i don''t see anything wrong with housing price going down...

[Beacon]

In california, refinanced loans are recourse. Technically the lender can seek a judicial forclosure and ask the borrower to make the loan whole via other assets. This is true for refis, not purchase money loans.

In practice it happens very rarely as it is a pain to do. Plus many people don''t even have enough other assets to cover.

 

[Beacon]

Date: 2/26/2009 1:50:57 PM
Author: Mara
having just gone through the process here in CA, it wasn''t that horrible. sure it was a PITA at the time because the landscape is different, but we closed within 30 days with wells fargo, and held our other property while doing it. i have multiple friends who are refinancing and have not had any issues at all, and got great rates. we keep in touch with our bank guy at wells fargo and he said he was going to be closing a few hundred loans in the first few months of this year and he was so busy it was ridiculous. there is only one more round of foreclosures they say.

in terms of lowering the tax deductability for the homes over time (won''t happen right away) on big earners... would that mean that no one would want to buy a house? i just found out last year that kids are only like 2500 write off. does that mean we won''t have one because the write off is going to suck? not even a factor. though man i am a little bitter they aren''t a better write off, diapers are expensive!

people need houses to live in... so while the 1m+ houses might languish a little, the under 1m pricing will still be desirable. rents right now in this area are ridiculously high and stuff is being rented quickly...if you can''t get a loan then sure, rent, but like i am telling everyone who is even thinking about the housing market...do your due diligence, talk to a bank or a few lenders, talk to a good realtor, and find out information relevant to what YOUR specific situation is. don''t just assume based on hearsay from other people or some website blog.

i am kind of an odd-bird because i was raised here and have seen how much people can make in RE if you are in it for the long term. my parents started out with a 60k house 35 years ago, and just finished a 1.7m remodel in los gatos...they have come so far. yes they saw the crazy ups and downs and probably wanted to pull their hair out numerous times, but they stuck with it. RE can''t be viewed as a short-term investment or like stocks IMO. but because of what i have seen in this area i have lived in all my life, where we have crazy highs and lows in both jobs and housing, i tend to just think it all levels out one time or another and then just starts to climb again.

Yes WFC is very busy doing refis. They are swamped with refis, I know as we are doing ours now too!

But the metrics just look dicy in CA. I am not saying that is is impossible to buy, or that the market will crash. What I am saying is that it ain''t going back to that top we had for quite some time.

Rents are actually falling in the area, not rising. I know people who are renegotiating w/ their landlords now. I also know this from the apartments REITs I own.

 

[NewEnglandLady]

Date: 2/21/2009 9:29:38 PM
Author: DiamanteBlu
Dunno. I''m watching closely - in fact, we went out to look at properties on the seacoast here last weekend. Asking prices still seem too high.

I know I''m really late to this thread, but we''ve been watching prices in the seaside town where we plan to buy for about five years. I feel like the prices have softened quite a bit, but I''ve noticed that oceanfront property doesn''t fluctuate the same way prices do in other areas of the region. I agree that prices will continue to fall (one main reason we haven''t bought), but I think the fact that there is only so much oceanfront property makes those markets a little more stable.

I always wanted to wait to pay cash to buy and we were investing heavily to reach that goal--when we got wiped out pretty badly this summer I thought "Hmm, it would have been nice if that money was in a house instead of the market". We''re going to try to recover as much as possible over the next couple of years (while continuing to live in a cheap rental) and then buy, even though I don''t think we''ll reach our original goal. I guess hindsight is 20/20.

 

[Harriet]

Beacon,

Here''s a hypothetical: B is cash rich and owns Blackacre (encumbered by its original mortgage) and Whiteacre (unencumbered). Assume that Blackacre falls below B''s basis. Since he already has a residence and is cash rich, B doesn''t need a good Fico score. So, wouldn''t he have an incentive to walk away from Blackacre?

