Walk on Existing Mortgage??

[onewhippedpuppy]

Originally Posted by jyl

I would tend to consider a mortgage more like a business decision than a moral contract.

If I agree to something, I do everything in my power to hold up my end of the bargain. Morals can be intertwined with business.

[the]

Originally Posted by onewhippedpuppy

If I agree to something, I do everything in my power to hold up my end of the bargain. Morals can be intertwined with business.

A bank who relies on the "morality" of its borrowers, even a little, rather than sound legal and business judgment and protection, is irresponsible to itself and its shareholders.

[onewhippedpuppy]

I can only worry about myself. I only expect the bank to adhere to the terms set forth in the contract. I don't go to the bank looking for a babysitter. Acting with integrity should not first require a cost benefit analysis.

Old fashioned thinking? Perhaps. But if I shake your hand and tell you I'll do something, I'll do everything in my power to meet my commitment.

[Radioactive]

The bank didn't sell you a house, they loaned you money to buy a house.

Its not there fault the house you bought is worth less than you paid for it.

If you went and bought a new car and took out a loan, drove it off the lot you
would be upside down on that too. I don't here too many people buying a new car
and driving it for a 6 months and then walking away, saying it is not worth what the loan amount is. You signed the loan docs saying you would pay said amount.

The banks problem is they loaned money to people that can't pay it back and didn't take enough collateral for the loan. The banks are losing billions on this and they should. But the people that can pay what they signed up for should or there should be some stiff penalties.

Maybe the banks should go to all the people that are upside down like the OP and ask for more collateral.

[Nathans_Dad]

The issue is truly about whether a borrower has an obligation to repay a loan or not. Yes, the borrower can walk away, the consequence of that SHOULD (and might) be that they will not get another loan for several years and will have to rent. Whether or not that is actually the case depends on the decision of the bank and whether they fund the new loan. I would suspect that in today's climate they would tend to not fund the loan.

It is COMPLETELY disingenuous, though to setup another loan prior to defaulting on the first one. By doing this, you are removing your consequence of default.

If you want to walk, then walk. Accept the consequence of your poor decision and take the hit to your credit rating. Then rent for the next 10 years.

If you set up yet another mortgage and then walk from the first one, sticking the rest of us with your poor decision with no consequences to yourself...well karma is a b!tch and you will eventually see the consequences of that decision.

[cl8ton]

Only in the USA are you forgiven
http://en.wikipedia.org/wiki/Debtor%27s_prison

[pwd72s]

Originally Posted by Jim Richards

In most cases, a home is primarily a dwelling, not an investment. If the purpose of the mortgage was to finance an investment, the bank would have required different terms relative to an owner-occupied mortgage. If the owner wants to now look at their home as an investment, perhaps the bank should have the latitude to change the terms of the note.

Exactly. Cindy & I bought this place to live in...we fulfilled our end of the bargain, even adding to the payments each month so we could pay it off early. The only way we'll leave it is when we can no longer care for it. Yet, we had people buying houses they couldn't possibly afford as they chanted the mantra that houses always went up in value. In some cases, these people bought multi houses, flipping them.

Yep...I was a sucker, playing by the rules...

[Dixie]

We would be outraged if the bank said, "Your house has doubled in value. We're altering the mortgage to reflect the fact. The principle and payments have doubled."

Yet we find it acceptable to bail on our obligation when the shoe is on th other foot, and the house falls in value...

[lendaddy]

Originally Posted by onewhippedpuppy

If I agree to something, I do everything in my power to hold up my end of the bargain. Morals can be intertwined with business.

"Everything" is a pretty big term, you sure about that? If your house burned to the ground and via some loophole your insurance weaseled out. Would you continue to pay your $400k mortgage on a home that doesn't exist for the next 20 years or would you walk? Seriously think about it before you answer.

[onewhippedpuppy]

Originally Posted by lendaddy

"Everything" is a pretty big term, you sure about that? If your house burned to the ground and via some loophole your insurance weaseled out. Would you continue to pay your $400k mortgage on a home that doesn't exist for the next 20 years or would you walk? Seriously think about it before you answer.

I'd do my best to make it right, but obviously it's not a situation I could sustain. My family needs a home. It's also a rather out-there hypothetical, because there's a reason I piss away money on insurance.

