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Post by jeffolie on Jun 26, 2009 17:26:39 GMT -6
'walking away' for the fun of it Homeowners are 'walking away' just because they want to in some cases and not because they have to default of necessity. Some are jumping ship because other ships are sinking. They are underwater and do not like it. They feel hopeless and that they are throwing good money away. They are following the herd of defaults in neighborhoods going down hill. =================================================================== Can pay, won't pay Jun 25th 2009 From The Economist print edition It is easier to dump a home loan if a friend has done so too HOUSE prices in America have fallen so far that as many as one in five households have mortgage debt greater than the value of their homes. In a few states, borrowers are not liable for the shortfall between an unpaid loan and the resale value of the home it is secured upon. Even where borrowers are on the hook, lenders often find it too costly to pursue unpaid debts. So some homeowners may be tempted to default and escape the burden of negative equity. How widespread is this practice? New research* based on a survey of 1,000 homeowners suggests that one in four mortgage defaults are “strategic”—by people who could meet their payments but who choose not to. The main drivers of strategic default are the scale of negative equity, and moral and social considerations. Few would opt to renege on their mortgage if the equity gap were below 10% of their home’s value, the authors find, partly because of the costs of moving. But one in six would bail out if loans were underwater by a half. Four-fifths think strategic default is wrong. Those in the unethical minority are four times more likely to renege on loans (allowing for other influences) when their negative equity reaches $50,000. But morality has its price. When the equity gap reaches $100,000, “immoral” homeowners are only twice as keen to walk away from their debts as “moral” ones. People under 35 or over 65 are less likely to believe that default is wrong. So are the well-educated. Anger about bail-outs of banks or carmakers does not weaken the moral barrier to default. But people who live in neighbourhoods where home repossessions are frequent are more likely to welsh on loans. Homeowners who know someone who has defaulted strategically are 82% more likely to say they would do so, too. The likelihood of strategic default rises more quickly once the rate of local home foreclosures reaches a critical level. That hints at a vicious cycle of foreclosures that both depress home prices and weaken the social and economic barriers to further defaults. To break the cycle, policymakers need to address the problem of negative equity, not just unaffordable interest payments. www.economist.com/businessfinance/displaystory.cfm?story_id=13905502
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Post by unlawflcombatnt on Jun 26, 2009 17:38:33 GMT -6
Those that just "walk away" are also helping make homes more affordable for those of us who could never afford them. Every one of these walk-aways adds another home to the potential supply of homes for sale, which suppresses prices.
And in most cases, it also puts an end to the financial sinkhole an underwater mortgagee is in.
I don't see how anyone would see it as much of a moral obligation to make sure a millionaire investor doesn't lose money on his mortgage-backed security backed by a struggling homeowner.
It's these greedy investors that foolishly provided the money that allowed for the overvaluation of homes, helping to put money in the pockets of flippers, and keeping less affluent Americans from being able to afford a home.
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Post by waltc on Jun 26, 2009 20:39:22 GMT -6
Folks who are upside down on their mortgages should just stop paying, save the money and live in the house until they are evicted. Especially if they are unemployed or got stuck with a nasty mortgage with no recourse.
Heck you might be able to live there up to a year for free before they send the cops in.
The thing is their, credit is shot no matter what, so you may as well save up some cash and give the banksters a big FU while they are at it.
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Post by unlawflcombatnt on Jun 27, 2009 1:49:30 GMT -6
Folks who are upside down on their mortgages should just stop paying, save the money and live in the house until they are evicted. Especially if they are unemployed or got stuck with a nasty mortgage with no recourse. That's an even better idea. Let the local police try to pull 1-2 million defaulting homeowners out of their homes. There's no way it can be done. What a great way to start a Revolution.
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Post by jeffolie on Jun 27, 2009 10:59:00 GMT -6
A benefit of voluntarily defaulting is that one gets to live rent free for a while. Banks are reluctant to complete the foreclosure process and are using it to bluff owners into a modification or to pay the arrears. Some banks are so overloaded with foreclosures that they go right up to the last moment and then back out of completing the foreclosure process.
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Post by xtra on Jun 27, 2009 11:46:01 GMT -6
Folks who are upside down on their mortgages should just stop paying, save the money and live in the house until they are evicted. Especially if they are unemployed or got stuck with a nasty mortgage with no recourse. Heck you might be able to live there up to a year for free before they send the cops in. The thing is their, credit is shot no matter what, so you may as well save up some cash and give the banksters a big FU while they are at it. My X wife has been living in the house for almost a year and a half without paying her mortgage. and waltz plz answer my question in the Iran/Iraq/Afgan about your "truther" comment.
