My neighbor is thinking about walking away from his mortgage

looneybin · 05-09-2008, 12:02 PM

I'm trying to convince my neighbor that just walking on his mortgage is a stupid thing to do.
He has to sell his house because he took another job out of state.
He is upside down in the loan (100% loan 2 years ago)
He can't rent or lease it for enough to cover the monthly note (he also has a second on the house).
His co-workers have been "advising" him that walking on the loan is no big deal WTF??
He is a university professor, so wouldn't you think he would know better?
He thinks the only issue would be he can't buy a home for 7 years, but i'm trying to convince him that there are MANY other issues involved & he is not seeing the bigger picture.
The other issues i am coming up with include:
hoping you car lasts 7 years, because you won't get a car loan either (unless 30% interest is ok with him).
Renting a house or apartment will be difficult.
It could affect his job, as some potential employers won't hire you if you have roach credit.
Possible higher insurance rates?
Are there any other potential issues that i am missing, i want to make a good argument for him to not walk on his mortgage (plus i don't want to look at a vacant weed infested forclosed auction house across from me).
Any advice from the financial gurus here & would be grateful.
Thanks

Danny_Ocean · 05-09-2008, 12:07 PM

Quote:

Originally Posted by looneybin

He is a university professor, so wouldn't you think he would know better?

He shoulda "known better" when he signed those loan docs 2 yrs. ago.

So sad, too bad.

Ask him to short you the house.

onewhippedpuppy · 05-09-2008, 12:07 PM

I've met a lot of highly educated people with absolutely no common sense. How about integrity? I know it's a forgotten virtue, but he did sign a note agreeing to pay for a loan. Personally, walking off from a debt because you don't want to pay makes you a total dirtbag. So he's upside down, who's fault is that? People like him are a big part of what is wrong with our society, nobody wants to take responsibility for their actions.

As for the rational things, you nailed it pretty well. We won't be able to borrow for anything, and will have big issues renting a decent place.

Porsche-O-Phile · Porsche-O-Phile's Garage

Financially it might make sense.

From an ethics standpoint and the point-of-view of "doing the right thing", it's of exceedingly questionable character.

His call.

lendaddy · 05-09-2008, 12:08 PM

He won't have any trouble getting housing if he has income/down payment. He may not even need the down payment. I'm not saying he should walk, just that he won't have the problems you've outlined.

lendaddy · 05-09-2008, 12:14 PM

Guys, the customer WILL be served. He won't have trouble even buying a house. People like him are very common and there are too many vacant places needing owners for deals not to be made. They will and are being made. This pisses a lot of folks off but it is what it is.

m21sniper · 05-09-2008, 12:21 PM

Quote:

Originally Posted by onewhippedpuppy

I've met a lot of highly educated people with absolutely no common sense. How about integrity? I know it's a forgotten virtue, but he did sign a note agreeing to pay for a loan. Personally, walking off from a debt because you don't want to pay makes you a total dirtbag. So he's upside down, who's fault is that? People like him are a big part of what is wrong with our society, nobody wants to take responsibility for their actions.

As for the rational things, you nailed it pretty well. We won't be able to borrow for anything, and will have big issues renting a decent place.

IMO walking away from a predatory loan does not make you a dirt bag.

As far as bad credit causing problems for him, it does cause some, but nothing that major.

Car loan issues? Buy a nice used 10 year old car out of the paper for cash.
Rental issues for an apartment? Not in my experience.

Having bad credit does cause some angst, but it's really not that big a deal, as, if nothing else, it forces you to live within your means.

Something that IMO a LOT more Americans ought to friggin' try doing for the good of us all.

m21sniper · 05-09-2008, 12:26 PM

Quote:

Originally Posted by lendaddy

Guys, the customer WILL be served. He won't have trouble even buying a house. People like him are very common and there are too many vacant places needing owners for deals not to be made. They will and are being made. This pisses a lot of folks off but it is what it is.

Agreed.

Christien · Christien's Garage

What about getting sued by the bank when they foreclose and sell? If he's upside down, the bank will sell it for less then what he owes, then I would imagine they'll pursue him for the difference, costs and penalties.

I work in subprime car financing and lots of people just walk away from their leases/loans. What they don't realize is that we'll pursue it:

-foreclose/repossess (on credit file)
-sell the asset
-collection agency for deficiency/penalties/costs (on credit file)
-legal action when collections doesn't get results (on credit file)
-wages/bank account(s) garnished (on credit file)
-lien on new house and/or car (on credit file)

So you not only get your credit rating completely destroyed, you've got collection agencies hounding you, then that escalates to lawyers, then if you ignore it, you'll find your wages garnished and your bank accounts drained. Or the other option is to lawyer up, and it's a slam-dunk case for the credit granting agency.

These things don't just go away. The only time it makes sense to walk away is if you're already a deadbeat, have nothing to lose, and make a living from non-garnishable wages (pension, welfare, child support, disability).

