When do the prudent stop paying their mortgage?

I think these people should stop paying their mortgages and qualify for the forbearance because they will be able to squeeze a good year of living for free in the house. The downside is simply a 3 year credit hit but who cares. Right?

I am sure you are kidding right?  How does that make this who situation any better?

Not really kidding but maybe a little sarcastic.    I am hearing from people who have been extremely prudent and stuck in the same mortgages but are paying on time..   I am not sure how far the U.S. can push and poop on the prudent after bailing out every imprudent person in the USA before the "on-time" mortgage payors gang together and stop paying.  Am I missing some news item by chance where they plan on making this bill fair for all that are stuck in an underwater home?

trip,

Kidding or not... it is happening and the prudent are seeing that others are getting "better deals" to be bad and also, they just might be running out of money as well.  HANK & BEN can see this (over 4 mill 1 payment behind in JUN '08).  If the "A" paper FULL DOC Owner-OCC borrower collapses... it will resemble that picture of Galveston with the 1 house standing. Many more casualties than what is expected.

Can we add this to our list of "Unintended Consequence's" after this bill/bail-out is passed?

I don't know where you get 3 years of poor credit for not paying your mortgage.  The hit will be more likely 9-10 years.

What people do not realize from all of this is the domino effect.  When you don't pay your mortgage, you don't pay your taxes.  When you don't pay your taxes, the city/county cannot pay for roads, schools, transportation, etc.  Builders cannot build homes.  Businesses go under.  People lose their jobs and the economy basically goes into the toilet.  That is what we are seeing happen today.  Everyone should take pride in paying all of their debts on time.  There are very few times when anyone should let a debt go unpaid or even late.  If we depend on the government for everything, soon we will be nothing but a number.  We will have no rights, because we will not have earned them.

suwannee47,

I totally agree with you but is it reality?    When people learn they paid to much for their house based on appraisal fraud and the upward momentum appraisal fraud causes in a community I just don't see where the prudent win..

Good points Suwannee, next we will all have barcodes embedded on our wrists.

Triple, not everyone paid to much for their house because of appraisal fraud.  Alot of home values depreciated because the next door neighbor bought his 1/2 mil house on a 1% ARM that came due and the rate shot to 7% and they can no longer afford the house, it goes into foreclosure and brings the value of the homes around it down.  It's also the other neighbor who made every mortgage payment on time, but unfortunate circumstances prevailed (ie lost job, medical issues, etc), they now can't afford to make the payment, the house is foreclosed, valued drop. 

FHA changed guidelines recently to thwart the "buy  and bail" strategy.

From the comments ... I would guess most everyone here is going to get some kind of bail out or connected to some kind of real estate fraud.

Mark my words .. The prudent will want to see "blood in the streets".. My money is they will win in the end...

The ponzi scam real estate business model is broken... I have to believe all a prudent person needs to do is show one appraisal, mortgage fraud scheme in their neighborhood and they will win.. They have to win or the backlash will be 10 fold from what we see now..

Triplec, how do you show which appraisal is fraud?  How will that be determined exactly?  Why the great interest in this anyhow?

People's morals get tested in situations of stress and strife.  After hurricane Charley, I knew of some people that "helped" their roofs look worse to get insurance money.  I know of one that got a "free generator" when it was unnecessary as well.  They are/were upstanding people.  However "everyone else is getting it" so why not??? was the MO...  How many people who received the "stimulus checks" but were not broke, returned the money?  I would guess it can be counted on 1 hand. trip has very valid points about the psychology of people.  Take that to our industry... How many LO's were dancing naked in the streets (OK Wrong visual) when FNM and FRE collapsed?  Lower rates...write some biz, Marty!!!  It was a spurt of good in a sea of bad.  We all have a moral threshold and trip was just pointing it out.  Some have higher morals than others, but we have seen these boards terrorized by some and it was simply that they crossed their moral threshold.  I wish everyone well and keep rockin'.

Excellent points Martin.  I believe the reason all of the prudent people won't walk away is because many of them have Character.  I won't walk away as long as I can afford to make my payments for the same reason I gave the money back to the cashier last week when he gave me change for a $20 and I had only given him 2 bucks.  People need to look themselves in the mirror and decide if they want to be part of the problem or the solution.  Real estate values are cyclical, no matter what anybody says.  It will come back.  It may not be tomorrow, next year, or even 5 years, but it will come back.  Just don't panick.

