Underwater mortgage?

[barfo]

Just saw a report that 20% of homeowners nationwide are underwater (owe more on their mortgage than their house is worth). Poll time: are you underwater?

barfo

 

[Shapecity]

Yeah I heard about this report on the radio. It's up from 1 in 7 homeowners. Do you know if the report includes only primary residence or also rental and vacation property?

I live in Orange County and pretty much everyone I know is underwater on their home, or soon to be.

 

[bbwchingy0007]

Negative equity ftw.

I'm too young to have such problems

 

[BLAZER PROPHET]

I bought my house for $160K 3 years ago. Two years ago it appraised at $205K. Now, it's estimated at $145-150K.

 

[maxiep]

I own my house in LO free and clear and have a mortgage on my home in Denver. I do know several people, however, whose homes have negative equity value. The only advice I can give them is to keep paying their mortgages--and pay them down if you can--and one day their equity position will go right side up.

 

[blazerboy30]

None of my real estate is underwater. I have lost paper value on some, but I don't owe more than the market value on any.

Unless people are FORCED to move for some rare reason, primary residence homes being underwater doesn't really matter, right? What's the big deal?

 

[barfo]

Unless people are FORCED to move for some rare reason, primary residence homes being underwater doesn't really matter, right? What's the big deal?

I don't think the reasons are so rare. People lose their jobs, get transferred, get divorced, can't afford the mortgage payments, have health issues, etc. Sometimes people really do need to sell.

I paid off my mortgage several years ago, but the property taxes are high enough that if I lost my job and couldn't find another, I'd probably want to sell the house and buy something cheaper.

barfo

 

[mook]

None of my real estate is underwater. I have lost paper value on some, but I don't owe more than the market value on any.

Unless people are FORCED to move for some rare reason, primary residence homes being underwater doesn't really matter, right? What's the big deal?

Well, if you could move down the block and pay half as much in rent as you do now in a mortgage payment, there has to be a mighty temptation to just default on your loan. Particularly if you haven't built up much equity.

I'm not planning on doing it. But I was just visiting my brother in his 4 room house he's renting (built in 2004). He's paying $100 less a month than me to live in a far nicer neighborhood in a much more modern home (my house was built in 1955). Have to admit the thought crossed my mind.

My home isn't underwater, but by the time the real estate market finally shakes out it'll probably be worth the same as what I paid for it in 2004.

 

[blazerboy30]

Well, if you could move down the block and pay half as much in rent as you do now in a mortgage payment, there has to be a mighty temptation to just default on your loan. Particularly if you haven't built up much equity.

I'm not planning on doing it. But I was just visiting my brother in his 4 room house he's renting (built in 2004). He's paying $100 less a month than me to live in a far nicer neighborhood in a much more modern home (my house was built in 1955). Have to admit the thought crossed my mind.

My home isn't underwater, but by the time the real estate market finally shakes out it'll probably be worth the same as what I paid for it in 2004.

Agreed. Actually, the government has added incentive to do exactly what you describe. You used to have to pay taxes on the amount you were "gifted" by getting out of your old mortgage. That has been removed, and it costs you very little to move two homes down, for 30% less mortgage.

 

[MARIS61]

My property is ON the water, but not under water.

 

[Nate Dogg]

You forgot this option in the poll-------> : No, I rent my house/duplex.

 

[barfo]

You forgot this option in the poll-------> : No, I rent my house/duplex.

Not really, that option is

"No, I don't own a house"

barfo

 

[BTOWN_HUSTLA]

really don't put much into this stat. if its underwater, tough shit, the market went down, it will eventually come up. unless people bought their houses that they couldn't afford (which is probably likely many did, but they lose their shit...big fucking deal, they shouldn't have been able to have it in the first place).....all should be good. they make the payments.

 

[Paxil]

I got lucky twice. First house I bought for $225 and sold for $325 about two years later. Then I got married and wife sold her house around same time at peak of housing boom. We did buy one house, but we don't plan on moving for at least another 18 years. Its value did go down, but it went up so much after we bought it that it is still worth more than we paid (according to Zillow). Plus, we have a lot of equitity in it because we put 100K+ down.

 

[BTOWN_HUSTLA]

zillow? i remember that shit from the early housing boom when people were showing off how much money they were making on their houses. all the numbers seemed way overinflated.

 

[BlazersBlood]

Nope, according to Zillow, I'm not under water, but I think those values are still a little inflated.

