patrick.net

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.

klarek says

How am I being dishonest?

He wants to SD because he wants to move but can't sell.
You continue harping about people wanting 20% YoY profit.

You're attacking him for something he's not doing. That's dishonest.

klarek says

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.

Exactly. If I was really in a meth house with a 6 month old, you couldn't get me to spend one more night in that condo. This matter is totally irrespective of whether or not paying the mortgage on the condo is the right thing to do. Getting your child out of that environment asap is priority one.

And I also smell a tint of dishonesty in the OP. His question was not posed as, "Should I move, and how so, so I can get my child out of this mess". It was posed as, "I paid way too much, got an IO loan to pay for the condo (Smells of someone seeking to property flip, sorry. Only other reason to get an IO is to buy a home you cannot afford, which he states was not and is not the case, as the mortgage is payable with his current income) so do I go ahead and stop paying now, or wait until it is strategically beneficial in a year or so and then default. He made no mention of the meth or falling vaccums or even his infant child in his original post (as you claim). He even finished with, "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". So, in the first post it is a debate about whether or not moving is good for his pocketbook....and then a few posts later when he got blasted by karek, all of the sudden it's a meth house with appliances flying out of upper-floor windows which is directly threatening his 6 month old child. I don't buy it personally. If that were the case, any logical person would get the hell out of there immediately, and worry about the particulars of the financial implications of what to do with the outstanding mortgage later. The statement "It seems to me that we are best-off staying put" would not even cross my mind were I living in a crackhouse with an infant at home.

Schizlor - you make good points. It does seem there are some holes in OP's post. If that's the case, that it was an attempted flip, then Klarek's venom is warranted. I didn't read it that way, but maybe I should have.

Schizlor says

Well it’s now not worth that much so I don’t feel required to pay it back

klarek says

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.

You guys have missed the point entirely.

True strategic default is 100% fulfilling your obligations of the mortgage contract. It is pay according to the contract until complete and get the lien removed or let the bank take it via foreclosure proceedings (or deed in lieu etc.)

The banks are not evil when they foreclose and the people are not evil when they default. They are merely following the contract according to the law.

Lending money for profit has risk. Banks understand this. And if banks underestimated strategic default - then it is the banks fault. And those banks should lose moeny/fail. If investors underestimated the possibility to lose money on a fannie mae MBS, then it is the investors fault. And those investors should lose money. If a home buyer underestimated the ability to lose their entire down payment, then it is their fault. And they should lose their down payment and get dinged credit reports.

But the government makes the banks whole (by taking the garbage loans off their books thru HAMP and by supporting the market for mortgages), makes the investors whole (by guaranteeing the MBS instead of passing along the losses.), and tries to trick the borrowers into HAMP schemes that will just delay the inevitable - foreclosure, but this time with the government taking up the loss.

mthom

if a flipper got a bank to give no-down payment financing for a first/second home and then walked when he couldn't make money. I applaud that. That is just good business sense. No downside risk and a bunch of upside potential. Aside from trashed credit.

As long as there was no fraud, of course. Fraudulent people should go to jail.

bought_high says

Schizlor says

Well it’s now not worth that much so I don’t feel required to pay it back

klarek says

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.

You guys have missed the point entirely.
True strategic default is 100% fulfilling your obligations of the mortgage contract. It is pay according to the contract until complete and get the lien removed or let the bank take it via foreclosure proceedings (or deed in lieu etc.)
The banks are not evil when they foreclose and the people are not evil when they default. They are merely following the contract according to the law.
Lending money for profit has risk. Banks understand this. And if banks underestimated strategic default - then it is the banks fault. And those banks should lose moeny/fail. If investors underestimated the possibility to lose money on a fannie mae MBS, then it is the investors fault. And those investors should lose money. If a home buyer underestimated the ability to lose their entire down payment, then it is their fault. And they should lose their down payment and get dinged credit reports.
But the government makes the banks whole (by taking the garbage loans off their books thru HAMP and by supporting the market for mortgages), makes the investors whole (by guaranteeing the MBS instead of passing along the losses.), and tries to trick the borrowers into HAMP schemes that will just delay the inevitable - foreclosure, but this time with the government taking up the loss.

I agree that there is no morality involved here. There is no "evil" in any of these actions. And I also agree that if the government had kept it's hands off, the true consequences of these horribly irresponsible practices would have been fully realized by all parties involved, which should have happened. Instead, the gov't decided to erase any consequences for the banks and lenders and wall st., while doing really nothing for the average homeowner. That much is true.

I do however see grave danger in allowing strategic default to happen. Yes, it's within the scope of the agreement, (ie it says explicitly, "you pay, we let you keep house. You stop paying, we take house" and the borrowers are just exercising their option b), which is "here, take back my house, I can't pay") But on a fundamental level, allowing SD to happen unfettered sends a terrible message. It says, "Don't worry about having given your word...only hold up your end if it ends up totally benefiting you the way YOU WANT IT TO".

