I agree (with the addition of the edit). Also #2... not many folks would have a home if they waited for that.
Escaping Mortgage Disaster
- Thread starter Jam Piper Jam
- Start date
I agree (with the addition of the edit). Also #2... not many folks would have a home if they waited for that.
chocalate_topaz
I wanna be your lover...
Traditional lending venues will tell you this though. The mortgage brokers are servicing subprime markets in my opinion. And some of the things I've seen come across the desk, $30,000 where they want it to appraise for $80,000 to make the loan. Very, very sad. There IS a sucker born every minute. A good number are over in SW MS.
Da_Sperm
New Member
TRUE, but mortgage brokers couldn't COMPETE with traditional lenders until they started servicing subprime loans.
In the 80s, you couldn't get a home loan unless you had 20% down payment and the proper reserves. Then programs started to get LAXED to 3% down, then all the way to 0%. Then came the credit challenge programs (teaser rates!).
It was a perfect market because brokers could get loans for people who already had no financial sense and make big bucks. The only problem is they couldn't see the light at the end of the tunnel. If these customers had credit issues and you gave them a loan product that they couldn't afford or at least not for long, the train was going to run over them sooner or later. That meant not only would the customer lose their house, but the broker would also lose their job. WHY? Because his customer base were credit challenge people only.
The traditional lenders are the only ones still in the market.
Jam Piper Jam
Truth Seeker
Troubled homeowners: Can't pay? Just walk away
Troubled homeowners: Can't pay? Just walk away
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.
By Les Christie, CNNMoney.com staff writer
February 6 2008: 10:21 AM EST
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.
"I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months]," said one borrower, David, who doesn't want his last name used. "Now, I'm just waiting for the default notice."
The Los Angeles-based writer bought two properties in Hancock Park, west of downtown, using no-down, interest-only mortgages in 2006. He paid just over $1 million for both.
David had planned to sell them quickly but got caught in the slump. Soon his interest rate will jump by a few points, and his payments will go up by several hundred dollars a month for each place. He figures his properties have fallen in value by at least $60,000 each.
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 most serious consequence is a tremendous hit to credit scores. For some, that's better than throwing away money they'll never recover by selling their home.
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.
And now skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007. Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income. Now the IRS will ignore it.
"That's going to help a lot of people," said Mike Gray, a San Jose accountant who runs the web site Realestatetaxletter.com.
more info
Troubled homeowners: Can't pay? Just walk away
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.
By Les Christie, CNNMoney.com staff writer
February 6 2008: 10:21 AM EST
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.
"I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months]," said one borrower, David, who doesn't want his last name used. "Now, I'm just waiting for the default notice."
The Los Angeles-based writer bought two properties in Hancock Park, west of downtown, using no-down, interest-only mortgages in 2006. He paid just over $1 million for both.
David had planned to sell them quickly but got caught in the slump. Soon his interest rate will jump by a few points, and his payments will go up by several hundred dollars a month for each place. He figures his properties have fallen in value by at least $60,000 each.
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 most serious consequence is a tremendous hit to credit scores. For some, that's better than throwing away money they'll never recover by selling their home.
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.
And now skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007. Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income. Now the IRS will ignore it.
"That's going to help a lot of people," said Mike Gray, a San Jose accountant who runs the web site Realestatetaxletter.com.
more info
Da_Sperm
New Member
Re: Troubled homeowners: Can't pay? Just walk away
Which goes back to my earlier statement. For those who put $0 to little down, then you don't feel bad when you walk away from a property.
However, if you put down 20%, then you are going to put up a FIGHT to keep your property. That is why lenders in the 80s required 20% down and some RESERVES in your bank account. That meant that when the property value DROPPED, it was still worth more than your remaining mortgage. Or if you lost your job, then you could still make payments because you have RESERVES.
Which goes back to my earlier statement. For those who put $0 to little down, then you don't feel bad when you walk away from a property.
However, if you put down 20%, then you are going to put up a FIGHT to keep your property. That is why lenders in the 80s required 20% down and some RESERVES in your bank account. That meant that when the property value DROPPED, it was still worth more than your remaining mortgage. Or if you lost your job, then you could still make payments because you have RESERVES.
FAMU CLIFF
New Member
I had a friend go through an attorney to give a piece of property back to the back that had been willed to her. She said it never appeared on her credit. Apparently there is a process you can go through as long as you are not delinquent on your mortgage.