[strato58]

The question is would you be a complete fool to pay on a home that is underwater and in some cases has dropped 50% from peak? If you were the one that paid peak prices what would you do?

Thank God this has not happened to me but if it happened to you, what would you do?
Id walk....the banks are whole from bailout monies...

[tony soprano]

Originally Posted by olecapt

You actually have no claim against the individual homeowner. You own a slice of thousands and thousands of mortgages. The impact of any particular foreclosure on you is miniscule.

By extension of this logic, no one should care about others dodging their taxes, committing welfare fraud, unemployment fraud, mortgage fraud, etc. After all, the impact of any one of those particular instances to me will be miniscule. Yet collectively, they create billions in losses that are shouldered by those more responsible.

You may have a complaint in that the risk of the investment was incorrectly calculated by the rating agencies and those who sold you the security. But you really have no complaint against the individual mortgage holder. The calculation contained inherently an allowance for failure to pay by mortgage holders. That they got the number wrong is not the fault of the mortgage holder.

How did the mispriced risk influence people to walk away from their mortgages?

Simply untrue. I would also flatly disagree that the originators of these securities have any meat in the outcome. They put them together and sold them to the suckers with the connivance of the rating agencies. That these people improperly valued the security is not a problem for the mortgage holder.

Right, none of the originators had any mortgage exposure. That's why there were 140 bank failures last year, while others were acquired for pennies on the dollar and Congress approved $700B in TARP funds.

There is the old and well worked argument between the libertarian and the business man. Your word is your bond and you must honor it...versus...simply a business deal and you do whatever you chose within the terms of the contract.

But no the mortgage holder has no duty to the holder of a security...just too isolated. And they both got screwed.

As bad as things are, the majority of underwater homeowners continue to fulfill their mortgage obligation. Someday, that may all change if the "strategic default" mindset gathers momentum, and it certainly isn't going to help the housing market. So, while you're free to defend the decision to walk away from from one's mortgage, you should thank your lucky stars that for now your opinion remains in the minority.

[Georgie L.]

Well..... I HAVE been there, done that.

And we chose our mortgage as the single most important thing to pay each and every month.

We juggled the utilities.

We pinched every penny and fed ourselves and our two teens on a FRACTION of what we spent before unemployment. We had grandparents step in and pay the college tuition, but we could have/would have if they had not. It was their gift to us.

We drove only when absolutely necessary, decreasing the need for gasoline.

We were hot in the summer and cold in the winter... reducing our need for the energy bills that make a/c and heat possible.

Our entertainment came through the TV or computer. We didn't go to a single movie or rent a single DVD during that time.

My husband was self-employed so there was no severance nor was there unemployment insurance.

Our savings was drained. The tax money we had set aside (because we were self-employed) was used. Now we will be making payments to the IRS for those taxes, but we used Uncle Sam's money to make our house payment.

Start saving money. Start conserving what you spend. Look at getting your house in sale ready condition.

You owe it to your children to keep a roof over their heads and be an honorable and ethical man and father. If you participate in the problem, you cannot complain about the results. And the results of people walking away from their mortgages is an economy where it is difficult to find a job.

If you want your family to prosper you cannot act in a way that is not ethical. Bad karma dude. Bad mojo.

Why should someone give you a job when you have such disregard towards others? That's the way things work. Put good out into the world and it is returned to you.

Do the right thing. Your small children will be fine. They don't eat a lot. They don't need much at this point in life. Keep doing what is right and it will work out. Be the man they deserve to have as a father.

[Georgie L.]

Originally Posted by Huckleberry3911948

still still your debt and goes on your credit no?

.....and you can have a tax bill that you won't believe. Forgiven debt is considered income by the IRS. So if you walk away from a mortgage or have one foreclosed, that money that you DID owe but no longer owe? It can be taxed as regular income.

REGULAR INCOME. So if you've walked away from a $200K, $300K.... $500K mortgage, that can be considered "regular income" and you will be paying taxes on that for a very long time.

Originally Posted by dano

Spoken like a true liberal.

I consider myself a "true liberal" and I believe we have the moral obligation to ourselves, our neighbors and our god/higher power/universe/whatever floats your boat on that front, to pay our obligations.

Originally Posted by airics

nahh... we have a no squatting sign at the entrance.. besides these homes move fast... once the for sale sign goes up, its down in a week or so...