Why do people refrain from having sex with a far more attractive member of the opposite sex when they are already married to someone else? Because they made a commitment. Do they absolutely want to break it sometimes for their own narcissistic self-indulgence ? Sure, we all do. Are they bound to keep the agreement? No. They can do whatever they want. Some people would even say cheating is not 'morally' wrong. But you entered into a good faith agreement with someone, gave your word, and now are pissing all over that with this flippant, "well, it's not the best option I have anymore, so....." kind of attitude. Well, sometimes man...you just have to accept that you made a commitment. Does breaking it make you a terrible person? Not necessarily. It does make you kind of a scumbag though, and untrustworthy, and worthy of additional scruitany in the future.

And btw, we're (me and klarek) are drawing a distinction between default and strategic default. Of course you're not evil for defaulting. Shit happens. People lose jobs, lose family members, are forced to move, go to prison...there are numerous reasons called "involuntary inability to pay" which would justify default. But defaulting strictly because you don't feel like paying is fair anymore (even though you can more than adequately handle the payment) is just not right.

Think about this. Think about the people who make 5 times what their mortgage payment is per month....have no plans to move (being underwater is just annoying, not a hindrance to their lives) and live in a great neighborhood and love where the live. There are people in this very situation, who still choose to default on purpose just to save some money. Just because they don't feel it's "fair" to pay. Well when the hell did fairness come into play? If there is not moral obligation to pay your debts, there certainly can be no expectation of "justice" when it comes to your debts either. It's strictly dollars and cents. You wanted the house, they told you the price, you AGREED it was ok with you (the payment and balance of the loan you were taking out) at the time, and now you don't like the terms. They are not impeding or negatively impacing your life in any way at ALL, yet you still just don't want to pay because it's not "fair". Well my friends, sorry...that's just a crock of shit.

Look, false assumptions is what caused this mess. Pretty much just a single false assumption: Home Prices Never Fall. I had countless people call in and when I'd tell them we cant refinance the loan because their appraisal came in at $45,000 less than 6 months ago, they'd honestly say, "That's impossible, home prices don't go down like that". People truly believed this. How else could one delude themselves into thinking that buying a 1200 sqft condo for $485,000 was a good idea? And mind you, not one, not ONE of them EVER said, "That's impossible, home prices don't go UP that much" when we'd tell them their home they bought for $285,000 was now worth $425,000 in like 2004. They'd say, "Wow! That's great. So how much can I take out?"

I'm not saying I would never strategically default either. If I owed 3 times what my house was worth (I do not currently own) I would consider it too. But rest assured, it would be with a bit of shame, a touch of humility, and I sure as hell wouldn't be on an internet board asking for advice on the best way to do it.

mthom says

He wants to SD because he wants to move but can’t sell.
You continue harping about people wanting 20% YoY profit.
You’re attacking him for something he’s not doing. That’s dishonest

He listed two options in his original post. a) SD now and b) SD later.

I have said twice - make this thrice - that he can rent the place out and move. You are aware that this is an option for owner, right? I'm not making this up. There's nothing dishonest about what I said, you're just being a moron and intentionally ignoring the crux of my argument.

mthom says

If that’s the case, that it was an attempted flip, then Klarek’s venom is warranted.

I don't know whether it's an intentional flip or not. Doesn't really matter. But it was a short term purchase made without the consideration of what one would do if he started a family. That's usually a critical question people ask themselves before making the largest purchase in their lives. My venom is towards the attitude that it's not worth paying for because it fell in value. I have many friends whose houses have fallen by 50%. One of them is actually not underwater, to the best of my knowledge. He paid that sucker down aggressively and will not be burdening society with another six-figure lost to the banks (taxpayers).

He listed options 'a' and 'b' while leaving out 'c' which is having some integrity and owning up to one's purchases and obligations. This wouldn't even be debatable if society hadn't been so drastically converted into this kind of sociopathic self-entitled stupidity we're seeing every day.

bought_high says

True strategic default is 100% fulfilling your obligations of the mortgage contract. It is pay according to the contract until complete and get the lien removed or let the bank take it via foreclosure proceedings (or deed in lieu etc.)

I hear this all the time and it's not true. Foreclosure is a consequence of you defaulting, not an acceptible fulfillment of one's obligations. Read that: consequence != fulfillment. It's like saying you fulfilled your job of being a parent by raising a malnurished child that child protective services takes away from you.

If it were a fulfillment of the obligations, there wouldn't be a massive red mark on their credit report that tells every loan officer out there "this person is a deadbeat and they'll fuck you over if you're dumb enough to lend to them".

