Ace of Spades HQ

June 02, 2010

Change! Strategic defaults up almost 50% in past year
— Purple Avenger

...31 percent of foreclosures in March were deemed to be "strategic default" by researchers at University of Chicago and Northwestern University.
That's up from 22 percent in March of 2009.
We already know that mortgage walkaways are more prevalent among borrowers whose neighbors or friends have done the same thing.
We also learn from those same researchers that the likelihood of walking away increases by 23 percent when homeowners learn that a neighbor got some principal forgiveness...

THE NEW NORMAL.
SURFS UP! CATCH THE WAVE.

Posted by: Purple Avenger at 08:16 PM | Comments (115)
Post contains 108 words, total size 1 kb.

1 Wheeeeeeeee!!!!!!

Posted by: Insanity at June 02, 2010 08:18 PM (QVpWo)

Moral Hazzard. Man, you think things are bad now, they're just going to get worse. People are getting brazen.

Posted by: Lily at June 02, 2010 08:23 PM (igSv+)

3 The Ultimate Chew and Screw.

Posted by: eman at June 02, 2010 08:26 PM (QVpWo)

4 By the way, its not called shoplifting anymore. It's strategic self-applied discounting.

Posted by: Cicero at June 02, 2010 08:29 PM (jHd4t)

5 It'll be Ok. China will bail us out.

Posted by: GulfCoastTider at June 02, 2010 08:33 PM (bv1hq)

6 Moral Hazzard.

I don't think it that people are becoming less moral per se, rather they've come to understand that the rules of the game, as they were previously understood, no longer apply and are starting to adjust to the new rules. Under the new rules, strategic defaults are OK.

Morality often tends to be society specific with people taking cues as to what is un/acceptable behavior from many different sources and what is and is not "moral" can vary dramatically over the years. ex. most of the women's clothing, even the very conservative stuff your 80 year old grandmother might wear, would have been considered scandalous in Victorian England.

Posted by: Purple Avenger at June 02, 2010 08:35 PM (S1zlE)

Ha. Those stupid SOCONs always worrying about degradation of morals and the resulting fallout.

Just more proof how offbase they are. We have NOTHING to worry about.

(IMO, anyone who 'strategically defaults' - ie, walks away when they can make the payments, should have their credit permanently ruined. Anyone who does this will never be trustworthy).

Posted by: blindside at June 02, 2010 08:36 PM (vT9Nl)

8 we can take comfort knowing that theyll never get another loan again... (as long as theyre white)

Posted by: Judith Miller Antoinetta at June 02, 2010 08:38 PM (9vQ7f)

9 This is America. There's gotta be a way to make money from this.

Posted by: GulfCoastTider at June 02, 2010 08:38 PM (bv1hq)

10 OK, so I buy a house even though I can't pay for it, and when I default on my mortgage, SCORE!

WTF? Does anyone even pay for stuff anymore?

Posted by: Intrepid at June 02, 2010 08:42 PM (92zkk)

11 take comfort knowing that theyll never get another loan again

I wouldn't bet on that.

If you had say a $2,500/month mortgage payment and can get away for 18 months before being streeted, that's a $45K savings. If you didn't go nuts and spend it, and used that $45K as a down payment on some other more modest joint with a depressed price that could be had for say $130K, it probably would not be all that hard to get a loan putting down that much.

Posted by: Purple Avenger at June 02, 2010 08:43 PM (S1zlE)

Well, with a soon-to-be even larger glut of houses on the market, this might be a good time to go into the slumlord business.

Of course, then you'd have to rent to these same types of people, and we've already seen how likely they are to meet their obligations.

I hope every one of these 'strategic defaulters' ends up living in a fucking maytag box.

Posted by: blindside at June 02, 2010 08:44 PM (vT9Nl)

13 Does anyone even pay for stuff anymore?

Hell no. I always keep a Sawzall, pry bar, bolt cutters, and a lock pick set in the trunk of my car. You never know when a "buying opportunity" will present itself.

Posted by: Purple Avenger at June 02, 2010 08:46 PM (S1zlE)

14 I hope every one of these 'strategic defaulters' ends up living in a fucking maytag box.

Probably more likely they'll be running for congress.

Posted by: Purple Avenger at June 02, 2010 08:48 PM (S1zlE)

15 OT: Romanoff is now releasing emails and naming names! Yikes! It's going to get hairy!

http://tinyurl.com/32yuohb

Posted by: InCali at June 02, 2010 08:54 PM (PFubb)

Purple Avenger - I think I meant Moral Hazard in the traditional economics-sense

Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions

Posted by: Lily at June 02, 2010 08:55 PM (igSv+)

17 OK, I've been trying to get this done for a while. Someone smart needs to make a rollover of these two maps... Its a great visual.

PA, you up for that?

http://www.ritholtz.com/blog/ space 2009/01/08-foreclosure-heatmap/

http://tinyurl.com/5eosza

I think you will be surprised.

OK, Not really.
MikeB

Posted by: MikeB at June 02, 2010 08:56 PM (Y7Exx)

18 http://tinyurl.com/8e5qlu

http://tinyurl.com/5eosza

Good Lord. Where is the UNDO.

Try these two, folks

Posted by: MikeB at June 02, 2010 08:58 PM (Y7Exx)

19 IP = 112.94.254.9

Posted by: spammer at June 02, 2010 09:05 PM (fJB4X)

20 If I could refi with principle forgiveness, I'd stay. But I'm not sure I can fault folks who are carrying 500k mortgages on houses that are now (yeah, probably always were) worth, say, 300k. Why screw yourself out of 200k? The bank will get a cozy bailout and write-down if you walk away, which is why they'd rather foreclose than let people refi for the actual value of the property. I've never bought a house for more than 250k, so no foreclosure problems here, and always bought in desirable locations/school zones, etc. But I can still feel for folks who got buried underwater on loans because of the bubble/collapse.