And they do what the signs say? You have very well behaved squatters in LV. But if houses are selling that fast, then that is good news indeed. Very good news.

Originally Posted by GailMI

A) They should have known better. I, on the other hand, am "dumber than a 2nd grader."

Gail, I just grabbed a post to quote. It really isn't addressing the part I quoted.

As long as you are living in your home, the WORTH of it is immaterial. My home increased in value 100% within a year of moving in. It is now back at original value. Maybe. Maybe less. It doesn't matter that it was worth double or worth less. We're living here. We aren't moving any time soon.

The price you paid seems not too unreasonable. My sister is looking at $300K+ in Los Angeles (plus HOA fees) for a condo. Different markets to be sure... but under "normal economic conditions" your price seems pretty well in line. If you aren't in need to sell.... you're fine. NEED to sell. WANT to sell is a different creature.

Presuming you are employed and aren't looking to up and move... Stay put. Hang in there. As things improve, you'll still be there. I can see a time when you're on year 15 or 20 of a mortgage and folks are paying well over what you did for the condo next door to you.

You bought at a decent price. The BEST price? Not so much maybe. But rare is the homeowner who does. We bought at a good price that we thought was horrid at the time. (we wanted to get our children away from drive by shootings involving the gangbangers next door, so we sacrificed a lot to make the purchase possible) At the time, we were sick to think of what we were paying. But then it all took off like a rocket. And now it's back to what it was. The 'paper equity' did nothing for us. The loss does nothing to us.

As long as you don't have to sell.... you're fine.

[olecapt]

Originally Posted by tony soprano

By extension of this logic, no one should care about others dodging their taxes, committing welfare fraud, unemployment fraud, mortgage fraud, etc. After all, the impact of any one of those particular instances to me will be miniscule. Yet collectively, they create billions in losses that are shouldered by those more responsible

All of the above are violations of the law. When is the last time you saw a great outcry over speeding? You want to lead the charge? They do increase the wear of the streets and the cost to the taxpayer by miniscule amounts...but if it floats your boat go for it.

Most of us would expect the authorities to enforce the law. No law is violated by walking on a mortgage.

.How did the mispriced risk influence people to walk away from their mortgages?

Didn't as far as I know. Why do you ask?

Right, none of the originators had any mortgage exposure. That's why there were 140 bank failures last year, while others were acquired for pennies on the dollar and Congress approved $700B in TARP funds.

Nothing apparently kept various banks from buying really bad securities. And some failed. But they did not neccessarily initiate the securities involved...just bought them. And even if they initiated them they should have known better than to hold. Stupidity is its own reward?

As bad as things are, the majority of underwater homeowners continue to fulfill their mortgage obligation. Someday, that may all change if the "strategic default" mindset gathers momentum, and it certainly isn't going to help the housing market. So, while you're free to defend the decision to walk away from from one's mortgage, you should thank your lucky stars that for now your opinion remains in the minority.

As I have made clear I believe it is a personal decision. I personally have no problem with either...though if I was facing the abyss you better believe I would walk. On the other hand if it has any reasonable chance of working out I would go for it.

It is an amazing time. If you elect to guts it out against a large underwater you may well simply be postponing bankruptcy to someplace in the distant future. You slide through 7 or 8 years, almost starving your children and living an abysmal life to suddenly hit the trigger event and you swiftly end up with no option but to go bankrupt. Then you get to enjoy the fruit of bankruptcy long after it was "fashionable". So you louse up your life for 15 years, maximizing the damage so you can feel you did the right thing.

And actually I don't think I am in the minority. As I am on both sides of the issues I can't be in the minority. Tony however has a fixed view which I suspect is supported only by the more libertarian...a rather small minority.

[olecapt]

Originally Posted by Georgie L.

.....and you can have a tax bill that you won't believe. Forgiven debt is considered income by the IRS. So if you walk away from a mortgage or have one foreclosed, that money that you DID owe but no longer owe? It can be taxed as regular income.

REGULAR INCOME. So if you've walked away from a $200K, $300K.... $500K mortgage, that can be considered "regular income" and you will be paying taxes on that for a very long time.

You really should be careful about posting when you don't understand. In fact through 2012 such taxes are forgiven to owner occupants.

Note that if you continue on your course and wait until after 2012 you may well owe the taxes. But that is your own doing. Screwing your own family by not understanding what happens if you chose not to walk.

I consider myself a "true liberal" and I believe we have the moral obligation to ourselves, our neighbors and our god/higher power/universe/whatever floats your boat on that front, to pay our obligations.

