Was it worth it to stop paying my mortgage? Absolutely 100% yes!
04-30-2012, 07:26 AM
#241
Suzuka Master
A: the right thing to do.
B: the wrong thing to do.
You can do whatever you want to do in life, but justifying your bad actions by saying that they would do it to you, does not make it right.
04-30-2012, 08:18 AM
#242
Glad to see this thread continues to stir debate. Some valid and intelligent, some not...but debate nonetheless.
"the Champ", in your statements i do see several glimmers of intelligence and awareness of whats going on in the economy however i am dumbfounded by statements you make indicating that people like me should have "done our research" or been better "prepared".
Please explain to me, what research anywhere on earth circa 2006/early 2007 would have in any way indicated to me or the population at large that the worlds largest economic collapse and most severe real estate downturn in the better part of 100 years is about to occur?
Any given the facts of the situation that i am now thankfully out of where the best i could acheive in terms of a fair market value was a 60k cash offer on a property I owed over 160k on, how could i possibly have prepared for that sort of devastating loss? Are you trying to tell me that every buyer should be prepared to lose 60%-70% of the value of their homes?
No one is "prepared" for that.
That sort of devastating loss is catastrophic to most people, myself included. There were no circumstances under which it made any sense to perpetuate that sort of financial meltdown.
If the property was large enough to support my growing family (in terms of size particularly) i would have been much more open to looking at alternatives but after several years of attempting to refinance or negotiate with the banks and with my family expanding, there was no other choice.
I still firmly and stronly beleive anyone who attaches a "moral" responsibility to their mortgage contract is doing so at their own detriment and via the long embeded propaganda machine created by lenders and our government. There is no "morality" clause whatsoever in any contract. It is a simple legal document outlining terms, conditions, causes, and effects. Yes, businesses default all the time. And guess what, I (and you) have every right to exercise your rights to default just like anyone else or any other business.
I owe a solid foundation of sound financial choices to my "shareholders" just like any business. My shareholders are myself and my family (and our collective financial future). I owe you nothing, i owe "the greater good" nothing. Chrysler does not owe GM because Chrysler defaults on contracts. Merrill Lynch does not owe Goldman Sachs because Merrill Lynch defaults on contracts. I do not owe you anything, much less an explaination because i default on my contract.
Would you really, to the detriment of your future...your childrens future....feel so "morally" bound to a horrible investment that you would continue to facilitate the self inflicted damage to your financial future? Really? You are welcome to keep the REAL answer to that question private as it is a very private and personal matter. The 100k that i was forgiven in my negotiated settlement is going to allow my children to have a better life and that is the only thing that makes any difference to me. That 100k is going to pay for an adequate home, education, and life experience that i want to be able to afford to my children and wife. Not to mention, that is 100k that i am personally pumping back into this stagnant economy which helps everyone.
I negotiated in good faith with my bank and they had access to all of my financial data, i hid nothing. We came to an agreeable solution and that is the end of the story. I absolutely will continue to advocate for this course of action and support anyone who chooses to take that course of action.
Keep up the interesting debate.
Cheers
"the Champ", in your statements i do see several glimmers of intelligence and awareness of whats going on in the economy however i am dumbfounded by statements you make indicating that people like me should have "done our research" or been better "prepared".
Please explain to me, what research anywhere on earth circa 2006/early 2007 would have in any way indicated to me or the population at large that the worlds largest economic collapse and most severe real estate downturn in the better part of 100 years is about to occur?
Any given the facts of the situation that i am now thankfully out of where the best i could acheive in terms of a fair market value was a 60k cash offer on a property I owed over 160k on, how could i possibly have prepared for that sort of devastating loss? Are you trying to tell me that every buyer should be prepared to lose 60%-70% of the value of their homes?
No one is "prepared" for that.
That sort of devastating loss is catastrophic to most people, myself included. There were no circumstances under which it made any sense to perpetuate that sort of financial meltdown.
If the property was large enough to support my growing family (in terms of size particularly) i would have been much more open to looking at alternatives but after several years of attempting to refinance or negotiate with the banks and with my family expanding, there was no other choice.
I still firmly and stronly beleive anyone who attaches a "moral" responsibility to their mortgage contract is doing so at their own detriment and via the long embeded propaganda machine created by lenders and our government. There is no "morality" clause whatsoever in any contract. It is a simple legal document outlining terms, conditions, causes, and effects. Yes, businesses default all the time. And guess what, I (and you) have every right to exercise your rights to default just like anyone else or any other business.
I owe a solid foundation of sound financial choices to my "shareholders" just like any business. My shareholders are myself and my family (and our collective financial future). I owe you nothing, i owe "the greater good" nothing. Chrysler does not owe GM because Chrysler defaults on contracts. Merrill Lynch does not owe Goldman Sachs because Merrill Lynch defaults on contracts. I do not owe you anything, much less an explaination because i default on my contract.
Would you really, to the detriment of your future...your childrens future....feel so "morally" bound to a horrible investment that you would continue to facilitate the self inflicted damage to your financial future? Really? You are welcome to keep the REAL answer to that question private as it is a very private and personal matter. The 100k that i was forgiven in my negotiated settlement is going to allow my children to have a better life and that is the only thing that makes any difference to me. That 100k is going to pay for an adequate home, education, and life experience that i want to be able to afford to my children and wife. Not to mention, that is 100k that i am personally pumping back into this stagnant economy which helps everyone.
I negotiated in good faith with my bank and they had access to all of my financial data, i hid nothing. We came to an agreeable solution and that is the end of the story. I absolutely will continue to advocate for this course of action and support anyone who chooses to take that course of action.
Keep up the interesting debate.
Cheers
04-30-2012, 09:55 AM
#243
TQ > MPG
I havent read all 7 pages, but let me ask you this: Did you at any point in time have a hard time financially affording your mortgage payment?
I dont mean you didnt WANT to make the payment, but more along the lines that you had no savings in the bank, were racking up CC debt, and started to fall behind in the mortgage.
I dont mean you didnt WANT to make the payment, but more along the lines that you had no savings in the bank, were racking up CC debt, and started to fall behind in the mortgage.
Last edited by Joe5.0; 04-30-2012 at 10:07 AM.
04-30-2012, 10:47 AM
#244
Drifting
^^^that's all good in theory, but trust me buddy...we're not the bad guys here.