Posted by: ingrid newkirk at June 02, 2010 09:10 PM (fuemy)

21 ...31 percent of foreclosures in March were deemed to be "strategic default" by researchers at University of Chicago and Northwestern University.

These defaults are more tactical than strategic. I think we should keep the nomenclature clean while we're on the path to hell. It's the least we can do.

Posted by: progressoverpeace at June 02, 2010 09:11 PM (Qp4DT)

22 don't you see, there are no emotions, no guilt, no shame. join us. just fall asleep and you'll achieve the peace you want.

Posted by: invasion of the body snatchers pod person at June 02, 2010 09:16 PM (7JES6)

23 6. PA, it's called social validation. Turns out that when our Moms asked, "If 'everybody' jumped off a cliff, would you, too," the answer is yes: when we see others doing something, we subconsciously recalibrate our assessment of what's normal and acceptable. They've even found that airplane crashes tend to cluster for that reason: news of one crash makes it more acceptable in the minds of stressed or depressed pilots to consider going out with a bang.

Posted by: stuiec at June 02, 2010 09:27 PM (W+GYq)

24 Every time I think I should buy a house this convinces me otherwise. This type of news signals to me that prices must drop further.

Posted by: The Chewbacca Defense at June 02, 2010 09:30 PM (YMZjg)

25 "Personal Bankruptcies Jump 9% In May, And The Outlook For The Year Has Been Jacked Up"

Posted by: curious at June 02, 2010 09:32 PM (p302b)

26 O/T: What do you think causes these things?: "IT'S REAL: Check Out Aerial Footage Of The Massive Sinkhole In Guatemala"

Posted by: curious at June 02, 2010 09:48 PM (p302b)

27 What do you think causes these things?

No idea.

Posted by: Lucifer, noting those chains are loose enough to get a good stretch in these days at June 02, 2010 09:54 PM (Xsi7M)

The Wall Street fat-cats got bailed-out. Anybody go to jail for their dealings?

The congress passed stupid laws and rules that got us into this mess in the first place. Have any of them been kicked-out of office?

President Hope&Change has failed big time.

The rich take care of themselves and government can't give away to much to poor folks.

We export our jobs.

It's the middle class that suffer. And suffer we will. Before long we all may be living in "fucking maytag boxes".

Posted by: Case at June 02, 2010 10:23 PM (0K+Kw)

29 anyone who 'strategically defaults' - ie, walks away when they can make the payments, should have their credit permanently ruined. Looking to the future, Criswell predicts: This clusterfuck masquerading as an administration will propose, or some Demotards in Congress will propose a bill that eliminates the "stain of bankruptcy caused by eight years of malfeasance and greed" (BOOOOSH!), foisted upon an innocent public. The argument will be that it's unfair for so, so many 'Mericans to have their credit ruined by the Evil Predations of Two Terms of Unbridled Greed. Everyone who strategically defaulted was forced into it, dontcha know? Seriously, look forward to Congress passing a bill that requires creditors to overlook the deadbeat behavior of millions of 'Mericans as a sop to buy more votes, under cover of redressing alleged injustices suffered under our vile capitalist system. Perhaps they will just legislate a reset of credit scores. Who knows. They won't know what exactly is in such a bill until they pass it, in the Pelosi fashion. At any rate this will happen, guaranteed, before Barry's second term is out.

Posted by: George Orwell at June 02, 2010 10:29 PM (AZGON)

30 I was responsible. I saved and saved while living in a crappy starter home in a crime ridden neighborhood until i could afford my dream home.

I put 20% down on it.

But I can't say I blame the strategic defaulters. Cause honestly, fuck the banks. Fucking crony capitalists is all they are. The contract you sign says you pay back the loan or they get the property. Nothing moral or immoral about it. The bank gambled and lost. Fuck 'em. Uncle Sam's got their back. Walk away. Why shouldn't you? You gonna throw those crooks your every last penny to uphold some mythical honor?

No way. Walk.

Posted by: Warden at June 02, 2010 10:37 PM (fE6tn)

31 Warden - that speech would have really messed up "Its a Wonderful Life" in the bank run part.

Posted by: Oldcat at June 02, 2010 10:43 PM (Jp/J9)

32 IP = 112.94.254.9

Posted by: spammer at June 02, 2010 10:47 PM (fJB4X)

33 I have to largely agree with many here. Large financial institutions get plenty of sugar from Uncle Barry, while it comes out of our hides. So if your bank gets screwed, I for one can't get too upset. If trillions in bailout cash are out there, ready to be printed, then why does Barry hate the little guy so much? He won't send you or me a check for a few thousand large. So get it from his cronies, like B of A and GE Financial and every creep at Goldman Sachs. One of the problems with a society that riddles itself with a byzantine maze of rules and laws and special exceptions is that it, quite justly, makes everyone lose respect for rules and laws.

Posted by: George Orwell at June 02, 2010 10:48 PM (AZGON)

34 Posted by: Warden at June 03, 2010 02:37 AM (fE6tn)

So ... people who rent should just stop paying and take the free 6 months or year it takes to evict them and have a blast? The lessor signed the contract with them.

Anyone who took a variable rate mortgage is an idiot who deserved what he got. He was already taking risk in the real estate market by buying the house, but he then decided to have huge exposure to the interest rate movement, too.

I have no sympathy for those who got themselves into these wacky mortgages, to save a few bucks in the short term. Fixed rates were more than low enough, themselves. And this was all nothing new. They started with balloon mortgages in California back in the 70's, that roped a lot of people into silly financing and burned them.

None of this would have happened had Fannie and Freddie not been buying these shit mortgages from the originators.

Posted by: progressoverpeace at June 02, 2010 10:52 PM (Qp4DT)

Posted by: George Orwell at June 03, 2010 02:48 AM (AZGON)

It's funny that it took the leftists to make the housing market truly predatory and amoral. It's irreparable damage, too.