You've just listened to too many self-sponsored TV and radio programs from fly-by-night lawyers telling idiots to stop paying.

klarek says

mthom says

He wants to SD because he wants to move but can’t sell.
You continue harping about people wanting 20% YoY profit.
You’re attacking him for something he’s not doing. That’s dishonest

He listed two options in his original post. a) SD now and b) SD later.
I have said twice - make this thrice - that he can rent the place out and move. You are aware that this is an option for owner, right? I’m not making this up. There’s nothing dishonest about what I said, you’re just being a moron and intentionally ignoring the crux of my argument.

Renting may or may not be a valid option. I don't know which area of SJ he's specifically talking about but he's paying $2600 right now which is probably about to go up. What if the amount of rent isn't that close to what he's paying? Your renting point is irrelevant anyway. You have repeatedly said he's SD because he's not making 20% YoY, did you not? That's completely made up by you, is it not?

I don’t know whether it’s an intentional flip or not. Doesn’t really matter. But it was a short term purchase made without the consideration of what one would do if he started a family. That’s usually a critical question people ask themselves before making the largest purchase in their lives. My venom is towards the attitude that it’s not worth paying for because it fell in value. I have many friends whose houses have fallen by 50%. One of them is actually not underwater, to the best of my knowledge. He paid that sucker down aggressively and will not be burdening society with another six-figure lost to the banks (taxpayers).
He listed options ‘a’ and ‘b’ while leaving out ‘c’ which is having some integrity and owning up to one’s purchases and obligations. This wouldn’t even be debatable if society hadn’t been so drastically converted into this kind of sociopathic self-entitled stupidity we’re seeing every day.

I disagree with your view. Whatever makes the most sense for the family is the right decision. I don't know all of the facts to know which that is. Renting it out may be the best option. Whatever keeps my family happy and safe is more important than keeping an obligation to a bank. You either don't have a family or don't treat your family well if you disagree.

mthom says

Renting may or may not be a valid option. I don’t know which area of SJ he’s specifically talking about but he’s paying $2600 right now which is probably about to go up. What if the amount of rent isn’t that close to what he’s paying?

You mean rent for a loss? Happens all the time. My dad owned a rental house in Miami back in the 80's. Negative cash flow for a while, but he survived.

Oh wait, you mean that he won't score a profit from the renters, therefore it's not worth renting. Just like he shouldn't pay his mortgage since he can't score an immediate profit in the sales market.

It doesn't matter whether he has a negative cash flow from renting. That's his problem, something he should have thought about when he bought the place. His problem (now) is that he has to move because appliances are being thrown off balconies, or whatever b.s. he made up once his reasoning for doing SD exposed him as a would-be deadbeat. Well, he can move just fine. If the negative cash flow is an impediment for buying/renting a nicer place than he would desire, then he should either consider that part of the cost of being a parent or bubble buyer. Or perhaps he and his wife own two luxury cars that can be downgraded. Whatever, I don't care, but renting for less than he pays is irrelevant to his choices: he can still rent it out.

mthom says

You have repeatedly said he’s SD because he’s not making 20% YoY, did you not? That’s completely made up by you, is it not?

No it's true. I don't know when he bought, but it was likely one of those years that prices were increasing by that amount. They are not now, hence he is underwater and wanting to SD, hence I was totally correct.

mthom says

I disagree with your view. Whatever makes the most sense for the family is the right decision. I don’t know all of the facts to know which that is. Renting it out may be the best option. Whatever keeps my family happy and safe is more important than keeping an obligation to a bank. You either don’t have a family or don’t treat your family well if you disagree.

It has nothing to do with family. If the place is dangerous for his child (which I highly doubt given that he said in his very first post that he might stay there for a couple of years, which means he was either lying about the dangers or is a shitty parent to subject his baby to such an environment), then he can move and rent it out. Nothing is stopping him from doing this.

Again, there are two different scenarios he's offered us as to why he's going to SD: the place is dangerous, and it's value is far less than he owes. If it's really too dangerous, he can rent it out. If it's not too dangerous, which is what is likely the case since he + child are still there and he's considering staying there, then he doesn't need to rent it out.

As for renting "not being the best option", who gives a fuck? It's an option. I think it's better than being a fuckhead deadbeat, but that's because I'm not a promoter of fuckhead deadbeatism.

Nice dig on me not having a family. In making a false personal attack against me, you're letting him off the hook for keeping his child in a hostile and dangerous environment (which, of course, is a total lie unless he's that shitty of a parent).

Schizlor says

So you think that the modern world of 105% financing with $0 down, and $250,000+ HELOCS is superior to say, 30 years ago, when sensible people budgeted their money and carefully saved for years, if not a decade, to get the 20% down to buy a home?
Do you not feel that the no-skin-in-the-game facet of these poorly-crafted mortgages only encourages people to strategically default? Would the bubble have gotten half as big as it did if people put 20% down? No.