There's got to be another quote where you stop bending over and taking it in the azz for your integrity and short sighted future. You have to draw the line when you DO try and work things out the right way and the bank backs you against a corner and won't do anything reasonable (read, I will pay you the inflated rate I agreed to but need a fixed interest rate of today and not the flexible rate that I had will get hit with after the first 10 years). I don't want to get back into the details...but I was totally willing to do what it takes for a fix. The loan I got into at the time, wasn't great, but it was a way to keep the roof over my head and with the promise that if I ever needed to walk away I'd either have 100k...I had no problem signing.
How would you feel if you were shown a ferrari, signed on the dotted line then 2 years later you come out to your garage to find a toyota tercel that the ferrari had turned into. Would you keep paying your ferrari car note? No, you'd take the car to the dealership and tell them to shove it up their azz. No different than a sinking business venture. You had illusions of security based on the market at one time.
You guys are very intelligent, clearly...and I'm all for morals. Don't question that. But how long would guys continue to sink thousands of dollars a month into a bad investment?!? If you say indefinitely because you're a man of your word. You are a fool, and probably full of shit.
Plus, I can't pay my mortgage anymore, I'm paying Gatrhumpy's new TL Type S's car payment!
There's got to be another quote where you stop bending over and taking it in the azz for your integrity and short sighted future. You have to draw the line when you DO try and work things out the right way and the bank backs you against a corner and won't do anything reasonable (read, I will pay you the inflated rate I agreed to but need a fixed interest rate of today and not the flexible rate that I had will get hit with after the first 10 years). I don't want to get back into the details...but I was totally willing to do what it takes for a fix. The loan I got into at the time, wasn't great, but it was a way to keep the roof over my head and with the promise that if I ever needed to walk away I'd either have 100k...I had no problem signing.
How would you feel if you were shown a ferrari, signed on the dotted line then 2 years later you come out to your garage to find a toyota tercel that the ferrari had turned into. Would you keep paying your ferrari car note? No, you'd take the car to the dealership and tell them to shove it up their azz. No different than a sinking business venture. You had illusions of security based on the market at one time.
You guys are very intelligent, clearly...and I'm all for morals. Don't question that. But how long would guys continue to sink thousands of dollars a month into a bad investment?!? If you say indefinitely because you're a man of your word. You are a fool, and probably full of shit.
Plus, I can't pay my mortgage anymore, I'm paying Gatrhumpy's new TL Type S's car payment!
04-30-2012, 11:02 AM
#245
AZ Community Team
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I understand what you're saying; you're making a moral appeal. And I agree, morally you should live up to the terms of a contract/agreement. I am 100% on board with this.
What I am saying is that default is a contractually specified and agreed upon OPTION. You can CHOOSE default as a way to fulfill the contract.
In the VAST majority of situations default is the WORST option financially. The penalties, short and long term, are harsh. Contracts are built that way on purpose, so that default only occurs in dire circumstances, usually as a last resort. But let's not say it's immoral to exercise a legitimate contract option.
NORMALLY in default the lender gets enough in compensation to minimize their loss, for example, your house which was the collateral for the loan. TODAY the problem is the banks gambled all of their risk on CDO's. When that market collapsed, it destroyed the value of the under-lying asset that SHOULD have been the collateral. IOW - the banks/markets destroyed their own safety net.
That has set up an unusual set of circumstance where default by the borrower can now be a more financially appealing option than it NORMALLY is.
If the bank doesn't want to renegotiate the remedies for default, they don't have to. They can foreclose and sue and collect and destroy the borrower's credit, just like it's always been. But why don't they? Because it's not worth it - the value in the asset doesn't make that the most financially attractive remedy. Why? Because they F'kd up the market with their slice-and-dice shenanigans. So they CHOOSE to renegotiate. THEY put the borrower in a stronger position vis-a-vis default. Not the other way round.
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BubbaMarkTL (04-30-2012)
04-30-2012, 11:20 AM
#246
I havent read all 7 pages, but let me ask you this: Did you at any point in time have a hard time financially affording your mortgage payment?
I dont mean you didnt WANT to make the payment, but more along the lines that you had no savings in the bank, were racking up CC debt, and started to fall behind in the mortgage.
I dont mean you didnt WANT to make the payment, but more along the lines that you had no savings in the bank, were racking up CC debt, and started to fall behind in the mortgage.
What is your definition of a "hard time"? I never was unable to make the payments. But I was in a position where i was not able to save a dime. Is that an ideal way to secure your future?
I was having a "hard time" with the fact that I had no ability to save money or contribute to retirement. Already within less than a year of the short sale/default i have amassed a substantial cash savings, increased my retirement savings by several %, paid off all outstanding debt besides wifes student loans.
Had i continued paying that mortgage to this day i would still have ZERO savings, miniscule contributions to my retirement accounts, and i would have paid down only another 2k-3k in principle and still be upside down over 100k on the property. You tell me what situation sounds better. You tell me you would put yourself through that INDEFINATELY because you had some made up "moral" obligation to essentially screw yourself for the rest of your life.
Defaulting was the smartest financial decision i ever made. Oh and my credit score is back up over 740 already. Another 18 months and i will be able to qualify for a mortgage (but frankly, i am loving every minute of renting) and by that time the credit score will easily be back at 800+/-.
04-30-2012, 11:21 AM
#247
I understand what you're saying; you're making a moral appeal. And I agree, morally you should live up to the terms of a contract/agreement. I am 100% on board with this.
What I am saying is that default is a contractually specified and agreed upon OPTION. You can CHOOSE default as a way to fulfill the contract.
In the VAST majority of situations default is the WORST option financially. The penalties, short and long term, are harsh. Contracts are built that way on purpose, so that default only occurs in dire circumstances, usually as a last resort. But let's not say it's immoral to exercise a legitimate contract option.
NORMALLY in default the lender gets enough in compensation to minimize their loss, for example, your house which was the collateral for the loan. TODAY the problem is the banks gambled all of their risk on CDO's. When that market collapsed, it destroyed the value of the under-lying asset that SHOULD have been the collateral. IOW - the banks/markets destroyed their own safety net.
That has set up an unusual set of circumstance where default by the borrower can now be a more financially appealing option than it NORMALLY is.