Posted by: progressoverpeace at June 02, 2010 10:54 PM (Qp4DT)

36 None of this would have happened had Fannie and Freddie not been buying these shit mortgages from the originators. That is THE single most important point about this housing bubble. It outstrips the CRA by far. The fact that government-sponsored and supported FNMA and FMAC were authorized to essentially buy toilet paper and claim it was investment grade was all the incentive anyone needed to loan half a million to a chimpanzee, a crack whore, or a brick, if one could get a brick to sign a loan doc.

Posted by: George Orwell at June 02, 2010 10:58 PM (AZGON)

37 So ... people who rent should just stop paying and take the free 6 months or year it takes to evict them and have a blast? The lessor signed the contract with them.

Are the lessors getting 0% interest loans from Uncle Sugar and then allowed to profit by loaning that very money back to Uncle Sugar for a tidy 2-3% risk free profit?

Then sure!

Here's my point, roughly: If the banks don't have to play fair with you, then why the fuck should you play fair with them? You're really gonna throw every last dime away as a matter of honor to the very folks who are running a rigged game? That's the definition of stupid.

Fuck the banks. Fucking crooks.

And again, I'm fully paid up on my mortgage. I did things the right way. I know that most of these numbskulls made stupid fucking decisions. So what? We've got crooks making MILLIONS a year at these banks who made worse decisions and got rewarded for it. So fuck it. There ain't no rules anymore. Look out for number one.

Posted by: Warden at June 02, 2010 11:03 PM (fE6tn)

38 None of this would have happened had Fannie and Freddie not been buying these shit mortgages from the originators.

No argument here. But once the banks saw that Uncle Sugar was gonna be backstopping all these deadbeats, well they sure were happy enough to collect some fat origination fees and shove those crappy loans off on someone else.

There are no good guys in this mess. The dumbfucks who took these loans aren't victims, I agree. But if I found myself in their shoes, i'd strategic default in a heartbeat. Why not? The banks weren't honorable either. So fuck them. They're worse than the deadbeats, in my eyes, because they knew damned well what they were doing.

Posted by: Warden at June 02, 2010 11:12 PM (fE6tn)

39 It's nearly a done deal that while one's credit is supposed to be damaged severely by deliberately defaulting on a loan, the damage will be undone by law. Barry is not going to let a fat chunk of voters slip through his fingers if he can insure their loyalty by not only eliminating the income tax on unpaid or forgiven debt, but by actually mandating a restoration of credit status to "the victims." This is coming as surely as Barry's next pack of Kools must come.

Posted by: George Orwell at June 02, 2010 11:17 PM (AZGON)

40 Fuck the banks. Fucking crooks. And again, I'm fully paid up on my mortgage. I did things the right way. I know that most of these numbskulls made stupid fucking decisions. So what? We've got crooks making MILLIONS a year at these banks who made worse decisions and got rewarded for it. So fuck it. There ain't no rules anymore. Look out for number one. Your just envious that I have a bigger house. Out of bananas again? Time to refinance.

Posted by: chimpanzee with a pen at June 03, 2010 12:02 AM (SwkdU)

41

I got a zero down, interest only HELOC to get into my house. Within 2 years, I refi-ed with 20% down in equity. It was a great way to buy a house.

Others were ... not so lucky.

Posted by: hobgoblin at June 03, 2010 12:26 AM (BXLor)

42 Posted by: Purple Avenger at June 03, 2010 12:43 AM (S1zlE)

That is the key right there. As well as two other facts. First the communists in the WH, aided by the CBC, Bwaney Fwank and Piss Dodd, are making sure that people get "assistance" paying off their mortgage or at least some forgiveness from the banks. Who pays for that? The honest taxpayer. If you are an honest taxpayer and you are underwater on your mortgage and still paying for it it makes you a sucker. And second, CRA means that you don't have to worry about a bad credit score to get a home loan anymore. Again, thank you CBC, Bwaney Fwank, and Piss Dodd.

Who does this hurt, why those evil banks that must originate loans and the investment banks who have to buy those loans. Ultimately it hurts the "honest taxpayer" who has to bail out the banks and F&F who had to buy all those bad loans.

Posted by: Vic at June 03, 2010 01:24 AM (6taRI)

43 Damn there are a lot of people on here who have the cart exactly backwards. CRA did, in fact, cause this mess.

The banks were forced to make these bad loans. And guess what, they are STILL being forced to make these bad loans as we speak.

In order to allow them to make the bad loans F&F had to "buy" those loans. It was Jamie Goerlich (remember her) who was the lead honcho in developing those "investment packages" that his the bad loans in amongst the good loans. In a sane world she and her partners would now be under indictment for fraud.

It was the Dems who wrote the bank regulations that allowed the banks to call a loan a "good" one if it was insured. That is what got AIG into the picture. Those so-called bad investment instruments everyone howls about were nothing more than insurance policies on "bad loans".

And just like the ENRON debacle the corporate auditors were lax at the banks and at AIG in allowing this to go on. That being said, the problem was not unknown. As far back as 2005 both Bush and idiot McCain warned there was a massive problem with home loans and F&F. Those videos of Bwaney Fwank and Piss Dodd saying there were no problems and nothing else needed to be done should have gone viral on the newscasts. You can bet that if it had been Republicans defending some bank they would have played non-stop for months.

No the problem did not originate with the banks. The Democrats own this problem lock stock and barrel. What the banks are guilty of is not making the original problems known to the public and actually fighting the commies in the Democrat party. But that is a problem with all large companies now. They are scarfed to death of the regulators on one hand and on the other the larger the company the more they think they can get regulations that benefit them in the short term. .

Posted by: Vic at June 03, 2010 01:42 AM (6taRI)

44 One last point here and I will shut up. In the States that had the largest runaway price escalation (bubble) the prices have NOT come down as much as they need to.

Again, this is because of government meddling in the market. This is CA, NY, FL, and maybe a couple of others to a smaller extent.