I agree 100%. In fact I said almost the same thing a few posts ago. And I also agree that the buyers share some blame in this mess. My contention is that if you look at who should have know better--someone who does this for a living, day in, day out or someone who buys a house once every 5-10 years, I think it's clear where more of the blame lies.

Schizlor says

What gets me angry is this: People discount the borrower’s role in their own demise, blame it all on the banks, and then say, “Well, the banks shouldn’t have done that so they deserve to get screwed”. Which is all well and good, except that in the real world they don’t. We do. The simple fact is that the government has decided that you and I and everyone who pays taxes in the US is going to pick up the tab for all the bubble-profit purchases that were made, but cannot be paid back (either by the borrower via mortgage payments, or by the bank via foreclosure monies they obtained from selling the home) The money the borrower’s spent is gone. The equity in their homes that money was supposed to be backed by, is also gone. To take up the slack, the government is forcing you and I to pay the difference between what the bank can recoup in foreclosure and what was originally lent out. The borrower gets away clean. The bank gets away relatively clean.

Not sure whey everyone thinks this. The borrower lost whatever skin he had in the house and takes a credit hit. The banks lost big time. And will continue losing for a long time. Did IndyMac come through unscathed? Or WAMU? Did Lehman?

Klarek, you write too much to copy the whole thing. Bottom line for me, as stated before, whatever is best for his family is the best option to go with. I didn't dig you for not having a family. It just seems like you don't have the same family considerations to think about as the OP. For instance, does he pay an extra $1k/ mo. on his mortgage when he could default and possibly buy the same thing for less, and then put that $1k towards his child's food, college fund, etc. I think having a family changes a lot for people. If most of what the OP said was true, he'd rather be a deadbeat homeowner than a deadbeat husband/father. I think that's a good choice.

mthom says

If most of what the OP said was true, he’d rather be a deadbeat homeowner than a deadbeat husband/father. I think that’s a good choice.

If he raises his kids to not honor their debts just like daddy, then he's accomplished both of those things.
mthom says

Bottom line for me, as stated before, whatever is best for his family is the best option to go with.

Now I've already stated the obvious like twenty fucking times that he could rent the place out. Negative cash flow doesn't matter. He can adjust his lifestyle accordingly if that's the case, and it's something to consider before making the biggest purchase of one's life.

Again, see his first post where he stated that staying in the condo is preferable.... fuck it, you're too lazy to read the thread and long posts, so I'll spoon feed it to you:

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).

Take your family uppitiness and either direct it towards the guy that claims keeping his kid in a dangerous environment is the best thing to do, or cram it up your ass.

klarek says

Now I’ve already stated the obvious like twenty fucking times that he could rent the place out. Negative cash flow doesn’t matter. He can adjust his lifestyle accordingly if that’s the case, and it’s something to consider before making the biggest purchase of one’s life.
Again, see his first post where he stated that staying in the condo is preferable…. fuck it, you’re too lazy to read the thread and long posts, so I’ll spoon feed it to you:

Take your family uppitiness and either direct it towards the guy that claims keeping his kid in a dangerous environment is the best thing to do, or cram it up your ass.

It's not family uppitiness - don't get so defensive. It's a different mindset. I thought similar to you before I had a family. My thinking has since changed. As far as he goes, if he's staying in a place that is so dangerous for his child, then he's doing a terrible job of being a parent. Staying put under those conditions shouldn't be an option.

Schizlor, that was a great post at 11:16 a.m. this morning!

Schizlor - I think we mostly agree on things, except

Schizlor says

“Don’t worry about having given your word…only hold up your end if it ends up totally benefiting you the way YOU WANT IT TO”

The only word the borrower gave was - I will abide by the contract / law. And as long as the borrower does that then all is good. Don't trash the house, steal the fixtures, etc. etc. Financially, there is no difference between 'cannot pay' and 'does not pay.' And it is impossible for someone to impartially pass judgement on someone who has stopped paying. Whatever financial decision the borrower makes is his alone to make - for the right or wrong reasons.

Klarek - I think we will continue to disagree.

klarek says

Foreclosure is a consequence of you defaulting, not an acceptible fulfillment of one’s obligations.

http://www.azcentral.com/arizonarepublic/business/articles/2010/01/31/20100131biz-walkaway0131.html

--> Scottsdale civil-rights attorney Donald Loeb, "If you stop making payments, you're not breaching the contract, because default and foreclosure are valid means of fulfilling the contract."
--> White said he's in the process of crafting another legal argument, based on Arizona's non-deficiency statute, that says lenders don't have the legal right to report mortgage defaults to the credit bureaus, and that walking away should not have any negative effect on the borrower's credit score.
--> The reason it's called a "non-deficiency" statute, Loeb said, is that it establishes default and subsequent foreclosure as a valid means of fulfilling a mortgage contract, as opposed to being a breach of contract in which one party's actions are considered "deficient."

