patrick.net

We do have plenty of money to put down on a nice house, but think houses will continue going down for the next few years.

I wouldn't count on that, at least not for a while: There are too many equity barons and HELOC contessas chasing around your neck of the wood. The lucky bunch who didn't piss their new-found fortunes away will be looking for a hedge against the false specter of hyperinflation, and since most people seem to share a canine instinct for investment sense, they'll keep returning to one of two or three places to bury their bones -- namely, housing. How many more "landlords" do you know personally compared to just five years ago?

I know San Jose is a boring town, but I'd sit tight. As for your credit, I've seen the idea floated for an institution that specializes exclusively in lending to people with spotless credit sans strategic default. I rather doubt with the sheer volume of house buyers that will be taken out of the market that there won't be some kind of creative scheme designed to get you back into mortgage debt in some way, don't worry. If you've got money you're aching to stick into someone's pocket, they will find a way to help that along.

try this:

c) not be a piece of shit deadbeat, and pay for the condo you bought that nobody forced you to buy

You mentioned you have an interest only loan. When does your loan start adjusting??

you seem pretty sure that house prices are going down so maybe you should just strategically foreclose now.

Klarek,

I will stop being a piece of shit deadbeat the same moment that banks do. How's that for fairness?

dajanara says

I will stop being a piece of shit deadbeat the same moment that banks do. How’s that for fairness?

You're holding yourself to such high standards. I'm going to blow up oil drilling platforms and pollute the world's oceans until BP stops doing it. Because modeling personal behavior after unsavory companies shows what little integrity one actually has.

I'm sure you thought you were really smart buying into the housing bubble too. Probably bragged at cocktail parties how you bought before it was too late, unlike those renting suckeres.

People that strategically default are deadbeat sociopaths. "How can I immediately benefit myself now, regardless of how many people I fuck over?"

How many people I fuck over? Dude!!! In my building the assholes are moving in paying 50% of what I paid. They are putting myself and my 6-month old baby in immediate danger. The other day someone threw a vacuum cleaner from the 4th floor balcony. I could have gotten killed.
There is meth being cooked on the 2nd floor.

And you are telling me I need to be a good samaritan and put up with this shit becasue I 'promised' that I would?

Which freaking fairytale are you from???? What a luagh! In the end, if you have no constructive comment to give me, please, please find another place to rant. Or crawl back in your fairytale.

dajanara says

How many people I fuck over?

The govt is spending billions of taxpayer dollars to stop foreclosures. We're spending hundreds of billions bailing out banks because people are foreclosing. Yet you intentionally want to foreclose. I'm all for more cheap housing, so go right ahead, but you're being a deadbeat. I do commend you though for actually putting money down on that place. Most people that go SD never had skin in the game to begin with.

dajanara says

Dude!!! In my building the assholes are moving in paying 50% of what I paid.

Well whose dumbass fault was it for buying a place that was going to lose half its value? If you spent ten seconds to think before making the biggest purchase of your life, you would have realized that renting the same place cost half as much and that prices were completely unsubstainable.

dajanara says

And you are telling me I need to be a good samaritan and put up with this shit becasue I ‘promised’ that I would?

I'm not telling you to do anything. But I know lots of people who bought at double what their houses are now worth. Their goals are to pay down the mortgage and not have the burden of being underwater on their shoulders. That's because they have personal integrity and aren't a bunch of selfish, whining weasels trying to sack other people with their mistakes.

dajanara says

They are putting myself and my 6-month old baby in immediate danger. The other day someone threw a vacuum cleaner from the 4th floor balcony. I could have gotten killed.
There is meth being cooked on the 2nd floor.

You're just inventing reasons to justify being a deadbeat. It's the same building that it was before. Except now you have real owners, not jackasses that were buying with no-doc liar loans at ten times their annual income.

If it's really as awful as you're stating, then move out and rent your unit. Why is that impossible? Not going to make bank every month? Face it, you're a selfish jackass that can't own up to your own decisions. I don't blame you for considering strategic default as it is in the short term often a financially savvy thing to do. I'm just saying that those who do it are selfish sociopaths that don't care who has to clean up their mess.