 

[Mara]

oh i agree beacon, CA is always a bigger risk than anywhere else IMO. this is a high gain and loss area.... where you can see large increases or drops in quick times. i think that the market will rebound, but yes it will take years. people have to be willing to be patient. that is why i am glad we got in now and plan to sit in our house for a long period of time, we chose one with an exceptional public elementrary school so in case we do have kids and can't afford to move or pay private school, we are good for at least 8-10 years. we could think...well if we had waited 3 more months, we could have paid 30k less but in reality if we want to be here that long... the 30k amortizes out over time and THIS particular house on this street would not have been available 3 months later as there were 2 offers on it (see still multiple offers, crazy!).

now if we can just sell our TH... i hate paying 2 mortgages. we could rent it out, as here in SJ they have not dropped yet and people are still renting like crazy but we are not interested in being landlords...!! we have had a lot of interest so keeping fingers crossed.

 

[Beacon]

Harriet,

As far as I understand, he may do so without much downside, excepting his FICO score.

There are many considerations which may cause the owner to decide not to walk away. But excluding these, he has little other risk besides bad FICO.

Now then, if he has a lot of other outstanding debt, and any of that debt has the equivalent of a material adverse change clause, that could motivate him to hold onto his underwater property. This is unikely though. (although credit card companies have essentially done just this with their bizarre "universal default" provisions!)

Cross collateralization is extremely rare, so Blackacre and Whiteacre are mutually exclusive relative to mortgage default.

 

[Beacon]

Harriet, I forgot one thing: if his property is so substantially underwater that it''s sale will not recover the mortgage, then I believe the IRS rules regarding debt forgiveness as income come into play.

There has been recent legislation regarding this, so I do not know if it would apply in a residential home and to what extent, limitations etc. This is in your ballpark!

It could certainly provide strong motivation to an underwater owner to keep the home.

 

[TravelingGal]

Date: 2/26/2009 3:14:07 PM
Author: NewEnglandLady

Date: 2/21/2009 9:29:38 PM
Author: DiamanteBlu
Dunno. I''m watching closely - in fact, we went out to look at properties on the seacoast here last weekend. Asking prices still seem too high.

I know I''m really late to this thread, but we''ve been watching prices in the seaside town where we plan to buy for about five years. I feel like the prices have softened quite a bit, but I''ve noticed that oceanfront property doesn''t fluctuate the same way prices do in other areas of the region. I agree that prices will continue to fall (one main reason we haven''t bought), but I think the fact that there is only so much oceanfront property makes those markets a little more stable.

I always wanted to wait to pay cash to buy and we were investing heavily to reach that goal--when we got wiped out pretty badly this summer I thought ''Hmm, it would have been nice if that money was in a house instead of the market''. We''re going to try to recover as much as possible over the next couple of years (while continuing to live in a cheap rental) and then buy, even though I don''t think we''ll reach our original goal. I guess hindsight is 20/20.

Well yes and no. It''s a lot of rich people thinking they are untouchable. And they''re not. Will it fall 50% like some places are doing? Most likely not. But in my area, homes were about 800K when this started. I can say it''s safely fallen 15%. That''s $120,000!!! And that''s the same 120K to me as a house that''s fallen 50% (from 240K to 120K) in the inland empire. Yeah, it sounds scarier at a 50% loss, but I''m looking at what I can save in my pocket at the moment.

One realtor said I should buy now because she believes homes will only fall 10% more max in the area. Homes are in the 600K range right now for what we want, and I''m thinking that''s 60K! It would take us over two years to save that amount, and so if I can "make" that in a year (which is how long I think it will take - and how long the realtor says until we "bottom out") while saving ANOTHER 25K by waiting a year, I''d get 85K worth of home compared to buying now.

I can''t wait forever, but I can wait another year, two probably max if we want to have kids.

