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

[Mara]

Date: 3/6/2009 2:38:29 PM
Author: zhuzhu

If nobody takes financial responsibility for their own action seriously, then perhaps this country deserves to be going into a economic depression.

ITA.

Beacon... I didn''t say that stock isn''t a worthwhile option for people. I said that I learned my lesson in 2000. I don''t have the heart or the time-management to play in the stock market or even hold options after buying waiting for them to peak or whatever. We treat it like a bonus... if it''s in the money at the time, cash it out. Done, move on. This is why we definitely WON''T be living in a house in Atherton or Monte Sereno anytime soon. Even though we are carrying two mortgages right now, a new kind of mental stress let me assure you in the BayArea.... hahaha, we are pretty conservative overall.

 

[fleur-de-lis]

Date: 3/6/2009 2:38:29 PM
Author: zhuzhu
I did not know that an imperfect system makes it OK to abuse it.

If Tiffany does not have security guard at the front door, does it make it OK to steal their 10ct solitaire?


If nobody takes financial responsibility for their own action seriously, then perhaps this country deserves to be going into a economic depression.

Aww, Zhuzhu, go after my PS'er's diamond-loving heart by making a reference to Tiffany, eh? Hee hee... two can play at that game!

If someone posts an ad on craiglist for a 5 carat Harry Winston emerald cut diamond ring with those pretty little delicate double claw prongs that sells for $300,000 at HW for $30,000 because they really want to buy a Harley Davidson and I take them up on it and I accept their offer on their terms, am I abusing them if we agree on the contract terms they offered?

Did I just "steal" $270,000 from them?

I agree with the sentiment that "If nobody takes financial responsibility for their own action seriously, then perhaps this country deserves to be going into an economic depression." Of course, the crux of my argument is that focusing ire on PP is to give the other side of the contract --the banks who drafted contracts without downpayment but with inherently bad collateral valuation methodologies-- a "pass" for accountability for THEIR own actions seriously as well.

The bank could (and arguably should) have required a 20% downpayment, or taken a look at historical reference from price support and determined that no property should have a 200% increase in 3 years, calculate that this is a bubble, and protect its own business by opting out of the mortgage business until things normalize. OR they could have performed basic due diligence, valued the property more accurately by looking at historical precedent, and offered terms in line with the obvious risk, such as limiting the loan approval amount and offering a higher interest rate to make the loan more able to handle the ups and downs with a decreased odds of default in order to protect their investment like a good businessman should do. But PP's bank took on that risk. PP's bank could have offered terms that would protect them and their investors, but didn't.... I'd argue, should not the bank have to deal with the ramifications of their bad decisions as well? If a bank does not take financial responsibility to protect its investment, perhaps it deserves to fail as well?

PP is losing her downpayment, she's losing the interest she's been paying these last few years, she's losing her credit score, she's losing her right to low interest credit cards for years to come. She's taking each and every lump she signed on the dotted line for. Should the bank have had more onerous terms to give homebuyers like PP more incentive to stay in the house, such as requiring a 20% downpayment if in a non-recourse state, or charging 9% interest in addition to points up front so they at least still make money if she jumps ship in year 4? You bet.

Just like the person selling the 5 carat HW on craigslist should have asked for WAAY more than $30,000. In both instances, it's a contract. Benefit of the bargain does not equal theft... though if the deal terms are good enough, I'll agree that it can sometimes seem that way.

 

[saltymuffin]

fleur-de-lis, two very good posts.

I feel no sympathy for lenders who are being defaulted on. They made absolutely irresponsible loans because they were greedy. Greedy for short tem gains without considering the ability of the their clients to repay. Greedy to make more interest off people who couldn't afford more debt. Their greed caused their own system to collapse on them, it was pretty much a giant piramid scheme. Banks often make money off of people by making them feel stupid, overwealming them with financial jargon. When they do this, and then assure you that you can afford this giant loan, or "investing in tech stocks is no big deal" people beleive and buy in. They should be legislated to ensure it never happens again, not bailed out.

I feel little sympathy for those who didn't take responsibility for their own finances and somehow beleived that thier generation could have it all. "Sure, I can buy a huge house, live a disposable lifestyle and dabble in the stock market and expect double digit annual returns on all of it! My grandparents were suckers, they saved for things, invested in savings bonds and darned socks!" But I have more sympathy for them than the banks. They were obviously let down by the education system which doesn't teach basic economics, and an out of control sales pitch put in place to keep them spending regardless of their means. There are too many people in this boat to let them just sink, they need a chance to start over or we'll all be dragged down with them.