Last year I checked my old neighborhood in CA in Castro Valley. Track houses built in the 50s were still being sold at an average of $550/sq ft. That is insanely overpriced and in a free market would have fallen a bunch by now because normal people simply can not afford those kinds of prices for a house and rich people are not going to buy a 1950s track house on a postage stamp size lot.

Posted by: Vic at June 03, 2010 01:49 AM (6taRI)

45 So will it ever get to the point where the banks start offering deals to the "good guys" (i.e. those who still have jobs and are still paying their mortgages)?

Or am I just a naive noob?

Posted by: rockhead at June 03, 2010 02:25 AM (RykTt)

46 One last point here and I will shut up.

It's about time.

And you know I'm just screwin' witcha, Vic. G'Mornin'..

550 a sq ft? Might I suggest that 50 year old housing going for 5.5 times its current cost to build is not a bubble; it's fucking insanity? Only government can create that kind of market distortion. I don't how the fuck they do it, but they do.

Posted by: Herr Morgenholz at June 03, 2010 02:30 AM (DVzx9)

47 Things are fine, well until they aren't.
And when the time comes that they aren't then look out below.
Hope for the best, but I strongly recommend you prepare you and your loved ones for the worst.

A perfect storm is brewing on the horizon.

Posted by: Markc at June 03, 2010 02:36 AM (2z8ZT)

48 Only government can create that kind of market distortion.

Yep, I think in the case of CA it was a combination of their "green" laws and then the feds with their double whammy of CRA and low interest rates all combined to make the perfect storm.

The prices in that neighborhood were starting to rocket up in 1977 when I left. That was long before the huge bubble.

Posted by: Vic at June 03, 2010 02:38 AM (6taRI)

49 So will it ever get to the point where the banks start offering deals to the "good guys" (i.e. those who still have jobs and are still paying their mortgages)?

They already do, at least here in my State (which had no huge bubble). A "good guy loan" as you describe has a much lower interest rate than the bad credit loans.

Posted by: Vic at June 03, 2010 02:40 AM (6taRI)

50 My brother has a friend in San Diego and was begging him to sell when his friend's little crackerbox house hit the 600K mark a few years back. Idiot didn't do it.

600K gets you a small mansion in Ohio.

Posted by: Herr Morgenholz at June 03, 2010 02:41 AM (DVzx9)

51 Good Morning to all Morons -- there seems to be some sympathy here for the homeowners and a lot of condemnation for the bankers...after reading this story (and yes, it is heart-wrenching/sarc off), you'll have them all in a boiling pot of oil.

http://tinyurl.com/2c3qs7a

Time to go work so I can pay my bills (yes...work and pay bills -- sucker that I am).

Posted by: billygoat at June 03, 2010 02:42 AM (5qJM5)

52 I wish I would have borrowed beyond my means. Instead I get poorer and poorer and don't qualify for foodstamps because I have actual savings.

Posted by: sexypig at June 03, 2010 02:43 AM (88C4M)

Vic, all that you said is true but don't let the banks off so easy. I'm not talking about some small bank in Nebraska or someplace like that. It's the large (to big to fail) banks hq-ed in New York City. They were up to their eyeballs in this mess. They could have made a statement like refusing the bad loans or backing the bad loans. They could have caused an up-roar, gone to the WSJ or someone who would listen to their concerns instead of going with the flow knowing it was going to explode sometime.

btw. Anyone who ever watched HGTV and seen the price of housing people were paying for a 2 bedroom 1 bath dump in various metro areas in the country would have known how over-priced housing was (and still is).

Posted by: Case at June 03, 2010 02:45 AM (0K+Kw)

54 600K gets you a small mansion in Ohio.

Posted by: Herr Morgenholz at June 03, 2010 06:41 AM (DVzx9)

Correction, HM -- you can buy a whole block in Ohio (CLE, anyway) and have $$ leftover to dig a moat, put up a cyclone/razorwire fence and hire crackheads to guard your new compound!

Posted by: billygoat at June 03, 2010 02:45 AM (5qJM5)

Posted by: billygoat at June 03, 2010 06:45 AM (5qJM5)

I though about doing something similar in Dayton years ago, when I was single. There was a veritable mansion from the teens or 20s that needed rehab and going for damned near free. About 10,000 sq ft of Craftsman style yumminess. Would've been like living in a movie, the bones on that place were so good. Hell, there was probably a half million worth of woodwork in there.

I determined that the cost of Hessian mercenaries as personal bodyguards was prohibitive.

Posted by: Herr Morgenholz at June 03, 2010 02:51 AM (DVzx9)

56 They could have made a statement like refusing the bad loans or backing the bad loans.

Some of the large banks did fight them in the beginning. That is where CRA came in. The changes made while Cinton was in office while congress was still controlled by Dems not only penalized banks if they didn't make the loans, but it also made it easy to sue.

That is the ONLY time Obama ever went into a court room; suing banks in Chicago for not making enough of those CRA pushed loans.

Yes banks could have fought more but there is that old saying "you can't fight city hall". I blame the voters that keep sending idiots like Bwaney Fwank and Piss Doddd to congress more than I do the banks.

I will repeat; the Dems own this fiasco lock stock and barrel and we as conservatives should not be jumping on the blame big business populist bandwagon.

Posted by: Vic at June 03, 2010 02:53 AM (6taRI)

57 The banks could choose to write down these losses and keep paying customers, but they don't (shhhh hide the losses.) There are short sales that never get approved - guess the bank prefers not to get paid every month, but pretend the house is worth 600K.

Posted by: sexypig at June 03, 2010 02:59 AM (88C4M)

58 600K gets you a small mansion in Ohio.

LOL, it will get you a pretty damn good house here as well. (close to 6,000 ft2 assuming the prices in my neighborhood).