I lived in an ocean town growing up. In the 90''s, the same people said that ocean area could not lose their shirts. Well, they did...foreclosures were rampant and we were one of them. Homevalues plummeted in our local beach cities and the prices were not nearly as inflated as now. I do realize back then our aerospace industry shutdown was one of the main reasons our local real estate was so affected, but we are going to see a huge loss of white color jobs as well in the next couple of years. Beach cities are the last to crumble, but I am willing to bet we''re just starting the downward slide in the wealthier communities.

In any market, if the house is priced WELL and is turnkey, you are going to have a way better chance at selling, and most likely will sell. But seen the listings lately? Most people are STILL on DRUGS.

 

[Winks_Elf]

Date: 2/21/2009 8:17:41 PM
Author: DiamanteBlu
I am waiting patiently . . .

Add us to that branch!

 

[purrfectpear]

I bought my oceanview condo in 2006 (yep, my timing was impeccable

). I paid $500/sq. ft. with 3% down. It''s now worth $200/sq. ft.
I''m upside down and the 3% downpayment is a sunk cost. The $2000/mo mortgage I''ve been paying is also a sunk cost. I now owe a LOT more than it would sell for. We haven''t hit bottom yet. If I stay, I will be paying $2K a month for a condo I can now rent for $900. Let''s say I stay and let''s say the market bottoms in 2010 and then slowly appreciates at 3% a year (optomistic but possible). In 10 years it will still be upside down. In 10 years I will have paid $240,000 towards my mortgage, without a reduction in principal whatsoever. In other words 0 equity and still worth less than I owe.

I called the loan holder in September and told them I was done. I don''t have any hardship paying the mortgage, I''m just not interested in throwing more money down a bottomless pit. Thanks to California, I don''t have to. It''s purely a business decision. Would you sell your great FICO to save $240K? I did. I wasn''t a speculator, or in some zero interest loan. My loan is fine, it''s the value of the home that is screwed. It doesn''t make sense to sit around and throw money away for more than a few years. This market is not going to turn around anytime soon.

In the meantime I started banking my payment so that''s already $12K I''ve saved. I''m sure some will see it as some moral imperative but personally it''s just common sense to me. At the rate we''re going I''ll be able to pay cash for my next home with the money I save by renting.

 

[Harriet]

Beacon,
You''re right that income from forgiveness of debt is included. As far as I know, that section remains in place, as it should. I''ll write more later.

 

[TravelingGal]

Date: 2/26/2009 5:27:11 PM
Author: purrfectpear
I bought my oceanview condo in 2006 (yep, my timing was impeccable

). I paid $500/sq. ft. with 3% down. It''s now worth $200/sq. ft.
I''m upside down and the 3% downpayment is a sunk cost. The $2000/mo mortgage I''ve been paying is also a sunk cost. I now owe a LOT more than it would sell for. We haven''t hit bottom yet. If I stay, I will be paying $2K a month for a condo I can now rent for $900. Let''s say I stay and let''s say the market bottoms in 2010 and then slowly appreciates at 3% a year (optomistic but possible). In 10 years it will still be upside down. In 10 years I will have paid $240,000 towards my mortgage, without a reduction in principal whatsoever. In other words 0 equity and still worth less than I owe.

I called the loan holder in September and told them I was done. I don''t have any hardship paying the mortgage, I''m just not interested in throwing more money down a bottomless pit. Thanks to California, I don''t have to. It''s purely a business decision. Would you sell your great FICO to save $240K? I did. I wasn''t a speculator, or in some zero interest loan. My loan is fine, it''s the value of the home that is screwed. It doesn''t make sense to sit around and throw money away for more than a few years. This market is not going to turn around anytime soon.

In the meantime I started banking my payment so that''s already $12K I''ve saved. I''m sure some will see it as some moral imperative but personally it''s just common sense to me. At the rate we''re going I''ll be able to pay cash for my next home with the money I save by renting.

