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Old 12-13-2009, 08:48 PM   #61
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Well then Connie, you can pity me as I'm not getting any of it. I went back to work PT because of the losses I had in the market in the last year. I didn't fall down at work, take out a mortgage and say I can't pay it or tell SS to send me money for no reason. I'm just plugging away like most honest folks.
I truly doubt if you need or want my pity, rather I admire what you have done. If the market slide had continued I would have been evaluating my options as well. I frankly do not want to go back to work but do find that the better option to gaming the system. Congrats to you for having a sound set of ethics! I hope the PT work is enough till your portfolio recovers and hopefully it will be soon.
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Old 12-13-2009, 09:07 PM   #62
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Crazy Connie,
Like you, I object to anyone breaking the law or the applicable regulations in order to cheat the system. And, when it comes to private charity or help from friends, I'd need to be in deep need before taking it. But, when it comes to government giveaways, I would now urge people to take every nickel they are legally allowed to get. They should modify their behavior if it makes sense to get every drop. We and those who follow us will be paying higher taxes and will have a lower standard of living for decades as a result of the current government policies. Not taking the money is exactly the same as not taking a legal deduction on one's income taxes. Why would anyone do that?
Again, if this were charity I'd feel entirely different. But it's not.
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Old 12-13-2009, 09:23 PM   #63
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In an honest world I agree with you Sam. Problem is tons of folks are taking advantage of these give aways. Including Banks, Auto Companies, regular people who can game the system, etc.

I know a lot of people who taking advantage of what's going on right now. On the other hand I can't think of anyone who is getting help that really needs it, although I'm sure there are.

I get as pissed as you do about it but it is what it is I guess.

It also gets me mad that my buddy is gaming the system and laughing about it. What should I do, end a 40 year relationship over it?

Also, friends of mine who are X cops and firemen are the biggest offenders. Getting tax free pensions and SS for no reason at all. I'm not saying all of them but once again I know a bunch of them. When we are together they laugh about it while I'm paying to support them. Not too many jobs where you get hurt and get a tax free pension. If a painter is hurt on the job do we pay the painter millions of tax free dollars along with free medical for the rest of their lives.

Sorry, just venting I guess.
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Old 12-13-2009, 09:41 PM   #64
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What is rarely mentioned is that so many of the deadbeats with an income took the adjustable rate for several years to enhance their standard of living with way below market rates. Those folks should be considered as opportunistic scammers for their gambling at our expense. I know of more than 1 person who enjoyed 2.5 to 3.5 loans on a 3 to 5 year step up. Shame on the banks for offering those terms at all ever!
"Shame on the banks for offering those terms at all ever." You are right, BUT the gov't allowed them to do it. That's really the part that needs to change, IMHO.

If I bought a house for, say, $600K with no money down or even with 10% down ($60K), if the house value tanked by 30% ($180K under water) with the prospect of my option ARM recasting (which most likely will require me to come up with the $120K plus some), I cannot really justify not walking away if this was a no-recourse loan. Seriously. I would hate to do it from a moralistic point of view (I've been taught that I pay back what I owe, plus I have no admiration for the people who *work* the system.) but I would probably still do it if the rule said I could. I could totally live with the fact that I had made a poor choice out of greed and got myself out of it in a not so honorable way.

I don't consider myself a scammer. Far from it. Anyway, in 2004 during the housing frenzy in CA, I *almost* bought a house. My RE agent was saying 70% of Californians were going with less than 20% down and going ARMs since the housing prices were so high that people couldn't come up with the 20%; besides, ARMs has much more attractive rates. By my RE agent, I was introduced to a W*F* bank loan officer which gave me a very attractive Option-ARM deal. I cannot remember if it was my agent who said this or the loan officer but they were saying there was only so much land in the prime part of CA where they can build houses so don't worry; RE prices will keep going up and by the time your ARM resets, you have enough equity built in the house even with a no interest loan that you could refinance for a smaller mortgage in a few years. My question then was well, what if the housing prices tanked and instead of going up?? Oh they won't tank, not in CA. I'd day you see what happened in Japan? They still haven't recovered in 15 years. And they would say oh that's because the population is decreasing there, it won't happen here, etc, etc. The house I would have bought would have been in a jumbo loan range, and I would have had to carry a 2nd mortgage and the loan officer was saying I could borrow money from it to do renovation for the house etc... Imagine that. They were saying, well think about it, you would get a huge tax break with all the interest you would be paying. I still wasn't convinced. The loan officer even paid money to send me to a financial firm to do some tax consultation to see how much money I would be saving by buying a house. In those days (2003/2004), the mantra was "only the poor and the fools would rent. RE is an investment", etc, etc.