But this reminds me of something else peculiar to the Bay Area in CA when I lived there. Before I moved to the house in Castro Valley, I and two other guys were renting a duplex apartment in Union City. This was a large apartment, 3 bedrooms with a garage and furnished. We got this for $500/month. Now granted, Union City was the last available city limits moving down the concrete jungle from Oakland but it was still in the area.

When I moved here to SC it cost $550/month for a smaller apartment, no garage, and unfurnished and no garage. It was all due to the lack of rental housing in SC. I also checked on those same apartments last year in CA. They are renting now for about $1000/month which is not so bad over 30 years later.

If I was living in CA now I would not be buying, I would be renting and waiting for the prices to continue down.

Posted by: Vic at June 03, 2010 03:03 AM (6taRI)

59 The banks could choose to write down these losses and keep paying customers, but they don't (shhhh hide the losses.)

Again, that is caused by stupid federal regulations. As soon as they write down those loans they become insolvent because it comes off of the assets and on to their costs. When those get below a certain point the FDIC shuts them down and takes over.

Posted by: Vic at June 03, 2010 03:05 AM (6taRI)

60 26 O/T: What do you think causes these things?: "IT'S REAL: Check Out Aerial Footage Of The Massive Sinkhole In Guatemala"

Posted by: curious at June 03, 2010 01:48 AM (p302b)

GWB...who'd you think?

Posted by: torabora at June 03, 2010 03:10 AM (PevdC)

We should be so lucky and that happened in Washington D.C.

Posted by: Case at June 03, 2010 03:20 AM (0K+Kw)

62 Yep. Its one hell of a band-aid that we are slowly, slowly tearing off our wound.

Posted by: sexypig at June 03, 2010 03:21 AM (88C4M)

I propose a new law that anyone who strategically walks away from their mortgage never be able to purchase property again in their lifetime and that if they have children, their kids are never able to own property either - that is, unless they pay what they agreed to pay in their initial agreement.

Posted by: kdizzydaze at June 03, 2010 03:32 AM (eQxab)

64 Trade 'em to China to work off the debt.

Posted by: sexypig at June 03, 2010 03:33 AM (88C4M)

65 Well there are other penalties associated with these walk aways. I know a couple who did it a few years ago. One thing they did not count on was getting a 1099 reporting the difference between their loan amount and what the bank got at auction as income for them. A cool $125,000 was reported as income for them that year and the IRS was all over it. Interest, penalties and AMT payments mounted up quick and they are going to be paying monthly payments to the IRS for the next 15 years of so.

Posted by: Johnnyreb at June 03, 2010 03:40 AM (Mv/2X)

66 I propose a new law that anyone who strategically walks away from their mortgage never be able to purchase property again in their lifetime and that if they have children, their kids are never able to own property either - that is, unless they pay what they agreed to pay in their initial agreement.

That is the normal lib response. Pass new laws to "fix" the problems caused by the last laws passed.

What we need to do is get government out of the banking laws and real estate laws totally. repeal some laws, how about that?

Posted by: Vic at June 03, 2010 03:40 AM (6taRI)

67
I just want to let y'all know, this is difficult to say, but it needs to be said...I too had a sexual relationship with Nikki Haley.

What can I say? She likes me berries.

Posted by: Franken Berry at June 03, 2010 03:45 AM (k9Ti8)

With apologies to......well, nobody.

Spirits In The Radicals World

There is no political solution

to our troubled evolution

What happened to our constitution?

Maybe a bloody revolution?

We are spirits in the Obama world

Our so-called leaders speak

with words they try to jail you

Make promises to the meek

but it's the rhetoric of failure

We are spirits in the Pelosi world

Where does the answer lie?

Living from day to day

Their laws we can't abide

There must be another way

We are spirits in the radicals world.

Posted by: Case at June 03, 2010 03:47 AM (0K+Kw)

69
wow MACGRUBER is doing awful at the box office

typical SNL-skit movie, I suppose

Posted by: Franken Berry at June 03, 2010 04:07 AM (k9Ti8)

I feel like such a sucker. I sold my house and paying off my credit cards and all other debts. Shoulda just walked I guess.

Credit score isn't going to matter a whole bunch anyway when we are on a gold and barter economy,

I am planning on going all cash here. Serious draw down. Not going Galt just restructuring for the new normal.

Posted by: blaster at June 03, 2010 04:17 AM (su3hy)

71 As soon as they write down those loans they become insolvent because it comes off of the assets and on to their costs. When those get below a certain point the FDIC shuts them down and takes over.

Ever wonder where all that supposed $700B stimulus money and SBA loan money went that nobody seems to be able to actually find out in the street?

I'd bet a donut it got diverted somewhere along the way to shore up bank balance sheets so FDIC wouldn't be compelled to declare all the major banks insolvent.

Posted by: Purple Avenger at June 03, 2010 04:18 AM (vmdt/)

72
holy shit did y'all hear the Gary Coleman 911 call?

His wife is fucking useless.

Posted by: Franken Berry at June 03, 2010 04:26 AM (v77ig)

73
"There's blood and it's so gross."

It's bloody and I can't deal."

Posted by: Franken Berry at June 03, 2010 04:27 AM (v77ig)

74
What a shitty way to go. Poor Gary Coleman.

Posted by: Franken Berry at June 03, 2010 04:29 AM (k9Ti8)

75
Everyone thinks Capt Kirk/Denny Crane/TJ Hooker is so cool but he's a piece of shit.

Brave James T Kirk blubbering like a pussy while his wife is dying in the swimming pool. Captain fucking Kirk couldn't get her out because she was in the deep end...a whole, what, 9 feet of water?!?!?

Posted by: Franken Berry at June 03, 2010 04:31 AM (v77ig)

76 I just wanted to say that I really like your blog and I hope you keep up the Great Work!!

Steve
Common Cents
http://www.commoncts.blogspot.com

ps. Link Exchange??