And THIS is why the nicer areas will start to see a decline. Not because people are laid off and can''t pay their mortgage, but because they don''t see the point. Two on a lots on North Redondo are buckling big time and are starting to cave. We''ll start seeing it in areas like Manhattan, Hermosa, South Redondo when people who bought 1100 sq foot homes for over a million dollars will realize the same thing that PP did.

 

[Beacon]

It is also why we need major mortgage reform. It is absurd that if the prices go well the buyer makes appreciation and the lender gets 6% but if the prices go not so well the lender gets killed and the borrower walks away.

The very low downpayment loans have to go. They enable homebuying that is really no more than buying an option on a home, pledging a FICO score as collateral.

I see the homebuyers side of this. I also see a system set up to enable buying that never should have happened.

And the walk away phenonenon is certainly no longer a subprime issue.

 

[TravelingGal]

Date: 2/26/2009 7:00:59 PM
Author: Beacon
It is also why we need major mortgage reform. It is absurd that if the prices go well the buyer makes appreciation and the lender gets 6% but if the prices go not so well the lender gets killed and the borrower walks away.

The very low downpayment loans have to go. They enable homebuying that is really no more than buying an option on a home, pledging a FICO score as collateral.

I see the homebuyers side of this. I also see a system set up to enable buying that never should have happened.

And the walk away phenonenon is certainly no longer a subprime issue.

Yup, which is why I presume PP says "thanks to California" because the laws are what they are right now (PP correct me if I am wrong).

I can understand why PP made the decision. I guess the mentality is every man for himself. Moral dilemma? Probably. What amounts to just a "business decision" to PP directly affects someone like msflutter who now is out 300K by trying to do the right thing. So say msflutter sees PP''s post and thinks, screw it, she''s right. Then rents a nicer house for cheaper with a yard that her darling boy can play in. And so it snowballs from there.

Maybe debtor''s prison is not a bad thing.

 

[Dancing Fire]

Date: 2/26/2009 11:03:15 AM
Author: Mara
icekid... in some areas the prices will go back up over time, and probably even surpass what the craziness was 2-3 years in 05. imo this area is one of them. i have seen rises and falls, and houses that dropped from 400 to 190 go back up to 500 and surpass that. it''s very cyclical in this area.

it is great that the prices are dropping so that more people who are ''ready'' and were trying to save to just get into something, are going to be able to get so much more bang for their buck. this market, especially here in the CA Bayarea, was pricing out tons of people.

the San Jose area RE market will not bottom till Silicon Valley Companies stop laying off workers.

 

[TravelingGal]

Date: 2/26/2009 7:26:10 PM
Author: Dancing Fire

Date: 2/26/2009 11:03:15 AM
Author: Mara
icekid... in some areas the prices will go back up over time, and probably even surpass what the craziness was 2-3 years in 05. imo this area is one of them. i have seen rises and falls, and houses that dropped from 400 to 190 go back up to 500 and surpass that. it''s very cyclical in this area.

it is great that the prices are dropping so that more people who are ''ready'' and were trying to save to just get into something, are going to be able to get so much more bang for their buck. this market, especially here in the CA Bayarea, was pricing out tons of people.

the San Jose area RE market will not bottom till Silicon Valley Companies stop laying off workers.

I''m afraid this might be so. Mara and I are in the same industry I believe, and from where I am sitting, it is getting ugly. She''s probably in a better boat than I am though, as far as companies go.

 

[Dancing Fire]

Date: 2/26/2009 7:13:43 PM
Author: TravelingGal

Date: 2/26/2009 7:00:59 PM
Author: Beacon
It is also why we need major mortgage reform. It is absurd that if the prices go well the buyer makes appreciation and the lender gets 6% but if the prices go not so well the lender gets killed and the borrower walks away.

The very low downpayment loans have to go. They enable homebuying that is really no more than buying an option on a home, pledging a FICO score as collateral.

I see the homebuyers side of this. I also see a system set up to enable buying that never should have happened.