Anyway, I am a fairly conservative person. An average person probably would have bought a house then. (I was really really close to getting caught up in this stuff too.) I am soooo very glad I had a better sense than an average person. Before talking to W*F* bank, I thought if the bank said you were loan worthy up to so many hundreds of thousands of dollars, you really were. Interestingly, BofA weren't so generous with their loan approval process as W*F*.
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Old 12-13-2009, 10:59 PM   #65
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Well, I could never figure out how anyone who makes a mistake thinks it's OK for someone else to pay for it. It takes all kinds I guess.

If I remember correctly it's called "buyer beware". Not, it's OK if you're a Dummy, someone else will pay for your mistakes. Sheeesh!

Also, no the government didn't allow the banks to do it. The greed of customers made it all possible and the bank folks just cashed in on the stupidity.
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Old 12-13-2009, 11:49 PM   #66
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I am kind of in both camps.... not looking kindly at people who walk away from their debts... but also in the camp that this is a business decision... and the law allows this to happen...

If you were running a business and you had an asset that was not 'productive' for the costs.... and you could get a similar asset for a lot less... and your debt was non-recourse.... you would be a fool not to get the cheaper asset...


I also think that the banks should stop lending in the states that do not allow recourse... or the banks should require a larger down payment... or get the law changed...
This is exactly how I feel.
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Old 12-14-2009, 01:01 AM   #67
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"Shame on the banks for offering those terms at all ever." You are right, BUT the gov't allowed them to do it. That's really the part that needs to change, IMHO.

.
There is really so much blame to go around it boggles the imagination. You are right that government regulators were suppose to stop much of this madness, but I'd be a hypocrite if I didn't point out that myself and almost all other Republican, along with most Independent and many Democrat were arguing we need less government regulation and we should free business to compete.

I think millions of Americans did things that were generally illegally, (or should be) and almost certainly unethical. What bothers me is that while many have suffered financially, precious few have been sued, and almost none prosecuted. And even those who suffered financially with a foreclosure/strategic default maybe be better financially than those who played by the rules. Starting at the bottom, I'd like to see at least some of these people punished.
Bankers/Customers
  • Folks who lied on their loan applications despite the statement in big red letters that read "I certify under penalty of perjury that all of the information on this loan application is correct".
  • Mortgage brokers/loan officers who encouraged people to borrow more than they could and assisted with fraudulent loan applications.
  • Their supervisor who pushed people for more volume forget the standards.
  • Bank executives who punished any internal whistle blowers (audits, risk management)
  • Bank CEO and their boards who were paid big bucks to know better.
Appraisers
  • Real estate appraiser who gave inflated value in order to get more business
  • Rating agency who give in to pressure from investment banks to rate pieces (tranches of) sub-prime mortgage securities as AAA.
  • Insurance companies traders and execs who insured mortgage products and there derivatives.
Wall St., so many areas it is hard to know where to start but here are two.
  • Selling sub-prime MBS to conservative investors and institutions, while your trading operation is creating a net short position on the same securities.
  • Giving out massive bonus before your companies goes bankrupt
Government/Regulators again so much blame it is hard to narrow it down.
  • Office of Federal Housing Enterprise Oversight the folks who regulated Fannie and Fred. Honestly, they should have fired everybody in the department and forced them to get rehired.
  • Last but far from least. The bipartisan push by Congress to encourage home ownership, weaken bank regulation, and lower lending standards.
One of the big ironies I find in this whole situation is despite the size of the crime committed the penalties are so rare and so minor. If an average person walked into a store and found nobody was there, while some would be tempted to steal most would not steal anything. I think this is due to two reason, first stealing is pretty black and right wrong it is hard to rationalize, but more importantly the reward a few hundred worth stuff is quite small compared to the penalty a big fine, felony conviction and possibly jail.

In contrast the reward in financial crimes are large and rationalize has become fairly easy. None of the case we read about involve amounts under $10,000,e.g. 6 months of living rent free in foreclosed McMansion, strategic default wiping out hundreds of thousand of debt, doing a refi and buying the BMW, and taking Hawaii vacation while you home goes into foreclosure, pension fraud of thousands per month for life. . Loan brokers making tens of thousands and often hundred of thousand in commissions, Wall St. types make million or even tens of millions in bonuses. It is understandable why people would do these things.

What I don't understand is why the penalties are so light. You lose your house that after refi twice you've taken out $100K in cash out and your credit gets hurt for 7 years. You lose your job as mortgage broker after help hundreds of people commit perjury on their applications. You lie about the risks of MBS to customers, and you probably get a promotion but worse case you get the axe.

I wonder what happen if the penalties for 100K mortgage fraud theft and stealing $100K from jewelry store were the same, or selling a $1 million of toxic securities was the treated the same as selling $1 million in cocaine....
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Old 12-17-2009, 04:23 PM   #68
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Very well said, clifp.
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Old 12-17-2009, 05:51 PM   #69
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We are not the only ones grappling with the issue. Here is an interesting piece from Seeking Alpha on strategic defaults.