I do feel sympathy for those who saved carefully, were financially responsible and have been bitten by the collapse. They are the ones that deserve some sort of help.

zhuzhu, when you speak of abusing an imperfect system, are you referring to a system that makes it possible to easily default on loans, or the system that made it possible to borrow irresponsible amounts of money in the first place? Unlike taking an unsecured diamond at Tiffany's both are legal. And both are exactly why the economy is in the state it is in. And when I say "our" economy, I mean the global economy.

 

[purrfectpear]

Stealing from Tiffany''s no less

A better example would be

1. purchasing a car, making payments, driving it around, defaulting on payments and returning the car to the dealer.
2. buying a ring from Tiffany''s, making payments, wearing it, defaulting on payments and returning the ring to the store.

I don''t think either dealer or store will be thrilled with the outcome, but they''ll be a LOT happier that at least they got their goods returned.

Or were you just throwing dirt at me for funsies?

 

[saltymuffin]

PP has shown an enormous amount of courage by sharing her story with all of us. She was in a tough situation and made a tough decision. One that I honestly think most people would make if they were actually faced with it.

Sure it would be tough, and sure you'd feel like crap for a while, but she learned from it. She is now planning on saving money, living well within her means, and will support the economy by her future financial security. She is not one of the people to be pointing fingers at.

 

[TravelingGal]

Date: 3/6/2009 4:16:14 PM
Author: saltymuffin
PP has shown an enormous amount of courage by sharing her story with all of us. She was in a tough situation and made a tough decision. One that I honestly think most people would make if they were actually faced with it.

Sure it would be tough, and sure you''d feel like crap for a while, but she learned from it. She is now planning on saving money, living well within her means, and will support the economy by her future financial security. She is not one of the people to be pointing fingers at.

Sure we can point the finger at PP. There''s plenty of blame to go around. She''s part of the problem. Did she do anything illegal? Nope. But she IS part of the current problem.

However, like I said before, while I don''t like the idea of what she did, I can totally understand it.

I simply put myself in her shoes and reallly THINK about it.

In fact, I was also thinking about Mara''s situation (sorry to bring this back to you Mara, but you were just in my train of thought). Mara is currently carrying two mortgages. Let''s just say I''m Mara. If I had two mortgages and my previous townhome didn''t sell, nor did it rent, what would I do? Would I risk jeopardizing everything to keep current on both mortgages if it was financially draining us? I don''t think I would. Since I would already be in the home I knew I could make payments on, AND it''s a home I want to be in for a long time, I''d probably give the townhome people some jingle mail. I wouldn''t be buying a house for at least 10 years, so my credit score isn''t too much of a concern.

Would I hate myself for it? Yup. I''d be embarrassed. I wouldn''t be as brave as PP and post it over Pricescope either. I would be guilty that I''m the scummy part of the current problem. But I''d be trying to keep my family afloat and if walking from the townhome meant I could save the money to give my daughter a better life, and I could be doing this all LEGALLY, well then...stones at glass houses....

 

[steph72276]

Date: 3/6/2009 3:01:19 PM
Author: Mara

Date: 3/6/2009 2:38:29 PM

Author: zhuzhu


If nobody takes financial responsibility for their own action seriously, then perhaps this country deserves to be going into a economic depression.

ITA.


Beacon... I didn''t say that stock isn''t a worthwhile option for people. I said that I learned my lesson in 2000. I don''t have the heart or the time-management to play in the stock market or even hold options after buying waiting for them to peak or whatever. We treat it like a bonus... if it''s in the money at the time, cash it out. Done, move on. This is why we definitely WON''T be living in a house in Atherton or Monte Sereno anytime soon. Even though we are carrying two mortgages right now, a new kind of mental stress let me assure you in the BayArea.... hahaha, we are pretty conservative overall.

Mara, that''s exactly how we treat Adam''s stock options as well....as a bonus that we do not count on in any way. This year we may not be getting as big a bonus, but who knows what it will do in the future. I''m not going to speculate that it will go back up anytime soon, so as soon as they mature we cash out. Btw, I can''t wait to see pics of the new house!