And the walk away phenonenon is certainly no longer a subprime issue.

Yup, which is why I presume PP says ''thanks to California'' because the laws are what they are right now (PP correct me if I am wrong).

I can understand why PP made the decision. I guess the mentality is every man for himself. Moral dilemma? Probably. What amounts to just a ''business decision'' to PP directly affects someone like msflutter who now is out 300K by trying to do the right thing. So say msflutter sees PP''s post and thinks, screw it, she''s right. Then rents a nicer house for cheaper with a yard that her darling boy can play in. And so it snowballs from there.

Maybe debtor''s prison is not a bad thing.

Moral...NO!!. good business decision...YES!!

 

[purrfectpear]

I guess I have situational morals. If it wasn''t legal I wouldn''t be doing it. I didn''t even know it was an option until the media and the internet kept bleating about it. Once I researched it and realized there were no tax implications, no further credit hounding, just a one time hit to the report it made sense in my case. I have no need for credit. My car is paid for. If I need another I can pay cash. I don''t plan on purchasing another home since rents are only going down, and when I do buy I''ll probably pay cash or at least 75% cash for the next home.

I talked to my ultra, ultra conservative parents about it last summer expecting them to be horrifed and ready with a responsibility pitch. To my shock they said it made perfect sense to them. These are people who are so right wing Republican that they scare me

I''m just one of hundreds of thousands in California. You''re lost in the herd. Landlords could care less since I can give them any deposit they ask for. Cash talks.

Personally I think the non-recourse states probably should rewrite their rules. Since they didn''t I''m availing myself. The lender is getting back exactly what they asked for in collateral. Maybe they should have considered the bubble when they handpicked their appraisers

I imagine they knew a lot more about the housing market then I did. I actually didn''t know that houses could go backwards like that. I thought they''d plateau and I would cease appreciating. Now I know better. So do the lenders, huh.

 

[TravelingGal]

Date: 2/26/2009 8:02:57 PM
Author: purrfectpear
I guess I have situational morals. If it wasn''t legal I wouldn''t be doing it. I didn''t even know it was an option until the media and the internet kept bleating about it. Once I researched it and realized there were no tax implications, no further credit hounding, just a one time hit to the report it made sense in my case. I have no need for credit. My car is paid for. If I need another I can pay cash. I don''t plan on purchasing another home since rents are only going down, and when I do buy I''ll probably pay cash or at least 75% cash for the next home.

I talked to my ultra, ultra conservative parents about it last summer expecting them to be horrifed and ready with a responsibility pitch. To my shock they said it made perfect sense to them. These are people who are so right wing Republican that they scare me

I''m just one of hundreds of thousands in California. You''re lost in the herd. Landlords could care less since I can give them any deposit they ask for. Cash talks.

Personally I think the non-recourse states probably should rewrite their rules. Since they didn''t I''m availing myself. The lender is getting back exactly what they asked for in collateral. Maybe they should have considered the bubble when they handpicked their appraisers

I imagine they knew a lot more about the housing market then I did. I actually didn''t know that houses could go backwards like that. I thought they''d plateau and I would cease appreciating. Now I know better. So do the lenders, huh.

PP, that shocks me...I always thought you were a pretty sharp bird.

But you''re right...it is legal. And unfortunately, it''s going to make a lot of sense to a lot of people.

 

[Dancing Fire]

Date: 2/26/2009 8:02:57 PM
Author: purrfectpear
I guess I have situational morals. If it wasn''t legal I wouldn''t be doing it. I didn''t even know it was an option until the media and the internet kept bleating about it. Once I researched it and realized there were no tax implications, no further credit hounding, just a one time hit to the report it made sense in my case. I have no need for credit. My car is paid for. If I need another I can pay cash. I don''t plan on purchasing another home since rents are only going down, and when I do buy I''ll probably pay cash or at least 75% cash for the next home.