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Post by jeffolie on Jun 28, 2009 12:10:17 GMT -6
There will be plenty of 'walking away' for the fun of it in SoCal hotels and motels. Hotel California is going down fast in the Crisis. 2500 are at risk of foreclosure. Hurry and prepare for the end of the tourist season to place your foreclosure bid at the peak of The Crisis in The Fall of 2009. There will be plenty of opportunities to become owners as SoCal collapses in The Fall. ============================================================= 175 California Hotels In Default; Sheraton Keahou Bay Resort in Hawaii Defaults; More Defaults Coming Hotel owners are facing the same problems as homeowners, being upside down on their properties with no good escape. Please consider Hotel foreclosures jump in California. In California, 175 hotels are in default -- the first stage in the foreclosure process -- according to a report from Atlas Hospitality Group, an Irvine-based brokerage firm. Another 31 have been foreclosed, nearly one third of them in the Inland region. Of those in default or foreclosure, about 75 percent obtained new loans between 2005 and 2007 for construction financing, re-financing or to buy the hotel, according to the firm. Atlas Hospitality estimates that 2,500 hotels -- about 25 percent of the state's entire hotel population -- refinanced or obtained new loans in that time meaning more defaults and foreclosures could be on the horizon. globaleconomicanalysis.blogspot.com/2009/06/175-california-hotels-in-default.html
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Post by waltc on Jun 28, 2009 19:09:38 GMT -6
The collapse of the tourism/hotel market in CA isn't surprising. Look if the rest of the country is shedding jobs by the millions. You are going to end in a situation where there are no longer enough folks with disposable income to sustain CA's over built hotel industry.
The good news is that it mostly impacts illegal aliens since they are the employees of choice in this business.
BTW another business that is taking in the ass are music instruments stores. High end stuff like Steinway Pianos aren't selling any more and even the mid-range is anemic.
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Post by whoswho on Jun 29, 2009 7:13:19 GMT -6
Walking away is a bad way of doing business.
Better if they had just not entered into a bad contract in the first place.
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Post by unlawflcombatnt on Jun 29, 2009 14:33:04 GMT -6
Walking away is a bad way of doing business. Better if they had just not entered into a bad contract in the first place. I agree that "walking away" is a bad way of doing business in most cases. And I further agree it would have been better had they not entered into bad contracts in the 1st place. However, historically there had been a reasonable assumption by homebuyers that no lender would lend them the money to buy a home if they couldn't afford it. As a result, most buyers put a lot of weight behind a lender's willingness to loan them the money. Buyers assumed that the lender, a trained financial professional, was a better judge of the affordability and the ability of the buyer to pay--than the buyers were themselves. Though I've never trusted a financial professional any farther than I could throw them myself, most people are a little more trusting. It's the same faith they put in fund managers with their 401K and IRA accounts. Given that the loan creators were as completely irresponsible, negligent, and greedy as any Americans in our entire history, I feel walking away is completely justified. Many of the homeowners were completely duped by these "professionals"- not realizing their source of their "professionalism" was in marketing and connivery, not economics or finance.
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Post by waltc on Jun 29, 2009 21:10:44 GMT -6
Walking away is a bad way of doing business.
Better if they had just not entered into a bad contract in the first place
That assumes prior knowledge that the mortgage they entered into was a scam. Most folks don't have the legal talent on tap to analyze prospective agreements or business propositions, they have to take it on faith to some extent that the person or business entity they are entering into a contract isn't a criminal in a three-piece suit(which many mortgage brokers turned out to be)
Also given the fact that the banks are being bailed out at our expense with no real prospect of those crooks ever paying us back, I have no problem with ripping off or walking away from any agreement with the banks.
Trust is a two way street and the banks have broken their word to the American people and deserve nothing but our contempt.
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Post by whoswho on Jun 30, 2009 7:38:14 GMT -6
For the biggest investment of your entire life, it would have paid them to do all the due diligence that it took, to make 100% sure that everything in that contract was fully understood and agreed upon. Surely there is still some honest folks to deal with out there. Might take longer to find them, but it would be worth the effort.
Let the crooks be the ones who do what's wrong.
Don't ever stoop to their unscrupulous ways. Do what's right, because it's right. If you don't, then who is there left to keep the whole game from going to hell in a hand basket?
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Post by xtra on Jun 30, 2009 13:15:40 GMT -6
Folks who are upside down on their mortgages should just stop paying, save the money and live in the house until they are evicted. Especially if they are unemployed or got stuck with a nasty mortgage with no recourse. Heck you might be able to live there up to a year for free before they send the cops in. The thing is their, credit is shot no matter what, so you may as well save up some cash and give the banksters a big FU while they are at it. a couple of problems with walking away..... Credit Reports April 26, 2009 by Darcy Sautelet Building the New Elite? Are "credit reports" choosing the future "elite"? To many this may sound silly but this may soon be a reality we all must face. Credit could likely be one of the biggest factors in our countries current economic crisis and credit reports are creating a very near future where only those with a "good" credit score can own or rent homes, buy cars, open bank accounts, shop, or even.....work. More and more companies are doing "pre-employment credit checks". According to the Credit Scoring Site, an employment report provides everything a regular credit report does, without the actual credit score or date of birth. Yet, potential employers can basically see your entire debt history, although you, depending on a paycheck from them, may not see their financial secrets. One has to wonder if the companies now getting "bailed out" by the government - did credit checks on their employees while apparently having financial difficulties of their own. Could the use of credit checks be one cause for the rising unemployment numbers? We could be moving into a vicious cycle with more people falling behind on payments at this time and more employers doing credit checks to determine a person's hiring desirability. Also, many opponents to the use of pre-employment credit checks worry about the ability to "profile" or "discriminate" against people of certain races etc. through their credit history. In essence, those who do credit checks are discriminating against every individual, no matter race or color, who does not have a perfect credit rating. You can not judge any individuals ability to be a good employee by their personal finances, as how you spend your money has nothing to do with how you earn it, therefore the only possible reason to actually do a credit check would be to exclude people off a bias created by what I call "economic snobbery".
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