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Replies (13)
- Michael Emery, "MikeEmery"
- Contributions:7298
Before the home depreciated 'so much', how were they able to afford the payments?
Walking away from a home could have serious consequences for a persons credit score, inhibit their ability to get consumer credit, raise their insurance rates, prevent them from getting a job, an apartment and another home.
Walking away from a home could have serious consequences for a persons credit score, inhibit their ability to get consumer credit, raise their insurance rates, prevent them from getting a job, an apartment and another home.
- Dan, "the_country_hick"
- Contributions:4699
If the house has depreciated makes no difference. Do what you can.
If you can not afford the payments you can not afford the payments. Foreclosure, short sale, or something else equally bad looks to be in the near future.
Do not leave if you can afford to pay. But if you can not afford to pay you will be thrown out anyway.
If you can not afford the payments you can not afford the payments. Foreclosure, short sale, or something else equally bad looks to be in the near future.
Do not leave if you can afford to pay. But if you can not afford to pay you will be thrown out anyway.
- shasta_steve
- Contributions:448
I have a little different opinion on the whole thing than Mike and Dan do. I say weigh all you options and do what is best for you. Florida is a recourse state and the bank can come after you. In states like Arizona and California it almost never happens on purchase money loans.
My own experience with a foreclosure is my credit dropped from high 700's to right at 700 now. My friend dropped from 805 to 720 and three months later he is 737. I had one credit card, Bank of America, drop my limit to about what I owed. I usually pay it off at the end of the month but have been just paying $100 a month so I keep the account open. My American Express card has not done a thing and I have been averaging about $2000 or $3000 a month but I pay it off every month too. I don't use any of my other cards but none have cancelled or reduced my credit.
My job tends to be who you know but I really don't worry too much about it. Most of the people I know who have had problems have more than just a foreclosure on their credit report.
My insurance has not been affected but I will have to see when I get my next bill. Here in California I have seen people have almost zero problems renting homes with just a foreclosure. Most landlords seem to understand and many are actively courting foreclosures. I already have another house but it looks like I would have to wait about three years to buy a new one with an FHA loan. There is a good chance Fannie and Freddie will not even exist in their present form in three years so who knows how that will all turn out.
In the end it is all a gamble but economically it would be pretty hard to justify keeping paying on homes that are 30-50% underwater for many people. Many people are paying well over $1000 more a month than they could rent the same house for and it will be years before they can even sell it. In my humble opinion I say weigh all your options, do what big business has always done and do what is best for you.
My own experience with a foreclosure is my credit dropped from high 700's to right at 700 now. My friend dropped from 805 to 720 and three months later he is 737. I had one credit card, Bank of America, drop my limit to about what I owed. I usually pay it off at the end of the month but have been just paying $100 a month so I keep the account open. My American Express card has not done a thing and I have been averaging about $2000 or $3000 a month but I pay it off every month too. I don't use any of my other cards but none have cancelled or reduced my credit.
My job tends to be who you know but I really don't worry too much about it. Most of the people I know who have had problems have more than just a foreclosure on their credit report.
My insurance has not been affected but I will have to see when I get my next bill. Here in California I have seen people have almost zero problems renting homes with just a foreclosure. Most landlords seem to understand and many are actively courting foreclosures. I already have another house but it looks like I would have to wait about three years to buy a new one with an FHA loan. There is a good chance Fannie and Freddie will not even exist in their present form in three years so who knows how that will all turn out.
In the end it is all a gamble but economically it would be pretty hard to justify keeping paying on homes that are 30-50% underwater for many people. Many people are paying well over $1000 more a month than they could rent the same house for and it will be years before they can even sell it. In my humble opinion I say weigh all your options, do what big business has always done and do what is best for you.
- Rob Howard, "RobSellsKnoxville"
- Contributions:21
In states like California, Nevada and Florida there are wild swings in valuation, in areas like here in Knoxville, the linear market is like a cushion on both sides. We have lost an uncomfortable amount on our properties, but when buyer confidence recovers we will likely recover more quickly.
The downside of a linear market is that when the other states come back in a big way we'll continue our slow and steady appreciation. But, hey, I would rather live here than anywhere else!
The downside of a linear market is that when the other states come back in a big way we'll continue our slow and steady appreciation. But, hey, I would rather live here than anywhere else!
- Louis Wolfson, "Louis Wolfson"
- Contributions:173
Shasta Steve,
Sounds like your credit score is higher than many of those true americans that struggle everyday to meet their obligations.
Your the problem with the country. You should not of bought what you couldn't afford. (sorry for those that lost jobs as that is a different issue) You should be responsible for the short fall. Sounds like you pay your bills as your FICO is still strong. Sure if it went up you'd take the profit.
