Foreclosure Point/Counterpoint

[AZGrizFan]

This moron:

http://www.azcentral.com/arizonarepubli ... ite25.html" onclick="window.open(this.href);return false;

The arguments against homeowners intentionally defaulting on their mortgages generally center on the same three basic points.

First, underwater homeowners "promised" to pay their mortgages when they signed the mortgage contract. Second, foreclosures lead to depreciation of neighborhoods, so underwater homeowners should hang on in order to help preserve their neighbors' property values. And, third, if all underwater homeowners defaulted, the housing market might crash. Homeowners thus have a social obligation to pay their underwater mortgage in order to save the economy.

While all three of these arguments might hold some initial appeal, none holds water.

versus someone with a conscience:

http://www.azcentral.com/arizonarepubli ... ngs25.html" onclick="window.open(this.href);return false;

If the anecdotes don't dispel the myths about hardship, the data are irrefutable. Of the foreclosures in the second half of 2008, only 183,447 resulted from the loss of employment. Other foreclosures? Negative net equity: 283,305; a 3 percent or less down payment: 130,014; low initial interest rate going higher: 60,942; and poor FICO score: 148, 697.

So, 624,958 foreclosures for financial folly vs. 183,447 for loss of employment. The 12 percent of the homes with negative equity are responsible for 47 percent of the foreclosures. Pick-a-Pay repeat default rates are 55 percent. If you refinance the mortgage-challenged, the default rate is 55 percent on their refinance.

The comments below the first article are simply mind-numbing. The complete and utter lack of a conscience or moral responsibility in this country is truly frightening. The accountant who did my taxes this year advised me to walk away from my mortgage. Anyone who thinks that people should just "en-masse" walk away from their mortgages and dump the homes back on their lenders have NO idea how the finanicial industry actually works. It truly is a recipe for disaster.

We haven't seen the worst of it yet, folks. Meanwhile, the dipshits in Washington are holding summits on greenhouse gasses. Talk about fiddling while Rome burns...

[danefan]

Willingly walking away from a mortgage is truly a abhorant practice. At the very least these people should attempt to sell short.

(Sidebard: Is it even ethical to counsel that? Do CPA's have a formal ethical code?)

BTW, I agree with you that the end of the housing market downfall is not yet here. I'm just saving up my buckos to pick up something on the cheap in about 6 months to a year.

[93henfan]

I'm in the negative net equity (due to depreciation) category, but I'd never walk away from my mortgage. I love my home, make more than enough to comfortably afford my mortgage, bills, sock away 15% of every paycheck for retirement, contribute to both my childrens' 529 college savings accounts, and go on the occasional vacation. About the only drawback to my negative equity is that I can't refi to a lower rate (not a tragedy, because I'm already at a historically reasonable 5.75% 30-year fixed) or take out a home equity loan.

Anyone (buyer or loan officer) who calculated their home affordability based on the monthly payment on an ARM at inception should be taken out back and shot, for they are fucking us all right now.

[GannonFan]

I'm in the negative net equity (due to depreciation) category, but I'd never walk away from my mortgage. I love my home, make more than enough to comfortably afford my mortgage, bills, sock away 15% of every paycheck for retirement, contribute to both my childrens' 529 college savings accounts, and go on the occasional vacation. About the only drawback to my negative equity is that I can't refi to a lower rate (not a tragedy, because I'm already at a historically reasonable 5.75% 30-year fixed) or take out a home equity loan.

Anyone (buyer or loan officer) who calculated their home affordability based on the monthly payment on an ARM at inception should be taken out back and shot, for they are **** us all right now.

Yup - stupid is as stupid does and there were/are plenty of examples of people just being downright stupid when it came to financing the buying of homes.

[Chizzang]

The comments below the first article are simply mind-numbing. The complete and utter lack of a conscience or moral responsibility in this country is truly frightening. The accountant who did my taxes this year advised me to walk away from my mortgage. Anyone who thinks that people should just "en-masse" walk away from their mortgages and dump the homes back on their lenders have NO idea how the finanicial industry actually works. It truly is a recipe for disaster.