The contract only has two possibilities - removal of the lien or reassignment of the title (foreclosure, deed in lieu, short sale). And guess what - the bank knew all of this going into the contract, and they even priced it into the contract. States that have longer foreclosure proceedings have higher interest rates/down-payments. States that have non-recourse laws have higher rates too. So you pay or don't and you either get the house or the bank does.

However, all this talk of sociopaths is ridiculous. You are just whining cause your taxes are gonna go up - well do something (like directing your anger) to the people who raise your taxes and make stupid financial decisions - the government and the banks. A homeowner who makes a good financial decision by SD does not warrant your derision. Foreclosures can help make neighborhoods affordable after bubble times. You could view the SD as helping the society /neighborhood too.

The talk of being a deadbeat non-debt honorer and passing that trait onto your children is credulous. Monkey see monkey do. Parents can educate their children about the burden of debt. Parents can be open and honest with their children about financial issues. Parents can admit mistakes they've made to their children and allow their children to avoid those mistakes. You honestly believe that children only learn to do what their parents did? Is that because you are 100% like your parents - who must be 100% identical to each other? I sure hope my kids can improve from my faults.

bought_high says

You are just whining cause your taxes are gonna go up

Am I? I don't think so.

Let's clear up a few things.

1. I am a woman
2. I did not lie. Why would I? i don't give a damn if you're calling me a cunt on this forum. You don't know me. Call me whatever you want. Why lie in an online forum? Makes no sense.
3. When we bought a condo we could afford about 600K in mortgage but didn't want to overextend and figured that 3 bedroom should last us a while. We weren't married then (no kid, no dog...get it?). The place was nice then (this is a 300+ condo complex) with young professionals such as oursleves. Since then, 50% of original owners either defaulted becasue they had to or becasue they chose to. People are moving in now paying half of what we paid and some of these new folks are unsavory. The truth is that it's getting shadier every day. The place is big enough so these shady characters are here and there, but more and more come to my attention every day.
4. We make lots of money. We work our asses off to pull 300k+ annually combined. Needless to say, we pay shitloads of $$$ in taxes. So according to you, if we overextended ourselves and if we made no money and if we HAD TO foreclose because we had overextended and lost a job or two, then it's no big deal to foreclose. But because we work our asses off and save lots of money we are deadbeats. You're funny.
5. We already qualified for yet another mortgage (WF and BOFA approved for up to 950K loan), so initially we were going to rent this place out for some loss (we can rent for 2k a month to probably some meth dealer) and buy a sweet home in, say, Almaden or Cambrian where schools are good and doggie will have a yard. But now I think prices will go further down.
6. The we learnt that we cannot rent because stupid HOA only allows 10% of units to be rented out. That number is already rented out so we're out of luck.
7. Even if houses further fall down, which I think they will, we will still choose to SF, I think. SO my question was do we do it now or do we wait. In a way it makes more sense to stay here rather than rent for 2K. Unless things get really shitty with criminals in the building, in which case we are going to SD right away.

So Klarek, don't be upset, it will make you wrinkly. Relax. Breathe. I just want to do what's best for my family and my finances. If that makes me a deadbeat, so be it.

In my book, if I chose to live here and I didn't have to, I'd be stupid. And that I am not.

And finally, I never expected for this place to go up in value 20% annually. I did expect it to at least maintain the price I paid. It didn't happen. AH well. At least we never refinanced so bank is out of luck. I could almost cry for poor banks. And the fact that the government is taking your money to bail out the banks is not my problem.

Cheers.

I think the safety of you and your family should be your #1 priority. "Shady characters" and more surfacing every day SCREAMS that you should leave now. How does it make more sense to stay there than rent when you keep repeating that questionable people live there? You said that "unless things get really shitty with criminals in the building" then you'll default right away. What are you waiting for? It sounds like things are already very "shitty." Are you going to wait for some meth freak to bust your door down or for a home invasion robbery to happen before making a decision?? You mentioned that someone cooks meth and then you talked about the vacuum incident. I don't understand why you keep coming back and explaining/defending yourself when you know what you need to do. Make peace with your decision and go for it. Since you make decent money, you can rent, save your money, rebuild your credit, and later buy a house that you and your family can settle in for many years to come.

dajanara says

In my book, if I chose to live here and I didn’t have to, I’d be stupid. And that I am not.

And finally, I never expected for this place to go up in value 20% annually. I did expect it to at least maintain the price I paid. It didn’t happen. AH well. At least we never refinanced so bank is out of luck. I could almost cry for poor banks. And the fact that the government is taking your money to bail out the banks is not my problem.