Posted by: Steve at June 03, 2010 04:33 AM (0dcjh)

77
Steve, give it up. You'd be blog-pimpin' your stupid site for a couple of years now.

Posted by: Franken Berry at June 03, 2010 04:34 AM (v77ig)

78
Really?

It's just me and Steve the spammer?

Posted by: Franken Berry at June 03, 2010 04:35 AM (k9Ti8)

79
me being alone here in the top post is like my own 9/11

Posted by: Franken Berry at June 03, 2010 04:38 AM (k9Ti8)

80 I'd bet a donut it got diverted somewhere along the way to shore up bank balance sheets so FDIC wouldn't be compelled to declare all the major banks insolvent.

Posted by: Purple Avenger at June 03, 2010 08:18 AM (vmdt/)

I concur. That is the only reason everyone was kicking and screaming about how you can't audit the Fed because it would turn into politics and Ron Paul is a kook, is it would show where the money actually went. If they actually did a full blown audit, there would be rioting in the streets.

Posted by: Johnnyreb at June 03, 2010 04:39 AM (cqZXM)

81 Ever wonder where all that supposed $700B stimulus money and SBA loan money went that nobody seems to be able to actually find out in the street?

The 700B was Tarp??? It was supposed to go to the banks for buying up toxic assets (i.e. bad loans) instead it went to bail out AIG and other Wall Street investment houses.

The "stimulus package" was 1T and most of it was pure Dem pork/welfare projects. Most of it hasn't been spent yet and they are holding it until election year politics. Look for massive spending after the primaries are over.

The stimulus became nothing more than a slush fund used to bribe people in the healthscam votes.

Posted by: Vic at June 03, 2010 04:41 AM (6taRI)

82 What do you think causes these things? Gravity & Water

Posted by: Jean at June 03, 2010 04:47 AM (mtAmx)

83 The "stimulus package" was 1T and most of it was pure Dem pork/welfare projects.

Not all. ex. DOE was supposedly, supposed to get maybe $50B to hand out to small companies working on energy saving products. Well informed, highly placed inside sources at Oak Ridge are saying that that grant money congress authorized simply never showed up, and they've been unable to give grants to a number of things they really wanted to.

Posted by: Purple Avenger at June 03, 2010 04:49 AM (vmdt/)

84 Unfortunately I am in a situation where this is relevant in my life. 10 years ago I built/purchased a brand new home in a growing major metro area. I paid $153k and put 3% down on an adjustable FHA product (this was before subprime and 80/20 loans became the primary way to go for those with little or no downpayment). 2 years later I borrowed $25k against the house in a 125% loan program to pay off some higher interest credit debt. In retrospect, what moron designed that loan program? And what moron borrowed 25% more than the house was worth?

Anyways, after about 3 years, the neighborhood began to see a rash of foreclosures and values began to really take a hit. I had no interest in moving, so I didn't have any urgent reaction. However, a career change a year later sent me to another state, but I could not sell the house since I owed about $170k and it was worth about $155k. So, I began renting it out. Over the next 4 1/2 years I rented the house out while I lived away. After getting married and buying another home, I/we decided being landlords is not for us, so we asked the renter to vacate and spent appx. $8k putting the house back to excellent condition to market to sell. This was summer of 2009.

Fast forward to last month, where home had been listed for $159,900 for months with ZERO showings. On realtor's recommendation, I dropped the price to $139,900 and now have a contract to sell at $132,500. A tidy loss of $20k off my original price 10 years ago.

I owe approximately $150k on the two loans and, frankly, don't have the difference to bring to closing. So, we're trying to get the banks to approve a short sale. Frankly, if they don't, default is an option, as we really can't continue to carry both and I'd almost rather default than go through renting it again. ALMOST.

Now, is the overall situation my fault...certainly. If the short-sale is approved, I'll suffer a credit hit and the resulting financial damage. Is it the banks fault...well, yes, the 2nd lender made a fng stupid business decision and the market punishes stupid decisions. But, that's where it should end. The borrower and the bank are responsible and the market had ways to deal with this scenario.

Government intervention has brought the general tax-paying population into the equation in a way that never should have happened. Previously, banks were properly punished for poor decisions and borrowers tended to make every effort not to default because of the ramifications. The government changed all that and the rabbit hole is very deep indeed.

Posted by: The Hammer at June 03, 2010 04:55 AM (YBTwf)

85 "Is This Woman Too Hot To Be a Banker?""Al-Jazeera Anchors Quit Over Makeup and Hair"

Posted by: curious at June 03, 2010 04:55 AM (p302b)

86 O/T: What do you think causes these things?: "IT'S REAL: Check Out Aerial Footage Of The Massive Sinkhole In Guatemala"

I totally thought this was a great big interweb hoax. The pics of the thing looked like a total p-shop. Thanks for the link to the video.

Posted by: rockhead at June 03, 2010 04:57 AM (RykTt)

87 Not all. ex. DOE was supposedly, supposed to get maybe $50B to hand out to small companies working on energy saving products.

Yes there was a lot of money designated for these "green energy" projects but I view them as typical Dem pork. I actually downloaded the bill and went through it. The overwhelming amount of money in the bill was dedicated to typical Dem socialism projects.

Note that this is the 1T "stimulus" bill which hasn't been spent yet. So that is why the DOE may not have got their money yet. Hell, if they do what they have been doing it will get spent on something else, like paying off the bribes in the healthscam issue. Obama knows the Dem congress is not going to challenge him on spending money where it was not authorized and withholding it where it was.

Posted by: Vic at June 03, 2010 05:01 AM (6taRI)

88 Now, is the overall situation my fault...certainly. If the short-sale is approved, I'll suffer a credit hit and the resulting financial damage.

It would be tragic if all that kraft paper and sheets you had spread all over the place as masking and drop cloths for a big painting project were to catch fire because the cat tipped over a lamp, the bulb broke, and the glowing filament set the drop cloths on fire while you were away for the weekend. I'm just saying...