Just to comment on rents - I have been looking at the rental market and I agree that your mortgage is less than or equal to some of the best rents out there right now in the Bay area for a 3/2. Not sure what areas you are looking at - depends also on the size, etc. I would stay put for now - unless you feel the building is becoming unsafe for you and your family...

What about stopping your payment now and playing the game of trying to get a loan modification (with no actual intention of getting it)? From what I've read, foreclosures take over a year nowadays. With the loan mod BS and slow foreclosure process you might be able to live at your current place for 2 years rent free, and then really be in a position to buy something else. It's not the greatest plan morally, but it may be the best plan for your family.

supplement:
This will trash your credit, so for it to work, you'll have to be able to buy in cash or wait until your credit is restored.

dajanara says

hey are putting myself and my 6-month old baby in immediate danger. The other day someone threw a vacuum cleaner from the 4th floor balcony. I could have gotten killed.
There is meth being cooked on the 2nd floor.

Hmmm, your community must be in very bad shape.

Earlier you said:

It seems to me that we are best-off staying put because renting a nicer 2/2 would cost us more than we pay now (after tax benefits are accounted for).

You are comparing apple to orange - your current neighborhood where renting/owning is cheap and a neighborhood with "a nicer 2/2" where you would like to live.

Bottomline, it's more of your lifestyle decision than financial one. If you want to live in a "nicer 2/2" and want your 6 month child to be safe, just get out from your current neighborhood.

2600 for a 3/2 condo in SJ?

I pay 1800 for a 3/2 corner lot house in Campbell (granted it should rent for 2200 or so).

You're overpaying.

klarek says

The govt is spending billions of taxpayer dollars to stop foreclosures. We’re spending hundreds of billions bailing out banks because people are foreclosing. Yet you intentionally want to foreclose.

I'd phrase it a different way. The government is spending money because banks made reckless lending decisions. Nobody forced the banks to lend out money to poor credit risks...

tatupu70 says

I’d phrase it a different way. The government is spending money because banks made reckless lending decisions. Nobody forced the banks to lend out money to poor credit risks…

Right, and in the cases of defaults from those that were given bad loans, that is indeed the fault of the banks. It's the fault of people that can afford their loans but choose not to because they're selfish deadbeats that the problem for taxpayers becomes exaccerbated.

There is so much downright cheating going on in the short sale game. We're all paying for it.

This strategic foreclosure is great for those who aren't invested heavily in their homes. What about everyone else whose homes have greatly dropped in price

klarek says

Right, and in the cases of defaults from those that were given bad loans, that is indeed the fault of the banks. It’s the fault of people that can afford their loans but choose not to because they’re selfish deadbeats that the problem for taxpayers becomes exaccerbated.

There's probably enough blame to go around, but personally, I fault banks more than owners.

#1 They were a big reason for the bubble in the first place with the reckless lending
#2 They made low and no down payment loans--they should have known that these are very risky if property values were to decrease.
#3 This is their business. If anyone could see this coming--they should have. They should be much more knowledgeable than JSP about the real value of a house.

tatupu70 says

I fault banks more than owners.

I do too, but unfortunately this thread wasn't started by a banker looking to escape from his fiduciary duties. Lots of potential buyers saw the bubble for what it was and decided to have no part of it. For some bubble buyer to want to escape his commitment because he can't flip it for a profit, that makes him a piece of shit.

I personally think there may be deflation in the housing sector for at least a year. If the government continues printing, there may come a time (2-7 yrs?) when wild hyperinflation kicks in overnight and housing will be a refuge. I am renting right now and am trying to time this somehow . Very difficult to make decisions in this crazy environment where everything is manipulated.
Asking for spiritual guidance would make sense. This is all IMHO.

You paid $480,000 for a place in a building where they cook meth and throw appliances out the window? And you moved your family into such a place??? And now you want to debate the intricacies of whether or not paying a few hundred dollars more a month to get your baby out of the crack house is worth it?

Are you for real?

Look, your options are:

a) get the f out of there and rent until your credit and/or market conditions allow you to buy a reasonable home at a reasonable price, and rent out this dump.

b) stay put and stop paying, and wait for them to take a year and a half to kick you out. I imagine from how you describe your neighbors, there won't be much shame on eviction day.

c) stay put and keep paying like a normal person who's perfectly capable of doing so, and the move when the time is right.

