As home prices have fallen, growing numbers of borrowers wound up owing more on their homes than the homes are worth.
For at least two years, we've been hearing that this situation will result in more mortgage defaults as borrowers rationally decide to "just walk away."
A few warnings about this:
It's still hard to find reliable data about people who could otherwise afford to pay their mortgages choosing instead to default. Many defaults still seem to be driven by much more traditional factors, such as economic distress and unemployment. What evidence there is of strategic defaults, seems to confine the practice to the most sophisticated borrowers.
Strategic defaults may seem rational but people don't always act in a cold, calculating manner when it comes to their homes. A rise in strategic defaults would represent a huge change in borrower behavior in the US. That's not to say it cannot happen but it is reason to be at least a bit skeptical.
Many of the predictions of a rise in strategic defaults seem to assume that borrowers have accurate and timely information about the value of their homes. In fact, most people have a wide degree of ignorance about home values unless they are planning to sell or refinance soon. They tend to overestimate the value of their home, which should put a damper on stratgic defaults.
LINK HERE
As it has been said here before, walking away from a contract is a business decision. There is nothing wrong with it, corporations due it all day long.
ReplyDeleteThe bank is your business opponent. They are out to screw you in every direction. Beat them to it. Think like a business, not like a gullible drone.
Stop catering to criminal banks.
ReplyDeleteDoesn't matter if you walk away. Until things change, they'll just regroup and figure out another way to suck you dry, the job of capitalistic vampirism.
ReplyDeleteWalk away from it. Hell, Bank of America, Chase, and AIG did. Forget those A$$H%^%&
ReplyDeleteI know some people are doing it in Florida but making their payment in most cases is not easy either so they see the falling value and say I could rent an equivalent house a lot cheaper now.
ReplyDeleteOne problem is Florida is a state where they can come after wages for the default and the difference from what they sell for and what is owed on the defaulted mortgage - so far there has been so many they dont appear to be going after the people but I wouldnt be surprised in a few years if they dont go that route to try and get some money....
4:03. Doesnt that just mean they will file for bankrupcy to clear a wage reduction or future legal claims? Sounds like you can do a foreclosure and if they want to come after you for compensation, you can file for bankrupcy.
ReplyDeleteUmm ?
ReplyDeleteWhat good is a credit rating if you can't buy a house, a car, or a boat because the banks are not lending ?
Hmm... So what exactly is holding me up from defaulting on all my loans ? Is it that pesky morality clause that distinguishes me from the vampires on Wall Street who have sold their own mothers and children down the river for money ?
Oh right, that was it! However as soon as I find a high ground reason my creditors are going to be screwed..
Pssssst: Here's a secret! That good reason is almost here!
Hee hee hee!
I have many coworkers, friends and relativs who are upside down on their mortgage. Even though the facts are avialable right in front of them, they REFUSE to believe it.
ReplyDeleteFor example, a relative bought a McMansion for $990,000. Three years ago, a builder sold an exact one like theirs on the next block for $660,000. Just recently, the bank foreclosed on another home just like thiers and it sold for $425,000.
I told them they should walk away. Their idiotic response? "Well prices will bounce back". They don't even have a clear understanding of math. They think real estate prices will go up by 20% to 30% for a couple of years and their home will be worth a million dollars again.
5:17 you are probably right but I wonder with that new law on bankruptcies if they could get a judge to make you pay something if you are making over 40k as an individual or whatever that cutoff is now if they really pressed it which I doubt they would do with so many...
ReplyDelete6:04 it will be 15 years before they can dream of getting anywhere near that price again...
ReplyDeleteWell why pay the mortgage when you cannot afford the utilities? The banks are too afraid to foreclose when they have to mark that loan as a loss. Every day these bankers sit down and discuss the implications of 100's of foreclosures on their balance sheets. My girlfriend has one house that she hasn't paid the mortgage payment for 18 months and she just recently received notice from the bank for intent to foreclose. That's another 6 months of squatting. The second mortgage company is calling inceasently for payment. She has told them from the beginning (when Qbama promised all homeowners a re-fi and a skittles shitting unicorn) that unless they can convince the first mortgage issuer to help her out, they'll be shat-outta-luck.
ReplyDeleteWe gotta get these second mortgage issuers to start putting pressure on the first.
By the way, I admit my girlfriends no saint. But before the economy was destroyed, she was making the payments, $4,500 a month.
A skittles shitting unicorn, now that is/would be priceless. 4,500 a month is an insane mortgage payment. My brothers friend had a 5,000 a month mortgage which the bank simply would not help refinance on or even work with the customer on. They demanded payment after the first 2 months, so he cut his losses and moved out of the state. Against my better advice, my sister bought a $900,000 home. I told her the housing market was going to start falling apart. Now she cant sell the thing and its been a year. Stuck in a place she doesnt want to be in. Yuppies have a certain mentality they can not break away from easily., but eventually they learn. Just another small step towards the third world.
ReplyDelete