That is your right. But you also have an obligation to children particular but to yourselves as well to maintain your family. If you chose to make mortgage payments while not feeding your children appropriately you are going to have to go off an negotiate with your God for the right thing to do. I suspect most Gods will favor the children eating well.

And they do what the signs say? You have very well behaved squatters in LV. But if houses are selling that fast, then that is good news indeed. Very good news.



Gail, I just grabbed a post to quote. It really isn't addressing the part I quoted.

As long as you are living in your home, the WORTH of it is immaterial. My home increased in value 100% within a year of moving in. It is now back at original value. Maybe. Maybe less. It doesn't matter that it was worth double or worth less. We're living here. We aren't moving any time soon.

The price you paid seems not too unreasonable. My sister is looking at $300K+ in Los Angeles (plus HOA fees) for a condo. Different markets to be sure... but under "normal economic conditions" your price seems pretty well in line. If you aren't in need to sell.... you're fine. NEED to sell. WANT to sell is a different creature.

Presuming you are employed and aren't looking to up and move... Stay put. Hang in there. As things improve, you'll still be there. I can see a time when you're on year 15 or 20 of a mortgage and folks are paying well over what you did for the condo next door to you.

You bought at a decent price. The BEST price? Not so much maybe. But rare is the homeowner who does. We bought at a good price that we thought was horrid at the time. (we wanted to get our children away from drive by shootings involving the gangbangers next door, so we sacrificed a lot to make the purchase possible) At the time, we were sick to think of what we were paying. But then it all took off like a rocket. And now it's back to what it was. The 'paper equity' did nothing for us. The loss does nothing to us.

As long as you don't have to sell.... you're fine.

Some Condos are down to 1/3 or less of what was paid for them. The probability is that they will not come above water in our livetime. So practically you go bust now or you go bust later.

All situations are not soluable. It is a pain but true. When in one of those situations you do what for you, if the right thing.

[tony soprano]

Originally Posted by olecapt

All of the above are violations of the law. When is the last time you saw a great outcry over speeding? You want to lead the charge? They do increase the wear of the streets and the cost to the taxpayer by miniscule amounts...but if it floats your boat go for it.

Most of us would expect the authorities to enforce the law. No law is violated by walking on a mortgage.

You told the OP that the impact of the person he was addressing walking away from his mortgage was miniscule. The point is, collectively the impact is not miniscule because we're not talking about just one person walking away from their mortage. A single individual dodging their taxes has a miniscule impact on me as well but there too we know we're not talking about a single instance. In other words, that a single instance of someone walking away from their mortgage has little impact on me is largely irrelevant.

Didn't as far as I know. Why do you ask?

Because it too was irrelevant. The OP made their case that the person walking away from their mortgage was stealing not from a faceless bank, but from him and other shareholders. What does mispriced risk have anything to do with that or any of his other points?

Nothing apparently kept various banks from buying really bad securities. And some failed. But they did not neccessarily initiate the securities involved...just bought them. And even if they initiated them they should have known better than to hold. Stupidity is its own reward?

You stated to the OP that the loan originators had "no meat in the outcome" because they securitized all their loans and sold them. You're wrong. You've demonstrated before that you have absolutely no idea what mortgage exposure banks had or have. As best I can tell, you repeat a sound bite you heard on the tube or something you've read in a blog - "Banks sold all their mortgages."

Bank of America announced their Q1 earnings less than three weeks ago. They still carry ~$36B of nonperforming loans, leases and foreclosed properties on their books. This, after already writing off tens of billions in loans over the last two years.

As I have made clear I believe it is a personal decision. I personally have no problem with either...though if I was facing the abyss you better believe I would walk. On the other hand if it has any reasonable chance of working out I would go for it.

It is a personal decision. And as you are free to suggest to people that they ask for money to return the keys to the house they defaulted on, and to suggest how they might maximize the duration of time they can live rent free, others are free to voice their dissenting opinion.

And actually I don't think I am in the minority. As I am on both sides of the issues I can't be in the minority. Tony however has a fixed view which I suspect is supported only by the more libertarian...a rather small minority.

Well, kudos to you on having the courage to take no real position other than the one that maximizes your own best interest - regardless of whose expense it might come at. We should all be so lucky.