 

[crown1]

Date: 3/6/2009 4:30:31 PM
Author: TravelingGal

Date: 3/6/2009 4:16:14 PM

Author: saltymuffin

PP has shown an enormous amount of courage by sharing her story with all of us. She was in a tough situation and made a tough decision. One that I honestly think most people would make if they were actually faced with it.



Sure it would be tough, and sure you''d feel like crap for a while, but she learned from it. She is now planning on saving money, living well within her means, and will support the economy by her future financial security. She is not one of the people to be pointing fingers at.

Sure we can point the finger at PP. There''s plenty of blame to go around. She''s part of the problem. Did she do anything illegal? Nope. But she IS part of the current problem.


However, like I said before, while I don''t like the idea of what she did, I can totally understand it.


I simply put myself in her shoes and reallly THINK about it.


In fact, I was also thinking about Mara''s situation (sorry to bring this back to you Mara, but you were just in my train of thought). Mara is currently carrying two mortgages. Let''s just say I''m Mara. If I had two mortgages and my previous townhome didn''t sell, nor did it rent, what would I do? Would I risk jeopardizing everything to keep current on both mortgages if it was financially draining us? I don''t think I would. Since I would already be in the home I knew I could make payments on, AND it''s a home I want to be in for a long time, I''d probably give the townhome people some jingle mail. I wouldn''t be buying a house for at least 10 years, so my credit score isn''t too much of a concern.


Would I hate myself for it? Yup. I''d be embarrassed. I wouldn''t be as brave as PP and post it over Pricescope either. I would be guilty that I''m the scummy part of the current problem. But I''d be trying to keep my family afloat and if walking from the townhome meant I could save the money to give my daughter a better life, and I could be doing this all LEGALLY, well then...stones at glass houses....

i find it hard to believe, given what you have posted here, that you would ever get yourself in the position of holding mortgages for two homes and feeling forced to bail on one.

i think those who purchased two homes (and i am not singling anyone out just going on the scenario you created)and entered into two mortgages simply because they wanted something different, got themselves into that predicament and they should not be allowed to walk away. i feel the fact that the government and banking institutions have not made this illegal is ridiculous. when buyers take the chance they should be the one who pays the freight. walking and leaving the mess for someone else to deal with should be outlawed in my opinion.

 

[Dancing Fire]

Date: 3/6/2009 12:12:23 PM
Author: Beacon
I get where DF is coming from: there is a moral outrage at people breaking promises and taking advantage of the system. But people will do this. The system needs to be changed.

A loan with a 3% downpayment and no recourse is just like the customer buying an option on the house and it is a very underpriced option cause it comes with a put option of 30 years duration back to the bank and that put option is priced at FREE to the buyer/borrower.

DF since you trade stocks, I am sure you understand exactly what I mean here.

yup, a no lose situation.

 

[saltymuffin]

Sure we can point the finger at PP. There's plenty of blame to go around. She's part of the problem. Did she do anything illegal? Nope. But she IS part of the current problem.

Hmmm. I understand what you are saying. But she didn't create the problem. She is more a result and example of the current problem than the cause. How would the economy be better off if she were still making those payments? She made the best financial move for her when everything collapsed around her. Financially secure people who are in control of, or without debt are good for the economy. If everyone borrowed within their means like she did, we wouldn't be in this mess. It is the people who borrowed more than they could not afford to pay, and those that leant it to them that created the the problem.

 

[Dancing Fire]

Date: 3/6/2009 10:13:24 AM
Author: purrfectpear

Date: 3/5/2009 11:18:59 PM
Author: Dancing Fire
you know what PP?
can you imagine the horror of taxpayers picking up your $400K mortgage tab?

sounds like you are very well off financially but you still chose to walk out on your mortgage.

you know what DF?

You stay well off financially by reading your contracts and making the best decision for you within the legal confines of said contract. It sounds like you would be much happier if I kept throwing $22K a year down the hole for the next 10 years so you could post your sympathy to my sad, sad, underwater situation. Sorry, I evaluated the cost of your sympathy and it fell short

1 in 5 mortgages are now underwater in the nation (1 in 2 in Nevada) Article Here

Prepare for more to come.

then why bother to sign a contract?

if you can walk way clean when ever you wanted to.

