Not us - we're fine.

A couple we know (he's a federal firefighter, so his job's good...) are planning on just walking away from their mortgage/house and defaulting on the loan. As I understand it, he's planning on retiring, and they're moving to Idaho.

Am I wrong to be irritated at them for pulling this? They're able to make the payments, they just don't want to.

It irritates me, had something similar happpen down my street. The family decided that they didn't like the house any more since they owe more than its worth so mom and dad have purchased them a new home and they are walking on their mortgage.

All these crooks made it difficult for some of us to buy a house in the last 5 years.. I wasn't going to spend 500k on a cookie cutter home.
I'm glad now that I was priced out of the market by these fools as I will be buying them back for .30 on the dollar soon..
People that have the ability to pay and choose to walk should face criminal charges.

I'm torn on this. Had a family member do it to.

If you can make the payments, do the right thing and keep paying or sell it. Everyone is so quick to jump on the bandwagon here and "get theirs". Just because you can take assistance, doesn't mean you should.

I wonder if your friend bitches about all the welfare taking obama followers. Guess what...he does this, he's one of them.

Oooooooo How this Pisses me off!!! We all know someone who has or is planning on doing the same thing!

Until there are much harsher penalties for doing this, its gonna continue!!

Too me the answer is very simple!! If you walk away from your mortgage and bank has to short sale your home, when you do purchase another home (which 90% of these people do!!). The amount of Money that the bank/mortgage company had to eat, should be leined upon your new home.....That is when you decide to sell the new place any money made should first be given to the bank/mortgage company you screwed on the "walk away" house!!

Now tell me why thats a bad idea???

I guarantee it would make people re-think

If someone is willing to take a hit on there credit by walking away then that's their deal. After that they won't have any good credit, insurance rates will soar, credit cards will be non-existent or at the least through the roof rates, everything tied to credit will cost them more.

That's their choice.

That being said.....I couldn't do it. If I could pay I would. Could live with myself to go down that road.

See, not really... credit is tighter now, for sure, but if I chose to walk away from our home, all I have to do is clear up any collections and boom, VA loan... now, I could never walk away from a VA loan, but it really isn't as bad for you as it seems.

That being said, we all take a risk that our home will lose value. We sure don't wanna share the wealth when our home appreciates 250K in 3 years, but we just can't have it when our home loses that much in the same time.

John

Yes it pisses me off. It has a indirect affect on all of us.

Why not rent it, why not sell it?

It's a bad idea. They might not care about their credit but.....
They will eventually get a 1099 for the amount they owe on the loan. The government see's this as earned income.

They just BK it when they get into a new house.

I don't think taxes or a tax bill can be BK'd.

It sucks that people can just walk away from a loan, but in all respect. The banking industry is a business. Its the cost of doing business for the banks.

Just to shed some light. I am an investor & I do Short Sales.

If the loan amount is under $2mil & the property is your primary residence, it falls under the debt forgiveness act. (no taxes)
If the loan amount is above $2mil AND/OR the property is NOT your primary residence, you get a 1099C... HOWEVER.....
Your tax preparer can prepare a 982 form & write off the owners loss because they lost money too in the form of equity.

I agree that people that can make their payments, should. But thats just the way people are. They see an easy way out & they take it.
They keep me pretty busy though. The adjustment in values makes properties affordable for average people again also.

Its an Unethical choice if they can make their payments. They are playing the system.
You have the right to be Irritated.

They better file BK or the Bank can go after their IRA. The Bank can also sue them for the difference between the selling price and outstanding balance.

Seems like they are risking allot if they are truly financially secure....

I guess what I meant to say is they would include the house in a BK, therefore the banks couldn't send them a 1099.

You are correct they can not!!

but still...you get a 1099 for say 100k (the difference of the short sale from what you owed)...depending on your tax bracket and how aggressive your accountant is you may owe 20,000 bucks!!.

You still are 80K ahead of the game!!

this is why there needs to be stiffer sanctions if one chooses this route!!

DING DING DING!!!
The banks helped create this mess (as well as others too).

BTW... The Fed is saying this will continue through 2012.

I blame everyone that got into and made the deals. First off how can a person with a combine income of lets just same $100k annually buy a house for $500k. The agents and banks played with the #'s so much to stick it to you just so they can get there commission. Like mentioned before, all the parties involved should take the hit not just the home owners. Banks were getting fat and happy, agents were making there $ and not giving a flying PHUQ about the sucker they just put in a positioned they knew would eventually fail. EFF em all. Like LEgit mentioned, I was priced out then and still em cause I know the #'s dont lie and my combine income is still not enough for me and wife to buy a house in an area we feel safe for our little one and still close to work... RANT OFF

I think it sucks. My wife and I are busting our butts so we can hopefully get into a house...and these people, who can pay decide they don't like it anymore. Mommy and Daddy will get them a new one. Eff them!

sorry to rant.

db

All those that have and or will walk away from their homes have opened up a HUGE market for investors and first time home buyers....not that its an excuse but there is an up side to it....it's what keeps my business alive at the moment!