Cheers.

OK, I think this paragraph is telling us what kind of person she is, and what's up with her situation. I was kinda reluctant to say anything so far though, now here we go.

Two things first before go any further.

Her loan is IO. so she technically haven't repaid a dime at all so far.
The loan will reset soon and the payment will shoot up.

Thus, her taking SD now means she could almost cry for poor banks as she said, right?

If that is the part of the reason why she is thinking about SD, she is trying to get away without paying her obligation. She definitely is a deatbeat and so be it. She decided to have baby in early 2009, when the home price is dropping like hell. So, don't say you didn't know, don't put your baby up on our faces, or freakin complain about what happened as if you're all innocent because you smells like crap.

Now let's suppose that is not the case, she in fact is innocent, and really in need of doing something.

What's going to happen when she does SD and ultimately foreclosing? She won't be able to get another home for a while. So, She'd better buy another home before she pulls it off. She'd better have some cash aside enough to live outta it for couple years, because the record will be on her record for next 7 years to haunt, and first couple of years will be very inconvinient. But, she will do fine since she said she earns a lot. What she needs is keeping her job, because she will have hard time to find new job once got laid off. And this SD thing will affect her chance of future promotion or scout offer.

So, is it the risk worth taking?

I'd say yes if she is poor and she can't pay her mortgage.

But her case, well... Not sure what to say.
She and her guy earns over 300K/yr, so couple thousand dollars won't be a big problem for her if she is willing to pay. She is able to afford another home, she is more than capable of go thru this without defaulting. Yeah, she is in underwater, but she is not in financial danger at all. I just don't see that willingness or sense of urgency, so...

I think she knew what to do before even asking the question.

Schizlorsays

I’m not saying I would never strategically default either. If I owed 3 times what my house was worth (I do not currently own) I would consider it too. But rest assured, it would be with a bit of shame, a touch of humility…

Then you are a schmuck.

Lending with a home as collateral FOR PROFIT is no different than lending with jewelry as collateral at a pawn shop. If the lender lends too much, and the pawn shop customer decides not to pay up and claim ownership of the jewelry, it’s the pawn shop’s own f***ing fault for lending too much if they take a hit on the resale.

Nomograph says

Your right. She should have had an abortion because house prices were dropping.

Just out of curiosity, what were babies going for in early 2009? Has the baby market experienced a bubble burst?

dajanara, personally I'm against "strategic default." If your condo had increased in value, you wouldn't have shared the profits with the bank. Strategic default sticks the bank with the depreciating asset.

but you say that you live in a crappy area that's getting crappier. lack of pride in the home ownership/rentership, meth cooking (one place that you know of...), and you're not happy there. you're staying 'cause the rent is cheaper... If you bail, you can afford another place but are staying for financial reasons.

If you call the cops on the neighbors, they'll be looking to retaliate against anyone that they suspect. So you'll have pissed off meth freaks to contend with.

So, either buy another place now because you're preauth'ed and lose more money (short or long-term, who knows?); or rent in a better neighborhood. But from what I can tell you're not considering strategic default because of the financial benefits - it's because the place isn't what it once was and you can't sell to get the hell out.

Or, you can consider selling the baby to make up the difference. But if the baby market is down that's not a good option and I'd wait... ;)

“strategic default” just another made up marketing term made up by RE industry. Screw you into buying and scew you into selling so some can churn the property over. Banks are the brokers, they dont have the staff, so they have been using Realtors.

The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property.

"Failed to comply" .."violation of the mortgage"... breach of contract.. pretty cut and dry here.
What ever that Civil Rights attorney said is meaningless when it comes to UCC and Common Law.

Bankers and lawyers have been using the term "Strategic Bankruptcy" for decades so they just jumped to the next logical term for strategic default..........I doubt that the real estate industry was bright enough to come up with that term LOL.

rob918 says

“Strategic Bankruptcy”

There was no such thing as Strategic Bankruptcy.. You can look back to Braniff Airlines to Lehman, its the same. When you fail you fail. SV is peppered with bankrupties over the past 10 years. They just close the doors and sell the assets. No matter how you cut it ... its a breach of contract as regulated by the UCC and Common Law.

There are a couple of differences between standard foreclosure and strategic foreclosure as I see it.

1. In a strategic presumably the owner can make mortgage payments, he is CHOOSING not to. With a regular foreclosure, this isn't the case

2. Many times the owner will just give the keys back, allowing the bank to save all the costs of a foreclosure.

I think the term is meant to apply to #1 though. It's strategic because it's a choice.

dajanara says

pull 300k+ annually combined.

If you make that much, you obviously can afford the package from youwalkaway.com to help you make a decision. And retain a lawyer and pay some fees for advice / guidance.