 

[saltymuffin]

Date: 3/6/2009 5:48:23 PM
Author: crown1
. i feel the fact that the government and banking institutions have not made this illegal is ridiculous. when buyers take the chance they should be the one who pays the freight. walking and leaving the mess for someone else to deal with should be outlawed in my opinion.

Isn''t it the bank that "took the chance" by making the loan?? Isn''t making loans all about risk analysis etc? They obviously did a bad, bad job of that. It isn''t "someone else" who is left to deal with the default, it is the the lender that took the risk in the first place. Making it the tax payers problem by bailing out these institutions is the mistake. They should be allowed to fail.

 

[Dancing Fire]

Date: 3/6/2009 12:52:33 PM
Author: fleur-de-lis


(BTW, I didn't see your threads in 2005, but we must have been seeing the same stuff since I sold all my US real estate holdings in 2005. Also, do you have any websites you find particularly fascinating on these topics you'd be willing to suggest?)

no,it was just my own opinion. it didn't take a genius to figure out what was gonna happen to the housing market.

 

[saltymuffin]

then why bother to sign a contract?

if you can walk way clean when ever you wanted to.

Contracts are not promises which are never to be broken. They include clauses which define the conditions and consequences for breaking them.

I signed a lease once and broke it. I needed to move to another city and I understood the consequences, and paid the penalty to landlord. A penalty the landlord had defined himself. I didn't write the contract, I just followed it's conditions. Didn't PP do the same?

There is no doubt that the banking system should be regulated better to ensure that the banks implement more responsible lending policies, I just think that those of us whose do not owe more for our homes than they are worth should hold our judgement until we are in that situation.

 

[tradergirl]

Fleur-de-lis, three sites of interest

www.itulip.com

www.patrick.net

www.calculatedrisk.com

 

[CrookedRock]

Date: 3/6/2009 6:27:55 PM
Author: saltymuffin

Sure we can point the finger at PP. There''s plenty of blame to go around. She''s part of the problem. Did she do anything illegal? Nope. But she IS part of the current problem.

Hmmm. I understand what you are saying. But she didn''t create the problem. She is more a result and example of the current problem than the cause. How would the economy be better off if she were still making those payments? She made the best financial move for her when everything collapsed around her. Financially secure people who are in control of, or without debt are good for the economy. If everyone borrowed within their means like she did, we wouldn''t be in this mess. It is the people who borrowed more than they could not afford to pay, and those that leant it to them that created the the problem.

She fueled the fire that was already raging. THIS is the problem! Like I said a few pages ago... At one point that house was worth the amount of money she choose to spend on it.

 

[Dancing Fire]

Date: 3/6/2009 4:04:39 PM
Author: purrfectpear
Stealing from Tiffany's no less

A better example would be

1. purchasing a car, making payments, driving it around, defaulting on payments and returning the car to the dealer.
2. buying a ring from Tiffany's, making payments, wearing it, defaulting on payments and returning the ring to the store.

I don't think either dealer or store will be thrilled with the outcome, but they'll be a LOT happier that at least they got their goods returned.

Or were you just throwing dirt at me for funsies?

PP
when was in the coin business, i could order gold bullion with a phone call b/c my word was gold as gold. let say i order 100 oz of gold when gold is trading at $1000 per oz and on delivery day gold had drop down to $900 per oz. i could say screw you,i don't want it now cuz i'll be losing $10k instantly. how would you feel if you were the wholesaler of this gold deal? of course if gold had gone up an $100 per oz i would of been on the winning end of this deal. in other words...i can't lose!!

 

[CrookedRock]

I have also never read a contract that says if you decide someday you don''t want your house, give us a ring and we''ll be happy to eat the loss...

 

[saltymuffin]

Date: 3/6/2009 7:17:19 PM
Author: CrookedRock

Date: 3/6/2009 6:27:55 PM

Author: saltymuffin

Sure we can point the finger at PP. There''s plenty of blame to go around. She''s part of the problem. Did she do anything illegal? Nope. But she IS part of the current problem.

Hmmm. I understand what you are saying. But she didn''t create the problem. She is more a result and example of the current problem than the cause. How would the economy be better off if she were still making those payments? She made the best financial move for her when everything collapsed around her. Financially secure people who are in control of, or without debt are good for the economy. If everyone borrowed within their means like she did, we wouldn''t be in this mess. It is the people who borrowed more than they could not afford to pay, and those that leant it to them that created the the problem.

