stevenaa Posted December 11, 2009 Share Posted December 11, 2009 http://articles.moneycentral.msn.com/Banking/HomeFinancing/weston-should-you-walk-away-from-your-home.aspx Are you stupid not to walk away from an "underwater" mortgage, even if you can make the payments? How to avoid foreclosure Law professor Brent T. White thinks the answer may be yes. White doesn't actually use the word "stupid" in his recent paper, "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis." Instead, the University of Arizona prof blames emotion for clouding homeowners' judgment Link to comment Share on other sites More sharing options...
techboy Posted December 11, 2009 Share Posted December 11, 2009 It is absolutely true that many homeowners are making decisions that are not the best for their bottom lines, and that businesses in a similar position would walk away without a second thought. On the other hand, if everyone suddenly acted this way, the mess we're in now would get a whole lot worse. On the other hand (No! There is no other hand!), if people acted were acting rationally and not emotionally, many wouldn't be in the situation to begin with. Link to comment Share on other sites More sharing options...
twa Posted December 11, 2009 Share Posted December 11, 2009 On the other hand (No! There is no other hand!), if people acted were acting rationally and not emotionally, many wouldn't be in the situation to begin with. True dat Link to comment Share on other sites More sharing options...
polywog999 Posted December 11, 2009 Share Posted December 11, 2009 Foreclosure, while on your credit report for up to 10 years does not have much of a baring on your credit after 3 or 4 years. Enough time for you to save for a new house! Link to comment Share on other sites More sharing options...
Larry Posted December 11, 2009 Share Posted December 11, 2009 My opinion is that there's something wrong with a system where people are speculating with borrowed money, and then sticking somebody else with the bill when they lose money on the investment. I don't think people should be defaulting on loans simply because "I'll make more money this way". (Based on my ironclad opinion as someone who's never even had a mortgage.) Link to comment Share on other sites More sharing options...
SloppyOneXXVI Posted December 11, 2009 Share Posted December 11, 2009 Foreclosure, while on your credit report for up to 10 years does not have much of a baring on your credit after 3 or 4 years. Enough time for you to save for a new house! Just in time for the housing market to go up! Then you can buy a house that is overpriced again!!!! Link to comment Share on other sites More sharing options...
TD_washingtonredskins Posted December 11, 2009 Share Posted December 11, 2009 Well, people need a place to live. So, is it even a better deal to pay roughly the same amount in rent and walk away from something that could (in theory at least) appreciate in value? Link to comment Share on other sites More sharing options...
polywog999 Posted December 11, 2009 Share Posted December 11, 2009 Just in time for the housing market to go up! Then you can buy a house that is overpriced again!!!! Be smart about it this time and invest wisely! Don't buy a house that two years prior sold for 20,000. when you are paying 250,000. Home ownership is a terrific investment if properly done. Most interest rates now are just a tad bit above the usual rate of inflation. Why would you want to Rent for 2,000 a month when you could own for 1,200? In Maryland you can be evicted in as little as 30 days for non payment. Most foreclosures take much longer, sometimes a year. You get a nice fat check from uncle Sam for the tax break! You can rent out rooms and make enough to pay for your mortgage. Well, people need a place to live.So, is it even a better deal to pay roughly the same amount in rent and walk away from something that could (in theory at least) appreciate in value? Sometimes this can actually make sense. It depends how much of the 'upside down' you are in. You can also arrange what they call a 'short sale.' This means the bank will allow you to sell the house for less than is owed. Be careful with this kind of deal though... It should be handled by a lawyer. Link to comment Share on other sites More sharing options...
Winning Season Please! Posted December 11, 2009 Share Posted December 11, 2009 My opinion is that there's something wrong with a system where people are speculating with borrowed money, and then sticking somebody else with the bill when they lose money on the investment. QFT!! People don't think of it this way. Now everyone is pissed because banks are asking for PROOF that they can pay their payments. What a stupid idea! :doh: Isn't getting a mortgage a right not a privilege? I guess not. Link to comment Share on other sites More sharing options...