As for my advice, obviously do not refinance the loan. Keep paying the interest only until you are ready to find another place (depending on family situation and complex deterioration.) Most likely your recast on the loan would lower the payment depending on what index the mortgage is tied to - check with your bank to find out the index the loan is tied to and what the recast would be. But consider one other option - trying to qualify for a loan on a second house while still paying the mortgage on the first place. That way you can buy the house you want with a good credit rating and get a good interest rate - then hit the strategic default option. Otherwise, default and wait a little for the bank to follow the foreclosure proceedings. Save enough money to offer a new landlord the entire years rent in an escrow account - and I bet they won't even check your credit report.

dajanara,

you saw how quickly some folks on here outed that Tivo millionaire. Probably not wise to write on blogging (or social networking) that you earn 300 K per year. Next thing you know, something could happen like your car will hit a pedestrian, or some identity theft will occur.

It may not sound like much to Cool and Hip Bay Areans, but 300K per year is a fortune to a lot of people, like street scammers who could step (or ride their bike) in front of your car, or some Eastern European hackers perusing the web. Reminds me of the posts some young Hip and Cool real estate investor made here, identifying himself by the address of his rental property investment and boasting about his 100K cash that he has in the bank. Particularly frightening when one considers that in San Jose certain groups prey on their own in home invasions.

Please, in these public forums leave out such specifics.

I find it hilarious that she and her hubby make that much money and she had the nerve to play the flying appliances excuse to justify bailing on their mortgage. The question of affordability and family's safety are now in effect null. It's all about wanting to stick someone else with your easily affordable house's loss because it's not generating the short term profit you expected when you purchased it to flip. This is textbook case of a wealthy deadbeat that doesn't want to live up to their commitments and stick their losses to everyone else.

I think SD in general is fine, but this particular poster is getting out of hand. How do you make $300k+ and live in a condo complex with a meth lab and other crap going on? Fine, conditions may change unexpectedly, but you seem to be doing nothing to address these issues. At this point, I'm going to have to agree with Klarek's earlier comments about the OP being a deadbeat parent and borrower. That just isn't right to keep the baby there when you clearly have the means to move.

HlthCrPr says

I owe over $300,000 in student loans from my education. Average income for those in my chosen field was $165,000 per year. By the time I had gotten the prereqs in college and gone through 4 years of grad school that had all changed. With an income contingent loan, my original total loan of around $150,000 multiplied over the last 15 years to a pay-off of over $307,000. Life changes, along with circumstances. Marriage, divorce, health issues, failed businesses, etc. Why should they be allowed to walk away from their “mistakes” any more than I can? Even with bankruptcy I am still liable to pay back every cent, principal and interest. These buyers hoped to capitalize on the unbelievable doubling and tripling of values. It didn’t work out. Now they should be required to live with their choices just as I am required to live by mine.

Because that's how the financial contract was written.

At that income, why don't you squat? I rarely see banks foreclosing on Condos in SJ. They really do not want to pay HOA dues. Stall if you have to by offering a fake short sale like everyone else just to squat longer. By the time they get you out of there, you should have enough to make an all cash offer on something you want.

The short sale condo my friend's family is trying to buy - there has been no payment made to the bank for almost 2 years. Not even a notice of default.

tatupu70 says

HlthCrPr says

I owe over $300,000 in student loans from my education. Average income for those in my chosen field was $165,000 per year. By the time I had gotten the prereqs in college and gone through 4 years of grad school that had all changed. With an income contingent loan, my original total loan of around $150,000 multiplied over the last 15 years to a pay-off of over $307,000. Life changes, along with circumstances. Marriage, divorce, health issues, failed businesses, etc. Why should they be allowed to walk away from their “mistakes” any more than I can? Even with bankruptcy I am still liable to pay back every cent, principal and interest. These buyers hoped to capitalize on the unbelievable doubling and tripling of values. It didn’t work out. Now they should be required to live with their choices just as I am required to live by mine.

Because that’s how the financial contract was written.

Exactly.

Unfortunately, your life was pretty much the collateral for your loan. When buying a house, that's the collateral. These are the rules of the game.

I think you are in a good situation, you have a big enough place where you are not on top of each other and it sounds like you are in a nice new condo. I think you could probably rent for a little cheaper, but not by much and the ramification of ruining your credit score are much worse then losing a few hundred dollars every month. I have heard from other sources that the foreclosure will stop hurting your credit after 7 years but it is never off your report, which means lenders will always see it. Stay put for as long as you can, save up your money and either sell at the point you want to buy something new or rent it out.

Also if you strategically default after you buy something else the bank will sue you with fraud!