If the bank doesn't want to renegotiate the remedies for default, they don't have to. They can foreclose and sue and collect and destroy the borrower's credit, just like it's always been. But why don't they? Because it's not worth it - the value in the asset doesn't make that the most financially attractive remedy. Why? Because they F'kd up the market with their slice-and-dice shenanigans. So they CHOOSE to renegotiate. THEY put the borrower in a stronger position vis-a-vis default. Not the other way round.
What I am saying is that default is a contractually specified and agreed upon OPTION. You can CHOOSE default as a way to fulfill the contract.
In the VAST majority of situations default is the WORST option financially. The penalties, short and long term, are harsh. Contracts are built that way on purpose, so that default only occurs in dire circumstances, usually as a last resort. But let's not say it's immoral to exercise a legitimate contract option.
NORMALLY in default the lender gets enough in compensation to minimize their loss, for example, your house which was the collateral for the loan. TODAY the problem is the banks gambled all of their risk on CDO's. When that market collapsed, it destroyed the value of the under-lying asset that SHOULD have been the collateral. IOW - the banks/markets destroyed their own safety net.
That has set up an unusual set of circumstance where default by the borrower can now be a more financially appealing option than it NORMALLY is.
If the bank doesn't want to renegotiate the remedies for default, they don't have to. They can foreclose and sue and collect and destroy the borrower's credit, just like it's always been. But why don't they? Because it's not worth it - the value in the asset doesn't make that the most financially attractive remedy. Why? Because they F'kd up the market with their slice-and-dice shenanigans. So they CHOOSE to renegotiate. THEY put the borrower in a stronger position vis-a-vis default. Not the other way round.
04-30-2012, 11:39 AM
#248
TQ > MPG
What is your definition of a "hard time"? I never was unable to make the payments. But I was in a position where i was not able to save a dime. Is that an ideal way to secure your future?
I was having a "hard time" with the fact that I had no ability to save money or contribute to retirement. Already within less than a year of the short sale/default i have amassed a substantial cash savings, increased my retirement savings by several %, paid off all outstanding debt besides wifes student loans.
Had i continued paying that mortgage to this day i would still have ZERO savings, miniscule contributions to my retirement accounts, and i would have paid down only another 2k-3k in principle and still be upside down over 100k on the property. You tell me what situation sounds better. You tell me you would put yourself through that INDEFINATELY because you had some made up "moral" obligation to essentially screw yourself for the rest of your life.
Defaulting was the smartest financial decision i ever made. Oh and my credit score is back up over 740 already. Another 18 months and i will be able to qualify for a mortgage (but frankly, i am loving every minute of renting) and by that time the credit score will easily be back at 800+/-.
I was having a "hard time" with the fact that I had no ability to save money or contribute to retirement. Already within less than a year of the short sale/default i have amassed a substantial cash savings, increased my retirement savings by several %, paid off all outstanding debt besides wifes student loans.
Had i continued paying that mortgage to this day i would still have ZERO savings, miniscule contributions to my retirement accounts, and i would have paid down only another 2k-3k in principle and still be upside down over 100k on the property. You tell me what situation sounds better. You tell me you would put yourself through that INDEFINATELY because you had some made up "moral" obligation to essentially screw yourself for the rest of your life.
Defaulting was the smartest financial decision i ever made. Oh and my credit score is back up over 740 already. Another 18 months and i will be able to qualify for a mortgage (but frankly, i am loving every minute of renting) and by that time the credit score will easily be back at 800+/-.
2. Reduce unnecessary expenses (luxury cars, expensive dinners out, vacations, etc).
3. Be a man and own up to YOUR mistake.
This is only my opinion, and it is not a personal attack on you specifically, more on the thousands of people that have done the exact same thing you have done.
All you did was pass the buck of your poor decision onto the rest of us. What you have done is made it harder for a new home owner to get a mortgage, screwed your neighbors values even more, and now you are reaping the rewards.
I bought my house in 2006 for $205k, its now worth maybe $150k and I have put $30k into it. Does that suck? Sure as shit does. Would I ever think 'well this is a bad investment, screw the banks I WANT a bigger house, I'm gonna stop making payments'? No F'in way.
Again, in my opinion, the way you (and thousands of people) have simply walked away with no significant penalty is a sign of what's wrong with my generation. Its a throw-away society and always someone else's fault. No one ever promised you that the value of your condo would increase, and while the real estate bubble was seen by some, it wasnt ever expected to blow up like it did. Guess what, thats life and you deal with it. What you did was throw up your hands and say 'I give up' and walk away.
Your biggest defense is that you improved your kids futures, your savings, your retirement. In the process you see no problem with what you did, and come onto a public forum to basically brag about how you defaulted on a contract. If it were me I would be so embarrassed about what I did that I wouldn't even tell close friends & family, let alone tell people "look what I did, it was awesome, you should do it too!".
In the end, from my perspective, you come off extremely selfish and proud of telling people how you didn't have to own up to your obligation. Very lame, in my opinion.
04-30-2012, 12:52 PM
#249
1. Get a second job.
2. Reduce unnecessary expenses (luxury cars, expensive dinners out, vacations, etc).
3. Be a man and own up to YOUR mistake.
This is only my opinion, and it is not a personal attack on you specifically, more on the thousands of people that have done the exact same thing you have done.
All you did was pass the buck of your poor decision onto the rest of us. What you have done is made it harder for a new home owner to get a mortgage, screwed your neighbors values even more, and now you are reaping the rewards.
I bought my house in 2006 for $205k, its now worth maybe $150k and I have put $30k into it. Does that suck? Sure as shit does. Would I ever think 'well this is a bad investment, screw the banks I WANT a bigger house, I'm gonna stop making payments'? No F'in way.
Again, in my opinion, the way you (and thousands of people) have simply walked away with no significant penalty is a sign of what's wrong with my generation. Its a throw-away society and always someone else's fault. No one ever promised you that the value of your condo would increase, and while the real estate bubble was seen by some, it wasnt ever expected to blow up like it did. Guess what, thats life and you deal with it. What you did was throw up your hands and say 'I give up' and walk away.
Your biggest defense is that you improved your kids futures, your savings, your retirement. In the process you see no problem with what you did, and come onto a public forum to basically brag about how you defaulted on a contract. If it were me I would be so embarrassed about what I did that I wouldn't even tell close friends & family, let alone tell people "look what I did, it was awesome, you should do it too!".
In the end, from my perspective, you come off extremely selfish and proud of telling people how you didn't have to own up to your obligation. Very lame, in my opinion.