I purchased my home for $188,000 5 years ago. During the boom, homes similar to mine were going for $285,0000 and now it's back down to $235,000. I took out about $55,000 in home equity loans for my wife's school, cost of living, and credit card debt, but I'm still ok. I'd probably break even at this point if I sold my home and paid the realtor.

 

[The_Lillard_King]

Well, if you could move down the block and pay half as much in rent as you do now in a mortgage payment, there has to be a mighty temptation to just default on your loan. Particularly if you haven't built up much equity.
I'm not planning on doing it. But I was just visiting my brother in his 4 room house he's renting (built in 2004). He's paying $100 less a month than me to live in a far nicer neighborhood in a much more modern home (my house was built in 1955). Have to admit the thought crossed my mind.

My home isn't underwater, but by the time the real estate market finally shakes out it'll probably be worth the same as what I paid for it in 2004.

Exactlt . . defaulting (just like BK) can be used as a tool if you are buried in your house.

Why wait it out. If you have no equity and are paying thousands in interest each month, think about getting out. There are alot of other investments you can throw thousands of dollar into each month that will give you better returns than waiting for the housing market to recover.

I know there is the whole interest deduction and pride of ownership thing to factor in . . . but when many people pencil it out . . . it might be a better financial move to default and rent.

 

[maxiep]

Default on a mortgage and try to get financing for anything ever again, especially in this environment. People with good credit are being turned down. If you have a major blemish, you're not only limited in how much you can get, but your interest rates will be ridiculous.

And on a moral basis, defaulting on a mortgage when you have other options is plain wrong. If you make a promise, you fulfill it.

 

[BTOWN_HUSTLA]

it goes away after 7 years, doesn't it?

 

[maxiep]

it goes away after 7 years, doesn't it?

I think that's bankruptcy. However, any cursury google check can find it out. Search home property records and you'll see if a bank took possesion of a home you once owned.

Again, the lack of a moral consideration here is stunning.

 

[BTOWN_HUSTLA]

I thought things on your credit report go away after 7 years.

 

[The_Lillard_King]

Default on a mortgage and try to get financing for anything ever again, especially in this environment. People with good credit are being turned down. If you have a major blemish, you're not only limited in how much you can get, but your interest rates will be ridiculous.

And on a moral basis, defaulting on a mortgage when you have other options is plain wrong. If you make a promise, you fulfill it.

I agree wiht your first point, only I don't think many people who are underwater and paying huge mortgage payments are overly concerned with credit . . . if they are, they should think of other alternatives.

I disagree with your second point. Banks don't treat these mortgages with any kind of moral basis. This is business, pure and simple and morals should not play into it. If it makes financial sense to breech a contract, then you do it. Contracts are part of business and should be handled that way . . . keep the emotions out it.

 

[The_Lillard_King]

I think that's bankruptcy. However, any cursury google check can find it out. Search home property records and you'll see if a bank took possesion of a home you once owned.

Again, the lack of a moral consideration here is stunning.

Show me in the contract where moral considerations are addressed in the contract. If a bank wants the loanee to use moral considerations when deciding to pay, put it in the contract (they have everything else in there) Better yet, show me a bank who factors in moral considerations when making decisions about foreclosing.

Doh . . . I'm talking to a banker, aren't I. Sorry but the public perception is banks do not operate by moral obligations. And banks, as much as any business, will breech a contract if it makes financial sense to do it.

 

[maxiep]

I'll just say that if you borrow money and feel you have an out when it becomes inconvenient to repay it, then we have very little in common.

 

[maxiep]

Show me in the contract where moral considerations are addressed in the contract. If a bank wants the loanee to use moral considerations when deciding to pay, put it in the contract (they have everything else in there) Better yet, show me a bank who factors in moral considerations when making decisions about foreclosing.

Doh . . . I'm talking to a banker, aren't I. Sorry but the public perception is banks do not operate by moral obligations. And banks, as much as any business, will breech a contract if it makes financial sense to do it.

The moral consideration is in the good faith clause.

Would you consider it okay if inflation increased and a bank decided that a fixed rate needed to increase otherwise the loan would be called? Would you consider it okay if the property value went up and the bank decided to increase your loan balance to participate in the upside? Would you consider it okay if a bank saw that property values on a property massively increased and decided to foreclose on the loan? Just wondering.