Why people say "Im not going to pay on a home that's worth less than I paid!!! Im not stupid!!" is just beyond me. You can afford it asshole, pay up. When a home appreciates a couple dozen grand....does the bank have the right to come back and say, "look man...we gave you $480K but the home is now worth $520K....it's so not fair that you only get to pay on $480K.....we need to modify your mortgage payment up a bit to be fair."? Of course not. The reverse (mortgage mods, principal forgiveness, strategic defaults) is just as absurd. Buyer's remorse is no excuse for weaseling out of your contractual obligations. This isn't wal-mart...you cant find the same home for $10,000 less, come back to the store with the printed add, and get refunded the difference plus 10%.

And prices will continue to fall. If you wait to SD until a year or two from now, the difference in your principal balance will be far greater than the value of your home, than it is today. If the govt (which I strongly suspect is coming) starts ramping up default judgements against people who chose to SD, you will owe a hell of a lot more if your home sells for $190K instead of $270K, when they do finally take the place from you. If you're going to take the route of SD....by all means do it now. Whether or not you choose stay in the crackhouse rent-free during that time, or find a decent place to raise your child in the meantime, is up to you.

Just beware though, this environment of "everybody's doing it so why can't we" surrounding strategic defaults is a very dangerous one. You or I or anyone does not know what steps the govt is going to take in the future to prevent this and punish those who engage in it. Don't think that retroactively, after you default, the government won't be entitled or inclined to come after you for the money. You are fucking the bank by not paying. They in turn go to the government and the government takes money from me and my wife and my parents and every other tax-paying citizen, to pay them back. They have already done it. You aren't screwing the bank who screwed you. The banks won't be screwed. You fuck them, they pass the screwing on to the American taxpayer via massive government bailouts. The bank's balance sheets don't take the hit, the American taxpayer does. I do. YOU do. Eventually, public outcry over this will lead to legislation wherein no one is going to get away clean from a strategic default, as they appear to be right now. A 550 credit score is not going to be the only consequence of your actions, should you choose to SD. You should think about that before you choose this seemingly 'easy' way out.

I don't quite understand, why interest only loan? Were you trying to flip it after a few years?

Schizlor says

Why people say “Im not going to pay on a home that’s worth less than I paid!!! Im not stupid!!” is just beyond me. You can afford it asshole, pay up. When a home appreciates a couple dozen grand….does the bank have the right to come back and say, “look man…we gave you $480K but the home is now worth $520K….it’s so not fair that you only get to pay on $480K…..we need to modify your mortgage payment up a bit to be fair.”? Of course not. The reverse (mortgage mods, principal forgiveness, strategic defaults) is just as absurd. Buyer’s remorse is no excuse for weaseling out of your contractual obligations. This isn’t wal-mart…you cant find the same home for $10,000 less, come back to the store with the printed add, and get refunded the difference plus 10%.

That's a crappy analogy. The bank entered into a contract with the buyer which states that the buyer has to repay the loan else the bank can repossess the house. If a buyer stops paying and gives the bank the house, he is abiding by the rules of the contract. The lender usually requires a down payment and charges varying levels of interest to account for the risk of the buyer not paying.
You could make an argument that by continuing to pay a severely underwater mortgage you are increasing the moral hazard for mortgage lending. Lenders need to properly account for the risk of buyers walking away from underwater mortgages and they won't if people continue to pay...

tatupu70 says

There’s probably enough blame to go around, but personally, I fault banks more than owners.
#1 They were a big reason for the bubble in the first place with the reckless lending
#2 They made low and no down payment loans–they should have known that these are very risky if property values were to decrease.
#3 This is their business. If anyone could see this coming–they should have. They should be much more knowledgeable than JSP about the real value of a house.

If you go out and buy up a lot of junk on credit, the banks are not responible for your bad buying habits. Long before we had easy lending, places like the SF Bay Area/Boston saw a 100% increase in prices. Banks were not even close being a party to this. Buyers around the Bay Area were looking to a new era of prosperity and gambled wrong. We had two waves of irrational exhuberance in the Bay Area. Both went splat....

