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Strategic Mortgage Defaults???

Old 05-18-2010, 07:27 AM
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http://www.marketwatch.com/story/mor...ans-2010-05-17


This news report is timely. My son called for advice about one of his friends (got married, bought big home, got divorced and needs to unload his home)

Son asked me what's the best way the guy can stay in his home the longest. Should he just not pay any mortgage and wait out the court decree, or should he pay a couple hundred a month and play along with telling the bank that he's trying?

The house won't appraise for near what they bought it for, so his equity is zero.

Stop cold turkey or pay a little each month in hopes of staying longer?
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Old 05-18-2010, 07:46 AM
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If hes just trying to screw the bank I dont want offer any advice. Its a contract and should be honored if possible. If hes trying to save the house, get out as best he can, or just make the best out of a bad situation the best deal is to work with the bank.

Believe it or not, the bank 100% does not want to own that house. Miss payments, get a harship letter together, show some effort to the bank. Call someone to help if you have to. Who is the Bank? some ore better than others.

I have an example, not me, but a family member so I know its true ---Jumbo Mortgage - could not pay the mortgage so he stopped paying. It took 6 months, but he went from paying 7.4% interest only, to 3.25% interest only and the rate is fixed for 5 years. Hopefully that will be enough to get him through this crisis.

Its a pain in the arse to deal with any bank, but they know owning that house will loose them thousands more than working with someone.

Where is he located?
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Old 05-18-2010, 07:50 AM
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Also, If he just trying to unload and is going to short sale he needs to do two things.

1) get it on the market, the longer its on the market and not selling the better.

2) Stop paying completely. It wont help anyways
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Old 05-18-2010, 08:17 AM
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He's in Birmingham and might be declaring bankruptcy anyway since there's only one person paying the mortgage and they seem to have bought a $350,000 house fresh into marriage. I don't have much more information than what I know, but it sounds like a classic example of what sent the financial markets on their arse to begin with; 80/20 loans with minimal employment history.

Don't know whether he's talked to banks or real estate people...let's assume that he has, and there's no way for him to save a house that might be worth $200K in today's market (just a guess).

If you say that he's not going to extend the time he can live there by paying a little of the mortgage, then I'll pass that along. I originally said that I thought it probably would help to pay something...but I have no knowledge of how mortgage companies do things. That's why I posed the question to the experts!
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Old 05-18-2010, 08:59 AM
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Hire an attorney to fight the foreclosure. I have clients that have not made payments since march of 2009 and we are still in the infancy of the case. I am thinking that I can litigate their case until mid 2011 or later while leveraging the bank to mod the loan to more reasonable terms. Keep in mind, they have attempted to make payments but the lender has rejected them post acceleration.

I have zero mercy or sympathy for the big lenders. They have screwed us over and over since Oct '08. To top it off, when the Fed offered to loan them money at zero percent to start lending to businesses whet did they do?? They recapitalized themselves, bonused themselves and then took the money and started buying T-bills from the Govt at 4% and leveraging that zero percent money to buy tenfold T-Bills. The fucking govt is paying 4% to get back money they lent for zero!!! It has been the biggest banking subsidy in history. Dont feel bad for one second about sticking it to the big banks..... they have been silently driving a freight train up our ass for 2 years.
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Old 05-18-2010, 09:14 AM
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Okay... and Im not an expert so keep asking around, I just have had some close dealings with this.

1st off, - stop paying and save your money for the next house. There does come a time when you just have to take the loss. use that money to fix the CC bills or save a little for the next house.

Every cent you send will not help the situation unless he gets caught up and will only go to paying penalties. If your going for a short sale, dont haggel about the price, just get it sold.. a short sale is a short sale...

2nd- mimimum I would expect a forclosre to happen is a year. There is a huge backlog at this point the bigger the bank, the slower the process. houses have had actions against them here for two years and people are still in them. Again, the bank doesnt want your house.

3rd - dont ignore the problem, they will offer mediation. Go for it, even if you dont qualify as they work through that process it put the forclose action on hold and could add anywhere from 1 to 4 months.

Bankruptcy will add time too but get a lawyer.

Paying the bank in these situations will not help him. sometime you have to take care of yourself first. Tough times out there.
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Old 05-18-2010, 09:38 AM
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a side note

I understand that in some cases the banks couldn't produce documentation in court that they actually held the loan, because the loans were sold and bundled and resold and the legal paperwork wasn't done properly.

when the judge ask for the legal documents proving the bank held the note, they didn't even have it????
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Old 05-18-2010, 09:59 AM
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Originally Posted by Brett1 View Post
Hire an attorney to fight the foreclosure. I have clients that have not made payments since march of 2009 and we are still in the infancy of the case. I am thinking that I can litigate their case until mid 2011 or later while leveraging the bank to mod the loan to more reasonable terms. Keep in mind, they have attempted to make payments but the lender has rejected them post acceleration.
.
Interesting thought. He's obviously going to have cash for an attorney if he's not paying his half of the mortgage. Any ballpark figures on what kind of money an attorney would charge and how much it would lengthen the process?