She fueled the fire that was already raging. THIS is the problem! Like I said a few pages ago... At one point that house was worth the amount of money she choose to spend on it.

And she could afford it - what is wrong with buying something you can afford? We can''t expect her to have been able to predict the future. I am really missing something here . . .

 

[CrookedRock]

The truth is no one actually "owns" their home unless there isn''t a mortgage. You are enforcing my point. She could afford the payments, which is what she agreed to.

 

[purrfectpear]

Exactly. My contract clearly stated that the loan was contingent upon the lender holding an interest in the condo as collateral. It even specified what the terms were for default, ie. foreclosure and the "repossession" so to speak of the collateral.

I realize by putting a name and a person (rather than a mystical media reference to "homeowner") behind a real life walk-away I make a handy target. Be that as it may, I was not one of the fakers. I took out a full documentation loan, and qualified with all the bells and whistles. I didn''t buy some mega mansion that my salary would not support. In returning the condo to the lender I will have penalties. It appears that DF and others don''t think the penalties are severe enough. I can''t say that I disagree with them there. Let''s not forget, I''m a taxpayer too. I think that all the non-recourse states should promptly rethink those rules. You ask why the banks didn''t stop this madness? Because they were thrilled to rake in the points and fees to make those loans. It looks like they weren''t any smarter than I, since it appears that they too thought they would end up owning property that increased in value if someone foreclosed. Now you might think I should have known better but I didn''t, lending and real estate valuation is not my career. How did the banks miss the bubble

Isn''t it THEIR career to know?

People decide not to follow through on all sorts of contracts and there are always some sort of punitive clauses that will are levied. There is no more shame in the default of a mortgage contract than there is in ending a car lease early, quitting a job that gave you a hiring bonus, or ending a cell phone contract before the term is up. Unless you believe that the $$$ amount of the contract somehow carries some moral issue?

This has been a very interesting thread. I never thought that people actually believed that my condo brought down the economy. In fact I think it''s the other way around.

 

[TravelingGal]

Date: 3/6/2009 7:25:34 PM
Author: purrfectpear
Exactly. My contract clearly stated that the loan was contingent upon the lender holding an interest in the condo as collateral. It even specified what the terms were for default, ie. foreclosure and the ''repossession'' so to speak of the collateral.

I realize by putting a name and a person (rather than a mystical media reference to ''homeowner'') behind a real life walk-away I make a handy target. Be that as it may, I was not one of the fakers. I took out a full documentation loan, and qualified with all the bells and whistles. I didn''t buy some mega mansion that my salary would not support. In returning the condo to the lender I will have penalties. It appears that DF and others don''t think the penalties are severe enough. I can''t say that I disagree with them there. Let''s not forget, I''m a taxpayer too. I think that all the non-recourse states should promptly rethink those rules. You ask why the banks didn''t stop this madness? Because they were thrilled to rake in the points and fees to make those loans. It looks like they weren''t any smarter than I, since it appears that they too thought they would end up owning property that increased in value if someone foreclosed. Now you might think I should have known better but I didn''t, lending and real estate valuation is not my career. How did the banks miss the bubble

Isn''t it THEIR career to know?

People decide not to follow through on all sorts of contracts and there are always some sort of punitive clauses that will are levied. There is no more shame in the default of a mortgage contract than there is in ending a car lease early, quitting a job that gave you a hiring bonus, or ending a cell phone contract before the term is up. Unless you believe that the $$$ amount of the contract somehow carries some moral issue?

This has been a very interesting thread. I never thought that people actually believed that my condo brought down the economy. In fact I think it''s the other way around.

PP, I believe banks started going under first (which started the chain reaction). The reason why banks failed is because people started walking or getting foreclosed on. That happened because banks made loans they shouldn''t have. But the people took the loans...

what came first, the chicken or the egg...

Crown1, that''s exactly right...I wouldn''t INTENTIONALLY get myself in a situation like that...but what if it just happened because I honestly believed everything was going to be fine and we would manage?

 

[saltymuffin]

Date: 3/6/2009 7:19:51 PM
Author: CrookedRock
I have also never read a contract that says if you decide someday you don''t want your house, give us a ring and we''ll be happy to eat the loss...