As already stated, under the Debt Forgiveness Act they will NOT be liable for taxes on that amount. Also, if you are in a "non-recourse" state the mortgage company can NOT sue you for the difference-the only "recourse" they have is to take possession of the house back.

One caveat here-if you did a "no-doc" loan and are now defaulting, they can pull copies of your tax returns from the years before taking out the loan and see if you lied about the income you stated you were making when you took the loan. This can only be done if you signed the release in your loan paperwork (can't remember the IRS form # off hand) giving them the right to do so. Hope any of you who did a no-doc and are in that situation READ the papers you were signing and refused to sign that one If you did sign it and get found to have been lying you could have a little bit more of a problem on your hands...

Since he is federal tell him he can't just walk away or he will lose any security clearance he has and my lose his job in the proccess because he can't hold a security clearance. He needs to exhaust all other means before he can just "Walk" or default on the loan
His best bet would be to short sale

I can help with that...

Hi Julie!

Hi Shawn

OP stated he was looking at retiring-I would think he'd only do this if he had made the decision to leave his employment.

It's more of a downfall for those of us that are busting our (_|_) and staying in our homes. I'm not in trouble with mine, but my neighbor leveraged $800K+ against his home to start up his business. He walked from it over a year ago and took all the things he bought for his business. The bank finally sold it for $280,000 two weeks ago!
What do you think that did to my $650K home? It sure as hell isn't anywhere near 650 now!

Are you planning on selling anytime soon? Are you planning on staying for a while? Real Estate is a Long term investment. I dont think ur 650K is worth 650K regardless of your neighbors default. The banks arent just giving homes away, listing prices are appraised against comp sales in your area.

Any profession input is appreciated...

When I sahort sale a property, I get it between 70-80% of value. If I buy bulk REO packages from the bank, I can get them for around 60% of value. But you have to buy in bulk to get those rates. Minimum purchase amount is $20 mil. & you have to pay cash.

Who/what determines value?

Well, in fact I tried selling my place at the peak in 2003. I missed the boat by 6 months, literally. At this point I don't intend on selling anytime soon.
Appraisals are against comp sales, and 5 years ago when homes were selling like crazy and there were tons of comps, it was easy to sort of brush the short sale or foreclosure under the rug, but these days, those are all the comps you can find so they do effect appraisals.

The bank gets appraisals or BPO (Broker Price Opinion) That determines value, then they offer them at discounts & we negotiate with them to get their rock bottom price.

Do you work for a company, or you do this on your own?

I do this on my own.

really grinds my coffee too... I am going to do the right thing and end up paying for people who are being unethical!!!

Yup. Thats what we are all doing...

I am about to get out of my home. My home got robbed 2 months ago and it was the last straw. My neighborhood looks nice but it is not safe anymore (multiple vehicle break ins, 2nd time house has been robbed). I bought in 05' for $280K (and I put $70K of MY CASH down). I looked into selling and a realtor told me I could only sell it for 100K-110K!!! It is literally going to be 10-12 years before my house will be worth anywhere near what I bought it for and I'll be dammed if I'm gonna live there for that long.
IMO there are no ethics involved here. Its a business decision. I have never missed a single payment on anything in my life so it pains me to do this but I literally cant leave my house without the constant fear of being robbed again. I cant live like this for 10 more years.

my 2 cents

and PS....I put 70K down on a 30 year fixed. I wasnt buying something way over my head but this purchase has been a disaster for me.

Not saying people are not getting the shaft just saying that it is helping me at the moment.......I feel your pain my 660k house is maybe worth 300k and probably 10+ years before I am at break even point and yes I've had the talk with the wife and agent on what the next move would be, thats the reality of what is going on and it sucks but you gotta do what you gotta do to survive.

A-HOLES!!!!!!!!!!!