Ok khancokloans,



Put yourself in the shoes of a person with a family and everyone around you is losing their jobs. You may not lose your job but certainly the probability is increasing on a daily basis. Fear kicks in and human nature takes over. Survival.. You need money in the bank just in case you lose your job and the 3000 to 5000 payment you are making a month while your neighbor is contributing to his saving account because he got a loan modification and paying only $1500 month is not going to sit well at all.  I just don't see how any human being will stomach this when they have children.

     I believe that when the economy recovers and housing stabilizes that all these folks who went bankrupt will be looked at differently than normal bankruptcies. There is so many bankruptcies and foreclosures that I think that they have lost some good people in the mix. If your credit was good before this meltdown, you will be treated differently than someone who never paid their bills to begin with.

Greed will not go away.. In order to stimulate growth we can't and won't eliminate the 40 percent with a damaged credit. You and I know anyone who does damage to their credit during this time will not be held accountable.. We need them to buy. We can never recover unless we do business with them..

Keep trying to throw the old righteous "do the right thing" and you will be rewarded at the prudent. The more we throw that line to them the more they will slip over to the imprudent side..

Prudence needs to pay.. If it does not it is human nature to convert..

Everyone is worried about "keeping people in their homes"..  Every time they say that they have converted a prudent person to live a life of imprudence.

In theory anyone in s. California, a state with an anti deficiency clause, purchase money loan, no home equity loans are ripe to walk away..

Triplec,

I see what you are saying.  I don't have to put myself in anyone else's shoes because those are my shoes.  Believe me, those of us in the Real Estate industry are not having an easy time right now.  I was just trying to address your initial question.

Very interesting discussion...I guess you would call us one of the "imprudent" families that got caught in this huge housing mess. My husband has a terminal disease causing hepatic encephalopathy. (It is like he has Alzheimer's, has NO short-term memory, could not tell you who he spoke to on the phone 1 hr ago if his life depended on it.) Well a "friend" in the mortgage business talked him into refinancing his house about 2 yrs ago. We are now in the situation of having a $341,000 mortgage, we pay >$3000/month on an interest-only loan, our house is only worth $250,000. When I called the mortgage lender (WAMU) to find out how this new housing bill could help us, they said, "Nobody is doing that." So I spent $3,000 to get a "second opinion", someone that could answer questions for me besides the bank (a co. called HomeAssure), someone that is supposedly is own the side of the borrower. They were totally worthless. They also said that the new housing bill would take YEARS to implement, & by the time banks were in a position to help folks, the crisis would be over. What do they mean "nobody's doing that?" No one is following the LAW?? Wow. Home Assure told me I should just listen to my bank, pay my mortgage, or I would go into foreclosure.

     So this I would think is the epitome of predatory lending. A person gives a loan to a man who is ill, has NO INCOME whatsoever. The house is not in my name at all. I could turn around & buy a house actually worth $371,000 & then it would seem at least worthwhile. What do I do? Be a "prudent" person & continue to pay? Let the house foreclose? (Any idea how long it would take to do...when would we need to be out of the house?)

     Thanks for any advice/criticism.

Angela

Fresno, California

You have a rate of 10.625% currently???!!!

     I believe that a lot of good people with excellent credit got caught up in this craze and ended up bankrupt. A lot of good people with great credit also have invested in the stock market and got burned. So in this case I believe that someone who had good credit before this meltdown occurred will be offered credit while someone who never paid their bills before this happened will not. Just my opinion.

How did you spend $3000 for a second opinion?  If someone chaged you $3000 give you advice you need to call the local DA.  There are local agencies that help at no cost?  The other news today is WaMu is now in the control of the FDIC if they follow the IndyMAC process they may be offering some relief to Borrowers in your situation.  Stay in contact with the lender as things progress.

Yes, i spent $3000 for someone to help me. HomeAssure charges one month's mortgage payment to offer help...the person that was supposedly helping us, her advice was the same as yours, Carl--keep in touch with your lender & do what they say...

Angela

Did the forbearance get included in the Economic Stability act 2008? Are the taxpayers paying for our neighbors to stay in their mcmansion with an Olympic size pool and hot tub? Granite countertops? Do they get to stop paying their mortgage for a couple years? How do you qualify for this deal?

"You and I know anyone who does damage to their credit during this time will not be held accountable."



I have no idea where you get the idea that the credit bureaus will suddenly become the most caring organizations out there and automatically clear people's credit because of the housing burst. There are people's credit that got ruined because they had medical bills due to their child having Leukemia, the credit bureaus don't care. Children who lost parents, individuals with cancer, mentally ill folks who can't pay their bills because they have schizophrenia, the list goes on and on and all of them have TERRIBLE credit with no forgiveness from anyone.



