dumpster56
Thinks s/he gets paid by the post
- Joined
- Nov 28, 2005
- Messages
- 2,146
This problem of more people walking away from their home loans is further exacerbated by the federal government recent passage of a law that does not require the borrowers on foreclosed properties to pay taxes on the amount of the mortgage that is forgiven from the lender.
In the above cases, it appears that state and federal governments are adding to "free falling" home prices in some areas by not forcing defaulting borrowers to take financial responsibility. We need to hope that this trend does not become out of hand. Unfortunately, with human nature being what it is, it probably will and this is specifically one of the contributing factors that will cause median housing price in the United States to drop another 30% by the end of 2009.
It appears that investors are walking away from their mortgages more frequently than individuals who live in their home. The Fair Isaac spokesperson says that walking away from your mortgage will do less damage to your credit than someone who tries to make payments and is unable to do so and ends up in bankruptcy. To be sure, a foreclosure will hurt ones credit credit for only two years, while a bankruptcy will be damaging for three years.
It seems apparent that a trend has begun in walking away from home mortgages, especially when the borrowers have 100% financing. The term "jingle mail" has even been coined, meaning borrowers who simply mail their keys back to the lender.
What I found most disturbing about this article, is someone who owns a home with an upside down mortgage. They decide to buy another perhaps comparable home, but maybe at a recently reduced price of as much as $150,000. They move into the home they buy and allow their original home to go into foreclosure. In this case, they maintain home ownership, but do not have to wait two years to restore their credit; as would have been case had they walked away from their mortgage without buying another home first. Apparently, this is now happening most often in states like California that has laws that protect borrowers on foreclosed homes. That is, if the lender sells the foreclosed home for less than the mortgage, the borrower does not have to pay the difference back.
This problem of more people walking away from their home loans is further exacerbated by the federal government recent passage of a law that does not require the borrowers on foreclosed properties to pay taxes on the amount of the mortgage that is forgiven from the lender.
In the above cases, it appears that state and federal governments are adding to "free falling" home prices in some areas by not forcing defaulting borrowers to take financial responsibility. We need to hope that this trend does not become out of hand. Unfortunately, with human nature being what it is, it probably will and this is specifically one of the contributing factors that will cause median housing price in the United States to drop another 30% by the end of 2009.
What about the prudent who refused to buy vastly overpriced properties, but hung on to their funds instead?
What will be their role in this fiasco?
Perhaps to supply the money to straighten things out, in the form of taxes and lost interest, no?
They are still in better shape than the people who purchased the inflated properties.
Create a law that says that people choosing to do that, cannot legally own any property again for 10 years.
They are still in better shape than the people who purchased the inflated properties.
What about the prudent who refused to buy vastly overpriced properties, but hung on to their funds instead? What will be their role in this fiasco?
I guess what I find funny is that business people walk away from failed business ventures all the time and they are considered smart business men.
If, of course, you are just some poor slob who has to give up your house, well we hate them, right?
You folks amuse me greatly.
b.
I guess what I find funny is that business people walk away from failed business ventures all the time and they are considered smart business men.
If, of course, you are just some poor slob who has to give up your house, well we hate them, right?
You folks amuse me greatly.
b.
<snip>
What I found most disturbing about this article, is someone who owns a home with an upside down mortgage. They decide to buy another perhaps comparable home, but maybe at a recently reduced price of as much as $150,000. They move into the home they buy and allow their original home to go into foreclosure. In this case, they maintain home ownership, but do not have to wait two years to restore their credit; as would have been case had they walked away from their mortgage without buying another home first. Apparently, this is now happening most often in states like California that has laws that protect borrowers on foreclosed homes. That is, if the lender sells the foreclosed home for less than the mortgage, the borrower does not have to pay the difference back.
<snip>
I'm confused. If the bank lends you money for one home you can't afford, and now they lend you more money... how is that anyone's problem but the banks?
"You can't fix stupid."
Kiyosaki would've done a 1031 exchange!
-CC
I'm confused. If the bank lends you money for one home you can't afford, and now they lend you more money... how is that anyone's problem but the banks?
"You can't fix stupid."
Kiyosaki would've done a 1031 exchange!
-CC
The problem is that it eventually becomes everybody's problem. When the buyer moves into the new home, the one he vacates will soon become another foreclosure. When a homeowner in his old neighborhood applies for a home equity loan or refinances their existing mortgage, there may not be sufficient equity, due to excessive foreclosures driving down home prices. A case in point is San Diego County. Home prices there have dropped 13% in the past year. In the communities of Spring Valley and Chula Vista prices have dropped 30%, largely because of numerous foreclosures on properties with subprime loans. This situation is great if you're purchasing property, but not if you're refinancing a 1st, taking out a new 2nd or have your home on the market.