Interesting topic

Last weekend I watched one of my neighbors walk away. dont know his circumstances. I had seen his house in forclosure in realtytrak for several months. saturday, his son rides down on his bike and tells my son they are leaving to go to Glamis for a week. well I looked down the street later in the evening and i could see furniture been moved out of the house. The next day his motorhome and trailer with sandcar disappear, and I check realtytrak and his house says bank owned. What a shame. so it's clear they were to embarrassed, and did like many and just slipped away into the night. I have camped with him at G with a few other neighbors. I guess if it were me, I sell all my toys first. many houses in my neighborhood are in/have been forclosed, bringing down the values of the whole neighborhood, and almost every house has toys

Amy and I bought our house in 2005, pretty much close to the top of the market. Sold all of our toys plus saved for quite awhile to come up with $60,000 cash money to put down (20%) with a fixed rate 30 year loan. With today's market I'd say I'm at least 50 to 60g upside down (by time I paid a Realtor etc) with no hope of that changing anytime soon. I signed a contract and made a commitment. Period. I'm a pretty simple guy, most things being black or white. I agreed to certain terms; "I" aka "me". Yeah, it sucks that the house across the street just sold/foreclosed at 200g less than I owe on my house- still has nothing to do with a promise "I" made to repay a loan.

If things ever go further south for me financially the move will be pretty effin' easy as I would have sold pretty much everything to at least try to cover my obligations.

I understand everyone's story/situation is different so I've got no business judging anyone else- just bums me out a little when I hear people talking about how clever they are when working the system. Bankruptcy is there for people who truly have fallen on hard times (of which there are many!) not for people that overindulged. I sure would like to see a shift in values and personal responsibility when this whole mess is over as opposed to the next generation of young adults whose parents taught them nothing more than how to live beyond their means then somehow justify walking away from a tough situation like climbing out of debt.

I agree, but I think the banks deserve a lot of the blame. there are a lot of brokers out there who really made a lot of money swindeling people in the inland empire. not to mention all those trying to be the Jones'es

The topic of selling all the toys before losing the house has come up here before. One thing I thought was interesting was someone saying why sell all the toys, etc if it is only going to prolong the losing of the house. Why not just cut your losses early and still have your toys instead of losing your house and everything else. Now if selling everything would guarantee you keep the house, then by all means. But at least if you keep your MH/trailer, at least you'll always have a place to live

Well I am one "those" people that have fallen on hard times. Since spring 2008 my 10 yr average income fell 70% . Did I think this would ever happen? No I did not. Did I have a nest egg saved for it, yes. We did not have a bad loan, it was a fixed 30 yr. The last 18 months I have worked a few different jobs and depleted my nest egg to nothing. I sold everything I could except my 2 boys quads which are worth about $2000 together. The wife went back to work in Jan 2009 after our youngest was 3, it helped but we were pretty buried by that time. Needless to say after 13 yrs of marriage we split up in July 2009. So we decide that she will keep the house and continue the pmts. Which we were current at the time. It was tight, but she was able to do it. So after a good year of using my credit worthiness to help pay bills and necessities. We are broke, 20 yrs of great credit gone, a nice savings account empty, Retirements drained hoping to pull out of it somehow.She now needs to move out because of her hours being cut , daycare expenses, etc. So instead of staying there for free, we both have our own rentals. She felt it wasn’t right to stay for free, and I agree. We are short selling the house, I had to file BK by myself because 90% of the debt was in my name. Anyways what I am trying to say is, few people do the right thing under the circumstances. I feel we have done everything we could, and are doing the right thing.
I don’t wish financial hardship upon anyone, it is a horrible thing to go through.

Shawn

Shawn,

Your current financial situation simply makes you human, how you handled/are handling makes you a man. Proud to call you my friend.

Incorrect, it had a direct affect on all of us. People that do this are no better than any welfare recipient that can actually get work or illegal alien that takes advantage of our country.

Its also the buyer who should know the banks and realtors are trying to get rich but should also know that in reality he would not be able to afford that 500k house and he does have the option to fully read the contract and what his possible payments will be aftera few years befor he signs and commits to the agreement,

But if you ever talk to someone that went in way over their head, they were going to only live there a couple of year and then flip it for more profit. Or the other excuse I hear is we were going to refi on a fixed rate before the adjustment kicked in but the economy collapsed and the banks aren't loaning money. I call BS on the banks not loaning money. If you have the credit and the debt to income ratio, you can still get a mortgage that you can afford, it just takes longer and the banks go over everything with a fine tooth comb.

Shawn, being a commissioned sales person in a luxury industry and having the economy go through this really put the screws to you. I know that financial troubles can really put a strain on a marriage. I wish you the best and hope things work out for you and your family.

I can tell you about a scenario of a family member..
Bought low, refi'd a few times and fell on hard times..
He has spent the last 12-16 months trying to get assistance through the Bank,Atty,Gov.,etccc.. After all that was said and done he was offered a longer loan and only 150 less a month..
Some people do try and just aren't getting the help..
Their fault? Yes , but they tried like h#ll to make it right..