2. Reduce unnecessary expenses (luxury cars, expensive dinners out, vacations, etc).
3. Be a man and own up to YOUR mistake.
This is only my opinion, and it is not a personal attack on you specifically, more on the thousands of people that have done the exact same thing you have done.
All you did was pass the buck of your poor decision onto the rest of us. What you have done is made it harder for a new home owner to get a mortgage, screwed your neighbors values even more, and now you are reaping the rewards.
I bought my house in 2006 for $205k, its now worth maybe $150k and I have put $30k into it. Does that suck? Sure as shit does. Would I ever think 'well this is a bad investment, screw the banks I WANT a bigger house, I'm gonna stop making payments'? No F'in way.
Again, in my opinion, the way you (and thousands of people) have simply walked away with no significant penalty is a sign of what's wrong with my generation. Its a throw-away society and always someone else's fault. No one ever promised you that the value of your condo would increase, and while the real estate bubble was seen by some, it wasnt ever expected to blow up like it did. Guess what, thats life and you deal with it. What you did was throw up your hands and say 'I give up' and walk away.
Your biggest defense is that you improved your kids futures, your savings, your retirement. In the process you see no problem with what you did, and come onto a public forum to basically brag about how you defaulted on a contract. If it were me I would be so embarrassed about what I did that I wouldn't even tell close friends & family, let alone tell people "look what I did, it was awesome, you should do it too!".
In the end, from my perspective, you come off extremely selfish and proud of telling people how you didn't have to own up to your obligation. Very lame, in my opinion.
And as far as your suggested alternatives?
1. not feasible due to time commitments from my existing job/career and commitments in life
2. my vehicles are owned outright, no loans. I do own any luxury items. I do not take vacations other than to see family in distant locations typically. I dont even have cable TV at home, so what is there to cut?
3. Well thats where we differ. my decision to default and negotiate a way out of the nightmare with my lender has nothing to do with morals, being a man, etc. I will say it again. You attach morality to your mortgage at your own detriment and your own peril. You are NOT morally OR legally obligated to pay your mortgage.
You default, you relinquish the property and (if you are smart) negotiate the settlement terms. End of story.
04-30-2012, 01:06 PM
#250
TQ > MPG
So you are not embarrassed AT ALL that you chose to walk away from an obligation? Nobody forced you to buy the condo, it was of your own free will.
Will you tell your son to go ahead and default on his mortgage when the time comes, because it saved you a bunch of money and headache? Where does the cycle of passing the problem end?
I guess I just view foreclosure as failure, not as a means to IMPROVE my life. I guess thats the society and culture of hand-me-outs that we live in nowadays.
I can understand your perspective, and that your family comes first. I just think thats a way in your mind to justify your choice.
Will you tell your son to go ahead and default on his mortgage when the time comes, because it saved you a bunch of money and headache? Where does the cycle of passing the problem end?
I guess I just view foreclosure as failure, not as a means to IMPROVE my life. I guess thats the society and culture of hand-me-outs that we live in nowadays.
I can understand your perspective, and that your family comes first. I just think thats a way in your mind to justify your choice.
04-30-2012, 01:38 PM
#251
Drifting
So you are not embarrassed AT ALL that you chose to walk away from an obligation? Nobody forced you to buy the condo, it was of your own free will.
Will you tell your son to go ahead and default on his mortgage when the time comes, because it saved you a bunch of money and headache? Where does the cycle of passing the problem end?
I guess I just view foreclosure as failure, not as a means to IMPROVE my life. I guess thats the society and culture of hand-me-outs that we live in nowadays.
I can understand your perspective, and that your family comes first. I just think thats a way in your mind to justify your choice.
Will you tell your son to go ahead and default on his mortgage when the time comes, because it saved you a bunch of money and headache? Where does the cycle of passing the problem end?
I guess I just view foreclosure as failure, not as a means to IMPROVE my life. I guess thats the society and culture of hand-me-outs that we live in nowadays.
I can understand your perspective, and that your family comes first. I just think thats a way in your mind to justify your choice.
Yes, it would be best for everyone if we pay back what we borrow, and 99.9% of people have that intention, I believe bubba did too. But to continually compare it to ones morals and "what is right" is just not appropriate in my opinion. Contracts are agreements, and they take into account what will happen if one doesn't hold up their end. If you stop making payments on your car, they will come take it and your credit takes a big hit. Same thing here, just on a much larger scale.
It isn't very reasonable to say people should have planned for this or seen it coming. On the other hand, people should NOT have been buying houses at the peak prices. I wouldn't have bought a house during those few years when the prices skyrocketed. I don't care how easily they were handing out loans, there was no way i could have justified the prices houses were going for. The banks didn't help matters either, they acted in their best interest and wouldn't work with people, which forced people to act in their best interests as well.
Personally, I wouldn't be telling people about it, I would keep it to myself. I am so anal about paying bills I have never carried a balance on my cc's, so defaulting on my mortgage would be the last thing I'd want to do. People get put in bad spots....I couldn't see myself paying an interest only mortgage for years and years like someone mentioned.
04-30-2012, 01:47 PM
#252
Suzuka Master
I understand what you're saying; you're making a moral appeal. And I agree, morally you should live up to the terms of a contract/agreement. I am 100% on board with this.
What I am saying is that default is a contractually specified and agreed upon OPTION. You can CHOOSE default as a way to fulfill the contract.
In the VAST majority of situations default is the WORST option financially. The penalties, short and long term, are harsh. Contracts are built that way on purpose, so that default only occurs in dire circumstances, usually as a last resort. But let's not say it's immoral to exercise a legitimate contract option.
NORMALLY in default the lender gets enough in compensation to minimize their loss, for example, your house which was the collateral for the loan. TODAY the problem is the banks gambled all of their risk on CDO's. When that market collapsed, it destroyed the value of the under-lying asset that SHOULD have been the collateral. IOW - the banks/markets destroyed their own safety net.
That has set up an unusual set of circumstance where default by the borrower can now be a more financially appealing option than it NORMALLY is.
If the bank doesn't want to renegotiate the remedies for default, they don't have to. They can foreclose and sue and collect and destroy the borrower's credit, just like it's always been. But why don't they? Because it's not worth it - the value in the asset doesn't make that the most financially attractive remedy. Why? Because they F'kd up the market with their slice-and-dice shenanigans. So they CHOOSE to renegotiate. THEY put the borrower in a stronger position vis-a-vis default. Not the other way round.