We haven't seen the worst of it yet, folks. Meanwhile, the dipshits in Washington are holding summits on greenhouse gasses. Talk about fiddling while Rome burns...

I understand your frustration...
But consider this - we give corporations the right to just walk away when they get upside down with virtually no penalty or accountability - in fact - in some cases you and I bail giant companies out with our own money...

So the average upside down home owner who just walks away is only doing what he's seen corporate America do for decades and recently seen them do with impunity...

Try to explain to that guy how he's more responsible for his loan than WAMU or AIG is to theirs..?

[AZGrizFan]

The comments below the first article are simply mind-numbing. The complete and utter lack of a conscience or moral responsibility in this country is truly frightening. The accountant who did my taxes this year advised me to walk away from my mortgage. Anyone who thinks that people should just "en-masse" walk away from their mortgages and dump the homes back on their lenders have NO idea how the finanicial industry actually works. It truly is a recipe for disaster.

We haven't seen the worst of it yet, folks. Meanwhile, the dipshits in Washington are holding summits on greenhouse gasses. Talk about fiddling while Rome burns...

I understand your frustration...
But consider this - we give corporations the right to just walk away when they get upside down with virtually no penalty or accountability - in fact - in some cases you and I bail giant companies out with our own money...

So the average upside down home owner who just walks away is only doing what he's seen corporate America do for decades and recently seen them do with impunity...

Try to explain to that guy how he's more responsible for his loan than WAMU or AIG is to theirs..?

I can't, becuase I don't agree with THAT practice either. The concept of someone like Donald Trump filing business bankruptcy not ONCE, but THREE times boggles the mind. This truly is like living in Oz.

[houndawg]

I understand your frustration...
But consider this - we give corporations the right to just walk away when they get upside down with virtually no penalty or accountability - in fact - in some cases you and I bail giant companies out with our own money...

So the average upside down home owner who just walks away is only doing what he's seen corporate America do for decades and recently seen them do with impunity...

Try to explain to that guy how he's more responsible for his loan than WAMU or AIG is to theirs..?

I can't, becuase I don't agree with THAT practice either. The concept of someone like Donald Trump filing business bankruptcy not ONCE, but THREE times boggles the mind. This truly is like living in Oz.

Too bad that the corporate rights of personhood don't include three strikes and you're out. All these fcvkup execs on Wall Street should get a felony for incompetence and mismanagement. Two more and they go away for life. Oh yeah.

I don't know, or care, what our place is worth, we bought it to settle down on and raise kids and grow roots. While I'd never walk away from a debt I pledged to repay, the big boys get to play by different rules. The Scum Also Rises.

[AZGrizFan]

I can't, becuase I don't agree with THAT practice either. The concept of someone like Donald Trump filing business bankruptcy not ONCE, but THREE times boggles the mind. This truly is like living in Oz.

Too bad that the corporate rights of personhood don't include three strikes and you're out. All these fcvkup execs on Wall Street should get a felony for incompetence and mismanagement. Two more and they go away for life. Oh yeah.

I don't know, or care, what our place is worth, we bought it to settle down on and raise kids and grow roots. While I'd never walk away from a debt I pledged to repay, the big boys get to play by different rules. The Scum Also Rises.

Apparently you and I are "old fashioned" in that regard, Dawg. We need to get with the program. Walk away is the new way.

[bobbythekidd]

Too bad that the corporate rights of personhood don't include three strikes and you're out. All these fcvkup execs on Wall Street should get a felony for incompetence and mismanagement. Two more and they go away for life. Oh yeah.

I don't know, or care, what our place is worth, we bought it to settle down on and raise kids and grow roots. While I'd never walk away from a debt I pledged to repay, the big boys get to play by different rules. The Scum Also Rises.

Apparently you and I are "old fashioned" in that regard, Dawg. We need to get with the program. Walk away is the new way.

An abhorrent lack of a moral code is to blame.

[travelinman67]

I understand your frustration...
But consider this - we give corporations the right to just walk away when they get upside down with virtually no penalty or accountability - in fact - in some cases you and I bail giant companies out with our own money...

So the average upside down home owner who just walks away is only doing what he's seen corporate America do for decades and recently seen them do with impunity...