Strategic Default and Duty to Shareholders -- Seeking Alpha
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Old 12-17-2009, 11:34 PM   #70
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If I had read that article several days ago, I could have save myself lots of typing.

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They have two choices: live nobly and get screwed, or adopt the amoral norms of their counterparties. It has taken some time, but we are all coming around to the only supportable view. “It’s just business,” we shrug, even if we never wanted to be businessmen.
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Old 12-18-2009, 09:03 AM   #71
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If I had read that article several days ago, I could have save myself lots of typing.

"They have two choices: live nobly and get screwed, or adopt the amoral norms of their counterparties. It has taken some time, but we are all coming around to the only supportable view. “It’s just business,” we shrug, even if we never wanted to be businessmen."
I'm glad I had that high horse moral crap smacked out of my head at an early age. Makes it easier to swallow the bitter medicine surrounding us.
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Old 12-18-2009, 09:46 AM   #72
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Here is a most intresting article on some issues facing some folks in the coming months.

Home short-sellers may face painful taxes
Home short-sellers may face painful taxes | Real Estate News | eastvalleytribune.com
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Old 12-18-2009, 12:06 PM   #73
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I'm sorry but you would have to be living in la-la land if you are unaware of the tax implications of doing a short sale. I don't own a house or even have a mortgage but I was aware of it.
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Old 12-18-2009, 01:16 PM   #74
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So, to paraphrase one of the stories: Ms. Richey stopped making payments on her mortgage, discovered she has a lot more money to spend, is planning a cruise, and now has a bigger, nicer house. And of course is very happy about this lifestyle change.

In other words, "Screw everyone else, suckers! Oh, and by the way, here is my new address if you'd like to pay me a visit." (!)
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Old 12-18-2009, 01:35 PM   #75
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I'm in the camp of people having a moral obligation to Pay what you owe and be responsible, but hard to condem personel Strategic Default, when big business is doing it with no regrets.

http://www.bloomberg.com/apps/news?p...hnfoXOSk&pos=5
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Old 12-18-2009, 01:57 PM   #76
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I'm glad I had that high horse moral crap smacked out of my head at an early age. Makes it easier to swallow the bitter medicine surrounding us.
Agreed. This is why I'm rapidly embracing the idea of engineering an asset-rich/income-poor retirement -- at least as long as the trend is to base redistributive public policies on income. On one hand it feels like I'd be taking advantage of the system, but on the other hand, if I don't do it, I'd feel like the system was taking advantage of me.
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Old 12-18-2009, 02:00 PM   #77
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I'm in the camp of people having a moral obligation to Pay what you owe and be responsible, but hard to condem personel Strategic Default, when big business is doing it with no regrets.
I think those who reasonably can pay back what they owe should morally do so. I'm debt-free so it wouldn't be an issue for me, but if things get really bad and you're way underwater on the loan, I would feel more of an obligation to my family than to the bank or their shareholders, and if defaulting and walking away is what is best for my family, so be it.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 12-18-2009, 02:35 PM   #78
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Agreed. This is why I'm rapidly embracing the idea of engineering an asset-rich/income-poor retirement -- at least as long as the trend is to base redistributive public policies on income. On one hand it feels like I'd be taking advantage of the system, but on the other hand, if I don't do it, I'd feel like the system was taking advantage of me.
That's been my plan all along. Hopefully they never get any bright ideas and start taxing wealth directly.

I think this approach may be particularly savvy if the proposed health insurance subsidies for premiums get put in place. The lower your income, the lower the percentage of your income you pay. It is a very progressive "tax" that will really ding the middle income earners, but for those ER's that can avoid needing lots of income, it may work out nicely vs. the status quo.
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Old 12-18-2009, 03:44 PM   #79
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I'm sorry but you would have to be living in la-la land if you are unaware of the tax implications of doing a short sale. I don't own a house or even have a mortgage but I was aware of it.
That's interesting cause while I was aware of the Debt Relief act including its expiration in 13 days, I was unaware the income tax forgiveness only extended to the original value of the mortgage. This seems perfectly fair to me.

As a practical matter, I think this will force many/most of the people who used their house as an ATM and have"strategically" defaulted into bankruptcy.It is worth noting that even in non-recourse state like California, refinances are recourse loans. I hope (but doubt) that banks file claims in court to obtain additional judgments on those with the means to pay back their mortgages.
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Old 02-24-2010, 08:27 AM   #80
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There is a related article in yesterday's Financial Times: Aline van Duyn, "A Business Decision". You can read the entire article here: US housing market hit by ‘walkaways’.

What a dysfunctional system.
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