When IS it time to walk away from your mortgage?

http://www.progressillinois.com/post...
This is mostly an article on one of Chicago's mayoral candidates, but it made me wonder if individual cities can go after some of the banks that have left these foreclosures in terrible condition or if neighborhoods can get together and use class action lawsuits because of devaluing there homes.

Wow, just read through that article. I knew some of this stuff was going on... but it looks more and more like banks are just shuffling properties they don't want around between themselves and vaguely defined holding corporations. This stinks of some sort of national conspiracy/fraud where we'll discover months or years from now that all the worst properties are owned by companies with no money to care for them and no capital to go after when they fail.

http://www.huffingtonpost.com/2011/0...
A man starts a foreclosure on a Wells Fargo bank.

Gotta love karma.

Beautiful.

AWESOME.

http://www.huffingtonpost.com/2011/02/24/regulator-stands-in-way-mortgage_n_828026.html

*sigh*

The govt. tries to take a $30 Billion chunk out of the mortgage companies when the damage they caused is in the trillions and some people may never get their career or home back. Keep in mind the banks will be paying these fines in part with the sweetheart loans they get from the Fed where the Fed is converting CDOs into no-interest loans.

And yet they fight it.

Tell me again why would should bother paying our mortgage?

Latest funhouse news from the mortgage / financial crisis. A lying borrower goes to jail. The lenders? Pffff. Don't make me laugh.

http://www.nytimes.com/2011/03/26/business/26nocera.html?_r=1

Seems like one should strategically default before debtor prisons come back.

DSGamer wrote:

Seems like one should strategically default before debtor prisons come back.

They're already back.

60 Minutes piece on the mortgage crisis:
http://www.cbs.com/primetime/60_minu...
starts at about 1:30
I feel that if the bank can't show that they have the actual documents that prove they own the homes then the people who live there should be able to stay. In fact if this was me and my bank couldn't prove that they owned my home I would seriously consider suing them for my previous loan payments.

Wow. The 60 Minutes piece is interesting. A proposed bailout fund to pay homeowners to accept their foreclosure and spare the banks the cost of documenting ownership in a legitimate manner.

I would force my bank to prove ownership. I save my statements to prove that I paid. It scares me that I could find out that I am paying the wrong bank.

This screw up is far from over.

Greg wrote:

Wow. The 60 Minutes piece is interesting. A proposed bailout fund to pay homeowners to accept their foreclosure and spare the banks the cost of documenting ownership in a legitimate manner.

So glad that we are going to set up a fund to help those poor banks to quickly remove those freeloaders from their homes.
Do the banks pay property taxes on homes they foreclose on? Does anyone know how that works?

That makes me want to walk tomorrow. Just walk before they can do anything about it.

NathanialG wrote:
Greg wrote:

Wow. The 60 Minutes piece is interesting. A proposed bailout fund to pay homeowners to accept their foreclosure and spare the banks the cost of documenting ownership in a legitimate manner.

Do the banks pay property taxes on homes they foreclose on?

Yes, they do. They pay taxes, Home Owner Association or Condo Association dues.

This article reminded me of this thread.. so necropowers activate!

http://bottomline.msnbc.msn.com/_new...

I learned that the industry term for walking away is called a 'strategic default' Borrowers who can afford their mortgage payment, but choose to no longer do so, because their property has lost so much value.

I guess statistics or polling (whatever) indicate that 3 out of 10 defaults nowadays are of the strategic kind. Up from 22 percent in 2009.

I remember much earlier in this thread, there might've been some question as to how often this happens... and well, now we know.

Another interesting estimation from Goldman Sachs in the article is that homes bought at their peak value in 2006, are not expected to reach that value again until 2023. Of course there are so many factors.. that maybe that has to be taken with a huge grain of salt.

Anyways, the article seems to hit on many points that came up in this discussion. Not the least of which that the growth in strategic defaults is in part related to the perception of how the mortgage companies have chosen to do business (questionable paperwork and practices) weakening the personal morality/ethics/beliefs portion of the equation in making such a decision.