What I am saying is that default is a contractually specified and agreed upon OPTION. You can CHOOSE default as a way to fulfill the contract.
In the VAST majority of situations default is the WORST option financially. The penalties, short and long term, are harsh. Contracts are built that way on purpose, so that default only occurs in dire circumstances, usually as a last resort. But let's not say it's immoral to exercise a legitimate contract option.
NORMALLY in default the lender gets enough in compensation to minimize their loss, for example, your house which was the collateral for the loan. TODAY the problem is the banks gambled all of their risk on CDO's. When that market collapsed, it destroyed the value of the under-lying asset that SHOULD have been the collateral. IOW - the banks/markets destroyed their own safety net.
That has set up an unusual set of circumstance where default by the borrower can now be a more financially appealing option than it NORMALLY is.
If the bank doesn't want to renegotiate the remedies for default, they don't have to. They can foreclose and sue and collect and destroy the borrower's credit, just like it's always been. But why don't they? Because it's not worth it - the value in the asset doesn't make that the most financially attractive remedy. Why? Because they F'kd up the market with their slice-and-dice shenanigans. So they CHOOSE to renegotiate. THEY put the borrower in a stronger position vis-a-vis default. Not the other way round.
What I do disagree with is claiming that a house is an investment (it is not) and that if the investment goes bad, then anything is fair game, because it's the banks fault anyway.
This type of thinking is what leads people to say to NEVER lend money to friends or family, because people find a way to justify to themselves that they shouldn't have to pay it back. Would you feel the same way if he bought the house with money from his mother and said, "I'm not paying her back, it's not worth it to me, I want a new motorcycle instead"? I doubt you would. Therefore, if it is wrong to back out of a contract with his mother, then why is it ok to back out of a contract with his bank?
Also, any item should have value to you, and you alone. If you buy a piece of art for $500, and someone says "I wouldn't pay $1" what does that mean? If you bought the art because YOU like it, then it means nothing right?
It should be the same way with a house. If you paid $150,000 for a house because you thought that's what the house is worth, then why does someone else's opinion make it somehow worth less? A house, just like EVERY other commodity that has every existed, is always worth what someone else will pay for it, not one cent more or less. Why is a house such a special item, in the minds of so many people? Is it entirely based on cost?
I don't think that banks are blameless in this scenario, I think they have only themselves to blame, both sides gambled and both sides lost, they tried to stack the deck and failed, and they should have known better. It still does not excuse someone from failing to live up to what they say they are going to do.
I just want to call a spade a spade here, if you are defaulting based on what is best for you, you are doing it because you are greedy, there is no way around it. If you are fine with that, whatever, lots of people are, but don't try to mask it with some false indignation about the banks deserving it.
Just wanted to say when I say *you* I do not mean anyone in particular, I am using it in a general sense.
Last edited by TzarChasm; 04-30-2012 at 01:53 PM.
04-30-2012, 05:52 PM
#254
The only reason any of us would be on here defending a decision is because we do feel guilty, and morally unsound. But also cornered into it. Nobody fked me...I fked me. And unfortunately, that also leaves only ME to unfk me. 
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
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MR1 (04-30-2012)
04-30-2012, 08:08 PM
#255
We're still fussing about this? A gent I know just settled 80k+ in credit cards for 23K, has a full time job and annual pay exceed 300k. The difference he didn't pay, he brags is his play money for the market. I understand many won't see eye to eye on this but as I rise through the ranks, Im seeing the game being played here. The wealthy skimp out and break contracts often. Mostly on deals/contracts that have become liabilities. I doubt they're willing to lose their wealth over liabilities they can walk away from. I am in no means placing all wealthy persons in the same boat, but this seems to be common. 
Last edited by whudini3000; 04-30-2012 at 08:19 PM.
04-30-2012, 08:35 PM
#256
AZ Community Team
Join Date: May 2007
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rockstar143 (04-30-2012)
04-30-2012, 08:39 PM
#257
Hahahaha...
you ain't lyin! Well, I know the way we've written we make it sound like we're victims...and to a certain degree we are (all of us, really) but I don't absolve myself of liability for making the mistake.
J.
you ain't lyin!
Well, I know the way we've written we make it sound like we're victims...and to a certain degree we are (all of us, really) but I don't absolve myself of liability for making the mistake.J.
04-30-2012, 08:46 PM
#258
The only reason any of us would be on here defending a decision is because we do feel guilty, and morally unsound. But also cornered into it. Nobody fked me...I fked me. And unfortunately, that also leaves only ME to unfk me.
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
That is justified compared to what we're talking about the OP.
04-30-2012, 09:13 PM
#259
Suzuka Master
We're still fussing about this? A gent I know just settled 80k+ in credit cards for 23K, has a full time job and annual pay exceed 300k. The difference he didn't pay, he brags is his play money for the market. I understand many won't see eye to eye on this but as I rise through the ranks, Im seeing the game being played here. The wealthy skimp out and break contracts often. Mostly on deals/contracts that have become liabilities. I doubt they're willing to lose their wealth over liabilities they can walk away from. I am in no means placing all wealthy persons in the same boat, but this seems to be common.
04-30-2012, 09:19 PM
#260
Suzuka Master
The only reason any of us would be on here defending a decision is because we do feel guilty, and morally unsound. But also cornered into it. Nobody fked me...I fked me. And unfortunately, that also leaves only ME to unfk me.
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
I just don't like being defined by a particular action...especially when it's one that is totally out of character for me and didn't come without a lot of thought, lost sleep and attempts at doing things the right way.
The Champ...wait, you have 8K in credit card debt that you're trying to get wiped clean? I'm sure the circumstances can be explained, but that's pretty ironic that you'd come on here slinging morality about broken promises.
I just find that to be distinctly different than screwing someone (even a bank) by making a "financial decision" to not live up to your word.
04-30-2012, 09:28 PM
#261
Sorry to hear about that Champ...different circumstance (obviously) and less serious amount of money, but not, to me if it's morals you're all preaching then it's across the board for all scenarios. In many ways I ended up with the sh*tty mortgage I had as a means to an end to be able to keep the roof over my head after paying off my ex.
Either way, we're all the same. Some have gotten lucky, some haven't. Bottom line. Tzar, I hear what you're saying but had you not gotten the promotion, you would have had to make that "financial decision", yourself.
