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"Foreclose me...I'll save money!"

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posted on Jan, 26 2008 @ 11:47 AM
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It's ironic that the tables are being turned...you know this just scares the hell out of the Banksters! In a world of moral relativism, technicalities and P.R. spin, it's really no surprise that homeowners have become more sophisticated and pragmatic in their own dealings. It will be very interesting to see how this trend plays out over the next year or two.

L.A. Times


"I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.

"Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I'm not a 'hardship' case they'd apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won't even talk to me until I miss a couple of payments.

"I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."




posted on Jan, 26 2008 @ 11:51 AM
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Yup, the people are going to start wising up and realize that this is a possible way out.

I'm not saying I agree with it, as I work in Credit / Finance, but I certainly understand the frustration people are going through.



posted on Jan, 26 2008 @ 12:01 PM
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You will still owe the bank the difference. Eventually they will get the new house as well if you don't pay them. For people with a bunch of other debt and not enough income to pay them, bankruptcy is probably your best bet. The courts will only allow creditors to keep the amount of debt you can afford to pay, the rest will be discharged.

I am also underwater on my home. That said, I have no intention of screwing those who gave me my loan. If something happened and I couldn't pay then I would consider other options. First step is to fall behind and then ask the bank adjust the terms to what you can afford. This can include reducing the principal amount due, the interest rate, or the length of the loan.

Just plain outbailing because you made a bad deal is bogus. Peoplelike you are the reason that I am disgustedbyhumanity.



posted on Jan, 26 2008 @ 12:03 PM
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reply to post by elevatedone
 


I have been observing a foreclosure situation right down the street from my house and I think the homeowner may be taking this tactic. He has recently acquired lots of new furniture (prior to removing it from the house), a truck and other big ticket items. Most of the contents have now been removed from the house by the homeowner but no "for sale" sign.

My question is why does it take up to a year or more to evict a homeowner in default? A landlord has far more leeway.



[edit on 26/1/08 by kosmicjack]



posted on Jan, 26 2008 @ 12:06 PM
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Originally posted by disgustedbyhumanity

Just plain outbailing because you made a bad deal is bogus. Peoplelike you are the reason that I am disgustedbyhumanity.


Read the OP more closely...I have not done this nor will I. Furthermore, I am in no danger of losing my home, though, like most people these days, I probably am upside-down.

I am simply providing a link to an article which interviews a homeowner who is willing to go to these lengths to safegaurd his own interests - not unlike many corporations and banks.

[edit on 26/1/08 by kosmicjack]



posted on Jan, 26 2008 @ 12:08 PM
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I don't think it's people doing this just because the feel they got a bad deal on a loan.

It's a number of reasons, economy, maybe lost their job, could be a number of things and now they just don't have the income to make the payment on the house.

However, there could be some people who just don't want to pay anymore.



posted on Jan, 26 2008 @ 12:43 PM
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Any way you look at it, many if not most people in this situation are there because they bought more than they can afford... taking the ARM now, and figuring they would deal with it later and refinance..... except now they cant refinance on a house or property that is worth much less than they paid....

I myself was tempted... we sold a condo a few years ago while the getting was still good and flipped the money into another property.. we could easily have bought a new place that was double the price with a low mortgage if we did an ARM.. but we were cautious and spent just a little more and stayed with a traditional loan. (Thank God!)

I do feel bad for anyone in a foreclosure situation... but really everyone.. when are we going to wake up and buy what we can afford... instead of buying what we want people to THINK we can afford.



posted on Jan, 26 2008 @ 12:53 PM
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THIS IS PRECISELY WHAT THE MARKET NEEDS!


Originally posted by kosmicjack


"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."





I'm dead serious.

Maybe I'm being rash, but I believe much of this mess would have been avoided if lending institutions had been forced to more meaningfully assess their risk.

I grow tired of hearing the "people need to learn to live within their means" arguments. It's like complaining water is wet. It helps nothing and offers no real practical solution to the problems we face.

Credit granting is out of control! THAT IS THE REAL PROBLEM. The loose standards they apply create a false economy and make REAL risk assessment impossible. Until the credit grantors are made to be accountable for their ridiculous lending practices, nothing will change.