I'm in a similar situation as you, we are basically paying about $1000 too much every month to stay in our condo vs renting something else out, but we have a 1/1 670 sq ft home and we can't handle it anymore. As I said before, given you are in a comfortable living space, stay put for now.

Hope that helps.

I wanted to make an additional comment after I read some negative comments by others.

1) Everyone is to blame for the housing bubble, and it really makes me upset when people only blame it on the buyer. People that are in dajanara's situation are not "deadbeats" they were doing what was best for their families at the time. Dajanara put money down on his home and wanted to buy something he could afford. I empathize with him as I am in a very familiar situation. Dajanara is not complaining in my opinion, rather he is asking for advice due to his situation. In hindsight I'm sure knowing what he knows now he would not have bought. It's easy to say that buyers should have known better, but the majority of the population had no idea this would have happened.

2) I think the government needs to make a better effort to lower home payments on underwater homes to prevent further foreclosures.

3) The economy is completely unpredictable at this point and everyone should be very concerned about how they are spending their money. Police departments are laying off officers, schools are laying off teachers, we are in a jobless recovery and things seem to be going into a very bad spiral. Even though Dajanara and others who are underwater could and can still afford their payments why should they continue to throw away money that should be saved for unpredictable bad situations?

Just by two cents.

Sorry for the typo!

*Just my two cents

Condohelp says

Everyone is to blame for the housing bubble, and it really makes me upset when people only blame it on the buyer.

Yes, everyone who bought or atm'd is responsible to some degree. The banks who loaned without vetting the buyers are also responsible, as is Wall Street and politicos.

But when one makes a purchase, he/she is entering into a contract that says that it'll be paid back according to the terms. When I bought my house, I wasn't aware that my neighbors had a barking dog that came onto my back porch and barked all night long (no exaggeration there, seriously). I wasn't aware that my house would more than double in phantom value within five years, nor was I aware that value would drop dramatically... I wasn't aware my job would end, that another job would begin... Wasn't aware of any of this...

Don't know if I'd term it "deadbeat... but this person is choosing many different reasons to support the fact that the house isn't what he/she wanted and would like to bail, now. It might affect the credit, it's possible that the bank will sue for fraud when there's a bail & new purchase at the same time.

Condohelp says

It’s easy to say that buyers should have known better, but the majority of the population had no idea this would have happened.

Bullshit - if people bought without considering their ability to pay it back (interest only ARMS) or grew out of the place, or bought in a neighborhood they didn't realize wasn't the best... they didn't do their homework and/or make smart choices. It's their responsibility.

Condohelp says

I think the government needs to make a better effort to lower home payments on underwater homes to prevent further foreclosures... we are in a jobless recovery... bad spiral...

The government is us. And I don't feel like paying to lower someone else's house payment merely because it's worth less than they owe. Should people who atm'd be able to modify the same as those who lost their jobs due to the economy?
Condohelp says

Even though Dajanara and others who are underwater could and can still afford their payments why should they continue to throw away money that should be saved for unpredictable bad situations?

Because they gambled & lost and should be held responsible to pay it back. If they had sold at the height of the bubble they wouldn't be sharing the profit with the bank. It goes both ways.
Just my two cents. :)

tough call

Condohelp says

Everyone is to blame for the housing bubble, and it really makes me upset when people only blame it on the buyer. People that are in dajanara’s situation are not “deadbeats”

No, read what dajanara said. They can EASILY afford the place, which was purchased as a flip (or very short term residence), and she's pissy that it hasn't continued appreciating in value. She wanted to profit, hasn't yet, and wants to stick the banks and the public with her decision.

Nobody forced her to buy.

Condohelp says

I think the government needs to make a better effort to lower home payments on underwater homes to prevent further foreclosures.

I think the govt needs to make the pain of strategic default so severe that every greedy housing gambler out there will think long and hard before bailing. No more wasting OUR tax dollars to subsidize THEIR fucking half-million dollar houses. That's absolutely ridiculous. Punch yourself in the face for saying such a stupid thing.

klarek says

I think the govt needs to make the pain of strategic default so severe that every greedy housing gambler out there will think long and hard before bailing. No more wasting OUR tax dollars to subsidize THEIR fucking half-million dollar houses. That’s absolutely ridiculous. Punch yourself in the face for saying such a stupid thing.

No-your post is ridiculous. The government should break up the banks so none are too big to fail. Then if lenders make risky loans and they don't get repaid, those banks or S&Ls go under. I imagine they'd figure out that they need larger down payments at that point. And no negative amortizations or interest only loans.

Again--nobody forced the bank to make any loans. They knew that it was non-recourse when they made it. You can't change the terms of a contract after it's signed. Banks should have been well aware of the possibility of falling home prices and strategic defaults and factored this risk into their loan analysis models. If they underestimated the risk, then they should feel the pain. Otherwise it's a moral hazard situation for the banks...