[mresort]

Originally Posted by olecapt

Some Condos are down to 1/3 or less of what was paid for them. The probability is that they will not come above water in our livetime. So practically you go bust now or you go bust later.

All situations are not soluable. It is a pain but true. When in one of those situations you do what for you, if the right thing.

I have a classmate who studied college together with me in San Diego about 20 years ago. After graudation, he went back to his home country, Hong Kong. In 1997, he bought a 750-square-feet high-rise condo in Hong Kong for about 300K USD with 70/30 loan. Just few months after his purchase, the massive East Asian housing bubble went bust due to the Asian Financial Crisis. His condo was down to 35% of what he paid for it. He could walk away if he wanted to, but he didn't choose to do so. His neighbor who was in the same situation chose to walk away because he thought his condo wouldn't come above water in his lifetime as he was severly undewater.

Now it is 2010, 13 years after 1997, the value of his condo has finally recovered to his original purchase price. He sold his condo last month and used the money to buy a bigger house. His neighbor who walked away a decade ago keeps paying rent to his landlord every month (all of 13 years rent went to his landlord's bank account). My friend has a lot of money now, but his former neightbor doesn't. See the difference?

Different markets to be sure because Las Vegas is not Hong Kong. I just want to share a story with you guys.

[olecapt]

Originally Posted by tony soprano

You told the OP that the impact of the person he was addressing walking away from his mortgage was miniscule. The point is, collectively the impact is not miniscule because we're not talking about just one person walking away from their mortage. A single individual dodging their taxes has a miniscule impact on me as well but there too we know we're not talking about a single instance. In other words, that a single instance of someone walking away from their mortgage has little impact on me is largely irrelevant.Because it too was irrelevant. The OP made their case that the person walking away from their mortgage was stealing not from a faceless bank, but from him and other shareholders. What does mispriced risk have anything to do with that or any of his other points?You stated to the OP that the loan originators had "no meat in the outcome" because they securitized all their loans and sold them. You're wrong. You've demonstrated before that you have absolutely no idea what mortgage exposure banks had or have. As best I can tell, you repeat a sound bite you heard on the tube or something you've read in a blog - "Banks sold all their mortgages."

Bank of America announced their Q1 earnings less than three weeks ago. They still carry ~$36B of nonperforming loans, leases and foreclosed properties on their books. This, after already writing off tens of billions in loans over the last two years.It is a personal decision. And as you are free to suggest to people that they ask for money to return the keys to the house they defaulted on, and to suggest how they might maximize the duration of time they can live rent free, others are free to voice their dissenting opinion.Well, kudos to you on having the courage to take no real position other than the one that maximizes your own best interest - regardless of whose expense it might come at. We should all be so lucky.

Tony it is clear that nobody but you and I care about any of these issues to the level of detail we work them. If you wish to pursue them privately I will be pleased to play as I find it interesting.

However it appears it only appeals to you and I.

So move them private. Otherwise you are on your own.

[tony soprano]

Originally Posted by olecapt

Tony it is clear that nobody but you and I care about any of these issues to the level of detail we work them. If you wish to pursue them privately I will be pleased to play as I find it interesting.

However it appears it only appeals to you and I.

So move them private. Otherwise you are on your own.

It's a polarizing topic to be sure. OC, let me ask you a question, and I'll let you answer with the promise of no rebuttal. I've mentioned in the past that without question, there are circumstances where staying current on the mortgage is simply untenable. My issue is typically limited to those that can afford their mortgage but decide it's in their best interest to walk away.

By some estimates, some two thirds of Vegas homeowners are underwater. We can even disagree on that specific number but let's agree that it's a lot. What if they all decided, "I better take advantage of mortgage debt forgiveness before it sunsets in 2012." What if everyone currently underwater walked away? What would be the effect on the Vegas housing market and by extension, the local economy? The same holds true on a national level. Any semblance of an economic recovery would be completely overwhelmed if everybody currently underwater simply walked away from their mortgage. If that didn't create the Great Depression II, I don't' know what would. I find it difficult to embrace a philosophy that were it exercised by everyone who would benefit from it, would throw entire economies in disarray.

Walking away from an underwater mortgage may be in the best business interest of the individual walking away, but let's be clear that someone has to bear those costs. The lenders and investors will do so until they buckle under the weight of their losses. We've witnessed that in spades. If the losses become too great, they'll be socialized (see fanny, freddie, AIG, etc.). And if the losses continue to mount as more and more people decide to act in their best interest by walking away, what then?