I talked to my ultra, ultra conservative parents about it last summer expecting them to be horrifed and ready with a responsibility pitch. To my shock they said it made perfect sense to them. These are people who are so right wing Republican that they scare me

I''m just one of hundreds of thousands in California. You''re lost in the herd. Landlords could care less since I can give them any deposit they ask for. Cash talks.

maybe i was the only dummy for not taking all the equity out of my house to buy a couple of brand new Mercedes,a 5 ct ring ,a boat,go on a around the world trip,then just give my creditor the middle finger.

 

[purrfectpear]

You actually had equity in your house. I had 3%. To tell you the truth though on paper I would have walked away even if I'd had 10%. It just doesn't make sense to flush money down the toilet.

Yeah, I thought I was smart too

. I'd never owned a home in LA. My homes were all in the midwest and I made money (not crazy bubble money) when I sold all three of them.

I figured when people talked about the housing bubble that maybe you lost 10% and then no appreciation for a couple of years. I had no friggin idea that a market could go from $500/sq. to $200/sq. in two years. I feel like a mega idiot. Seriously, seriously, stupid. Epic fail. Forget debtors prison. They should just make us wear T-Shirts that say "I bought at the peak of the market - I suck".

There are folks worse off just next door. They developed two 36 story luxury condo towers. People who paid $3 million for the penthouse walked away from their contracts. They had a big auction of 30 units in December. I think the penthouse went for $1.2 million. The majority of units have HOA dues at $600/mo plus.

All the recent downtown LA loft developers are converting to rental (and screwing those who purchased as condo) and they're holding auctions trying to sell off the dogs.

 

[jcrow]

Date: 2/22/2009 7:10:57 PM
Author: zhuzhu
One half of my brain wishes that we had waited for a couple more years to buy our house as we prob could save 10-15% (we bought our house in 200; the other half of my brain is loving the lifestyle associated with home ownership. With our own property we enjoy the landscaping, the designing of both inside and outside of our home, and we feel a great sense of pride for home ownership. It is ultimately a personal choice if financial gain outweighs the lifestyle of your choice. Even though I would not mind the savings associated with ''market low'', having a property to call your own has brought more joy than I had ever imagined when I was renting.

ditto ditto ditto! although we bought in 2007...
i also have to remind myself that apartments around here flat out suck. they are all old... a few new ones have popped up, but they are the price of a mortgage... sheesh.

 

[Dancing Fire]

Date: 2/25/2009 11:40:31 PM
Author: msflutter
I am so sad that house prices are going down. I know they should, but we bought at the top of the market, we were moving from Chicago to LA and wanted to put our money in another place. We put over $300k down and didnt get a crazy loan, but only got a 2bedroom townhouse. Living very close to T-Gal the average home price was about $800k. Now it is as if we threw most of that down payment out the window. So selfishly I hope that we can someday sell this place, and buy a new home, but unless we win the lotto I doubt we will ever have another $300k to use as a downpayment.

msf
you are the only kind of home owners that i have sympathy for.

(HUGGS!!) if others had put that much down we wouldn't have this housing mess on our hands.

 

[Dancing Fire]

Date: 2/26/2009 9:08:59 PM
Author: purrfectpear
You actually had equity in your house. I had 3%. To tell you the truth though on paper I would have walked away even if I''d had 10%. It just doesn''t make sense to flush money down the toilet.

PP
again,let me say...legally,yes. morally,no. why should others pay for your poor decision?

 

[Beacon]

I have to say PPs case is very exceptional, even in bad parts of California.

If she had a payment of $2000, I calculate a $333K loan at 6%. At $500 per square foot, she bought a small property of 687 square feet for a purchase price roughly of 345K.

Now this same property is worth $137K at her estimate of $200/foot. It is a very bad situation and beyond the normal depreciation I have seen. Sounds like a distressed new building. Those can work out, but it takes a long time.

