in the mail and I had left for a 6 month vacation. Would the bank say "The right thing to do would be to wait a few months to see if he returns and is able to pay." or would they send the 90 day notice and start the foreclosure process?

The House is the collateral for the loan. If someone can not pay the loan then the bank gets the house. That is how it has worked for a hundred plus years. The only reason people find this so disturbing now is the number and mostly the amount of the defaults. The bank and Mortgage companies agreed with the appraisals signed off on the terms. They made a contract and accepted the risk. Why do we now call the completion of a contract immoral? Just because the BUBBLE BURST. A real estate bubble is a fairly new thing if you look at the charts. Housing Prices were relatively stable for adjusted for inflation for most of the last century. Who profited and was responsible for the immoral Bubble. Was it immoral to inflate appraisals and fake paperwork to sell houses make loans and collect commissions. Do the real estate agents and Mortgage brokers have to return there large paychecks if the house defaults? Let me be clear I Rent. My husband and I were offered one of these interest only loans about four years ago when we were considering our first house purchase, I cried the day day we turned it down because we did what most did not a used a calculator and understood ourselves we could not afford to purchase in inflated southern CA. The market crashes we celebrated and spent the last two years looking for that bargain foreclosure. After two years of being outbid by investors and looking at falling down Fixers still prices at 500,000.00 We rent. I am happy now not to have participated in either end of this insanity. And although I am sometimes jealous of these people living for a year or more in a beautiful house rent free I can not blame them if I was in that position I would do the same guilt free.

Old Donald Trump says walk away, its a business decision, not a moral one.

fredMG says

There seems to be some confusion over what a mortgage is. It is contract, not a moral honor code. The contract says the bank gets the house back if you default. You are contractually obligated to give the house back when the bank forecloses. You are NOT contractually obligated to pay “because it is the right thing to do”
What if the shoe was on the other foot. What if I made every payment on my 15 year mortgage but the last payment was lost in the mail and I had left for a 6 month vacation. Would the bank say “The right thing to do would be to wait a few months to see if he returns and is able to pay.” or would they send the 90 day notice and start the foreclosure process?

I'm not sure how this urban legend got started that a mortgage contract says, "Pay back the loan OR give the house back". I hear this a lot. But they actually are not worded that way. The house is held as security for the loan, but you are borrowing money, not a house. The reason you are not liable to pay back the loan after the bank takes the house back, in California, is that California has laws that prevent it. It is NOT because your mortgage contract is some sort of either/or proposition. You borrowed money, and you agreed to pay back money. And in fact, only the original purchase loan is non-recourse; HELOCs are not. I'll leave it up to each individual to decide what he thinks is moral or immoral, but don't use some misguided notion of what a mortgage contract is as your supposed justification for anything.

IMHO, the market just correct itself. The bank did the lax lending and now they bite the bullets back, simple?

gameisrigged says

fredMG says

There seems to be some confusion over what a mortgage is. It is contract, not a moral honor code. The contract says the bank gets the house back if you default. You are contractually obligated to give the house back when the bank forecloses. You are NOT contractually obligated to pay “because it is the right thing to do”
What if the shoe was on the other foot. What if I made every payment on my 15 year mortgage but the last payment was lost in the mail and I had left for a 6 month vacation. Would the bank say “The right thing to do would be to wait a few months to see if he returns and is able to pay.” or would they send the 90 day notice and start the foreclosure process?

I’m not sure how this urban legend got started that a mortgage contract says, “Pay back the loan OR give the house back”. I hear this a lot. But they actually are not worded that way. The house is held as security for the loan, but you are borrowing money, not a house. The reason you are not liable to pay back the loan after the bank takes the house back, in California, is that California has laws that prevent it. It is NOT because your mortgage contract is some sort of either/or proposition. You borrowed money, and you agreed to pay back money. And in fact, only the original purchase loan is non-recourse; HELOCs are not. I’ll leave it up to each individual to decide what he thinks is moral or immoral, but don’t use some misguided notion of what a mortgage contract is as your supposed justification for anything.

Yawn. So in your words, the mortgage contract says the bank can take the house back and if non-recourse they cannot sue for deficiency. If recourse they can sue your pants off.
Why get all moralistic and long-winded about it?

kt says

Yawn. So in your words, the mortgage contract says the bank can take the house back and if non-recourse they cannot sue for deficiency. If recourse they can sue your pants off.

Why get all moralistic and long-winded about it?

Um, no. That's not what I said at all. Maybe you shouldn't try to read message boards and have the TV on at the same time.

retro-active windfall taxs on REwhores and lenders that made all of the big cash between 1999 and 2012.

Full recourse loans and debtors prison for unpaid taxes.

Just tossing out some ideas.

I've forgotten the name of the particular mortgage, but I vaguely recall hearing about a mortgage where commission is paid as the mortgage was paid, throughout the life of the loan. I think anything that makes the lender/broker/realtor think good and hard about lending/selling is a step in the right direction (as opposed to the smash-and-grab technique that has been the industry standard for so long now). And of course, we all know money is all that matters to these folks. You've got to hit them where it hurts, or they will just do it again.