The bill is in, and they are on the hook, and they lost.

tatupu70 says

That’s a crappy analogy.

On a social and psychological level, it's a perfect analogy to describe what the original poster is doing. You're talking about whether it's legally the same. Well no, it isn't, but that doesn't invalidate his point that OP and other people that engage in SD are selfish sociopaths by running away from the debts that THEY sought to have and now regret. Welcome to the real world, you have to pay for what you bought. Isn't that terrible

I can't wait to read the forums in the future from these deadbeats whining about how they still have to pay back the difference on their intentionally abandoned homes' losses. The govt and the banking industry will start treating home ownership like student loans. You want to get away from your debt? Tough shit. You selfish little cunts didn't buy those houses with a gun to your head. Stop being a bitch and pay up. This is costing taxpayers a fortune. Congress is waking up.

Like I said, a lot of my friends bought at the peak of the market. Because they actually have something called integrity, they're paying down the principal rather than overburdening our society with their mistakes.

thomas.wong1986 says

If you go out and buy up a lot of junk on credit, the banks are not responible for your bad buying habits

But we're not talking about people buying junk. We're talking about people buying houses. And even so, the banks are responsible for determining whether or not someone is a good creidt risk before lending out their money. They loaned out money they shouldn't have and they lost.

tatupu70 says

But we’re not talking about people buying junk. We’re talking about people buying houses.

A pile of sticks and bricks isn't junk?

klarek says

A pile of sticks and bricks isn’t junk?

A pile of sticks and bricks does not provide any useful economic services, no, other than being a ready source of kindling.

A home, on the other hand, provides numerous services. It is a place to store your shit, a service that Public Storage will charge you hundreds a month for. There is also the shelter service, so unless you like camping out under the 237 or in a truck in some quiet part of town, this has value too.

What people overpaid for was not the physical housing good, it was the expected future value of the land and rents therefrom. HIstorically, buying real estate in the Bay Area has not been a bad deal, and this is not because our houses are built out of gold.

Klarek - why so angry? Did you lend out money in a non-recourse state? Did you invest in toxic assets that are not GSE-backed? Did you put too much money down? Did your girlfriend just leave you?

klarek says

You selfish little cunts didn’t buy those houses with a gun to your head. Stop being a bitch and pay up.

People who truly "bought" a house are screwed if they have to sell.

Most people entered into a mortgage contract with a lender. It is a two-party private contract between the savvy bank that models risk with sophisticated computer algorithms and understands every clause of the mortgage contract (whether put in by themselves or legally required) and Joe Consumer. In california, the original purchase money contract is non-recourse.

Most banks that lent money to borrowers with low-down payments and/or low credit scores during a time of incredibly inflated property values are screwed if the borrower defaults.

Notice how you are not involved in that loss Klarek? The only one to push the loss to you was the government, after the banks threatened to hold the economy hostage.

klarek says

Like I said, a lot of my friends bought at the peak of the market. Because they actually have something called integrity, they’re paying down the principal rather than overburdening our society with their mistakes.

Are they paying down the principal ahead of schedule - or are they just maintaining the non-default status of the mortgage contract? If they are truly your friends, you would educate them about the non-recourse status of their loan (assuming it still is) and the potential benefits it provides them with. Also, you would tell them to not put any savings money with a bank that has lent them money in a mortgage contract (as the bank can seize the any defaults directly i believe)

klarek says

But I know lots of people who bought at double what their houses are now worth.

As a hypothetical, if you were my friend and I had 250K in one bank and a 500K interest only loan with another bank on a property that is now only worth 250K, would you advise me to -

Be a selfish, whining, piece of shit, deadbeat, jackass, little cunt, bitch sociopath and buy another identical property with the 250K from the bank and default on the original loan?

OR

Maintain integrity, not overburden our society, and remove the burden of being underwater from my shoulders by applying 250K in the bank to the principal of my outstanding balance?

Hypothetically, I probably have one less friend and no mortgage.

Troy says

What people overpaid for was not the physical housing good, it was the expected future value of the land and rents therefrom. HIstorically, buying real estate in the Bay Area has not been a bad deal, and this is not because our houses are built out of gold.