Don't be fooled by the "it's all the consumer's fault". Think about it... Their behavior is just a symptom of the problem.

Consumers live beyond their means, because they can. Plain and simple. It is completely unrealistic to believe that you can widely change this behavior. Unless, that is, you want to reintroduce debtor's prisons and force everyone, including good credit risks, to become afraid to borrow money.

Meanwhile, the thing we can change, becomes completely ignored-- lending practices.

I say fix THAT and you are well on your way to solving the problem our economy faces.



[edit on 26-1-2008 by loam]



posted on Jan, 26 2008 @ 04:17 PM
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As far as I am concerned the banks and mortgage lending companies brought this on themselves. From what I have heard most people didn't start to default on their mortgage loans until after the ARM rates adjusted higher. If the banks and mortgage lenders weren't so greedy and just left the loan rates alone there wouldn't be such a huge loss.

If the original ARM rate was a good enough business deal for the banks and lenders to begin with why not just fix the rate right there?

Because the banks and lenders saw an opportunity to make more money by adjusting the rates higher.



posted on Jan, 26 2008 @ 05:36 PM
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I really don't see the issue here. Why should individual consumers be expected to behave any differently than lawyers, corporations and banks? Business practices have long been divorced from morality. Business is business. You can't have it both ways.

Personally, I'd do it in a shot if I needed to. Like anyone could care less if I was swimming in an ocean of debt...



posted on Jan, 26 2008 @ 05:56 PM
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I feel that in this time with the market problems any homeowner should not feel in the bit guilty using the same system that has taken them to the point they are right now.

Remember a lot of greedy people got very well pay off for all this properties when the markets were up and souring.

If if help out there by any means take advantage of it because trust me the banks didn't have any scrupulous taking advantage of you.

Most of the finacial institutions involve in this morgage meldown have been bailed out as we speak.

And we all paying for.



posted on Jan, 26 2008 @ 06:15 PM
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Ya, I don't blame anybody but the banks who were blinded by a quick buck. They got burned and that is that. Also, corporations should be held more accountable for bad decisions that screw regular Joes. They should be held to a higher standard. The fact that they are not justifies the actions of the individual.



posted on Jan, 26 2008 @ 07:08 PM
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reply to post by loam
 



"The rich ruleth over the poor, and the borrower is servant to the lender"
-- Proverbs 22:7

The pure truth of the above proverb should be obvious to all. It should end all further discussion.

Of course the banks and our lenders are better than us! That is why they are rich, and we are poor. They are blessed and favored. We are not.

Therefore, if it takes you the rest of your life, you need to service your debt, no matter what it takes, or how it affects your life, no matter how much pain and inconvenience, no matter how grievous the harm to your life and the lives of your family members.

We must be punished for our foolish borrowing!

That is the way of the world, and what nature demands.

(I hope that is clearly recognized as sarcasm
)

Edit: See the link here on The Evils of Usury. It is a good statement and discussion on the morality of lending and borrowing, irrespective of your religious beliefs.

[edit on 26-1-2008 by Buck Division]



posted on Jan, 26 2008 @ 07:18 PM
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reply to post by kosmicjack
 



Sorry Jack. My thoughts go towards the person in the article and not yourself. Unfortunately that has become the way most people think these days.



posted on Jan, 26 2008 @ 08:11 PM
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I saw an artical on our local news yesterday. A home buyer is sueing her Real Estate Agent for the damages she lost on her home purchase.

I thouht, this will be interesting. I know the saying buyers beware. However a Real Estate Agent has a fiduciary responsiblity to the buyer if they were acting as an agent.



posted on Jan, 26 2008 @ 08:30 PM
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I love the peopel who feel sorry for the banks in this situation let me let you in on a little reality. The banks were letting people into these houeses to easy yes but they were also jacking up the interest rate kinda like the person who goes to buy a car and has no credit or do anything and has no credit the lender jacks up the interest rate and rapes you. Its a risk the banks take but they get paid well for that risk most of the time. I mean when you get a loan by the time you pay off that house you pay for that house 3x over before its paid off how fair is that....

The tables are turned sums this up very well and you know what I bought and own alot of real estate and you know what Ive given a couple houses back to the banks because I know In 5 to 10 years Im not gonna make money on these partricular ones so being the smart business man I am I gave them back and kept my others.