Elessar78 Posted December 11, 2009 Share Posted December 11, 2009 Most people when talking about buying a house call it a "good investment" but I also think that's the first thing that people forget when things go south. All of a sudden there are moral reasons for not approaching it as a business transaction. A lot of people weren't honest with themselves at the outset. When I hear people say "Good investment" it has that implication (not in all cases) that you can't really afford it, but the risk is acceptable because it's (allegedly) going to go up in value. Which for most of those around my age was true. Link to comment Share on other sites More sharing options...
TimmySmith Posted December 11, 2009 Share Posted December 11, 2009 My opinion is that there's something wrong with a system where people are speculating with borrowed money, and then sticking somebody else with the bill when they lose money on the investment. Lenders get the house if you default so really, the only ones who could come away with nothing are the consumers. Why mortgage (pun intended) your future against a bad investment? It's all business, you think the banks ever quibble about "morality"? Link to comment Share on other sites More sharing options...
SloppyOneXXVI Posted December 11, 2009 Share Posted December 11, 2009 Be smart about it this time and invest wisely! Don't buy a house that two years prior sold for 20,000. when you are paying 250,000. Home ownership is a terrific investment if properly done. Most interest rates now are just a tad bit above the usual rate of inflation. Why would you want to Rent for 2,000 a month when you could own for 1,200? In Maryland you can be evicted in as little as 30 days for non payment. Most foreclosures take much longer, sometimes a year. You get a nice fat check from uncle Sam for the tax break! You can rent out rooms and make enough to pay for your mortgage. I completely agree! I bought a house in the end of 2007. I don't live there (can't afford a house where I actually live), but the investment was too good to pass up. I break even (more or less) with the renters. Link to comment Share on other sites More sharing options...
Winning Season Please! Posted December 11, 2009 Share Posted December 11, 2009 Lenders get the house if you default so really, the only ones who could come away with nothing are the consumers. Why mortgage (pun intended) your future against a bad investment? It's all business, you think the banks ever quibble about "morality"? They are getting the house they bought for YOU (not you specifically) without even seeing it. A house that is now worth less than their investment which, was MUCH higher than the home buyer. So they take the loss for you. It is not really all on the consumer. I am not saying that banks are all good and no bad, but people always say "why do they care if i can pay, the get the house". The point is they don't want the house, they want you to pay your debt. Link to comment Share on other sites More sharing options...
GibbsFactor Posted December 11, 2009 Share Posted December 11, 2009 Foreclosure, while on your credit report for up to 10 years does not have much of a baring on your credit after 3 or 4 years. Enough time for you to save for a new house! True enough. One of my buddies (who does refi :doh: ) is foreclosing on his 2ND HOUSE in 4 years. I mean damn. Link to comment Share on other sites More sharing options...
Hunter44 Posted December 11, 2009 Share Posted December 11, 2009 My opinion is that there's something wrong with a system where people are speculating with borrowed money, and then sticking somebody else with the bill when they lose money on the investment. I don't think people should be defaulting on loans simply because "I'll make more money this way". (Based on my ironclad opinion as someone who's never even had a mortgage.) This is all well and good but this is exactly what corporations do all the time...Capitilism only has a moral code for me and you, for companies, there isn't one. Link to comment Share on other sites More sharing options...
Winning Season Please! Posted December 11, 2009 Share Posted December 11, 2009 This is all well and good but this is exactly what corporations do all the time...Capitilism only has a moral code for me and you, for companies, there isn't one. True. Their really is no easy answer. Link to comment Share on other sites More sharing options...
TimmySmith Posted December 11, 2009 Share Posted December 11, 2009 I am not saying that banks are all good and no bad, but people always say "why do they care if i can pay, the get the house". The point is they don't want the house, they want you to pay your debt.All true. But the fact is you both undertook risk, yet somehow people have been conned into the falsehood that the consumer should be held to a higher standard. After seeing the BS that the banks did the last 10 years and continue to do, I have come to a more honest realization about responsibility. If banks exhibited any morality at all (lowering rates automatically, restructuring terms automatically) in an effort to truly protect their investments then it is a different matter, but they haven't. They could honestly cut all mortgage payments in half and still make money on a 30 year note. Link to comment Share on other sites More sharing options...