Exactly! even post 2000, buyers expectations regarding the local economy were disconnected from reality.

bought_high says

why so angry?

Not angry at all. Just pointing out what every non-deadbeat knows. If you value short-term gains above personal integrity, SD is the way to go. This is impossible for a sociopath to understand, so continue clinging to the notion that running away from one's debt that they explicitely and willfully sought is the only thing that matters and the externalities of their behavior are irrelevant.

Nomograph says

ignore everything you hear on this board and do what is in the best interest of your family. You have a six-month old child to think about.

I think the decision to "do what's financially best" was kicked to the curb when the person bought into the bubble. Now it's a matter of retaining their integrity or seeking cheap gains in the short term. Saying that this is something that will benefit one's children is ridiculous. A child raised in a deadbeat environment will grow up and become a deadbeat as well.

klarek says

Not angry at all. Just pointing out what every non-deadbeat knows. If you value short-term gains above personal integrity, SD is the way to go. This is impossible for a sociopath to understand, so continue clinging to the notion that running away from one’s debt that they explicitely and willfully sought is the only thing that matters and the externalities of their behavior are irrelevant.

I'm a non-deadbeat and I know that you are completely wrong. Buyers didn't enter into a moral contract with the bank--they entered into a financial one. It's dollars and cents. As to externalities--how about the moral hazard of a bank not losing on a loan that they shouldn't have made. Now they'll continue to make no and low down payment loans that they shouldn't be making. If enough people SD, maybe they'll require 20% down again.

tatupu70 says

I’m a non-deadbeat and I know that you are completely wrong. Buyers didn’t enter into a moral contract with the bank–they entered into a financial one.

Yes, I know. And what are these dollars and cents reasons to stop paying, because it doesn't turn an immediate profit? That's where the morality ends and the epitome of America's deadbeat populace shows its face. "Whah, I want to profit NOW!!!"

tatupu70 says

As to externalities–how about the moral hazard of a bank not losing on a loan that they shouldn’t have made.

There is nothing wrong with the loans of those that strategically default. By definition, they are fine and affordable. Using other peoples' bad loans as an excuse is pathetic.

tatupu70 says

If enough people SD, maybe they’ll require 20% down again.

That would be awesome. Don't get me wrong, I have no problem with more foreclosures hence lower prices. I just think this sickening mentality that houses have to immediately appreciate and profit the purchaser is indicative of a society that is losing any integrity that it once had. We're a nation of spoiled losers. We've gone from people slaving for thirty years to pay off a loan to now wanting a 20% YoY profit or they're going to walk away and dump their mistakes on other people. Spoiled, selfish, narcissistic brats.

klarek says

We’ve gone from people slaving for thirty years to pay off a loan to now wanting a 20% YoY profit or they’re going to walk away and dump their mistakes on other people. Spoiled, selfish, narcissistic brats

I know, I know. In your day, people walked 5 miles to work uphill (both ways). It was 120 degrees in the shade and nobody used AC. And you LIKED it that way.

You had $63k you put down then and you have another sizeable amount saved up again now.

1) Don't get a loan modification, it MAY make your loan recourse
2) Make sure none of it is recourse now, or else you won't have that sizeable DP anymore.
3) If you've managed to save up while paying out this mortgage you can afford to dish out a little more for a better place to live. Thus, I agree with other folks that if you don't like living there you should become a landlord for a while, rent out the current place and rent something you really want elsewhere. OR
4) If you've checked with a lawyer that your assets really can't be taken, then you can strategically default now, live on a cash-only diet until the foreclosure has gotten old 5yrs, then start rebuilding your credit for the final 2yrs of being ineligible for a GSE-backed loan.

The virtue of renting is that when your neighbors turnover into meth labs, you can just up and move...

tatupu70 says

Schizlor says

Why people say “Im not going to pay on a home that’s worth less than I paid!!! Im not stupid!!” is just beyond me. You can afford it asshole, pay up. When a home appreciates a couple dozen grand….does the bank have the right to come back and say, “look man…we gave you $480K but the home is now worth $520K….it’s so not fair that you only get to pay on $480K…..we need to modify your mortgage payment up a bit to be fair.”? Of course not. The reverse (mortgage mods, principal forgiveness, strategic defaults) is just as absurd. Buyer’s remorse is no excuse for weaseling out of your contractual obligations. This isn’t wal-mart…you cant find the same home for $10,000 less, come back to the store with the printed add, and get refunded the difference plus 10%.