I see your point, but it's also not relevant to this thread. The poster wants to walk on his house BECAUSE HE MADE A BAD INVESTMENT, not because of circumstances beyond his control. Stupidity is not a valid excuse for defaulting on a mortgage.

[lendaddy]

Originally Posted by onewhippedpuppy

I'd do my best to make it right, but obviously it's not a situation I could sustain. My family needs a home. It's also a rather out-there hypothetical, because there's a reason I piss away money on insurance.

I see your point, but it's also not relevant to this thread. The poster wants to walk on his house BECAUSE HE MADE A BAD INVESTMENT, not because of circumstances beyond his control. Stupidity is not a valid excuse for defaulting on a mortgage.

I agree, but I'm completely with the on this. The banks set themselves up, it was amazingly stupid. The system needs to be setup so this stuff can't happen, to rely on the honesty and altruism of man is a liberal concept not a market concept.

[ruf-porsche]

Originally Posted by onewhippedpuppy

I can only worry about myself. I only expect the bank to adhere to the terms set forth in the contract. I don't go to the bank looking for a babysitter. Acting with integrity should not first require a cost benefit analysis.

Old fashioned thinking? Perhaps. But if I shake your hand and tell you I'll do something, I'll do everything in my power to meet my commitment.

But banks are always changing the rules of the agreedment. They up late fees and annual interest rates on both saving, checking accounts and credit cards account.

[Rick Lee]

Originally Posted by ruf-porsche

But banks are always changing the rules of the agreedment. They up late fees and annual interest rates on both saving, checking accounts and credit cards account.

I don't believe they can do this on balances you incurred before the change, only on future balances. They certainly can't change the terms of your existing mortgage, except in your favor.

[Jim Richards]

Originally Posted by lendaddy

to rely on the honesty and altruism of man is a liberal concept not a market concept.

As is socializing risk. I loath making taxpayers responsible for bailing out the banks, and those that walked out on their mortgages, or lied to get their mortgages.

[onewhippedpuppy]

Quote de onewhippedpuppy

I'd do my best to make it right, but obviously it's not a situation I could sustain. My family needs a home. It's also a rather out-there hypothetical, because there's a reason I piss away money on insurance.



I see your point, but it's also not relevant to this thread. The poster wants to walk on his house BECAUSE HE MADE A BAD INVESTMENT, not because of circumstances beyond his control. Stupidity is not a valid excuse for defaulting on a mortgage.

I agree, but I'm completely with the on this. The banks set themselves up, it was amazingly stupid. The system needs to be setup so this stuff can't happen, to rely on the honesty and altruism of man is a liberal concept not a market concept.

So what would your answer have been circa 2007? Quit loaning money in SoCal, Phoenix, etc? Homes were selling for market value only the market was inflated. So if the buyer has the means to pay the mortgage and the home is selling at appraised (assume market) value, what is your grounds for rejection? Remember that banks are not in the business of real estate appraisal and speculation.

This hypothetical obviously doesn't apply to a subprime situation. But that's really not the topic at hand.

[the]

Originally Posted by Capt. Carrera

We would be outraged if the bank said, "Your house has doubled in value. We're altering the mortgage to reflect the fact. The principle and payments have doubled."

Yet we find it acceptable to bail on our obligation when the shoe is on th other foot, and the house falls in value...

Of course.

The contract does not permit your first paragraph to happen. The bank could say that, but they would have no basis in the contract to make it stick. The bank could have tried to negotiate a provision which says the mortgage could be altered if the house doubled in value - but the bank did not do so.

Someone defaulting on payments is something which is contemplated in the contract. At the time of signing, the bank knew what its remedies were in the event of default.

Knowing that it is entering into a non-recourse loan (i.e., it can only look to the collateral in the event of a default), a bank with any common sense would take a real hard look at the current and future value of its collateral. The banks failed to do so, and the results are predictable.

[the]

Originally Posted by onewhippedpuppy

So what would your answer have been circa 2007? Quit loaning money in SoCal, Phoenix, etc? Homes were selling for market value only the market was inflated. So if the buyer has the means to pay the mortgage and the home is selling at appraised (assume market) value, what is your grounds for rejection? Remember that banks are not in the business of real estate appraisal and speculation.

This hypothetical obviously doesn't apply to a subprime situation. But that's really not the topic at hand.