Try to explain to that guy how he's more responsible for his loan than WAMU or AIG is to theirs..?

I can't, becuase I don't agree with THAT practice either. The concept of someone like Donald Trump filing business bankruptcy not ONCE, but THREE times boggles the mind. This truly is like living in Oz.

And when WF, BofA, Citibank, etc...told thousands of businesses in 2007-2009 that they posed too great a risk and cancelled their Biz LOC's, leaving many out in the cold, what responsibility did the banks have?

Was that just "business"?

Or for all the creditors who use graduated (risk based) interest schedules, aren't they factoring in losses?

Sorry, AZ...financiers and lenders need to do their job and build in risk-loss into their practices. I'm not defending "walking away" from loans, but the original mortgages were based upon current market values and the banks profited from those inflated values along with the homeowner. Shouldn't the banks also share in the loss from the market collapse?

NOBODY's walking away from this recession unscathed (except GS and maybe Paulson and their bottom-feeder Pelligrini).

[travelinman67]

Apparently you and I are "old fashioned" in that regard, Dawg. We need to get with the program. Walk away is the new way.

An abhorrent lack of a moral code is to blame.

...sayeth the one with Faustian sig...

[∞∞∞]

So can I just walk away from college loans too? That'd be sweeeeeeeeeeet!

[AZGrizFan]

I can't, becuase I don't agree with THAT practice either. The concept of someone like Donald Trump filing business bankruptcy not ONCE, but THREE times boggles the mind. This truly is like living in Oz.

And when WF, BofA, Citibank, etc...told thousands of businesses in 2007-2009 that they posed too great a risk and cancelled their Biz LOC's, leaving many out in the cold, what responsibility did the banks have?

Was that just "business"?

Or for all the creditors who use graduated (risk based) interest schedules, aren't they factoring in losses?

Sorry, AZ...financiers and lenders need to do their job and build in risk-loss into their practices. I'm not defending "walking away" from loans, but the original mortgages were based upon current market values and the banks profited from those inflated values along with the homeowner. Shouldn't the banks also share in the loss from the market collapse?

NOBODY's walking away from this recession unscathed (except GS and maybe Paulson and their bottom-feeder Pelligrini).

Business lines of credit come up for annual renewal. Mortages don't. Piss poor attempt at a diversion there, pal.

And factoring in losses has become all but an impossibility. NOBODY factored in a complete paradigm shift in people's attitudes towards their credit score and their home. You can factor till the cows come home and you'd NEVER have predicted that people---perfectly capable of making their payments---would willingly walk away en-masse and fuck their credit score for YEARS simply because the home isn't worth what it once was.

Sharing in the loss is one thing....but let me give you a real world example: In my 13 months at my current job, we've burned through $26,000,000 in charged off loans. And we were only a $180,000,000 credit union. We've gone from 17% capital to 4.5%. Basically we've got about 6 more months of chargeoffs to survive, and if it hasn't stopped by then then we're done. Finished. Kaput. And the vast majority of real estate we've written off had NOTHING to do with their ability to repay. I will tell you this: Any "profit" we've seen from the "inflated current market values" PALES incomparison to the losses we've suffered as a result of a collective loss of character. Character is one of the 5 "C's" of credit....and this country's character took a nosedive as soon as they realized they were paying for a depreciating asset.

You can defend the poor, innocent lost souls who got badgered into signing some crappy mortgage by an evil lender all you want....I have little sympathy for them.

[bobbythekidd]

So can I just walk away from college loans too? That'd be sweeeeeeeeeeet!

Sorry. Those are NOT bankruptable. At least that was the case before government took over healthcare. Somehow the two are now tied together.

[bobbythekidd]

An abhorrent lack of a moral code is to blame.

...sayeth the one with Faustian sig...

Excellent reference, T-man!

[houndawg]

Too bad that the corporate rights of personhood don't include three strikes and you're out. All these fcvkup execs on Wall Street should get a felony for incompetence and mismanagement. Two more and they go away for life. Oh yeah.

I don't know, or care, what our place is worth, we bought it to settle down on and raise kids and grow roots. While I'd never walk away from a debt I pledged to repay, the big boys get to play by different rules. The Scum Also Rises.