Posted by: Purple Avenger at June 03, 2010 05:06 AM (vmdt/)

89 This is no big f***ing deal. Barry is focused like a laser on it.

Posted by: TheQuietMan at June 03, 2010 05:11 AM (1Jaio)

90 a lot of money designated for these "green energy" projects but I view them as typical Dem pork.

Not all. Solar/wind nonsense, sure, but the stuff I'm working on is very hard science that could replace a traditional T8/electronic ballast fluorescent lights (32W/tube) for about 5W and doesn't have any of the high assembly cost comparable discrete LED technology does

Posted by: Purple Avenger at June 03, 2010 05:12 AM (vmdt/)

91 Plus more great unemployment news; New unemployment claims drop to only 453,000! I'm thinking that what we need is another bailout or people will die... Or something. Maybe Barry should rem ins us of all of the jobs he created or saved since nobody else seems to know about any.

Posted by: Hussein the Plumber at June 03, 2010 05:12 AM (r1h5M)

92 To each and every one of you who thinks that a "strategic default" is an appropriate choice, fuck you. Fuck you sideways. You're supporting the position that it's perfectly fine to fuck over the bank's investors and the remaining people who are attempting to pay their mortgages. You're also supporting the infantalization of the American populace. Absent true fraud, those who took out these mortgages knew or should have known what they were getting into. If you don't understand the terms, don't sign the paperwork. I have very little sympathy for walking away simply because you're underwater. So. Fucking. What. Markets go up. Markets go down. Yes, it completely and totally sucks to be caught in that situation. So. Fucking. What. The appropriate response isn't to bail on your obligations.

Hell, reading The Hammer's comment above, s/he should be allowed to come and take money out of the bank account of those who do that to pay off the loans. Why not? All attempts were made to be responsible and continue making the payments and the like. If it's okay to just fucking bail, then why shouldn't someone who didn't do that get to reap the benefits of those actions?

Oh and let's not forget that principal forgiveness and complete loan forgiveness should be counted as income for tax purposes. So now those who do this are also going to be walking on enormous income tax bills too.

So, yeah, you'll forgive me if I find the "screw the banks!" position to be complete bullshit.

Posted by: alexthechick at June 03, 2010 05:14 AM (8WZWv)

93 Wow... I never thought there would come a time when many people would "blow off" a mortgage. I remember when that payment used to mean something. Thank you DEMOCRATS and MFM for encouraging people to do these reckless things.

The really terrible thing is that the people in the MFM and Dems in Congress don't have to worry about a mortgage payment EVER, because they are rich.

You know, RICH. AKA Fucking assholes who need their money taken away according to them.

Un fucking real

Posted by: MelodicMetal at June 03, 2010 05:15 AM (x4S2a)

94 but the stuff I'm working on is very hard science

Well, sure, but actual sciencey science isn't generally part of the Green movement.

Posted by: alexthechick at June 03, 2010 05:16 AM (8WZWv)

95 88...yes...the tragedy of it all.

In all seriousness, my biggest reason for wanting out ASAP (besides the monthly pain of writing the checks) is that the neighborhood has little to no chance of ever recovering and I fully expect values to continue to decline there.

Again, that is on me...and the bank...and if the rules allow me to short sell or default with some penalty, then fine. Those rules were there for a reason and contracts run two ways. Unfortunately, our federal government has decided to be overly involved and continues to manipulate the rules in ways that will insure everyone is screwed royally...not just the borrowers and the banks.

Posted by: The Hammer at June 03, 2010 05:16 AM (YBTwf)

96 There is another part to thi story where many people are managing to stay in their homes after their homes have been foreclosed on - and they are bragging about it, about how foreclosure has improved their lives since they still have a home that they don't have to pay for. Life under Barry is really making me feel stupid. I think I just need to buck up and quit paying my bills!

Posted by: Hussein the Plumber at June 03, 2010 05:20 AM (r1h5M)

97 Posted by: alexthechick at June 03, 2010 09:14 AM (8WZWv)

The problem is the commie policies make honest people into suckers.

As Frederick Bastiat explained way back in the 1700s, people will always in the end seek the easyist way out. And really, Adam Smith said the same thing in a different manner in that they would always seek out what is "best" for themselves personally. The job of government is to make it harder for the looters to profit from their looting. When the government aids the looters the system will ultimately fail.

That is where we are at now. But I agree, the banks are not the evil minions in this fiasco.

Posted by: Vic at June 03, 2010 05:26 AM (6taRI)

98 #51 How in the world did these folks get three mortgages? No sympathy here.

Posted by: NotAMolly at June 03, 2010 05:29 AM (ADJFU)

99 Those rules were there for a reason and contracts run two ways.

Indeed. IMO, if default is a legit aspect of the contract, then the "moral obligation" is minimized -- IOW, the lender has made a conscious choice to use the legal system as recourse rather than dealing with you as an individual and basing a deal on trust and honor.

If the banks made mortgage loans on a handshake basis and trust, it would be a completely different story. I've taken some severe beating on handshake deals, because someone was given my personal word something would happen, and I damn well made sure it did.

People use formal contracts as a form of protection, but that protection also defines a set of behavior that is acceptable within the terms of the contract.

Posted by: Purple Avenger at June 03, 2010 05:32 AM (vmdt/)

100 What happens to the mortgage insurance - who got that cash, and what happens to the properties covered by it? Is it just a windfall for the bank who gets it and the house, didn't the borrower pay the PMI - does it go against his mortgage debt, do the insurers get the house?

Posted by: Jean at June 03, 2010 05:32 AM (OlnxK)

101 Barney Frnak and CHriss Dod have LOTS of questions to answer.

Specifically how they could have said back in 05 that "Everything is fine with F&F"

Fucking cock mongers.