He's in some kind of sales business, so in a couple of years his financial position might even be solid enough to afford the whole house payment...but would an attorney be the one to negotiate the loan balance down to today's pricing levels?

....and again, this isn't me we're talking about
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Old 05-18-2010, 12:48 PM
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While I understand the banks role, is there not any personal responsibility these days? Maybe things are different where I was born and raised, but nobody ever came to my front door and forced me to sign a shady loan on a house that I couldn't afford. Seems to me that most of the people that I hear about having foreclosure problems around here had no business buying the house they bought. If I don't have a pot to piss in and I go and somehow manage to secure a no doc. loan to buy Homesite's boat and lambo and then I can't afford it because I'm an idiot and had no business buying them in the first place, is it the banks fault for giving me that loan? chris
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Old 05-18-2010, 02:39 PM
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bayrunner, I'm not going to take the other side of that argument for several reasons. If we made everybody that made bad business decisions disappear, the world would be a lonely place, I think.
These kids (well, they're in their mid 30s if they're my son's friends) are both educated, both worked before marriage, they got married and....oops, divorced.
The last couple of generations have assumed that both parents work, and if divorce hits, then things fall apart if they live to the limit of their incomes.

Without knowing (or caring to know) the rest of the story about him, I think we can all relate to somebody that we know in the same boat. I'm also thinking that if they bought that kind of house, then furniture, vehicles, etc. were also bought on max credit...so he's screwed without another income to take half the load off.

As Brett said, as desperate as somebody is in that situation, it doesn't help that their collateral has dropped in value by 40% or more. That makes it a good business decision to bail out, doesn't it?
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Old 05-18-2010, 03:07 PM
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Bayrunner, you hit the nail on the head. Personal Responsibility. The bottom line is that this guy (if he's mid 30's, he's not a kid) and his wife made decisisions to spend every dime they made to live the unsustainable dream, just like a lot of other people, and now that things aren't rosy anymore, they want out. I am in my early thirties and live within my means. How many of you guys that are in your 50's owned $350,000 homes, two new cars and all of the other perks when you were in your early 30's? probably not many. The bottom line is that a lot of people will have to go through some pain before things get better. The government bailing them out of the loans that they signed up for is not the answer, b/c they will make the same decisions again.

Brett is right regarding the feds and T Bills, but that is our screwed up governement for you. However, that has nothing to do wtih these people who looked at willingly accepted loan terms to get the big house. Hell, why don't we all just quit paying and hire lawyers?
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Old 05-18-2010, 03:11 PM
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Originally Posted by bayrunner16 View Post
While I understand the banks role, is there not any personal responsibility these days? Maybe things are different where I was born and raised, but nobody ever came to my front door and forced me to sign a shady loan on a house that I couldn't afford. Seems to me that most of the people that I hear about having foreclosure problems around here had no business buying the house they bought. If I don't have a pot to piss in and I go and somehow manage to secure a no doc. loan to buy Homesite's boat and lambo and then I can't afford it because I'm an idiot and had no business buying them in the first place, is it the banks fault for giving me that loan? chris
This is NOT the scenario for a good number of people that are about to default. The newest group can fairly point their fingers right at the banking industry for reckless lending, packaging of fraudulent CDO's, skimming all the transactions and then betting against them. The end result is that we have to give our tax dollars to these companies so they can rape us more all while our incomes are in the shitter due to them. Starting to get the feeling?? The only way they will ever change is by pulling our money out and letting their bad decisions come home to roost.
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Old 05-18-2010, 03:16 PM
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Noone is disagreeing with Bayrunner. but unfortunatly it looks like the circumstances that allowed this individual to afford this house have changed. I dont advocate anyone run from thier responsibilities but there sometimes comes a point where things are just not goin to workout no matter how hard someone tries.