Eventually the housing market will reach an equilibrium where it only costs a bit more to own verse rent, which is how it should be. A forced way of savings with a value that goes up and down based on said abiltiy to pay the mortgage.
Till that time home values will continue to decline.
Sounds like your credit score is higher than many of those true americans that struggle everyday to meet their obligations.
Your the problem with the country. You should not of bought what you couldn't afford. (sorry for those that lost jobs as that is a different issue) You should be responsible for the short fall. Sounds like you pay your bills as your FICO is still strong. Sure if it went up you'd take the profit.
Eventually the housing market will reach an equilibrium where it only costs a bit more to own verse rent, which is how it should be. A forced way of savings with a value that goes up and down based on said abiltiy to pay the mortgage.
Till that time home values will continue to decline.
- shasta_steve
- Contributions:448
I absolutley did not buy more than I could afford. Before I changed jobs, my payment was less than 15% of my gross. My new house is about 17% of my gross. The problem is many other people out there did buy more than they could afford. They did this with the help and encouragement of many people in your industry. Lets be honest how many people did you help buy houses you felt they could not really afford? If you never did it, which would be doubtful, how often did you see you fellow agents and loan officers doing it? Basically we sold everyone who could afford a house one then when we ran out of them we changed the rules to sell to those who could not afford one. We drove prices through the roof and then they fell through the floor. Everyone made money except those who did the right thing.
When I changed jobs I was stuck with a house 500 miles away that I could not sell. When I purchased another house I had to qualifiy for both payments and my soon to be ending child support. I was not allowed to use my rent because my house was underwater. When my renters started to be late almost every month I decided that I would be better of financially if I let the house go back. In California the law is very specific, if the loan is purchase money and has not been refinanced, then it is non-recourse. That is if I stop paying then they get the house. No more money owed and no cancellation of debt income. Contract we both signed and something big business does every day.
To tell you the truth I had a hard time making this decision. I have never not paid anyone for anything in my life. I bought my house in 2003 for 145k and in 2006 it was worth about 310k. Now I could get about 95k out of it and when I stopped paying my agent friend figured he could get about 85k minus about 8% the cost to sell it. There is no way possible the prices could have ever gotten so high if it was not for the outright fraud in the mortgage industry but then again they would have never have fallen so far either. I would be happy to pay any money I personally owe. All I ask is we go back through every foreclosure and check how the transaction was written up. We then hold bank employees, loan officers and RE agents personally responsible for fraud and incompetence that occured in a great many of them.
When I changed jobs I was stuck with a house 500 miles away that I could not sell. When I purchased another house I had to qualifiy for both payments and my soon to be ending child support. I was not allowed to use my rent because my house was underwater. When my renters started to be late almost every month I decided that I would be better of financially if I let the house go back. In California the law is very specific, if the loan is purchase money and has not been refinanced, then it is non-recourse. That is if I stop paying then they get the house. No more money owed and no cancellation of debt income. Contract we both signed and something big business does every day.
To tell you the truth I had a hard time making this decision. I have never not paid anyone for anything in my life. I bought my house in 2003 for 145k and in 2006 it was worth about 310k. Now I could get about 95k out of it and when I stopped paying my agent friend figured he could get about 85k minus about 8% the cost to sell it. There is no way possible the prices could have ever gotten so high if it was not for the outright fraud in the mortgage industry but then again they would have never have fallen so far either. I would be happy to pay any money I personally owe. All I ask is we go back through every foreclosure and check how the transaction was written up. We then hold bank employees, loan officers and RE agents personally responsible for fraud and incompetence that occured in a great many of them.
- Louis Wolfson, "Louis Wolfson"
- Contributions:173
Shasta Steve,
I never have nor would I ever encourage someone to buy a house they couldn't afford. Most people you are right don't understand mortgages, and there is a risk to any mortgage that is not fixed. A home is not an investement it is a place to live, raise your family and a forced way of savings. Barney Frank wanted everyone to own a house and the mortgage companies let them with no income docs. Of course Barney likes to blame Bush, and of course Barney to the rescue with the Dodd Frank bill.
Did you refinance it and take money out as your values rose????? If so I have no sympathy for you or anyone else out there. Many people did both on their own as well as with the encouragement of lenders and yes many brokers did encourage people to sell and move up.....you know keeping up with the jones.
I have seen the highs and the lows of real estate over my 40 years in the business and unfortunately we have yet to see the lows.
But Im glad you have a job and a house, and I'm glad I do as well.
- shasta_steve
- Contributions:448
Louis I am not talking about encouraging someone to get a home loan they could not afford. I am saying would you turn someone down as a client who was buying a house they could not afford? I don't know many agents who would.
