will walking away from mortgage leave you in financial ruin?

vash · vash's Garage

didnt want to post up in the other thread. just wondering. if someone makes moderate cash, lives a moderate life. just trying to do it old school, work, save, invest alittle...like our parents did.

living relatively risk-free like wont make us rich...i know. but will some fast-living risk taker simply bounce back from a bad loan and keep on going, scot-free?

is the seven year credit "time out" painful to endure? ulcers in your future? having a hardtime wrapping my mind around it.

cantdrv55 · 03-07-2009, 08:40 AM

I had a relative walk away from their home. Their credit crashed big time and it took them many years to qualify for a new home loan. Then they had to deal with the added fees and crappy interest rate. I'd say it was painful to endure.

jorian · 03-07-2009, 08:57 AM

Not sure if your question is hypothetical but it always annoys me. Why is it acceptable for people to walk away from their obligations?

Credit scores are used for many things other than lending criteria. Your score speaks to your character as well.

berettafan · 03-07-2009, 09:03 AM

Quote:

Originally Posted by vash

but will some fast-living risk taker simply bounce back from a bad loan and keep on going, scot-free?

Yes and on a bigger scale than you can imagine.

This is why i'm not impressed when i meet big time real estate moguls. I know the dirty secrets of the less scrupulous parties in that industry and when it comes down to it many are frauds. In some cases the only thing that makes them 'big time' is an ability to con a bank and a willingness to leave said bank holding the bag at a moments notice.

sammyg2 · 03-07-2009, 09:07 AM

Quote:

will walking away from mortgage leave you in financial ruin?

Hopefully, yes it will. Unfortunately IMO it is not painful enough.
Too many people are taking the easy way out and the rest of us have to pay the bill.
I don't expect anyone else to pay for my mistakes, why should others?

It's called irresponsibility and deserves punishment, not bailouts.

berettafan · 03-07-2009, 09:07 AM

Further explanation;

When you are pushing millions of $$ back and forth this way and that, buying this and borrowing against the other, it's no big deal to pull out $50k here and there and pretty soon, after enough of this, you no longer live on PERSONAL credit but rather business credit based in questionable appraisals of your 'projects'. At this point your own personal credit score doesn't mean diddly and putting in a hard weeks work for a 'normal' paycheck isn't even a consideration. Regardless of current financial standing. You could be a convicted felon that Rent A Center wouldn't rent a microwave to but that has no bearing on your source of funds.

Laneco · 03-07-2009, 09:09 AM

Your credit score (depending on state) is even used to determine how much your automobile insurance costs. Those with good credit who are home owners tend to be less risky drivers than those who rent/live with family, etc., and have crappy credit.

Your credit score is a factor for government jobs that require security clearance. When I was working as a Federal contractor, they ran mine annually. Significant changes in credit scores or other evidence of financial instability increases your security risk. You can lose your security clearance.

That said, I suspect that so many people will be foreclosed on that some type of credit "forgiveness" will be given. Right now, it would be 5 to 10 years before these people could even consider getting a home. But if a "forgiveness" was issued, then they could go out and buy another home, a car, etc...

Wouldn't that stink? As the rest of us bust our humps to keep the mortgage we promised to pay up to date, some hoser gets to walk away, cost me 30% of my home equity, and then be forgiven to allow them to buy another house?

That might be the last straw for me... If you see a really pissed of red-headed woman charging around the capital with a paint ball gun, plastering every government dipstick in sight, just nod your head and say, "yeah, we all saw that coming!"

angela

berettafan · 03-07-2009, 09:12 AM

Oh man that would be SO hot!

hifeverz · 03-07-2009, 09:14 AM

Walking Away from a Home Mortgage

I've had several friends that were ruined after the .com bust and had to leave their home. They elected to just rent and NOT be tied to a mortgage. Credit (cards, personal loan fund) became available to them in 6 months. With rents at a virtual bargain, it is NOT a problem to find bargain apartments or houses. Investors are buying these foreclosed properties and need to rent them out ASAP. The choices to move (should the urge to do so) or relocate are too numerous and advantageous to the renter.
Renting and paying cash and/or using credit cards for purchases is actually a better option than to be tied to a mortgage/property maintenance/taxes/property insurance/etc. Then after 7+ years, if one desires to jump back in to a mortgage/property maintenance/taxes/property insurance/etc. it will be an option. Individuals can find other investment vehicles to make $$ other than their primary residence(as people have traditionally attempted) which proves to NOT work.
Look to the future as things do improve and finance is cyclical.
IMHO

Hz

911Freak · 03-07-2009, 09:50 AM

Under the current FHA guidelines:

borrowers can qualify for a 96.5% LTV mortgage

with only 3 years since a Foreclosure or BK...

If this isn't already a "forgiveness" I can't imagine what one would look like!

IMO~
It should be more like 5 - 7 years minimum seasoning before even being considered stable enough to qualify for a mortgage and even then 20% down should be an additional requirement.

(but some would believe that home ownership is an entitlement not a privilege)

And there it is, cyclical all over again

Pazuzu · 03-07-2009, 10:00 AM

Quote:

Originally Posted by vash

is the seven year credit "time out" painful to endure?

Depends on who you are. My credit is brutally bad. I haven't had (or wanted, or tried to have) a credit card or loan in 10 years, easily. No need. I have yet to find a case where my credit score, or any "bad things" on my credit report have prevented me from living my life just fine. I haven't tried to buy a house yet, but I'll have 10-15% down on an affordable home when I do, so I don't see any issues there.

