Dump the house?

[chiph]

I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

http://latimesblogs.latimes.com/lala...ing-point.html

I'm having a tough time wrapping my mind around that people will just walk out on an obligation like this.

Chip H.

[swamprat]

I have mixed feelings on that subject.

One side of me says the whole system is bonkers and that the loose monetary policies of the FED have caused this problem.

The other side of me says the self indulgent idiots and greedy speculators, leveraging their homes to over consume or for profit makes me sick.

As a potential homebuyer in this market, idiots like these are greatly complicating the market.

There is no accountability these days in people's behavior.

Accountability, however, is a word that upper corporate management uses over employees heads but one that they have no clue what it means. It means nothing to these people who are willing to renege on a deal and leave the country holding the bag. We will pay for it in higher prices for everything and continued economic malaise.

This whole housing problem in this country is a problem inviting a solution. I'm not sure what that is, but if a politician proposes it, you can be assured that its a bad thing.

We need a set of rules for everyone to follow when it comes to borrowing, lending and speculation. Unfortuantely, the idea smacks of big government.

I would be careful what we ask for in this case.

I think that the people who pay 500k and then dump it back deserve to have their credit affected for longer than a 7 year period. For us average Joe's our credit can be slammed for having a $400 collection about the same as a $400,000 forclosure for the same period. This is a sick and broken system.

As far as a house goes, it should take no more than 30 percent of your NET income. Most lenders loan on 30 percent of gross. Thats why you have people in $600,000 houses eating dogfood and moving into the doghouse.

[Eric]

I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

http://latimesblogs.latimes.com/lala...ing-point.html

I'm having a tough time wrapping my mind around that people will just walk out on an obligation like this.

Chip H.

I think it should be possible for the lender to pursue such a person and compel them to pay the debt - either by dunning their wages or by forced sale of their assets.

Egregious.

It's no different than outright fraud/theft.

[jdm124]

I think it should be possible for the lender to pursue such a person and compel them to pay the debt - either by dunning their wages or by forced sale of their assets.

It is.

And if the bank chooses to forgive any part of the existing debt, that amount is taxable as income.

In any case, the lender can get a judgment against whoever is responsible for the loan and it won't necessarily disappear in seven years. The new lender could probably call the new mortgage on the grounds of misrepresentation in the application, too.

The scheme, in one context or the next, is older than dirt. Stupid pills?

[Eric]

I think it should be possible for the lender to pursue such a person and compel them to pay the debt - either by dunning their wages or by forced sale of their assets.

It is.

And if the bank chooses to forgive any part of the existing debt, that amount is taxable as income.

In any case, the lender can get a judgment against whoever is responsible for the loan and it won't necessarily disappear in seven years. The new lender could probably call the new mortgage on the grounds of misrepresentation in the application, too.

The scheme, in one context or the next, is older than dirt. Stupid pills?

Good!

I am sympathetic toward people who suffered economic hardship (lost job/illness) and got in over their heads, etc. But if the person in Chip's original post did what was described, he's a con man, plain and simple - and should be handled as such.

[swamprat]

I think it should be possible for the lender to pursue such a person and compel them to pay the debt - either by dunning their wages or by forced sale of their assets.

It is.

And if the bank chooses to forgive any part of the existing debt, that amount is taxable as income.

In any case, the lender can get a judgment against whoever is responsible for the loan and it won't necessarily disappear in seven years. The new lender could probably call the new mortgage on the grounds of misrepresentation in the application, too.

The scheme, in one context or the next, is older than dirt. Stupid pills?

Good!

I am sympathetic toward people who suffered economic hardship (lost job/illness) and got in over their heads, etc. But if the person in Chip's original post did what was described, he's a con man, plain and simple - and should be handled as such.

And a moron, too. There is no way he should have paid that kind of money for a house, unless it was in Cape Cod or something.

[Eric]

"And a moron, too. There is no way he should have paid that kind of money for a house, unless it was in Cape Cod or something."

At the peak of the bubble, prices in some markets had inflated to truly ridiculous levels. As an example, in my old neighborhood in Sterling, Va. rickety old townhouses that sold for $80k circa 1998 were going for $300k by 2004. Little tract houses on small (1/4 acre) lots like our old place were going for $500k; they'd been selling for under $200k just a few years earlier.

The newer McMansions were going for $600k and up....

[damen]

When I moved here (Lorton) in 2003, houses were being built and going for the mid-300's. They peaked at over 1.2 million. Boy do I wish I made enough money to buy when I moved here!

[swamprat]

When I moved here (Lorton) in 2003, houses were being built and going for the mid-300's. They peaked at over 1.2 million. Boy do I wish I made enough money to buy when I moved here!