No I did not ever refinance or take money out but during the heyday I was getting about 10 letters a week telling me just how easy it was. You may say that a home is not an investment but that is not what the NAR was saying. Did they ever put out a press report when it was not a good time to buy a house? Mortgage brokers were telling people to let their equity work for them, they can always refinance and hey it is tax deductible. Agents were telling clients to buy now or forever lose their chance. The American public is not that smart but these people should have known better.
Funny thing is I don't think this is over. Everyone who originally bought a house in my current neighborhood is underwater. I paid 250k for a house that would have sold for 550k in 2006. We have RE agents all the time knocking on doors to say just how easy it is for them to get a short sale approved. They are actively trying to get people to short sale who may not of even been considering it. I know that is just good business, nothing unethical about that. One recently helped my neighbor by another house about 300 yards from his current one and now his current one is for sale short.
Yes many people did make some horrible financial decisions but if not for the easy money and outright fraud from the mortgage bankers we would have never have gotten into this position. It is pretty hard to tell the American public you have to play by one set of rules and we have another. I say this has long since gotten past a moral decision and has become an financial one. One could even argue it is immoral to waste money on a bloated mortgage when you need that money to help support your family or save money for your retirement.
No I did not ever refinance or take money out but during the heyday I was getting about 10 letters a week telling me just how easy it was. You may say that a home is not an investment but that is not what the NAR was saying. Did they ever put out a press report when it was not a good time to buy a house? Mortgage brokers were telling people to let their equity work for them, they can always refinance and hey it is tax deductible. Agents were telling clients to buy now or forever lose their chance. The American public is not that smart but these people should have known better.
Funny thing is I don't think this is over. Everyone who originally bought a house in my current neighborhood is underwater. I paid 250k for a house that would have sold for 550k in 2006. We have RE agents all the time knocking on doors to say just how easy it is for them to get a short sale approved. They are actively trying to get people to short sale who may not of even been considering it. I know that is just good business, nothing unethical about that. One recently helped my neighbor by another house about 300 yards from his current one and now his current one is for sale short.
Yes many people did make some horrible financial decisions but if not for the easy money and outright fraud from the mortgage bankers we would have never have gotten into this position. It is pretty hard to tell the American public you have to play by one set of rules and we have another. I say this has long since gotten past a moral decision and has become an financial one. One could even argue it is immoral to waste money on a bloated mortgage when you need that money to help support your family or save money for your retirement.
- Louis Wolfson, "Louis Wolfson"
- Contributions:173
I am not the NAR maybe I should be. I believe in the american dream, or what it use to be. A home, kids playing, kids learning, going to college, getting a job, getting married and starting the cycle again.
The fundamentals of your neighborhood must of been wrong to begin with? Where was the stabiltiy of the community. Where I am we have, the best colleges in the country, some of the best hospitals, financial institutions, high tech and biotech. We are 15 minutes to all of this, including the airport.
You need jobs to provide income to pay the bills. It's not over your right, but whos fault is the bloated mortgages.
I guess my ex partner is right its all a game, just like musical chairs or the hot potato, or the greater fool theory - to many people have gotten caught with their pants down. Cut your loses and move on.
Hey, your like my ex partner in a way.....its a new day, you've moved on and started fresh and learned from your mistakes.
Me on the other hand am still struggling along, making my high payments, watching my equity go down, but my equity that remains has the same buying power as in the height of the market.
Retirement I wish.....
The fundamentals of your neighborhood must of been wrong to begin with? Where was the stabiltiy of the community. Where I am we have, the best colleges in the country, some of the best hospitals, financial institutions, high tech and biotech. We are 15 minutes to all of this, including the airport.
You need jobs to provide income to pay the bills. It's not over your right, but whos fault is the bloated mortgages.
I guess my ex partner is right its all a game, just like musical chairs or the hot potato, or the greater fool theory - to many people have gotten caught with their pants down. Cut your loses and move on.
Hey, your like my ex partner in a way.....its a new day, you've moved on and started fresh and learned from your mistakes.
Me on the other hand am still struggling along, making my high payments, watching my equity go down, but my equity that remains has the same buying power as in the height of the market.
Retirement I wish.....
- Saul Zavala, "Century 21 Saul"
- Contributions:69
Well if they can't afford the payment they can't afford the payment...
Having said that I believe simply walking away is probably the worst of your choices. Walking away from the property does not resolve you of your legal obligation to pay your loan. If you do decide to walk away you better be ready to file for bankruptcy also.
whether you do file for bankruptcy or not it does not matter when it comes to your credit score which will take a major hit.
A short sale is your best option you are able to rid yourself of your debt and your credit is not affected as severely as in your other options..