You don't need to quit selling houses. You could so some simple sensible things, though, like requiring 30% down when houses are clearly in a bubble.

A big part of this problem is the declining house prices, but another huge part is the zero percent down (or 5% down) practices. That is the bank just being stupid. By doing that, the bank is buying into the "RE Never Goes Down," "RE Will Continue to Rise at 10% Per Year" mentality.

The bank requires no money down because it believes the homeowner will build equity quickly through appreciation, rather than paying for equity up front.

The bank ABSOLUTELY is in the business of appraisal. That's why it obtains an appraisal before making a loan. The appraisal of the collateral is of critical importance. In a massive, obvious bubble, that of course would include a consideration of the future value, which the banks apparently foolishly and irresponsibly ignored.

Requiring money down is a long time practice, and makes a huge difference. A person who put 20 or 30 percent down has "skin in the game." If he walks, he loses that 20 or 30 percent, which he probably saved a long time to accumulate. He is far, far, far more likely to try to ride it out. But when you put zero down (or, in the height of the bank craziness, took money OUT when getting the loan), there is little incentive to not walk. The banks allowed that to happen, and it was extremely irresponsible.

[m21sniper]

Originally Posted by jyl

Who is "us" and who is "them"?

Every month, as home values fall and jobs are lost, more people slip into "them". Many people are just a layoff or a bad tenant away from becoming "them".

When enough Americans become "them", then "them" becomes "us".

Agreed.

There are some people talking a lot of smack in here. It's really easy to be high moraled when you're at the top of the heap. Let some of you lose your jobs or have their local RE market tank, and stare into the abyss of financial collapse, and then see how their view changes.

There are a lot of hypocrites in this thread, IMO.

[onewhippedpuppy]

Originally Posted by the

You don't need to quit selling houses. You could so some simple sensible things, though, like requiring 30% down when houses are clearly in a bubble.

A big part of this problem is the declining house prices, but another huge part is the zero percent down (or 5% down) practices. That is the bank just being stupid. By doing that, the bank is buying into the "RE Never Goes Down," "RE Will Continue to Rise at 10% Per Year" mentality.

The bank requires no money down because it believes the homeowner will build equity quickly through appreciation, rather than paying for equity up front.

The bank ABSOLUTELY is in the business of appraisal. That's why it obtains an appraisal before making a loan. The appraisal of the collateral is of critical importance. In a massive, obvious bubble, that of course would include a consideration of the future value, which the banks apparently foolishly and irresponsibly ignored.

Requiring money down is a long time practice, and makes a huge difference. A person who put 20 or 30 percent down has "skin in the game." If he walks, he loses that 20 or 30 percent, which he probably saved a long time to accumulate. He is far, far, far more likely to try to ride it out. But when you put zero down (or, in the height of the bank craziness, took money OUT when getting the loan), there is little incentive to not walk. The banks allowed that to happen, and it was extremely irresponsible.

The bank is absolutely NOT in the business of appraisal. The independent appraisal that the bank requires prior to closing is typically the only information a bank sees. The appraisal typically takes the home, location, and condition into account and provides a number based on comps and current market conditions. That's fine when a single house is over-priced, but what if it's the entire market? How is a mortgage officer who never sees a house in person qualified to judge a house as over/under valued? Asking banks to assess the "true" value of a home is asking them to take on an entirely new skill set. You could make a case that appraisers need to take the the bubble effect into account, but that opens the process to a LOT of interpretation. Who determines what yearly appreciation in SoCal should be?

I don't argue with you on putting money down, but that's really not relevant to this conversation. The thread poster is upside down on his loan. Had he put 20% down he would still be upside down on his loan. The question and business case would remain the same. He's considering walking on his loan not because he can't afford it, but because that's what the numbers tell him to do.

[m21sniper]

Originally Posted by onewhippedpuppy

So what would your answer have been circa 2007? Quit loaning money in SoCal, Phoenix, etc? Homes were selling for market value only the market was inflated. So if the buyer has the means to pay the mortgage and the home is selling at appraised (assume market) value, what is your grounds for rejection? Remember that banks are not in the business of real estate appraisal and speculation.

My solution would be to not be a total moron and buy a house you KNOW is priced about 100% or more above it's real value.

But you kids wanted the Kali sunshine, so abandoned all manner of good sense when buying your $700,000 econo-homes.