Posted by: MelodicMetal at June 03, 2010 05:33 AM (x4S2a)

102 The government is defining the rules of this whole mess - they forced the banks to make the loans; they then backstopped the loans, so the investors would buy them; they forced the banks to maintain an inflated asset ratio, so they can't rework the loans; and IRS pub 4681 makes walking away viable. You couldn't have planned it better.

Posted by: Jean at June 03, 2010 05:34 AM (6Njk9)

103 What happens to the mortgage insurance - who got that cash, and what happens to the properties covered by it? Is it just a windfall for the bank who gets it and the house, didn't the borrower pay the PMI - does it go against his mortgage debt, do the insurers get the house?

The way I heard (which could be wrong of course), is that PMI pays off to cover the costs incurred in the foreclosure process. It doesn't actually cover the loan itself.

Posted by: someone else at June 03, 2010 05:38 AM (S/hBA)

104 Gee ??!!??

I can't understand why banks deemed some neighborhoods high risk,

can you?

Posted by: franksalterego at June 03, 2010 05:39 AM (+6fgE)

105 You want a foreclosure horror story. A guy around here got laid off (from a bank that failed, none the less) - in the middle of a divorce - got behind - forceclosure - shit happens. Except the foreclosing lawfirm foreclosed not just on his property - but the entire plat of property prior to subdivision (either their fault or county filing error) - eight homes. Sold them all on courthouse steps. The other property owners all had to fight eviction in court (won), and they are trying to unravel the mess. To top it off, the original guy - was in the reserves - volunteered for deployment and because they had to "re-foreclose"; they can't because he is deployed. Good times to be a lawyer, I guess.

Posted by: Jean at June 03, 2010 05:41 AM (JaO+v)

106 The way I heard (which could be wrong of course), is that PMI pays off to cover the costs incurred in the foreclosure process. It doesn't actually cover the loan itself. -- $250 a month should buy a lot of insurance, a lot more then the foreclosure fees.

Posted by: Jean at June 03, 2010 05:42 AM (vb5IK)

107 IRS pub 4681 makes walking away viable

Yes, when you're "insolvent". If you're not insolvent, there will be tax liability.

Posted by: Purple Avenger at June 03, 2010 05:46 AM (vmdt/)

108 There are no good guys in this mess. The dumbfucks who took these loans aren't victims, I agree. But if I found myself in their shoes, i'd strategic default in a heartbeat. Why not? The banks weren't honorable either. So fuck them. They're worse than the deadbeats, in my eyes, because they knew damned well what they were doing.

Posted by: Warden at June 03, 2010 03:12 AM (fE6tn)

There are two big problems with strategery default. One is that in most states you can default and the bank can take your house, sell it and sue you for the difference plus penalties and interest. The income tax problem has already been discussed.

You can get rid of the judgement the bank may bring upon you by declaring bankruptcy. The IRS charges you can't get rid of.

In Washington for example the bank can sue you and not even repossess your house. In other words they can come to you persoanlly and say hey you owe me $300,000 pay me.

Posted by: robtr at June 03, 2010 06:08 AM (fwSHf)

109 $250 a month should buy a lot of insurance, a lot more then the foreclosure fees.

Don't know. Never paid it.

Posted by: someone else at June 03, 2010 06:17 AM (S/hBA)

110 I especially enjoy the way this is all contributing to the declining values of all homes in the neighborhood.

Posted by: Masochistic Libtard at June 03, 2010 07:32 AM (gbCNS)

111 Here is the thing - we have created a situation where walking from a mortgage is a GOOD thing - or at least the benefits outweight the costs. Cuz you can hardly get credit, especially if you are stuck with one of these 30% credit card deals that you can never pay off. 30% is RUINOUS. Banks are not foreclosing for over a year because they are cooking their books. So if they are happy letting people live in the house for 16 months or so without paying, they really shouldn't be surprised that people choose to do so. If they took all the foreclosures at once they would get socked - stock value would get blown away if they reflected the actual loss all at once, instead of just writing off $2500 a month. You allow this conduct to occur so you can cook the books, you really aren't in a position to complain. The Hammer's story is emblematic. It is easier to walk from it than go to the trouble of renting it? Really? Wow, it must be pretty damn easy to walk on it, cuz otherwise you get some rental management company and they take 10% of the draw and you get the mortgage paid, or at least in part, by other people's money. But, warning - abandoned property is going to foreclosed on in a timely fashion. Its harder to push someone out, and whatever damage is already done. If you get a foreclosure notice, you are much more likely to strip the property and not take care of it. If noone is in there, no problem. Change the locks, files some paperwork, sell it at auction. Regardless, there will be MILLIONS of people with foreclosures on their record. Credit scores won't mean squat except to a few. I am retrenching. I am going all cash for the next few years. I was considering "infinite banking" but the underlying investments require a functioning core economy with investments that actually increase in value. That seems entirely risky at this point. Gold, guns, and seeds. Seriously.

Posted by: blaster at June 03, 2010 07:36 AM (SdFa6)

112 Fuck you sideways. You're supporting the position that it's perfectly fine to fuck over the bank's investors and the remaining people who are attempting to pay their mortgages.

It is perfectly fine. The bank's investors need to get fucked to make sure this crap doesn't happen again.

And guess what? I own Citi and am down 85%. How bout them apples? Oh, well. I guess I made a poor choice by investing in a company run by scumbags. Think the guys at the top didn't understand what was going on? Yeah?

"As long as the music is playing, you gotta get up and dance."
-Chuck Prince, former CEO Citi.

Posted by: Warden at June 03, 2010 07:48 AM (fE6tn)

113

It's strategic self-applied discounting.

It's an illegal theft, it's an undocumented transfer of ownership.

Posted by: Entropy at June 03, 2010 09:19 AM (IsLT6)

114

It is perfectly fine. The bank's investors need to get fucked to make sure this crap doesn't happen again.

Yes, yes they should.

But the homeowners need to get fucked as well.

Posted by: Entropy at June 03, 2010 09:21 AM (IsLT6)

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