Having said that I believe simply walking away is probably the worst of your choices. Walking away from the property does not resolve you of your legal obligation to pay your loan. If you do decide to walk away you better be ready to file for bankruptcy also.
whether you do file for bankruptcy or not it does not matter when it comes to your credit score which will take a major hit.
A short sale is your best option you are able to rid yourself of your debt and your credit is not affected as severely as in your other options..
Saul:
In many states, in fact walking away from a purchase money loan absolutely does end the legal obligation to pay. My state AZ is one of them.
Furthermore, the same is NOT TRUE about a short sale. So, in many cases where agents push short sales the fact is the owner would be much safer in a foreclosure.
Also, the credit hit from a short sale is very severe itself, particularly after many months of missed payments.
In many states, in fact walking away from a purchase money loan absolutely does end the legal obligation to pay. My state AZ is one of them.
Furthermore, the same is NOT TRUE about a short sale. So, in many cases where agents push short sales the fact is the owner would be much safer in a foreclosure.
Also, the credit hit from a short sale is very severe itself, particularly after many months of missed payments.
- shasta_steve
- Contributions:448
The fundamentals of your neighborhood must of been wrong to begin with? Where was the stabiltiy of the community. Where I am we have, the best colleges in the country, some of the best hospitals, financial institutions, high tech and biotech. We are 15 minutes to all of this, including the airport.
Sure they were. In 2006 the average household income was about 80k and the average house sold for well over 400k. Now the average house is about 200k. Lots and lots of places like this in California yet the banks and mortgage brokers were pushing loans like there was no tomorrow. Many people were concerned that they would forever lose out being able to buy a house if they did not do it then.
By the way I do not consider the house I let foreclose to be in anyway a "mistake" I bought something I could very well afford and it certainly was not expensive compared to the average household income at the time. The problem was three years later all the cheap and easy money had more than doubled home prices and caused way more houses to be built than the area could justify. In the end I did not end up spending much more than it would have cost me to rent.
Walking away from the property does not resolve you of your legal obligation to pay your loan.
Here is why real estate agents are the last people who you should be discussing this with. I see you are a California agent and yet you have no idea of what you are talking about. Quite honestly that is just sad. In California if you have one mortgage, that has not been refinanced and is purchase money then it absolutely ends any obligation to pay when the house is foreclosed on. Also even if you have refinanced or taken non-purchase money out, and the bank forecloses using a non-judicial foreclosure process, your obligation is ended. Almost all foreclosures in California are non-judicial. You may end up paying taxes on the non-purchase money but the bank gets nothing. Now if you have a non-purchase money second then you need to get some financial advice from a good tax person or attorney.
Sure they were. In 2006 the average household income was about 80k and the average house sold for well over 400k. Now the average house is about 200k. Lots and lots of places like this in California yet the banks and mortgage brokers were pushing loans like there was no tomorrow. Many people were concerned that they would forever lose out being able to buy a house if they did not do it then.
By the way I do not consider the house I let foreclose to be in anyway a "mistake" I bought something I could very well afford and it certainly was not expensive compared to the average household income at the time. The problem was three years later all the cheap and easy money had more than doubled home prices and caused way more houses to be built than the area could justify. In the end I did not end up spending much more than it would have cost me to rent.
Walking away from the property does not resolve you of your legal obligation to pay your loan.
Here is why real estate agents are the last people who you should be discussing this with. I see you are a California agent and yet you have no idea of what you are talking about. Quite honestly that is just sad. In California if you have one mortgage, that has not been refinanced and is purchase money then it absolutely ends any obligation to pay when the house is foreclosed on. Also even if you have refinanced or taken non-purchase money out, and the bank forecloses using a non-judicial foreclosure process, your obligation is ended. Almost all foreclosures in California are non-judicial. You may end up paying taxes on the non-purchase money but the bank gets nothing. Now if you have a non-purchase money second then you need to get some financial advice from a good tax person or attorney.
- Louis Wolfson, "Louis Wolfson"
- Contributions:173
Ah, I see and agree, that people felt they had to jump in or be left behind. Sort of like the stock market where no matter where you went, you heard the bus driver, elevator operator, garbage collector, etc talking about this tip and that (I do respect all those people and the jobs they do and have friends that are some, but I would not trust them for financial advice) But they missed the main principle of real estate, Supply and demand. If they have land they can keep building. Which means that there will always be supply. In our area there is no land only tear downs, which means there will always be demand. Its not that the income changed in your area, its that there is greater supply than demand? And were not even talking about the sub-prime mortgages.
Problem also was there was no requirements to be a mortgage broker.
Problem also was there was no requirements to be a mortgage broker.
Should homeowners just walk away if their home has depreciated so much and they can not afford the p
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