You are right, what they usually say is "you don''t make your payments, we get your house". When they wrote it, the bank was as delusional as PP and never expected the value of the home to go down so much. It seemed like a pretty swell deal for them at the time. If PP ever stopped paying they would have her down payment, her payments to date, and a sweet condo they could sell for lots of profit. Bank wins, PP looses. Unfortunately for everyone things didn''t turn out quite like that.

 

[purrfectpear]

Date: 3/6/2009 7:18:01 PM
Author: Dancing Fire

Date: 3/6/2009 4:04:39 PM
Author: purrfectpear
Stealing from Tiffany''s no less

A better example would be

1. purchasing a car, making payments, driving it around, defaulting on payments and returning the car to the dealer.
2. buying a ring from Tiffany''s, making payments, wearing it, defaulting on payments and returning the ring to the store.

I don''t think either dealer or store will be thrilled with the outcome, but they''ll be a LOT happier that at least they got their goods returned.

Or were you just throwing dirt at me for funsies?

PP
when was in the coin business, i could order gold bullion with a phone call b/c my word was gold as gold. let say i order 100 oz of gold when gold is trading at $1000 per oz and on delivery day gold had drop down to $900 per oz. i could say screw you,i don''t want it now cuz i''ll be losing $10k instantly. how would you feel if you were the wholesaler of this gold deal? of course if gold had gone up an $100 per oz i would of been on the winning end of this deal. in other words...i can''t lose!!

Straw man. You can do better than that.

You order gold bullion and the seller offers you a payment plan in lieu of all cash. He puts a clause in there that says "if DF doesn''t complete the payments I have the legal right to take my bullion back". You make payments for a couple of years, the market for gold drops and you look at the contract and realize that you could give back the bullion. There is a penalty involved. Your name will be mud with this seller for 7 years. You will be prevented from buying anymore bullion on payment plans. Cash only. YOU are the one who has the right to decide whether you are willing to default knowing the black mark on your future bullion buying.

At least make your examples the same. Not too much to ask is it? Oh, and I''m not silly enough to think you personally brought the gold bullion market to it''s knees

 

[Dancing Fire]

Date: 3/6/2009 7:21:30 PM
Author: saltymuffin

She fueled the fire that was already raging. THIS is the problem! Like I said a few pages ago... At one point that house was worth the amount of money she choose to spend on it.

And she could afford it - what is wrong with buying something you can afford? We can''t expect her to have been able to predict the future. I am really missing something here . . .

hmmm....maybe i should call my stock broker telling him that i wanted my money back b/c i wasn''t able to predict the future.

wonder what he would say to me.

 

[Mara]

OMG TG don't jinx us!! Trust me.... holding two mortgages in this type of economy is not something I am remotely happy about. But we had the right opp in the new house, we could do it, and so we did. Sometimes I wonder if it was the right decision. But we DO want to be in this new house up to 10 years (or at least now we have the option to if we want), so we feel good about the decision we did make even though it is somewhat risky. My parents have done quite well in the RE market here in the long-term, and they swear by it as a good investment, again this is LONG-TERM thinking on their parts. They were like no pain no gain, thanks parents.

PP...I have to say just based on what you have put out here that you are an intelligent lady. I find it very hard to believe you had no idea that RE could tank. You were smart enough to move your assets in 401k into other arenas last year, and therefore not lose your shirt there. You are smart enough to have cash and savings, and do the math on the bad business decision of staying in your home up to 10 years with only 3% estimated appreciation. I just cannot fathom how you could not have garnered that the area you were purchasing in was speculative in terms of having a revival and that paying however-much-per-square-footage was EXTREMELY risky.

I also am of the frame of mind of what others have said here in general which is...you signed for it, you are responsible for it. Is the bank at fault as well? The broker? Yes, yes of course. But you thought that property WAS worth whatever you paid...I would assume because you are intelligent you did some research right? Who just buys an expensive property and does not expect it to pay off? So then, a year later some appraiser says it ain't so....you will just assume based on a 3% calculation (not even sure where you got that) that it won't be worth it in 10 years-- so lets just walk now.