For the people who say oh its people like you who make us all pay let me tell you something we all have been paying for a long time and now its the banks turn. Dont worry the banks ARE getting bailed out via the interest rate cuts. I find it odd that the political pundits who critisize washington for giving people a little money little as it is its still money we didnt have in our pockets as a bailout for the "middle and poor class" I call double standard.

To sum it up anyone who is going into forclosure should feel no guilt and frankly in most cases is making a smart choice. Think about this Donald Trump in the early 90s did the same thing to the banks threatened to give them all their property back if they didnt work with him in that situation. Look at how well he is doing. Finally the tables have turned and I love it. Take it to the "man" now because i promise you the "man" will never ever let this happen again.



posted on Jan, 26 2008 @ 08:31 PM
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reply to post by marg6043
 


By the way marg can we agree more on these subjects?



posted on Jan, 26 2008 @ 08:46 PM
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Oh, mybigunit, I had no idea we disagree much on anything else, I see it as just difference of opinion and interpretations.


But I am glad that we can joint forces on certain topics.



posted on Jan, 26 2008 @ 09:28 PM
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Four years ago i lost my job. Three months before that i bought a house, something I would never had been able to do even a year before. I spent a year trying to find another job. My kind of work was long gone to the Asian/Indian markets. I was able to keep up the payments for a short time. I finally called the mortgage company to tell them i could no longer make payments. They were less then enthusiastic about my situation. They foreclosed on my house and i moved in with my parents.

At first i was guilty over what i had done because i really just walked away from the house. I had no choice. I still have some guilty feelings but not like when i first moved out. The whole real estate market was way out of line with reality. There were so many people who got mortgages that should not have. Even four years ago, there were enough signs of a faltering economy that the banks, mortgage brokers and realtors should have been more diligent in their practices. Yet this was not the case. They continued with business as usual and, oops, we goofed! Boo hoo, boo hoo, we are losing all our money.

I can't feel too much sympathy for companies over a situation that was ignored.



posted on Jan, 26 2008 @ 09:43 PM
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Something to consider...

Banks and mortgage holders rarely fail to cover their fannies in some fashion. If your home is foreclosed on and the resulting sale does not cover the "note" - technically the balance becomes taxable income to you. Additionally, there may be capital gains that may need to be recognized even though you "lost" the house.

From a recent article I read:

Forgiven but not forgotten

In many cases, the tax problem associated with a foreclosure arises from a seemingly benevolent move: The lender forgives some of the loan. This happens when a lender and a borrower negotiate a reduction in loan amount. Or when the lender forecloses on the property and sells it for less than the outstanding mortgage.

In both instances, the difference for which the borrower is no longer responsible is considered cancellation-of-debt, or COD, income. It also is called discharge-of-indebtedness income or discharge of debt. Regardless of the name, under the tax code, it's all taxable income. The tax on COD is calculated at ordinary rates, which range from 10% to 35% and depend upon your income.

*snip*

a foreclosed-upon homeowner could end up owing capital-gains taxes without ever receiving any money from the foreclosure sale.

"Foreclosure is not a sale in normal terms, but it is still treated under tax code as a sale," says Stephen Trenholm, CPA, MST (master's degree in taxation) and tax manager at Rucci Bardaro & Barrett in Boston.

"The outstanding balance of the mortgage is compared to the basis in house. If that produces a gain, it's a taxable gain. If it's a nonrecourse mortgage, it's a capital gain."

That's right: Even though you aren't selling the house and the bank is, the IRS views the transaction as if you were the seller. That means you could owe taxes on the sale.

*snip*

Let's say a homeowner has nonrecourse mortgage debt of $110,000 and $20,000 equity, or "adjusted basis," in the home, which has a fair market value of $100,000. The owner has no ordinary tax liability for that $10,000 difference between his debt and the home's value. But what about the $90,000 difference between the mortgage debt and his basis in the house ($110,000 less $20,000)?

That is seen as taxable capital gain from the "sale or other disposition" of the home. So even though the foreclosed-upon owner didn't get any cash from the transaction, he still owes taxes on what is known as phantom income. source


Bottom line - think long and hard before you bail.


B






[edit on 1/26/08 by Bleys]




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