If someone was a credit maven, and lived via credit, then yes, the time out would be painful.

fingpilot · 03-07-2009, 01:05 PM

The actual bad credit cycle is 7 years. Add to that the fact that any bad credit note on your account can be up to 3 years old. Total 10 years before it 'disappears'.

Even that all goes to hell when on almost every credit app is the question "Have you ever decleared Bankruptcy?"

That one never goes away.

Hugh R · 03-07-2009, 01:10 PM

I know Toyota won't give you a car loan now with less than about a 730 credit score.

911Rob · 911Rob's Garage

Some do, some don't; yadda, yadda.
One thing I know for sure, you'll never change the man in the mirror!

When you go around screwing people, you have a little man on your shoulder whispering into your ear daily...."Loser" regardless of how you justify it imo. I would never do it; ever.

One of the biggest things that pi$$e$ me off about our gubmints is this bankruptcy law deal; they make it so easy..... I could make a few suggestions to improve the processes.

Trust me, when you get to be my age; you'll want to feel successful. I've been a handshake guy all my life and today I'm as calm as a Hindu cow. Cheers,

fintstone · fintstone's Garage

I know a guy that moved for a new job in a less expensive area and bought a home assuming that he could sell the the old one in the area where he previously worked. His timing was perfect (perfectly bad). He has not been able to sell it for about two years. The value of his "for sale" home has dropped from about $700K to about $350K...if he could sell it at all. In the meantime, he has already poured amost $100K into the payments while it sits vacant. It is costing him $50K per year in carrying costs and he is underwater almost $350K. His intentions were good...and he can still make both payments...but the cost is staggering. He lives frugally, has a significant income, owns his currrent home and likely will never need credit again...as he has some cash saved and owns his new home already. At what point (if ever) would this guy be justified to sell short, get a loan modification, or just walk away?

look 171 · 03-08-2009, 12:29 AM

Quote:

Originally Posted by vash

didnt want to post up in the other thread. just wondering. if someone makes moderate cash, lives a moderate life. just trying to do it old school, work, save, invest alittle...like our parents did.

living relatively risk-free like wont make us rich...i know. but will some fast-living risk taker simply bounce back from a bad loan and keep on going, scot-free?

is the seven year credit "time out" painful to endure? ulcers in your future? having a hardtime wrapping my mind around it.

A lot of things could happen in 5-7 or 10 years. If you play your cards right, you could retired early. I say don't screw up that credit. You need money ( hopefully someone else's money) to make money.

KFC911 · 03-08-2009, 01:37 AM

Quote:

Originally Posted by fintstone

...has a significant income, owns his currrent home and likely will never need credit again...as he has some cash saved and owns his new home already. At what point (if ever) would this guy be justified to sell short, get a loan modification, or just walk away?

Is he a Republican or a Democrat

?

Jandrews · 03-08-2009, 07:48 AM

Just curious...what does "walking away" really mean? Does this imply that you one day just load up a moving van and disappear? Do you notify the bank you are unable or unwilling to make payments? What about real estate taxes? What about your forwarding address for the post office? Does this walking away have to be done under the cover of darkness, or is this just, "I'm leaving, good luck to my creditors".

JA

sammyg2 · 03-08-2009, 08:01 AM

Quote:

Originally Posted by fintstone

I know a guy that moved for a new job in a less expensive area and bought a home assuming that he could sell the the old one in the area where he previously worked. His timing was perfect (perfectly bad). He has not been able to sell it for about two years. The value of his "for sale" home has dropped from about $700K to about $350K...if he could sell it at all. In the meantime, he has already poured amost $100K into the payments while it sits vacant. It is costing him $50K per year in carrying costs and he is underwater almost $350K. His intentions were good...and he can still make both payments...but the cost is staggering. He lives frugally, has a significant income, owns his currrent home and likely will never need credit again...as he has some cash saved and owns his new home already. At what point (if ever) would this guy be justified to sell short, get a loan modification, or just walk away?

Never.
He screwed up and bought a second house without selling the other one first, and he knew he couldn't afford both. Why would anyone in his right mind buy a second house before he sold the first unless he was speculating?He gambled thinking he could get away with it.

If he walks away from it, the rest of us have to pay for his mistake. I'd prefer he pay for it instead.

sammyg2 · 03-08-2009, 08:07 AM

Quote:

Originally Posted by Jandrews

Just curious...what does "walking away" really mean? Does this imply that you one day just load up a moving van and disappear? Do you notify the bank you are unable or unwilling to make payments? What about real estate taxes? What about your forwarding address for the post office? Does this walking away have to be done under the cover of darkness, or is this just, "I'm leaving, good luck to my creditors".

JA

Usually it means you simply stop making payments like a low-life. You still live there, you just don't pay for it. After three months and a whole bunch of late notices, you get a notice that you have to move out which you ignore. After about 6 months of you not paying, they start to get serious. If you are sleazy enough you might get them to re-negotiate the loan so you make a couple of payments and then stop paying and the whole process starts all over again.
With today's market situation, a real scumbag could probably live in that house for up to 2 years without making more than a couple payments before they finally got kicked out for good.
I know a couple of people in South Orange County who are playing the game just as described above. No they are not my friends. Not any more. They deserve to end up living in a box in an alley.