You have to just move on. There will be penalties to him breaking this contract. Bad credit, inabilty to get a house in the future and of course the humiliation of the whole thing. I am sure this is not a decision that was made easlily. now its just time to take the best advice you can get to keep his head above water.
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Old 05-18-2010, 05:22 PM
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Originally Posted by wmalloy382 View Post

1st off, - stop paying and save your money for the next house.
Do what? Is that a joke?
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Old 05-18-2010, 05:30 PM
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Originally Posted by Brett1 View Post
This is NOT the scenario for a good number of people that are about to default. The newest group can fairly point their fingers right at the banking industry for reckless lending, packaging of fraudulent CDO's, skimming all the transactions and then betting against them. The end result is that we have to give our tax dollars to these companies so they can rape us more all while our incomes are in the shitter due to them. Starting to get the feeling?? The only way they will ever change is by pulling our money out and letting their bad decisions come home to roost.
Reckless lending? Did they force people to take loans they couldn't repay?

And who ultimately will pay the final price tag of this mess?

The Banks? nope.
The loan defaulters? Nope

The customers that pay their bills? Yup.

Thanks for helping someone rape me alittle harder and alittle longer.
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Old 05-18-2010, 05:34 PM
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I use to think that you should just man up and pay the bill, but then I read some other viewpoints and this is basically an economic decision. He is not the banks friend and the bank is not his friend. Indeed I believe that the banks are partially to blame for the mess they are in.

Like anything else, buying a house is a contract. If he walks the consequence is bad credit and will not be able to get financing for awhile.

CAUTION though--the banks are now pulling credit reports on folks they think are strategically defaulting. If they see that the person is keeping up everywhere else it is possible that they will come after him for the balance after foreclosure. If he is struggling all the way around (not paying several of his bills, repossession of vehicles, etc) then they wont bother.

I hear that there is a large looming high dollar house market where they are not foreclosing for fear of making the mess worse, and, of course, owning homes that they dont care to own.

For those with cash, there are some interesting investment deals out there....just have to be prepared to float it for 3-5 years depending on the property.
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Old 05-18-2010, 07:26 PM
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Originally Posted by gort View Post
Reckless lending? Did they force people to take loans they couldn't repay?

.


No, but they happily told people they would lend them 400K to buy a 240K house. They were driving this out of control locomotive. Its plain to see in hindsight that this was unsustainable and when their freight train full of greed finally derailed, a lot of people suffered job or income loss. Mostly people that would have otherwise kept paying.

As you should be keenly aware, many banks have no morals and will look out for themselves 100%. Customers should do the same. Its not just a question of you 'not doing the right thing' by defaulting on a loan, its a larger issue of why you are even in this situation to start with...(see above )

Im not saying borrowers are blameless but the situation is what the situation is. A business deal that went bad. Many simple cannot pay and others are faced with issues like paying 100K to "sell" their house because they have to move. Who (among the few that could) is going to do that?
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Old 05-18-2010, 08:45 PM
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I appreciate every opinion, but would like to get the question on track....so here it is:

REGARDLESS of circumstances or blame by any party, if the person pays only a part of their mortgage instead of the full payment, will that partial payment give them more time in the house before they have to move out?

Interestingly, our condo's maintenance man came over to the house today to cry in his beer about losing his house of 12 years because the mortgage company saddled him with a $5000 HO insurance bill because he couldn't afford the $4000 bill from his own company. This house of his is maybe $125,000 and his insurance has gone up 10X in 4 years.

His wife is losing her job as a pizza delivery person. His daughter and two kids live with them. One of the kids has Downs and our maintenance man (age about 60) spends every minute away from work changing diapers for both kids. He makes, what, $10/hour?

They were making it in their own home and then insurance companies put the screws to everybody within 50 miles of the coast (we're paying $12,300/year vs. $2,300 in 2003) I have to imagine that their monthly payment maybe tripled with the insurance increase.

I respect you guys with the personal responsibility credos...to a point. If the young guy that got a divorce doesn't turn your crank, can you provide advice to the man that's about to take his whole family to a $500/month apartment because he has nothing left in his whole life? What did he do wrong?
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Old 05-18-2010, 11:27 PM
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Heres another one for you. My wifes company hired someone who used the ID of another person. Got the job, license and got a mortage. Great worker, one of her best employees. Turns out several other people used the same false ID and it came out. Her company is working to get him a green card and even have a lawyer for him. The mortage company on the other hand started sending him his payments back and told him he had to secure financing elsewhere or forfiet the house. He continued making payments and they continued returning them. He stopped paying and that was 2 years ago. Has not heard anything from the bank in that time.
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Old 05-19-2010, 07:09 AM
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Originally Posted by big money View Post
Brett is right regarding the feds and T Bills, but that is our screwed up governement for you. However, that has nothing to do wtih these people who looked at willingly accepted loan terms to get the big house. Hell, why don't we all just quit paying and hire lawyers?
Hire a lawyer ?

I'm sure Brett is handling the case pro-bono. If not, it would make him a sanctimonious hypocrite who is benefitting from the misfortune of an innocent victim
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