Either way, we're all the same. Some have gotten lucky, some haven't. Bottom line. Tzar, I hear what you're saying but had you not gotten the promotion, you would have had to make that "financial decision", yourself.
04-30-2012, 10:07 PM
#262
There is no doubt that many people get rich by screwing over anyone they can, any time they can. If that's the kind of person you choose to be, well, that's your decision to make, I just caution you that those people frequently get much less satisfaction out of life than a guy who works hard to make an honest living.
05-13-2012, 08:34 PM
#263
Drifting
Glad to see this thread continues to stir debate. Some valid and intelligent, some not...but debate nonetheless.
Please explain to me, what research anywhere on earth circa 2006/early 2007 would have in any way indicated to me or the population at large that the worlds largest economic collapse and most severe real estate downturn in the better part of 100 years is about to occur?
Cheers
Please explain to me, what research anywhere on earth circa 2006/early 2007 would have in any way indicated to me or the population at large that the worlds largest economic collapse and most severe real estate downturn in the better part of 100 years is about to occur?
Cheers
People like Peter Schiff predicted this issue in 2006- here's a link to a talk he gave to the Mortgage Bankers that mocked him- boy he was right!
Care to guess what the next bubble will be? My money is on student debt. Hopefully you don't have any student debt too or perhaps you might start a new thread on defaulting in another year or two.
02-23-2013, 09:36 AM
#264
Team Owner
They Bailed On Their Homes -- Now They Want Back In
http://finance.yahoo.com/news/bailed...174153631.html
http://finance.yahoo.com/news/bailed...174153631.html
Home sales are slowly climbing back, thanks to investor demand, improving consumer confidence in housing, and the surprising return of former homeowners who once walked away from their commitments.
These so-called, "strategic defaulters," some of them investors and some owner-occupants, are coming back to the market, despite damaged credit, and apparently the market is welcoming them back.
A new survey of past clients by YouWalkAway.com, a website that assists borrowers in the legal pitfalls of strategic default, found that nearly 80 percent expressed a desire to buy a home again within the next twelve months. It also cites data by Moody's analytics, showing that the number of eligible home buyers who have had a previous foreclosure will be 1.5 million by the first quarter of 2014.
Crashing home prices and sketchy mortgage products caused millions of Americans to default on their loans and eventually lose their homes. For some, it was a tragic fight to the end to keep their single largest investment; for others it was a conscious decision to walk away from their mortgage commitments, given the real fact that they would likely not see home equity again for many years to come.
Some saw this as morally reprehensible, others as a sensible business decision.
While home ownership has fallen dramatically since the recent housing boom, from a high of 69.2 percent in 2004 to 65.4 percent at the end of 2012, according to the U.S. Census, the desire to own a home is still strong. 70 percent of Americans surveyed by online real estate website Trulia.com said homeownership was still a part of the "American Dream." 65 percent of those surveyed by Fannie Mae in January of 2013 said that if they had to move, they would buy a home, rather than rent.
Coming back to home ownership may not be as difficult as some think. Consumers who only defaulted on their mortgage during the recent recession were far better risks than those who went delinquent on multiple credit accounts, like credit cards and auto loans, according to a 2011 study by TransUnion.
"There appears to be a pocket of opportunity among mortgage-only defaulters that is not the result of excess liquidity, but rather the unique circumstances of the recent recession," said Steve Chaouki, group vice president in TransUnion's financial services business unit in the study release. "This new market segment that the recession created is an important one for lenders to understand. They have the potential, today, to be stronger and more reliable customers."
Not surprisingly, given this potential, YouWalkAway.com is launching the "AfterForeclosure.com Pass/Fail App," which claims to tell potential borrowers in just one minute, "if they have a shot at home ownership."
"We want people to know that it's possible and, in a lot of cases, it's advantageous," says Jon Maddux, former CEO and co-founder of YouWalkAway.com.
It is possible, but mortgage underwriting is far more strict today than during the housing boom, and there are varying waiting periods before former homeowners who went through foreclosure can qualify for a new loan. The Federal Housing Administration, the government insurer of home loans which now backs just over 20 percent of new loan originations, requires a three-year wait. Fannie Mae and Freddie Mac, which own or guarantee the bulk of the remaining new loan originations, require up to seven years for a strategic defaulter to qualify again for a mortgage.
These so-called, "strategic defaulters," some of them investors and some owner-occupants, are coming back to the market, despite damaged credit, and apparently the market is welcoming them back.
A new survey of past clients by YouWalkAway.com, a website that assists borrowers in the legal pitfalls of strategic default, found that nearly 80 percent expressed a desire to buy a home again within the next twelve months. It also cites data by Moody's analytics, showing that the number of eligible home buyers who have had a previous foreclosure will be 1.5 million by the first quarter of 2014.
Crashing home prices and sketchy mortgage products caused millions of Americans to default on their loans and eventually lose their homes. For some, it was a tragic fight to the end to keep their single largest investment; for others it was a conscious decision to walk away from their mortgage commitments, given the real fact that they would likely not see home equity again for many years to come.
Some saw this as morally reprehensible, others as a sensible business decision.
While home ownership has fallen dramatically since the recent housing boom, from a high of 69.2 percent in 2004 to 65.4 percent at the end of 2012, according to the U.S. Census, the desire to own a home is still strong. 70 percent of Americans surveyed by online real estate website Trulia.com said homeownership was still a part of the "American Dream." 65 percent of those surveyed by Fannie Mae in January of 2013 said that if they had to move, they would buy a home, rather than rent.
Coming back to home ownership may not be as difficult as some think. Consumers who only defaulted on their mortgage during the recent recession were far better risks than those who went delinquent on multiple credit accounts, like credit cards and auto loans, according to a 2011 study by TransUnion.
"There appears to be a pocket of opportunity among mortgage-only defaulters that is not the result of excess liquidity, but rather the unique circumstances of the recent recession," said Steve Chaouki, group vice president in TransUnion's financial services business unit in the study release. "This new market segment that the recession created is an important one for lenders to understand. They have the potential, today, to be stronger and more reliable customers."
Not surprisingly, given this potential, YouWalkAway.com is launching the "AfterForeclosure.com Pass/Fail App," which claims to tell potential borrowers in just one minute, "if they have a shot at home ownership."
"We want people to know that it's possible and, in a lot of cases, it's advantageous," says Jon Maddux, former CEO and co-founder of YouWalkAway.com.