The key thing to remember about strategic defaults is that these aren't foreclosures. These are middle to upper class families looking at their home as an investment, deciding it's a bad one and moving on. My wife and I recently decided we were tired of being tied down with our house. We moved into downtown and out of the suburbs. We love it. Best decision we've ever made. And we were able to shed a car and get $15,000 back for it. The house, though, we decided to turn into a rental property. We'll see if that's the best decision long term, but for now we're hoping that we can rent it out to close for the mortgage for long enough to get some value out of our initial investment and not hose our credit in the process.

That was a *strategic* decision, though. And it was a strategic decision where strategic default was certainly on our minds. It's very tempting when your $230,000 investment is now worth $150k and dropping. In the end we decided to go the route we did, but it's hard to ignore that option given the market.

When my wife and I were looking to buy our place here in Hawaii, we were told that we couldn't use the rental income from our house in WA as income/equity because people were doing that, and then once they bought the new place, they'd strategically default on the old one.

The idea of a strategic default is one that my wife and I have considered for our WA house as well. We bought it at the peak of the market, so it's worth about $120k less than we paid. The bank also won't let us refinance since it's not our primary residence. Well, that's not entirely true. We COULD refinance, if we had 30% equity. Since the house is now worth $120k less than we bought it for, that's pretty much impossible and we're stuck with a 6.5% rate. However - we're renting it out for roughly what our mortgage payment is (and a few hundred more than our payment in Hawaii), so I don't have a problem sitting on it for a while. And I suppose if my renters don't want to re-up this summer, I could always move back to WA for long enough to get a refinance through.

billt721 wrote:

When my wife and I were looking to buy our place here in Hawaii, we were told that we couldn't use the rental income from our house in WA as income/equity because people were doing that, and then once they bought the new place, they'd strategically default on the old one.

The idea of a strategic default is one that my wife and I have considered for our WA house as well. We bought it at the peak of the market, so it's worth about $120k less than we paid. The bank also won't let us refinance since it's not our primary residence. Well, that's not entirely true. We COULD refinance, if we had 30% equity. Since the house is now worth $120k less than we bought it for, that's pretty much impossible and we're stuck with a 6.5% rate. However - we're renting it out for roughly what our mortgage payment is (and a few hundred more than our payment in Hawaii), so I don't have a problem sitting on it for a while. And I suppose if my renters don't want to re-up this summer, I could always move back to WA for long enough to get a refinance through.

God that's absolutely crazy. Thankfully here in Ottawa the housing market is still strong and growing each year. We have about 5-10 years to go before we see the kind of prices Toronto or Vancouver have, but I'd be terrified if my $325,000 home suddenly became a $200,000 home. I hate that this is happening to people I even internet-know.

Stylez wrote:
billt721 wrote:

When my wife and I were looking to buy our place here in Hawaii, we were told that we couldn't use the rental income from our house in WA as income/equity because people were doing that, and then once they bought the new place, they'd strategically default on the old one.

The idea of a strategic default is one that my wife and I have considered for our WA house as well. We bought it at the peak of the market, so it's worth about $120k less than we paid. The bank also won't let us refinance since it's not our primary residence. Well, that's not entirely true. We COULD refinance, if we had 30% equity. Since the house is now worth $120k less than we bought it for, that's pretty much impossible and we're stuck with a 6.5% rate. However - we're renting it out for roughly what our mortgage payment is (and a few hundred more than our payment in Hawaii), so I don't have a problem sitting on it for a while. And I suppose if my renters don't want to re-up this summer, I could always move back to WA for long enough to get a refinance through.

God that's absolutely crazy. Thankfully here in Ottawa the housing market is still strong and growing each year. We have about 5-10 years to go before we see the kind of prices Toronto or Vancouver have, but I'd be terrified if my $325,000 home suddenly became a $200,000 home. I hate that this is happening to people I even internet-know.

I have a similar problem. My $265K is worth about 200K now. I can't refinance my rate even though this is my primary residence due to no equity in the home. We both still have jobs (and are in no danger of losing them), but our neighborhood took a huge hit. When a house 2 doors down went from about 230K to selling as a foreclosure for less than 80K, we knew we were in trouble. We thought long and hard about leaving and starting over, but we dumped way too much cash making this house nice to walk away.