To the extent that Morgan Stanley is leading by example, the securities colossus is sending an unlikely message to underwater homeowners: Walk away.
The Wall Street firm is itself walking away from five San Francisco office buildings it purchased as part of a landmark $2.43 billion deal near the height of the real estate boom. But don't call it a foreclosure or a default -- not when this kind of money is involved. A spokeswoman interviewed by Bloomberg News called it "a negotiated transfer to our lenders."
The buildings were bought in 2007 by a fund managed by the firm and supplied with cash from Morgan Stanley and investors. They may be worth half the price Morgan Stanley paid just two years ago, according to Bloomberg.
Businesses and corporations walk away from mortgages all the time, says Brent T. White, a law professor at the University of Arizona. But homeowners don't -- largely due to feelings of moral obligation and guilt.
Nevertheless, a quarter of homeowners with a mortgage are currently "underwater," which means they owe more on their property than the house is worth, according to real estate research firm First American CoreLogic. Property prices aren't returning to their boom highs anytime soon. Even those lenders and servicers willing to modify mortgages are balking at writing down principal, government data shows.
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Nation's 4 Biggest Banks Cut Business Lending By $100 Billion Since April
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I don't understand the concept of walking away from a mortgage. It seems to me, if you're underwater, just bite the bullet, concede you've overpaid, and make your payments. The alternative is to be homeless with a destroyed credit rating. There must be other factors at play here, because foreclosure means you are not ever going to be a homeowner again in this lifetime. I probably overpaid for my house by $30,000 or $40,000. I'm probably somewhat upside down, and you what? I don't care. I'll pay my mortgage, enjoy my house, and chalk it up to experience.
ReplyDelete11:04 thats what they want you to do. Be a good sheeple as the Gov't collects the interest and payments on the "MONEY" that they "PRINTED" for FREE. If everyone did it they would ADJUST your credit rating..to PERFECT sort of like the FEDERAL RESERVE
ReplyDeleteI say walk away if you're underwater/house devalued, with high payments. This is mainly for those with "too much house" and will be paying for a "dead horse"..depending on how much you're underwater and if the house is a smaller/average size, best in some cases to stay put..I know people who filed bankruptcy that bought houses later, but had restrictions on cost and financing with higher downpayment. We need to get back to basic fixed rate, 10 to 20% down- conventional loans only, with the gov.completely out of the housing biz. The gov is responsible for this mess, and the idiots that bought houses they knew they couldn't afford.
ReplyDelete@ 11:04: You are slave to the system. Credit ratings don't mean squat anymore. There are plenty of apartments out there for rent. No reason to be homeless. Why on earth would someone continue to pay on a massively underwater property that will never recover its value? If you are in a 30yr fixed rate and you can afford the payment and like the house, then more power to you. But for people in an ARM loan that is going to skyrocket, you expect them to starve their family just so they can pay the bastards at the bank?!?! That would be pure stupidity.
ReplyDeleteAnyone who is upside down and continues to pay their mortgage is an idiot. This isn't about morals, ethics, or what is right and wrong. It is a purely business decision. If a business loses money, they cut their losses short and "restructure" their debt, walk away from their obligations, etc... And you should too.
ReplyDeleteI agree 100%. Our owners have no morals and in the business world that puts them miles ahead of us.
ReplyDelete11:39 I agree. When you see the banksters for who they are a credit rating is worthless.
ReplyDeleteA high credit rating stamps a slave WORTHY OF MORE DEBT.
If I had some guts I'd max out all my cards on food, ammo, and PMs then cut them up, cancel my mail, and give the banks the finger. Could live very well for the rest of my life. Is it stealing? Not really, more like payback. Those scum have been stealing from me my whole life via credit scams and of course the Fed tax scam.
ReplyDeleteA few months ago there was a guy on YouTube that did just that and I thought he was nuts. Now, not so much.
No ARM. I'm going to stay put. I made a ton when I sold my house, and I lost some of it when I bought my present house. I have to live somewhere, and I have a ton of possessions. I don't want to move them again.
ReplyDeletePeople made errors and bought homes they could not afford. Serious errors in judgement.
ReplyDeletePeople went stupid, and bought homes they could not afford. Lived in fantasy land.
People went greedy and bought homes they could not afford. Premeditated greed.
People bought homes they "could" afford and lost them through losing their jobs thanks to the above.
let's call it like it is for a change.
Why is 11.04 a slave to the system ? Most of you fools are armchair warriors , you most likely have no family , living in your parents basement free of rent . Why would he give up his home that he invested money in , just to give it away , be homeless with a few kids . Sometimes you have to be realistic you know ! like he said he only paid 30 or 40k more , not 250K more .And if he gets his credit rating destroyed , whats next , most landlords do credit rating checks now days to rent out ! But how would you ppl know ! Right , Walk away in -40 Deg Celsius weather and throw your famliy in absolut destituition .
ReplyDeleteDo not get me wrong , i am no f-ing sheeeple , i am armed to the teeth , prepared for anything that comes my way . But you ppl need to wake up a bit , stop calling people idiots just becasue they do not whislt to your tune ..
Btw hey , your car that is in your driveway is 50% underwater driving off the lot , you gonna give it up ?