Larry Posted December 11, 2009 Share Posted December 11, 2009 Lenders get the house if you default so really, the only ones who could come away with nothing are the consumers. So your point is that when the bank forks over 100,000, and they get stuck with a house that's worth 75,000, then that's OK, since they didn't lose all of the money you were gambling? You don't see anything wrong with "If I pick the right stock in the stock market, then I made a profit, but if I pick the wrong one, then somebody else takes a loss"? Link to comment Share on other sites More sharing options...
Hunter44 Posted December 11, 2009 Share Posted December 11, 2009 My mortgage company offered to "modify" our loan, they'll drop our rate .75 of a point which would lower our monthly payment by $187. We are 44 months into our 30 year and we've paid about 100k so far. They want us to toss that away to "start over" with another 30 yr mortgage. At first I wondered why they would do this, then it became clear, they already made 100k off of us, so in order to lower our payments by 187 dollars a month we would have to start over. We would lose money by doing this, a lot of money...This is how they are offering to "help"...:doh: I still giggle when I think about the lady who left a message, "I know this seems to good to be true, no closing costs, $187 a month lower monthly payment"...blah blah... EDIT: Our house has lost about 60k in value... Link to comment Share on other sites More sharing options...
skinstzar Posted December 11, 2009 Share Posted December 11, 2009 I've heard of several examples of this scenario. Girlfriend moves in with boyfriend. Boyfriend owns house on his own but is underwater. Girlfriend's credit is good so they decide to walk only ruinning his credit. They take her good credit and money saved and get a better house. Of course the relationship could sour but if you think you might be with a person for the long term this option is financially sound. Link to comment Share on other sites More sharing options...
Larry Posted December 11, 2009 Share Posted December 11, 2009 This is all well and good but this is exactly what corporations do all the time...Capitilism only has a moral code for me and you, for companies, there isn't one. I'm not so much arguing the morality. Just that there's something wrong with a situation where I'm gambling, and if I win, then it's my winnings, but if I lose, then it's somebody else's loss. Or, put it another way, I think there's something wrong with a situation where it's to somebody's advantage to not pay off a debt. Link to comment Share on other sites More sharing options...
TimmySmith Posted December 11, 2009 Share Posted December 11, 2009 You don't see anything wrong with "If I pick the right stock in the stock market, then I made a profit, but if I pick the wrong one, then somebody else takes a loss"?More like if you give me money to buy stocks and I lose it, then you demand I pay you back. Is your argument that banks should invest without risk? Link to comment Share on other sites More sharing options...
twa Posted December 11, 2009 Share Posted December 11, 2009 This is all well and good but this is exactly what corporations do all the time...Capitilism only has a moral code for me and you, for companies, there isn't one. Beat me to it:) Plus of course the mortgage co is 'speculating with borrowed money' ,demanding collateral, and getting bailed out to boot. Those seriously underwater are simply being foolish twice in not walking away. Link to comment Share on other sites More sharing options...
JohnLockesGhost Posted December 11, 2009 Share Posted December 11, 2009 So your point is that when the bank forks over 100,000, and they get stuck with a house that's worth 75,000, then that's OK, since they didn't lose all of the money you were gambling? You don't see anything wrong with "If I pick the right stock in the stock market, then I made a profit, but if I pick the wrong one, then somebody else takes a loss"? If the vast part of that 100,000 dollars lent wasn't simply created, then I think you have a very sound, moral point. But for the most part, that $100,000 the bank "forks over" came out of an inflated supply of credit, so the bank was just making its own bet (i.e. speculating) that you'd pay it back. This is especially true when considering the incredible amount of reckless lending that the banking industry did during the build-up of the housing bubble. Link to comment Share on other sites More sharing options...
TD_washingtonredskins Posted December 11, 2009 Share Posted December 11, 2009 I'm not so much arguing the morality. Just that there's something wrong with a situation where I'm gambling, and if I win, then it's my winnings, but if I lose, then it's somebody else's loss. Or, put it another way, I think there's something wrong with a situation where it's to somebody's advantage to not pay off a debt. What would we do about it? Do you want to throw people in prison if they can't pay their mortgage? Link to comment Share on other sites More sharing options...
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