That’s a crappy analogy. The bank entered into a contract with the buyer which states that the buyer has to repay the loan else the bank can repossess the house. If a buyer stops paying and gives the bank the house, he is abiding by the rules of the contract. The lender usually requires a down payment and charges varying levels of interest to account for the risk of the buyer not paying.
You could make an argument that by continuing to pay a severely underwater mortgage you are increasing the moral hazard for mortgage lending. Lenders need to properly account for the risk of buyers walking away from underwater mortgages and they won’t if people continue to pay…

Understood. My point is simply that the logic of, "Well it's now not worth that much so I don't feel required to pay it back" is absurd. If that were true, why would anyone repay a car loan, or their credit cards? Just because at present the goods you were sold do not have the same resale value as the day you purchased them (on credit) does not entitle you to refuse to pay the debt back. Most things aren't worth what you paid for them the minute after you buy them. People seem stuck on this idea that you are automatically entitled to profits from the sale of real estate. This is patently untrue.

Schizlor says

Understood. My point is simply that the logic of, “Well it’s now not worth that much so I don’t feel required to pay it back” is absurd. If that were true, why would anyone repay a car loan, or their credit cards? Just because at present the goods you were sold do not have the same resale value as the day you purchased them (on credit) does not entitle you to refuse to pay the debt back. Most things aren’t worth what you paid for them the minute after you buy them. People seem stuck on this idea that you are automatically entitled to profits from the sale of real estate. This is patently untrue.

And I understand where you are coming from-I just don't agree that there is moral obligation involved. In my mind, it's a contract. There are consequences if you choose not to honor it. Poor credit rating, loss of collateral, etc.

tatupu70 says

And I understand where you are coming from-I just don’t agree that there is moral obligation involved.

Who is saying there's a moral obligation? Its a matter of integrity. I could go ahead and stop paying all my bills tomorrow, I'm not morally obligated to pay them. But bailing on your loan just because you're not scoring an immediate profit is symptomatic of the new American "gimme" attitude our populace seems to be embracing. Get all angry because your house isn't appreciating to the sky's limits, stomp your feet in child-like frustration, and stop paying the people you borrowed the money from, sticking them (and taxpayers) with your losses. It's borderline sociopathic behavior.

One point about this idea that you can foreclose then rent something cheaper.
As a landlord in San Jose I would probably not rent to you if I saw that on your credit report.
You stopped paying someone else who's to say you wont "strategically" stop paying your rent?

I know, we have a contract you have no moral obligation to pay. But
that's what credit reports are for... Makes it easier to find people who do feel there's a moral obligation to pay.

klarek says

Who is saying there’s a moral obligation? Its a matter of integrity. I could go ahead and stop paying all my bills tomorrow, I’m not morally obligated to pay them. But bailing on your loan just because you’re not scoring an immediate profit is symptomatic of the new American “gimme” attitude our populace seems to be embracing. Get all angry because your house isn’t appreciating to the sky’s limits, stomp your feet in child-like frustration, and stop paying the people you borrowed the money from, sticking them (and taxpayers) with your losses. It’s borderline sociopathic behavior.

That's interesting you're focused on integrity when you are being dishonest about why the OP wants out of his deal. He wants to move because the complex changed from when he bought. He can't sell because the property value dropped $210k. He isn't trying to bail because he isn't making 20% each year. If I had a 6 month old who I felt was in danger, I would put that ahead of everything else.

mthom says

That’s interesting you’re focused on integrity when you are being dishonest about why the OP wants out of his deal. He wants to move because the complex changed from when he bought. He can’t sell because the property value dropped $210k. He isn’t trying to bail because he isn’t making 20% each year. If I had a 6 month old who I felt was in danger, I would put that ahead of everything else.

How am I being dishonest? He can rent the property out and move wherever he wants. Talk about intellectual dishonesty.