It is possible, but mortgage underwriting is far more strict today than during the housing boom, and there are varying waiting periods before former homeowners who went through foreclosure can qualify for a new loan. The Federal Housing Administration, the government insurer of home loans which now backs just over 20 percent of new loan originations, requires a three-year wait. Fannie Mae and Freddie Mac, which own or guarantee the bulk of the remaining new loan originations, require up to seven years for a strategic defaulter to qualify again for a mortgage.
02-23-2013, 04:48 PM
#266
03-07-2013, 12:42 PM
#268
Safety Car
Looking back, I think buying a house was one of the worst decisions of my life. I bought in 2003 near the peak of the housing market, put 20% down and signed 30 year mortgage @5.75%.
Almost 10 years later, my house is $20,000 underwater. And here I was thinking that I was doing the right thing by putting 20% down and living below my means. I have never missed a payment even during the times I was out of work, but it still sucks that I will be stuck in this house for the rest of my life unless im willing to fork over $20k plus thousands more in real estate fees just to break even. I was able to refi at a much lower rate last year for a 20 year fixed, and it has knocked off $100 off my payments, but still I feel trapped.
I don't think I could ever stop making payments, as it would ruin my credit, but at the same time I know I'm not doing myself any good by remaining in this house, ultimately making 100's of thousands of dollars in mortgage payments on a depreciating asset. For that amount of money, I could have just kept renting and used my 20% down payment on something else.
They say hindsight is 20/20. I just had no idea how much of a mistake buying a house would be.
Almost 10 years later, my house is $20,000 underwater. And here I was thinking that I was doing the right thing by putting 20% down and living below my means. I have never missed a payment even during the times I was out of work, but it still sucks that I will be stuck in this house for the rest of my life unless im willing to fork over $20k plus thousands more in real estate fees just to break even. I was able to refi at a much lower rate last year for a 20 year fixed, and it has knocked off $100 off my payments, but still I feel trapped.
I don't think I could ever stop making payments, as it would ruin my credit, but at the same time I know I'm not doing myself any good by remaining in this house, ultimately making 100's of thousands of dollars in mortgage payments on a depreciating asset. For that amount of money, I could have just kept renting and used my 20% down payment on something else.
They say hindsight is 20/20. I just had no idea how much of a mistake buying a house would be.
Last edited by WdnUlik2no; 03-07-2013 at 12:49 PM.
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rockstar143 (03-07-2013)
03-07-2013, 01:15 PM
#269
Looking back, I think buying a house was one of the worst decisions of my life. I bought in 2003 near the peak of the housing market, put 20% down and signed 30 year mortgage @5.75%.
Almost 10 years later, my house is $20,000 underwater. And here I was thinking that I was doing the right thing by putting 20% down and living below my means. I have never missed a payment even during the times I was out of work, but it still sucks that I will be stuck in this house for the rest of my life unless im willing to fork over $20k plus thousands more in real estate fees just to break even. I was able to refi at a much lower rate last year for a 20 year fixed, and it has knocked off $100 off my payments, but still I feel trapped.
I don't think I could ever stop making payments, as it would ruin my credit, but at the same time I know I'm not doing myself any good by remaining in this house, ultimately making 100's of thousands of dollars in mortgage payments on a depreciating asset. For that amount of money, I could have just kept renting and used my 20% down payment on something else.
They say hindsight is 20/20. I just had no idea how much of a mistake buying a house would be.
Almost 10 years later, my house is $20,000 underwater. And here I was thinking that I was doing the right thing by putting 20% down and living below my means. I have never missed a payment even during the times I was out of work, but it still sucks that I will be stuck in this house for the rest of my life unless im willing to fork over $20k plus thousands more in real estate fees just to break even. I was able to refi at a much lower rate last year for a 20 year fixed, and it has knocked off $100 off my payments, but still I feel trapped.
I don't think I could ever stop making payments, as it would ruin my credit, but at the same time I know I'm not doing myself any good by remaining in this house, ultimately making 100's of thousands of dollars in mortgage payments on a depreciating asset. For that amount of money, I could have just kept renting and used my 20% down payment on something else.
They say hindsight is 20/20. I just had no idea how much of a mistake buying a house would be.
We love the house and the area, and if we need more room, we'll add onto it.
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rockstar143 (03-07-2013)
03-07-2013, 03:29 PM
#271
Registered but harmless
Join Date: Aug 2005
Location: Los Angeles, CA
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Almost 10 years later, my house is $20,000 underwater. And here I was thinking that I was doing the right thing by putting 20% down and living below my means. I have never missed a payment even during the times I was out of work, but it still sucks that I will be stuck in this house for the rest of my life unless im willing to fork over $20k plus thousands more in real estate fees just to break even. I was able to refi at a much lower rate last year for a 20 year fixed, and it has knocked off $100 off my payments, but still I feel trapped.
Also, if you sell while still underwater, you will probably be ahead monetarily anyway, as you will net back money that otherwise would have disappeared into rent.
05-31-2014, 02:35 PM
#272
Drifting
What is your definition of a "hard time"? I never was unable to make the payments. But I was in a position where i was not able to save a dime. Is that an ideal way to secure your future?
I was having a "hard time" with the fact that I had no ability to save money or contribute to retirement. Already within less than a year of the short sale/default i have amassed a substantial cash savings, increased my retirement savings by several %, paid off all outstanding debt besides wifes student loans.
Had i continued paying that mortgage to this day i would still have ZERO savings, miniscule contributions to my retirement accounts, and i would have paid down only another 2k-3k in principle and still be upside down over 100k on the property. You tell me what situation sounds better. You tell me you would put yourself through that INDEFINATELY because you had some made up "moral" obligation to essentially screw yourself for the rest of your life.
Defaulting was the smartest financial decision i ever made. Oh and my credit score is back up over 740 already. Another 18 months and i will be able to qualify for a mortgage (but frankly, i am loving every minute of renting) and by that time the credit score will easily be back at 800+/-.
I was having a "hard time" with the fact that I had no ability to save money or contribute to retirement. Already within less than a year of the short sale/default i have amassed a substantial cash savings, increased my retirement savings by several %, paid off all outstanding debt besides wifes student loans.
Had i continued paying that mortgage to this day i would still have ZERO savings, miniscule contributions to my retirement accounts, and i would have paid down only another 2k-3k in principle and still be upside down over 100k on the property. You tell me what situation sounds better. You tell me you would put yourself through that INDEFINATELY because you had some made up "moral" obligation to essentially screw yourself for the rest of your life.