I don't think I would do that in your situation. And what IS your situation?? Your situation is quite good. As per your own admission you have money in the bank, enough to not worry about credit for at least 7-10 years, your 401k and other investments are safe. You are a smart lady. Which is why honestly, I am not quite buying the whole scenario you laid out here. That property was worth double to you a year ago. You said you would have planned to stay there for many years. So that changed because an appraiser said in 2009 it's worth half? Will you feel silly in 5 years if that property IS worth what you paid and MORE and yet you are living in a small apt? Because as I have said earlier as well, we flat out DON'T KNOW what is going to happen. Which is why I honestly think if I was in your same exact scenario, I would not have walked out on that mortgage. I would have continued to pay it, considered it rent, enjoyed my beautiful new HOME, and see what happens in 1,2,3 years. Then make a truly educated decision at that point when things are not quite so volatile. I always tend to think long-term. Foreclose in 3 years. Or 5 years, if things have not happened the way you planned. I wonder if by then the penalties would be more steep than today. It would make a good case for not waiting. Everyone is doing it now!

So that is why when people are like 'in PP's situation' or 'put yourself in her shoes' or 'don't throw stones' or whatever... I scratch my head. PP is in a pretty good situation overall. I just don't quite understand the logic there. Oh and btw PP... I don't even remotely know you and you seem to be of hearty stock in terms of disposition which I personally quite like...I do find this all extremely interesting to think about, but no I don't think that I would do the same thing in your same situation.

 

[zhuzhu]

"So that is why when people are like ''in PP''s situation'' or ''put yourself in her shoes'' or ''don''t throw stones'' or whatever... I scratch my head. PP is in a pretty good situation overall. I just don''t quite understand the logic there. Oh and btw PP... I don''t even remotely know you and you seem to be of hearty stock in terms of disposition which I personally quite like...I do find this all extremely interesting to think about, but no I don''t think that I would do the same thing in your same situation."

I do wonder if those who defend PP''s action truly understand "her situation"??

I see no difference between PP and Octo-Mom in the action of system abuse. One can think up all and any excuses to make him/her feel better, but the fact is fact. Abusing the bank''s trust in PP''s ability to repay the loan is no better than abusing society''s welfare system to raise one''s "surplus" of children.

 

[purrfectpear]

I never thought it was worth what I was paying for it. I just thought it was what I had to pay if I wanted to buy. In fact it was what I had to pay as it was one of the cheapest condos in Long Beach at the time. I should have considered the fact that there was no real reason why I couldn''t have waited and let the market come to me. I was afraid that homes were just going up, and up, and up, and I was already at the point where I bought a studio, not even a one bedroom, because I was careful to only buy what I could afford in terms of payment. I wouldn''t sign up for an interest only loan to get a bigger or better home.

I didn''t pick Long Beach because I thought it was improving. I picked Long Beach because that''s where I worked and in 2006 you couldn''t even find a studio condo in Torrance, Huntington Beach, or Carson for what I paid. I wasn''t willing to live in Inglewood.

I did not realize that real estate could depreciate by 50 or more percent. It has never happened in the Midwest where I was from, and I wasn''t aware that it had ever happened before anywhere else either?

You say no one knows what will happen in 5 or 10 years. I was dumb once, this time I did lots of research - deep research, and I''m as sure as a heart attack that I would be paying a $2000 a month mortgage, property tax, and HOA dues for more than 5 years before it will appraise or sell for anything even close to the loan balance.

All of that money, ALL OF IT will be down the tubes. Let''s say it''s 5 years instead of 10 (but I don''t believe it for a second). That''s around $60,000 I spent just to "live" here. Money that you don''t get back because it would finally be marketable for what I owed. In other words in 5 or more years I might be as well off as I am today...only $60K poorer. Then and only then would my monthly payments begin to make a dent in equity. I''m not in love with this condo. It''s just a place to live. One condo is the same as another frankly. It''s not like this one was some once in a lifetime, no other condo could compare, must have.

In 5 to 10 years I''ll just pick out another one, only this time I''ll have $100K to put down. If they''re worth in 5 years what it was in 2006 then I didn''t lose a darn thing. I''m still buying at 2006 prices. Chances are they''ll be worth less than the market high of 2006. Then I pay less, have more down and end up in a substantially better position that I am right now.

 

[TravelingGal]

Date: 3/6/2009 7:48:57 PM
Author: Mara
PP...I have to say just based on what you have put out here that you are an intelligent lady. I find it very hard to believe you had no idea that RE could tank. You were smart enough to move your assets in 401k into other arenas last year, and therefore not lose your shirt there. You are smart enough to have cash and savings, and do the math on the bad business decision of staying in your home up to 10 years with only 3% estimated appreciation. I just cannot fathom how you could not have garnered that the area you were purchasing in was speculative in terms of having a revival and that paying however-much-per-square-footage was EXTREMELY risky.