 

[The_Lillard_King]

I'll just say that if you borrow money and feel you have an out when it becomes inconvenient to repay it, then we have very little in common.

If I borrow money from a bank charging me interest, and it makes financial sense to breech that contract, yes I'll do it . . . and we have always had very little in common, but don't even try to put yourself on some high moral platform.

Explain to me why individuals should have moral obligations about contracts with the banks yet banks don't factor in moral obligations when they decide to take action?

 

[maxiep]

If I borrow money from a bank charging me interest, and it makes financial sense to breech that contract, yes I'll do it . . . and we have always had very little in common, but don't even try to put yourself on some high moral platform.

You don't see morality in violating a contract? Sorry, but in this case, I am more moral than you are if you belive it's okay to walk out on a contract. Not only is it immoral, but it's bad business. Do you think someone would ever do business with you if you walked out on a contract when times got tough? Once you sully your word in the world of finance, then you're toast.

Explain to me why individuals should have moral obligations about contracts with the banks yet banks don't factor in moral obligations when they decide to take action?

Banks act in good faith. That's all you can expect from them on a moral basis. They lend the money and then service the loan. It's your responsibility and obligation to repay it. Their only security is the house. Frankly, I would like to see personal guarantees tied to mortgages so if you tried to walk away and the home wasn't enough to cover the loan, then they could come after you for the balance.

 

[The_Lillard_King]

The moral consideration is in the good faith clause.

Would you consider it okay if inflation increased and a bank decided that a fixed rate needed to increase otherwise the loan would be called? Would you consider it okay if the property value went up and the bank decided to increase your loan balance to participate in the upside? Just wondering.

Because it says in the contract, fixed rate. If in the contract, the bank is allowed to increase the fixed rate or call the loan, then I have no doubt banks would do it if it was in their financial interest.

I can't believe I'm having a discussion about whether a bank will do what is best for them finacially. Banks, have to be at or near the top of the list of industries that analyze thing purely on a financial basis.

Banks utilize and in some cases abuse the contract system to their advantage. But with your high morals, I'm surprised you are calling for banks to automatically readjust the interests rates they nailed the consumers (albeit naive consumers). The only time a bank will readjust their interest rate is when they feel it makes financial sense to (some money is better than no money).

 

[maxiep]

Because it says in the contract, fixed rate. If in the contract, the bank is allowed to increase the fixed rate or call the loan, then I have no doubt banks would do it if it was in their financial interest.

I can't believe I'm having a discussion about whether a bank will do what is best for them finacially. Banks, have to be at or near the top of the list of industries that analyze thing purely on a financial basis.

Banks utilize and in some cases abuse the contract system to their advantage. But with your high morals, I'm surprised you are calling for banks to automatically readjust the interests rates they nailed the consumers (albeit naive consumers). The only time a bank will readjust their interest rate is when they feel it makes financial sense to (some money is better than no money).

You can try to duck my questions, but they're no different than someone walking away when it becomes inconvenient. Personally, I despise these people because they're the ones who fucked up the banking system. If you're not a deadbeat, you should despise them too. These maggots are driving up rates and making it more difficult for honest people to obtain financing.

But you feel free siding with the cheats in this world. It speaks volumes about your character.

 

[The_Lillard_King]

You don't see morality in violating a contract? Sorry, but in this case, I am more moral than you are if you belive it's okay to walk out on a contract. Not only is it immoral, but it's bad business. Do you think someone would ever do business with you if you walked out on a contract when times got tough? Once you sully your word in the world of finance, then you're toast.



Banks act in good faith. That's all you can expect from them on a moral basis. They lend the money and then service the loan. It's your responsibility and obligation to repay it. Their only security is the house. Frankly, I would like to see personal guarantees tied to mortgages so if you tried to walk away and the home wasn't enough to cover the loan, then they could come after you for the balance.

Bad business to breech a contract? What are you talking about? Some of the best business decisons made involve cutting bait and breeching a contract. Contracts are business, pure and simple.

I think you are taking these business contracts on a personal level. It not personal, it's business. I personally have breeched a contract with a business, went back to them with another proposal that would make them a lot of money and guess what . . we wrote up another contract and did business together. It's not personal, it's business.

If all you can expect from a bank is to lend money and service the loan . . . then all you should expect from the home owner is to either pay the loan or the consequenses as stated in the contract if they don't pay for the loan (that is why they put taht stuff in the loan contracts) Fuck the bank, there are no loyalties there . . . on either side.