That's a big problem even today with the housing situation. Unless you want to eat catfood for dinner and sit on plastic milk crates, housing is damned near impossible to afford if you are earning less than $150k per year.

[Eric]

When I moved here (Lorton) in 2003, houses were being built and going for the mid-300's. They peaked at over 1.2 million. Boy do I wish I made enough money to buy when I moved here!

I hear that!

I bought the house in Sterling in the late '90s when they were still pretty cheap; by 2004, my Spider Sense was telling me the ridiculous annual rates of appreciation (20 percent and more in some cases) could not go on much longer; we bailed - not quite at the very peak, but well before the downturn, which is what counts.

And - we did the opposite of what suburban Yuppies are supposed to do. Instead of buying a more expensive McMansion in McLean or Great Falls, we took the money from the sale of the old house, paid off everything and bought a new house outright. The best part is the new house is way better than what we had - larger, nicer and has 8 acres of land, too. Also - our propperty taxes are a fourth of what they once were....

[damen]

yeah, thats why we're renting
we'd both love to have a house, but we just cant afford one big enough to be worthwhile

[Eric]

yeah, thats why we're renting
we'd both love to have a house, but we just cant afford one big enough to be worthwhile

Get ready; the market is swinging back toward buyers... if you have cash, you'll be in a good position to buy as sellers get increasingly desperate watching the values of their McMansions fall through the floor...

[damen]

well, I'd still rather not buy around here - it is too crowded/congested

[Eric]

well, I'd still rather not buy around here - it is too crowded/congested

No question; but the good news is property values are declining in more rural areas such as mine (and the NC areas you were talking about earlier) mainly because there's less money coming in to these areas via Yuppies like me who cashed out of their over-priced houses in places like NoVa!

[jdm124]

I think it should be possible for the lender to pursue such a person and compel them to pay the debt - either by dunning their wages or by forced sale of their assets.

It is.

And if the bank chooses to forgive any part of the existing debt, that amount is taxable as income.

In any case, the lender can get a judgment against whoever is responsible for the loan and it won't necessarily disappear in seven years. The new lender could probably call the new mortgage on the grounds of misrepresentation in the application, too.

The scheme, in one context or the next, is older than dirt. Stupid pills?

Good!

I am sympathetic toward people who suffered economic hardship (lost job/illness) and got in over their heads, etc. But if the person in Chip's original post did what was described, he's a con man, plain and simple - and should be handled as such.

Correction: Last month our oppressors changed the law and most forgiven mortgage debt will not be taxed.

[Disco Man]

When I moved here (Lorton) in 2003, houses were being built and going for the mid-300's. They peaked at over 1.2 million. Boy do I wish I made enough money to buy when I moved here!

Damen,

Wait another 2 years and these houses may be back to $300,000. Housing prices in the NoVA area are dropping very fast. There are going to be a lot of foreclosures in the next few years.

I went out house hunting back in 1999 and 2000. I looked at many houses and every house I bid on in 2000 there were 3 - 4 other bidders who had beaten me to the punch (each winning bid was well over sticker price). After seeing this I just bailed out and decided to not participate in the frenzy which should have ended by 2001. However the artificially low Federal Reserve rates kept the frenzy going until late 2006. I am glad I stayed out of the frenzy. I am still renting but at least I am not overextending like many of my friends who fell for these interest only loans. Some of these friends when the principle becomes due they admit they will be in deep doo-doo.

[jdm124]

Some of these friends when the principle becomes due they admit they will be in deep doo-doo.

Maybe your friends won't have too much hurt if their own positions have not changed. A 15 year fixed rate is around 5% and the 30 is around 5.5% both of which are probably not too far from their original rates. Of course, this assumes that whatever they signed in the first place does not prevent early pay off. What they need to do is to read the mortgage and note and do the numbers.

[robmcg]

Correction: Last month our oppressors changed the law and most forgiven mortgage debt will not be taxed.

Is there a tax-payment ceremony each year in the USA? With wringng-of-hands and self-examination?

I'm like Eric; no sympathy for people who have borrowed to much and the bottom has fallen out, and reason that if you want to buy a house you should have a modest deposit. Trouble is, markets aren't very moral animals...

[jdm124]

I'm like Eric; no sympathy for people who have borrowed to much and the bottom has fallen out, and reason that if you want to buy a house you should have a modest deposit. Trouble is, markets aren't very moral animals...

I tend to agree with you, please change the subject.

[robmcg]

I tend to agree with you, please change the subject.

Sort of like the 1945 photo of the young fit clean Russian Army Lieutenant shaking hands with a a clearly battle-stained GI possibly a sergeant somewhere just west of Berlin...

No wonder WC wanted to continue the war, knowing what he knew... but the dead don't speak.