patrick.net

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.

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.

tatupu70 says

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.

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.

Your point that if the mortgage co's didn't offer it, people couldn't have gotten themselves into horrible debt, is valid to a point. But your apparent contention that it's "too bad so sad" for the banks and no responsibility lays on the shoulders of the buyers is just flat out wrong. Just because someone is willing to bag up their own shit and sell it for a dollar, doesn't mean the person who willingly buys it is not a fucking moron.

Lets say a drug dealer gets a new client hooked on meth. He does this to turn a sizeable profit. The buyer gets further and further along in his addition, becoming broke and homeless in the process, until his situation gets so dire that he gets a gun, comes back to the dealer, robs him and then kills him. Is the drug dealer 'at fault' for his own death? Yes, to a point. But that doesn't mean the user is still not a low life piece of shit. "Well, the dealer shouldn't have been selling that shit, so too bad" is not justification for what the user did. Both are equally to blame for playing a fool's game.

Smith and Wesson is not responsible for your 7 year old killing his sister because you kept a loaded unlocked gun in your dresser. McDonald's is not responsible for your uncle's congenitive heart failure after eating there daily for 27 years. RJ Reynolds isn't to blame for your lung cancer. Banks are not responsible for you losing your home. They offered you a steaming pile of dogshit on a tray and tried to garnish it just right so it appeared like the "American Dream" on a platter...and instead of doing what klarek and I would have done, carefully considered the pros and cons and realizing it was a terrible ideas to take a 5/1 Interest Only, or better yet, the illustrious pay option arm w/negative amortization, politely refused the offer, most American's did what they always do. Ignored any sound logical advice offered contrary to their desire to get the home (what realtors call the "doom and gloom" crowd) signed on the dotted line as fast as they could, and only now act like "WTF?? the guy said I could sell the house later if I needed to!? What happened?"

I used to work in the mortgage industry. I saw hundreds of people doing horribly foolish things during the bubble. I was asked all the time, "Can I just waive the recission period and get my check today?" "How long is this closing gonna take?" (not caring to read anything they were signing) "How long til I get my check?" I saw one instance where a couple ran a pest control business, and took out a $145,000 HELOC and immediately withdrew 100% of the funds...to use for, among other things, paying CASH for a Ford F250 truck which they then GAVE AWAY as a prize in a contest between different vendors they worked with. So, these idiots pay cash for a $30-40,000 truck out of bubble proceeds from their own home, and then just give it away to a business partner, and now they want my tax dollars to pay back the bank for the loss since there is no way they could pay back the HELOC now that they are in bankruptcy? Yeah, that sounds fair. While were at it, lets have my tax dollars go to pay for that guys kids college, and that womans new pool, and that couple's new lexus, and the myriad other things that bubble profits were used to purchase.

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. The taxpayers get fucked. Should the government have let some or most of those banks take it in the ass and fail? Sure. But they didn't. And don't even get me started on the deplorable first time homebuyer tax credit, or the criminals at NAR.

Given that, in this kind of environment, I think I've earned the right to be a little upset at the spending habits of these selfish dipshits who think it's unfair for them to have to pay back the money they borrower and lavashed on themselves, but think it's completely fair for john and jane taxpayer to be on the hook for it instead.

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.