Can't pay? Just walk away

[somdrenter]

Troubled homeowners: Can't pay? Just walk away
By Les Christie, CNNMoney.com staff writer
February 6 2008: 10:21 AM EST

More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together.

NEW YORK (CNNMoney.com) -- Mortgage payments are set to jump. Home prices have plunged. "I'm outta here."

Homeowners are abandoning their homes and, more importantly, their mortgages, rather than trying to keep up with rising payments on deteriorating assets. So many people are handing their keys back to lenders that a new term has been coined for it: jingle mail.

…. Current lending practices have created an environment where a measure as extreme as abandoning a home actually makes sense to some people.

Many buyers put little or no money down, so they don't have much invested in them. That leaves them with little incentive to keep making payments when a home's market value dips below the balance of the mortgage….

…. The trend of walking away is most pronounced among real estate investors, according to Jay Brinkman, an economist with the Mortgage Bankers Association (MBA).

But families are doing it too. "If they have to stretch to make mortgage payments for a home that will not recover its value, then yes, they may walk away," he said.

Often they chose hybrid adjustable rate mortgages (ARMs) that came with low initial payments. After a few years, interest rates on these loans reset higher. But buyers thought they could count on the increased value of their homes to refinance into affordable, fixed-rate loans….

Troubled borrowers are walking away from their homes - Feb. 6, 2008

[crabcake]

Problem #1

Many buyers put little or no money down, so they don't have much invested in them.

Problem #2

But buyers thought they could count on the increased value of their homes to refinance into affordable, fixed-rate loans….

Why is it Uncle Sam's or the taxpayers' fault that people not only fail to cover their own bases by buying a home the smart way by putting a down payment on the loan (too many champagne tastes with beer budgets?), but that they also gambled by "thinking" they could count on something they have no control over (economy)?

I'm tired of hearing people asking others to bail out their problems. Walking away from the mortgage doesn't help them because it'll damage their credit for many years. All it does is hurt the rest of the economy. Thanks a lot dumbasses!:

[godsbutterfly]

The Courts got stricter on Bankruptcy Laws so now people are just simply not paying and letting the property be Foreclosed on? I'm not advocating Bankruptcy either - buying within your means would be the smartest thing to do. This article makes it seem as though people are not really concerned about how Foreclosures are affecting their credit because it really isn't that big of a deal anymore.

[vraiblonde]

The trend of walking away is most pronounced among real estate investors

Hello?

But for a homeowner who lives in the residence it makes absolutely no sense. So your home is never going to recover its value? Never ever?? The home will most certainly recover its value. ALL homes increase in value eventually, even if you just adjust for inflation.

If they'd keep paying on the house, in 10 years it will not only recover its value but they'll have a nice bit of equity in it. So instead they what? Give up their home and their neighborhood, their yard and their room, to rent some ####hole apartment???? To rent a house and make their landlord's mortgage payment???

That is absolutely insane. Now CNN and the rest of these loonies have gone too far with these crazy stories. And I'll bet you $10 that the "mortgage crisis" miraculously clears up the second Hillary or Barack take their oath of office.

[vraiblonde]

Walking away from the mortgage doesn't help them because it'll damage their credit for many years.

And not only will their home not increase in value because they don't HAVE a home, but now they will either NEVER have a home, or they'll have to scrounge up another sub-prime mortgage and they'll be right back where they started.

I have to go say some cusswords. brb

[Kyle (Premo)]

... And I'll bet you $10 that the "mortgage crisis" miraculously clears up the second Hillary or Barack take their oath of office.

Just like the homeless issue, that was "growing" from 1981 to 1992, disappeared from Jan of 93 to Dec of 2000.

[somdrenter]

[somdrenter]

And not only will their home not increase in value because they don't HAVE a home, but now they will either NEVER have a home, or they'll have to scrounge up another sub-prime mortgage and they'll be right back where they started.

...

And while a mortgage default can savage a person's credit record, trying to pay off a loan they can't afford could be worse for borrowers if it leads to bankruptcy, said Craig Watts, a spokesman for the credit reporting firm Fair Isaac.

Credit scores are hurt much more by missing multiple payments - on credit cards, cars and so on - than by a single foreclosure.

"The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy," said Watts.

It typically takes three years of a spotless payment record after a bankruptcy before credit scores recover enough for someone to think about buying a home again, he said. After abandoning a mortgage, a person may be able to buy a new house in two years or less.

[crabcake]

...

I think that anyone who has a foreclosure/bankruptcy on their credit history should be automatically required to put a 20% down payment on any future home purchase. I know there are all kinds of situations/circumstances out there (some of which may have been unavoidable) but it's time people accept personal responsibility for the choices they make in life, and accept the consequences of those choices vs placing that burden on the rest of the population.

If you don't put anything down on a house you're buying, you are far more likely to walk away (all you lose is credit score points) than if you had plunked down say $40K of your own, hard-earned/saved money.

[vraiblonde]

...

What part of "fiscal irresponsibility" is not getting through to you?

Every story that you or Patch posted is about some schmuck who got themselves in hot water because they bought more than they could afford. Would you feel the same sympathy toward someone who could budget a $300 a month car payment, then went out and bought a $250,000 Ferrari? Because that's what we're talking about here - people who bought way more than they could afford.

Real estate investors are a different story. They do this for a living, like trading stocks. They take a hit and go, "Grrrrr" then move on to the next project. And most of the sob stories you all post refer almost specifically to investors, with a "real person" thrown in there to make it sound like IT COULD HAPPEN TO YOU!!!!

NOW is the time to buy a home. Interest rates are sitting at around 5.5% for a 30-yr fixed, and housing prices have dropped. It's crazy to sit there, paralyzed by these hysterical news stories, and let this opportunity pass you by.