Apparently you and I are "old fashioned" in that regard, Dawg. We need to get with the program. Walk away is the new way.

Believe me I was tempted; having a commercial property that was vacant for two years and endured two more of deadbeat tennants, then my 401k doing a vanishing act worthy of David Copperfield, hurt us badly occuring as it did mostly while the twins were in college. Then came the insult on top of the injury watching these slimy corksoakers and their eight-figure-bonuses-for-galactic-scale-incompetence skate away with no accountability. (I still say that they should have been forced to collect their bonuses in cash, on Wall Street, about half an hour before the banks close for the day. Let those cokesackers push their bonus around in a fcvking wheelbarrow until the banks open in the morning).

[Chizzang]

Business lines of credit come up for annual renewal. Mortages don't. Piss poor attempt at a diversion there, pal.

And factoring in losses has become all but an impossibility. NOBODY factored in a complete paradigm shift in people's attitudes towards their credit score and their home. You can factor till the cows come home and you'd NEVER have predicted that people---perfectly capable of making their payments---would willingly walk away en-masse and fuck their credit score for YEARS simply because the home isn't worth what it once was.

Sharing in the loss is one thing....but let me give you a real world example: In my 13 months at my current job, we've burned through $26,000,000 in charged off loans. And we were only a $180,000,000 credit union. We've gone from 17% capital to 4.5%. Basically we've got about 6 more months of chargeoffs to survive, and if it hasn't stopped by then then we're done. Finished. Kaput. And the vast majority of real estate we've written off had NOTHING to do with their ability to repay. I will tell you this: Any "profit" we've seen from the "inflated current market values" PALES incomparison to the losses we've suffered as a result of a collective loss of character. Character is one of the 5 "C's" of credit....and this country's character took a nosedive as soon as they realized they were paying for a depreciating asset.

You can defend the poor, innocent lost souls who got badgered into signing some crappy mortgage by an evil lender all you want....I have little sympathy for them.

You say you don't feel sorry for the regular Joe plumber who sees AIG get bailed-out with his money and Corporations walk away from their debt with ZERO consequences... so Joe says: I can do that too you miserable bastards take my credit score and kiss my ass..

I don't feel sorry for that guy
I don't feel sorry for Banks
I don't feel sorry for credit Unions
I don;t feel sorry for Mortgage companies
Escrow & Title companies
I don't feel sorry about any of this...

It's just the way it is - and I don't think Joe Plumber walking away is the main issue either... he's just one of the many issues in a long long list of issues - he just happens to be YOUR biggest problem

[D1B]

Business lines of credit come up for annual renewal. Mortages don't. Piss poor attempt at a diversion there, pal.

And factoring in losses has become all but an impossibility. NOBODY factored in a complete paradigm shift in people's attitudes towards their credit score and their home. You can factor till the cows come home and you'd NEVER have predicted that people---perfectly capable of making their payments---would willingly walk away en-masse and fuck their credit score for YEARS simply because the home isn't worth what it once was.

Sharing in the loss is one thing....but let me give you a real world example: In my 13 months at my current job, we've burned through $26,000,000 in charged off loans. And we were only a $180,000,000 credit union. We've gone from 17% capital to 4.5%. Basically we've got about 6 more months of chargeoffs to survive, and if it hasn't stopped by then then we're done. Finished. Kaput. And the vast majority of real estate we've written off had NOTHING to do with their ability to repay. I will tell you this: Any "profit" we've seen from the "inflated current market values" PALES incomparison to the losses we've suffered as a result of a collective loss of character. Character is one of the 5 "C's" of credit....and this country's character took a nosedive as soon as they realized they were paying for a depreciating asset.

You can defend the poor, innocent lost souls who got badgered into signing some crappy mortgage by an evil lender all you want....I have little sympathy for them.

You say you don't feel sorry for the regular Joe plumber who sees AIG get bailed-out with his money and Corporations walk away from their debt with ZERO consequences... so Joe says: I can do that too you miserable bastards take my credit score and kiss my ass..