Mara first of all, I am not jinxing you! I am sending you lots of RE dust!

But look at the old threads that are now linked. I consider you an extremely intelligent woman, and you said you didn''t think RE could tank. Or maybe you were talking about SJ specifically?

 

[crown1]

Date: 3/6/2009 7:31:49 PM
Author: TravelingGal

Date: 3/6/2009 7:25:34 PM

Author: purrfectpear

Exactly. My contract clearly stated that the loan was contingent upon the lender holding an interest in the condo as collateral. It even specified what the terms were for default, ie. foreclosure and the ''repossession'' so to speak of the collateral.


I realize by putting a name and a person (rather than a mystical media reference to ''homeowner'') behind a real life walk-away I make a handy target. Be that as it may, I was not one of the fakers. I took out a full documentation loan, and qualified with all the bells and whistles. I didn''t buy some mega mansion that my salary would not support. In returning the condo to the lender I will have penalties. It appears that DF and others don''t think the penalties are severe enough. I can''t say that I disagree with them there. Let''s not forget, I''m a taxpayer too. I think that all the non-recourse states should promptly rethink those rules. You ask why the banks didn''t stop this madness? Because they were thrilled to rake in the points and fees to make those loans. It looks like they weren''t any smarter than I, since it appears that they too thought they would end up owning property that increased in value if someone foreclosed. Now you might think I should have known better but I didn''t, lending and real estate valuation is not my career. How did the banks miss the bubble

Isn''t it THEIR career to know?


People decide not to follow through on all sorts of contracts and there are always some sort of punitive clauses that will are levied. There is no more shame in the default of a mortgage contract than there is in ending a car lease early, quitting a job that gave you a hiring bonus, or ending a cell phone contract before the term is up. Unless you believe that the $$$ amount of the contract somehow carries some moral issue?


This has been a very interesting thread. I never thought that people actually believed that my condo brought down the economy. In fact I think it''s the other way around.

PP, I believe banks started going under first (which started the chain reaction). The reason why banks failed is because people started walking or getting foreclosed on. That happened because banks made loans they shouldn''t have. But the people took the loans...


what came first, the chicken or the egg...


Crown1, that''s exactly right...I wouldn''t INTENTIONALLY get myself in a situation like that...but what if it just happened because I honestly believed everything was going to be fine and we would manage?

don''t second guess yourself. you have saved and lived in the same place for a long period of time and have not even purchased the first home. i really don''t see you taking on two at the same time. i feel you would hold yourself to remain in the first place until you could unload it before taking on the second. you don''t want to get into something you can''t afford. this is the way i read you but maybe i am really reading you wrong. some people need instant gratification and to keep up with the jones or in a fashion they feel they deserve. you don''t come across this way. but maybe you have me fooled.

banks just got so greedy and scheming they made a big mess but a smart person like pp knew where she was heading.
the low down and the forty year loan were a dead giveaway. she was too close to retirement to allow such a deal if she fully intended to pay the thing off. she knew going in what her options were and it seems she could not loose. she had df''s warning just as others did if she was reading at this time. i took his banter about that seriously and watched to see if he really knew what he was talking about. i wish he had been wrong but he was not. lot''s of "smart" people let their guards down and believed what they wanted to hear.

there are no innocent people in the scenarios we are hearing. i do not refer to the people who purchased within their means and were forced to default do to illness, death or unemployment. i mean those who had the means to pay and choose to walk because they saw a better deal down the road or those who knew they could not afford what they were getting into and just went ahead because they could. i actually know a man whose brother purchased a new car because he needed gas and did not have the money. he knew he would get a full tank of gas with the new car and just choose to rack up more debt he could not afford to get his immediate need met.

now we have the accumulation of a whole lot of businesses, governments and individuals making bad judgments and blaming it on the other. time to face the music and make things right. it will not be easy for any of us but it can and should not be like it was as it has been proven it does not work.


i do feel that the banking industry got too big for it''s pants. small communities where the bank officials actually know more about their borrowers do not make very many bad loans. many small community banks are in good shape for this reason.

just my thoughts and they are worth what you paid for them.