Besides this do you really think it is honest and correct for folks who made conscious decisions to buy homes that might not be able to afford to have the records wiped clean because they made a poor decision? While we are at it, why don't we just get rid of Megan's List, too. Those folks made "bad" decisions didn't they? Should we just forgive them and not have any record of their behavior for when they move in next door to us? NOT!!! Having a credit report is a way to financially view the moral character of a person. How are we as landlords and business people supose to know what we are dealing with if they do this? I have been a landlord and I take into account people's individual situations if they explain to me why their credit is shot.

Honestly, I find this entire post upsetting and offensive. Even using the word prudent to describe this is annoying. People who are paying their mortgages are doing the right thing. They are being RESPONSIBLE. What is wrong with that? I understand that a whole lot American's don't feel that they have any part in what happens in these days and that every one wants to blame everybody else but this is getting to be an epidemic. A year ago I was on this same site trying to explain the concept of what was going to happen if the California housing market fell apart and tons of people were going on about how it just wasn't fair that they HAD to pay their bills. It was making me sick then and it is making me sick now. At this point I don't care if I piss off a lot of people and potential clients but really people we need to TAKE OUR PART. All of those folks who walked away from their mortgages were a HUGE part of what happened to the economy and now look where we are at! Billions of dollars lost, 401ks sinking, a 700 million dollar bailout, stocks crashing, huge banks failing. It is a mess and if people don't step up we are going to end up living in a socialist state. This is not right. The crash of capitalism is the beginnig of the crash of democracy and I don't want to see it happen here. I love America and am blessed to be free and that is why I pay all 8k of my mortgages every month! Get some spirit and lets bounce back and stop whining. It is time to become a nation of doers not pitiful poor me folks that need free health care, government housing and cleaned credit reports. So there!!!!

The "prudent" will never stop paying their mortgage, unless financially unable to do so.

1)  It is not "prudent" to place your financial future/security in the hands of others and "hope" that they will "come through". This is an immature and irresponsible respone to any situation.

2)  A "prudent" person is not necessarily risk averse, but they are definitely risk aware. This means that they only take on the risks which they are prepared to shoulder the weight when the risk is realized and things go bad.

I don't know how this is all going to work out, but I am definitely hoping that people who made bad choices, for whatever reason, are not going to get bailed out. After all, this is the "downside" to the "Great American Dream"...everyone can take their shot at the golden ring, but there may be consequences if you swing-and-miss (okay, don't know how many metaphors I just mixed, but apologies to those who are counting).

And what's in it for those who "did it the right way"? Maybe nothing more than that knowledge, especially if we let our government "fix things" for those who tried to take short cuts and got caught. But, maybe not having my future put in the hands of the government is reward enough.

SoCal(s),

I am unsure as to many (if any) in my field or the RE field that "got in the way" of a purchase.  The questions were always posed as "What does he/she qualify for?" whter directed from the Buyer or the RE agent. The cancer-strickern borrowers are the exception to this situation.  Prudent people did not participate in the buying/refinancing frenzy as they would not be prudent if they had.  However, they are the last financial levee left in housing and if they crumble, regardless of fault, it will be a mess. These types of discussions are good as it helps "air" feelings about this situation and we will find that the "people that pay" will be the ones who pay for this mess.  It is sad and necessary at the same time.  I liken it to: Child goes off to college... gets into bad gambling debt... must bail him/her out.. for safety reasons and anger and discussion happens after the bookie is paid.  Keep rockin'.

SoCal Underwater

Talk to my clients.  If you call me I will personally give you names of client's I told to walk from closing tables, client's I told that their ideas were flawed, client's I shot myself in the foot with because I didn't go for their finance games.  I am also an Enrolled Agent, a tax expert, per the Internal Revenue Service's definition.  I am one of those "PollyAnna, do the right thing kind of folks".  About the only people who would have much bad to say about me would be a tenant or two that stopped paying rent or were doing illegal things with my properties that I had to evict or at least start proceedings to have evicted.  You are barking up the wrong tree on this one.  I have my own money and am not now or ever motivated by "profit" on a real estate transaction. I spend a lot of my day working with mentally ill folks who are destitute and need help.  I even go out and do outreach work with the kind of people you see huddled in corners of buildings at night, the ones some people walk or drive away from really quickly.  That is why I founded a non profit organization, Abundance For Life. I am just not what you think I am.  But thanks for your input.  It just reminds me to always stay on my toes so people like you can't bring me down.

Really, look me up.  Call me.  Let me prove the truth to this.