I don't feel sorry for that guy
I don't feel sorry for Banks
I don't feel sorry for credit Unions
I don;t feel sorry for Mortgage companies
Escrow & Title companies
I don't feel sorry about any of this...

It's just the way it is - and I don't think Joe Plumber walking away is the main issue either... he's just one of the many issues in a long long list of issues - he just happens to be YOUR biggest problem

I feel sorry for some banks and most credit unions.

[AZGrizFan]

You say you don't feel sorry for the regular Joe plumber who sees AIG get bailed-out with his money and Corporations walk away from their debt with ZERO consequences... so Joe says: I can do that too you miserable bastards take my credit score and kiss my ass..

I don't feel sorry for that guy
I don't feel sorry for Banks
I don't feel sorry for credit Unions
I don;t feel sorry for Mortgage companies
Escrow & Title companies
I don't feel sorry about any of this...

It's just the way it is - and I don't think Joe Plumber walking away is the main issue either... he's just one of the many issues in a long long list of issues - he just happens to be YOUR biggest problem

I feel sorry for some banks and most credit unions.

The biggest mistake made by Congress in the past 15 years was the deregulation that allowed retail banks and investment banks to "merge". THOSE banks I don't feel sorry for. There's not a single credit union that wasn't a victim in this whole process....unfortunately, borrowers aren't making any distinction between a loan that was taken out at a CU and one that was taken out at a bank or a mortgage company.

Collateral damage, so to speak.

[travelinman67]

Business lines of credit come up for annual renewal. Mortages don't. Piss poor attempt at a diversion there, pal.

And factoring in losses has become all but an impossibility. NOBODY factored in a complete paradigm shift in people's attitudes towards their credit score and their home. You can factor till the cows come home and you'd NEVER have predicted that people---perfectly capable of making their payments---would willingly walk away en-masse and fuck their credit score for YEARS simply because the home isn't worth what it once was.

Sharing in the loss is one thing....but let me give you a real world example: In my 13 months at my current job, we've burned through $26,000,000 in charged off loans. And we were only a $180,000,000 credit union. We've gone from 17% capital to 4.5%. Basically we've got about 6 more months of chargeoffs to survive, and if it hasn't stopped by then then we're done. Finished. Kaput. And the vast majority of real estate we've written off had NOTHING to do with their ability to repay. I will tell you this: Any "profit" we've seen from the "inflated current market values" PALES incomparison to the losses we've suffered as a result of a collective loss of character. Character is one of the 5 "C's" of credit....and this country's character took a nosedive as soon as they realized they were paying for a depreciating asset.

You can defend the poor, innocent lost souls who got badgered into signing some crappy mortgage by an evil lender all you want....I have little sympathy for them.

You say you don't feel sorry for the regular Joe plumber who sees AIG get bailed-out with his money and Corporations walk away from their debt with ZERO consequences... so Joe says: I can do that too you miserable bastards take my credit score and kiss my ass..

I don't feel sorry for that guy
I don't feel sorry for Banks
I don't feel sorry for credit Unions
I don;t feel sorry for Mortgage companies
Escrow & Title companies
I don't feel sorry about any of this...

It's just the way it is - and I don't think Joe Plumber walking away is the main issue either... he's just one of the many issues in a long long list of issues - he just happens to be YOUR biggest problem

Spot on, Hippie. AZ's looking at this from one narrow point of view. This emanated from a myriad of wrongs, yet the banks/financiers should be sharing equally in the burden.

[ASUG8]

It's a combination of personal responsibility and corporate greed. When we bought our first house the banks and realtors were telling us not to have a mortgage of more than 36% of our gross income? GROSS income? Who gets to keep that much? Did my Federal/State/FICA/401K deductions disappear suddenly when qualifying for a mortgage? Apparently we were the crazy ones who ran some numbers, factored in other debts, estimated what the costs of ownership were, and backed off into a house we were comfortable in without having to eat store brand dog food by candlelight for the priveledge of homeownership.
The banks were predatory, potential homeowners were uneducated (and happy being that way) - it was a perfect storm. I'm not sympathetic to anyone who got themselves into this - the banks were pretty much asking for writeoffs and adding real estate on their balance sheets, and homeowners were asking to get their homes yanked for buying (and somehow qualifying) for a $400K home on income that was some small fraction of the purchase price.