Gogar · 05-09-2008, 12:26 PM

I'm still trying to get my head around what a "predatory" loan is.

m21sniper · 05-09-2008, 12:27 PM

Let us know when you figure it out.

onewhippedpuppy · 05-09-2008, 12:27 PM

A "predatory" loan is your loan officer with a .45 in one hand and a pen in the other. Not knowing what you are agreeing to is no excuse. More than likely, this is just another case of someone hoping to make money on a flip and getting caught. He agreed to the loan, he agreed to the terms. If he walks away from his word, from his agreement, then he's a dirtbag.

Christien · Christien's Garage

Quote:

Originally Posted by Gogar

I'm still trying to get my head around what a "predatory" loan is.

It's what we call it to make people who are too stupid/lazy to read their contract not feel so bad about themselves.

Christien · Christien's Garage

Quote:

Originally Posted by onewhippedpuppy

A "predatory" loan is your loan officer with a .45 in one hand and a pen in the other. Not knowing what you are agreeing to is no excuse. More than likely, this is just another case of someone hoping to make money on a flip and getting caught. He agreed to the loan, he agreed to the terms. If he walks away from his word, from his agreement, then he's a dirtbag.

Amen, brother.

m21sniper · 12:32 PM

Quote:

Originally Posted by Christien

What about getting sued by the bank when they foreclose and sell? If he's upside down, the bank will sell it for less then what he owes, then I would imagine they'll pursue him for the difference, costs and penalties..

They won't, that's just throwing good money after bad for them.

Quote:

Originally Posted by Christien

These things don't just go away. The only time it makes sense to walk away is if you're already a deadbeat, have nothing to lose, and make a living from non-garnishable wages (pension, welfare, child support, disability).

Two Words: CASH BUSINESSES.

There are a lot of people that make a cash (untraceable) living. Plus, garnishing is illegal in a lot of states anyway.

After X amount of years uncollected, these things DO just go away.

Quote:

Originally Posted by onewhippedpuppy

A "predatory" loan is your loan officer with a .45 in one hand and a pen in the other. Not knowing what you are agreeing to is no excuse. More than likely, this is just another case of someone hoping to make money on a flip and getting caught. He agreed to the loan, he agreed to the terms. If he walks away from his word, from his agreement, then he's a dirtbag.

To me selling a house to a low income a(read that poorly educated or with limited means to investigate) family with a massive balloon payment or ARM is a predatory loan.

You as the officer KNOW they don't know what they're agreeing to, and you as the officer sure as shiit aint gonna explain it to them either, are you?

This is one issue where you and i definitely differ on opinions.

onewhippedpuppy · 05-09-2008, 12:32 PM

If he's a university professor, I guarantee that he's not getting paid cash under the table. Also probably making a good wage, likely someone worth going after. You're not talking about a construction worker getting paid cash and working seasonally.

Christien · Christien's Garage

Quote:

Originally Posted by m21sniper

They won't, that's just throwing good money after bad for them.

It's definitely a judgment call, but he's a professor, not a burger-flipper. If it were my company we'd definitely go after him. That's an easy one by our standards.

Quote:

Plus, garnishing is illegal in a lot of states anyway.

WHAT?! How could it be illegal? Or rather why? It only makes sense - someone owes you money, you go to court, win, and the judge gives you the right to garnish their wages. Is it a consumer protection thing? grrrr....

m21sniper · 12:37 PM

Quote:

Originally Posted by onewhippedpuppy

If he's a university professor, I guarantee that he's not getting paid cash under the table. Also probably making a good wage, likely someone worth going after. You're not talking about a construction worker getting paid cash and working seasonally.

Or a repossessor working for a variety of buy here-pay here used car dealerships.

Obviously you are correct though- in his chosen profession, he is 'go afterable', but the truth is that the mortgage companies pursue very, very few of these cases.

Throwing good money after bad is stupid...they know that as well as you and i my friend. If he doesn't have the money, he just doesn't have the money. And in some cases the costs to pursue offset the lost amount anyway.

m21sniper · 05-09-2008, 12:35 PM

Quote:

Originally Posted by Christien

WHAT?! How could it be illegal? Or rather why? It only makes sense - someone owes you money, you go to court, win, and the judge gives you the right to garnish their wages. Is it a consumer protection thing? grrrr....

In some states only the gov't is able to legally garnish your wages.

I don't have any kind of list handy though. Not even sure how many states it is nowadays, but it used to be quite a few that did not allow garnishing of wages.

The reason is to protect poor people from having their lives totally destroyed by collections efforts.

The Gaijin · 05-09-2008, 12:40 PM

Wouldn't he be better off selling it for what he can get, then walking away from the difference? (Not that is the right thing to do..)

Imagine all the expenses to the bank by taking possesion and then re-selling a boarded up house? The greater loss would only make the outstanding loan larger and make the problem worse.

Maybe it makes no difference?