PP - will you have a tax liability for debt forgiveness if your forclosure sale fails to pay off your mortgage? Traditionally this is true and the IRS is much harder to deal with than a bank. But I think there may have been recent changes to the law in this regard. What did your research say?

 

[TravelingGal]

Date: 2/26/2009 10:26:08 PM
Author: Beacon
I have to say PPs case is very exceptional, even in bad parts of California.

If she had a payment of $2000, I calculate a $333K loan at 6%. At $500 per square foot, she bought a small property of 687 square feet for a purchase price roughly of 345K.

Now this same property is worth $137K at her estimate of $200/foot. It is a very bad situation and beyond the normal depreciation I have seen. Sounds like a distressed new building. Those can work out, but it takes a long time.

PP - will you have a tax liability for debt forgiveness if your forclosure sale fails to pay off your mortgage? Traditionally this is true and the IRS is much harder to deal with than a bank. But I think there may have been recent changes to the law in this regard. What did your research say?

I think I remember where PP live(d). If it was one of those ocean front higher rise condos that they built, I believe her when she says they depreciated that much. The area, especially near downtown, has not had the revival that many were hoping for.

LOL, welcome to California real estate PP...we try to be "different" round here, so you can definitely take them good ole midwest values and throw em out the window!!

 

[Harriet]

Grr (not directed at Purr, please):
http://www.irs.gov/newsroom/article/0,,id=174034,00.html

 

[zhuzhu]

Date: 2/26/2009 11:21:17 PM
Author: Harriet
Grr (not directed at Purr, please):

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

The link did not work....

 

[Harriet]

Try www.irs.gov and search for "home foreclosure and debt cancellation." Again, I'm not directing this at anyone here. I'm just concerned that the tax system is getting too progressive. I'll be in touch with one of my law school profs to pick his brain and perhaps work on a paper together.

 

[purrfectpear]

Beacon, Bush passed a bill that forgave tax consequences regardless of the difference between auction amount realized (if it sells at all) and loan amount owed. Nothing is taxable. If I remember correctly I think it holds for foreclosures through 2010. (edited to add, Harriet's link says 2012)

DF, I'm not sure I know how to answer that. Firstly I don't agree that "others" are having to pay for my mistake. I'm not taking any bailout money, I'm not resetting my loan at a lower amount. I'm taking the foreclosure on my credit report and believe me I'm not proud of the decision. If you think people should go ahead and pay their mortgages for the next 10-15 years in LA only to end up upside down after paying another $200K to $300K when they could rent for less than half that (and bank $100K to $150K), well that is their decision to make. Maybe that works for them. It doesn't for me. The fact that a mortgage company is going to end up with exactly what they started out with doesn't seem like such a bad thing to me? I didn't decide what the condo was worth, their appraiser did. I didn't lower the market value, and neither did foreclosures. The bubble burst because the values were not sustainable. A fact I didn't realize then, but surely LA mortgagers knew? I don't blame them, I'm not one of those people screaming predatory lendor. I figure they made a business decision they could live with. Now I'm making one that I can live with. How does the fact that my mortgage company will end up owning the condo they held as collateral that they deemed sufficient for a certain loan amount hurt you? Are you afraid that when you want a mortgage they are going to pass the loss on this condo on to you? I'm asking seriously. I can see how mass walk aways aren't a good thing, but I guess I'm not getting the correlation to the people who have equity and are happy with their loans and their homes? How are you being hurt? Your property values are going down due to the crappy economy, layoffs, etc.

If mortgage holders wanted to protect themselves from this, all they had to do was lobby for different rules. There are plenty of recourse states in the US. I think it's ironic that the very state where the most ridiculous loans were being passed out like candy to people who had no jobs, low paying jobs, and flat out liars, is one of the states where the loan companies greed is coming home to roost. My loan app was probably one of less than 20% that were honestly based on real income, with real downpayments.