[GannonFan]

So can I just walk away from college loans too? That'd be sweeeeeeeeeeet!

Don't fret - that's coming soon. No need to worry about those pesky loans - if you can't pay them off in 10 years or have a job that can keep up with the payments, we're looking into letting you just walk away from those loans too. Hang in there!!!

[Appaholic]

It's a combination of personal responsibility and corporate greed. When we bought our first house the banks and realtors were telling us not to have a mortgage of more than 36% of our gross income? GROSS income? Who gets to keep that much? Did my Federal/State/FICA/401K deductions disappear suddenly when qualifying for a mortgage? Apparently we were the crazy ones who ran some numbers, factored in other debts, estimated what the costs of ownership were, and backed off into a house we were comfortable in without having to eat store brand dog food by candlelight for the priveledge of homeownership.
The banks were predatory, potential homeowners were uneducated (and happy being that way) - it was a perfect storm. I'm not sympathetic to anyone who got themselves into this - the banks were pretty much asking for writeoffs and adding real estate on their balance sheets, and homeowners were asking to get their homes yanked for buying (and somehow qualifying) for a $400K home on income that was some small fraction of the purchase price.

Agree. Buyer & lender beware. Just another example of trickle down economics IMO. In this case, the ability to calculate risk/reward with no regard to ethics has basically trickled down to Average Joe from Corporate America. Do I blame the Mortgage Lenders/Banks for this phenomenom? No, nor do I feel sorry for them either. Just another example of eroding morality in business practices from Vendor & consumer. Consumers have now seen that the worst that can happen in most cases is 10 yrs bad credit, which is more than corp america suffers when they default on an obligation, but survivable nonetheless. Perhaps banks should lead by example before trying to shame people into paying bad mortgages...or disqualify them during the PreQual process.

[travelinman67]

The biggest mistake made by Congress in the past 15 years was the deregulation that allowed retail banks and investment banks to "merge". THOSE banks I don't feel sorry for. There's not a single credit union that wasn't a victim in this whole process....unfortunately, borrowers aren't making any distinction between a loan that was taken out at a CU and one that was taken out at a bank or a mortgage company.

Collateral damage, so to speak.

Expecting borrowers to differentiate between CU's and banks isn't practical. My last two mortgage notes I did through my CU, who then sold packaged notes to Norwest, who was bought by WF...which defeated my intended purpose of keeping my money in the local economy.

[AZGrizFan]

It's a combination of personal responsibility and corporate greed. When we bought our first house the banks and realtors were telling us not to have a mortgage of more than 36% of our gross income? GROSS income? Who gets to keep that much? Did my Federal/State/FICA/401K deductions disappear suddenly when qualifying for a mortgage? Apparently we were the crazy ones who ran some numbers, factored in other debts, estimated what the costs of ownership were, and backed off into a house we were comfortable in without having to eat store brand dog food by candlelight for the priveledge of homeownership.
The banks were predatory, potential homeowners were uneducated (and happy being that way) - it was a perfect storm. I'm not sympathetic to anyone who got themselves into this - the banks were pretty much asking for writeoffs and adding real estate on their balance sheets, and homeowners were asking to get their homes yanked for buying (and somehow qualifying) for a $400K home on income that was some small fraction of the purchase price.

Agree. Buyer & lender beware. Just another example of trickle down economics IMO. In this case, the ability to calculate risk/reward with no regard to ethics has basically trickled down to Average Joe from Corporate America. Do I blame the Mortgage Lenders/Banks for this phenomenom? No, nor do I feel sorry for them either. Just another example of eroding morality in business practices from Vendor & consumer. Consumers have now seen that the worst that can happen in most cases is 10 yrs bad credit, which is more than corp america suffers when they default on an obligation, but survivable nonetheless. Perhaps banks should lead by example before trying to shame people into paying bad mortgages...or disqualify them during the PreQual process.

Or, perhaps people should consider the impact of NOT paying their mortgages en-masse.

Trust me, it ain't pretty.