Defaulting was the smartest financial decision i ever made. Oh and my credit score is back up over 740 already. Another 18 months and i will be able to qualify for a mortgage (but frankly, i am loving every minute of renting) and by that time the credit score will easily be back at 800+/-.
06-01-2014, 08:08 PM
#274
Drifting
^ But how did things work out with renting another place? I don't care much about the Amex- I think Amex raise lots of people's limits recently. Is your credit score above 800 yet and are you planning on renting for an extended time or buying some time?
06-02-2014, 06:59 AM
#275
I'm currently happily renting...eventually, I'll be buying something.
...I wasn't at 800 BEFORE this debacle...last I checked I was 620 or so...
and no, Amex is doing it on a case by case basis. I'd be declined twice before for an increase and was denied. I'd like to see it as a sign of things going in the right direction.
...I wasn't at 800 BEFORE this debacle...last I checked I was 620 or so...and no, Amex is doing it on a case by case basis. I'd be declined twice before for an increase and was denied. I'd like to see it as a sign of things going in the right direction.
06-03-2014, 10:15 AM
#276
My rent actually went down by about 45% by moving to North Carolina while my income is up. (Cost of living alone was a huge reason for the move)
My credit is back over 800 (and has been for well over a year), I never experienced any sort of interest rate increase or limit reduction on any of my credit cards. In fact I recently bought a new car at 0% at the beginning of this year so clearly I qualify for the prime rates.
I never experienced any other consequence in terms of costs for any services or anything going up as a result of the temporarily lowered credit.
My family and I are currently renting not out of necessity but only because we need to learn the area down here before committing to a home purchase. We are looking and I am already prequalified at todays best rates for a mortgage...its just now a matter of timing and finding the right property.
I guess this is the end of the story for me on this one. I will go to my grave knowing this was the best financial decision I ever made for myself and my family's future. We are able to save as a result, we were able to relocate for a fantastic job opportunity, and aside from being "blacked out" of home purchasing for 24 months, which was never something we wanted to do anyway in that time period, there was absolutely no long term or negative consequence in any way to the strategic default.
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06-04-2014, 05:28 PM
#278
05/5AT/Navi/ABP/Quartz
Good outcome for OP. From these pages I guess we can come up with various learning points. What strikes me is that there are no guaranteed outcomes. The correct course of action may depend on the specifics of the individual, timing, and the circumstances. Morals and ethics will be debated forever. Lots of us don't really understand contracts, obligations, and responsibility.
In my area lenders are again offering loans to individuals with a 540 credit score. Also some 3% down, and, I think, a limited number of stated income loans.
In my area lenders are again offering loans to individuals with a 540 credit score. Also some 3% down, and, I think, a limited number of stated income loans.
06-04-2014, 10:39 PM
#279
Drifting
^ I agree. I think history will repeat itself and we'll have another wave of foreclosures and strategic defaults. ARMs are becoming more popular with people again with 10% of applications being for ARMs. This could cause problems in 5-7 years assuming interests start rising before then. We'll see how this plays out in 2019 when the 5-year ARMs adjust.
06-14-2014, 02:05 PM
#280
Team Owner
Lost your last house to foreclosure? No Problem! FHA backed loan for you.
'Boomerang' homebuyers getting government boost
http://www.cnbc.com/id/101757616
'Boomerang' homebuyers getting government boost
http://www.cnbc.com/id/101757616
Linda Van Doren works at a Tampa, Florida, area housing counseling center, but back in 2007 the center was unable to keep paying its counselors a full salary. She continued to work there, but, unable to pay her bills, ironically she lost her own home, agreeing to a short sale. Despite the stress, anger and damaged credit, Van Doren never soured on homeownership.
"In the back of my mind I knew what I was going to do; I was going to purchase another home when I could, and I did exactly that," she said with pride. After renting for three years, Van Doren bought a home last summer, using a loan insured by the Federal Housing Administration (FHA).
Since the housing crash began, 7.2 million homes have been lost to foreclosure or short sale, according to Black Knight Financial Services. Most of those former owners became renters and still are, but some are slowly, carefully moving back into homeownership. A new government program is making that happen faster than ever before.
"We see a lot of boomerang buyers. I'd say about 20 percent of my current clientele has either suffered a short sale or a foreclosure in the past and are now re-buying back into the marketplace," said Matt Weaver, a lender with PMAC Lending Services in Florida.
The bulk of those borrowers are using a new program launched last summer by the FHA, the government's insurer of home loans. The program requires that applicants show they lost at least 20 percent of their income for at least six months and that that caused them to lose their home. They then must show they recovered from that hardship and have had clean credit for at least one year. The loans are fully documented, with all the borrowers finances considered.
"You still have to have the right housing-to-debt ratio, that's key," said Sylvia Alvarez, executive director of the Housing & Education Alliance in Tampa. "If you are over-indebted, you're not going to get a mortgage."
Once borrowers clear the hurdle, they are eligible for regular FHA loans which can carry low interest rates and require just a 3.5 percent down payment. The FHA has no hard number yet on how many borrowers have taken advantage of the new program, but it is a tiny percentage of those who lost their homes.
"Based on the fact that the homeownership rate isn't rising again and demand for single-family rentals is historically high, the comeback buyer is not a significant phenomenon in the market," said Mark Fleming, chief economist at CoreLogic. "Given the duration of the recovery, it's likely that many of the initially foreclosed borrowers have repaired their credit and are now creditworthy, but the scale at which they will enter the market is not sufficient to significantly influence demand."
While the opportunity to get a home loan may be increasing for those with damaged credit, housing affordability is deteriorating, and confidence in both housing and the overall economy is still wavering.
"In the back of my mind I knew what I was going to do; I was going to purchase another home when I could, and I did exactly that," she said with pride. After renting for three years, Van Doren bought a home last summer, using a loan insured by the Federal Housing Administration (FHA).
Since the housing crash began, 7.2 million homes have been lost to foreclosure or short sale, according to Black Knight Financial Services. Most of those former owners became renters and still are, but some are slowly, carefully moving back into homeownership. A new government program is making that happen faster than ever before.
"We see a lot of boomerang buyers. I'd say about 20 percent of my current clientele has either suffered a short sale or a foreclosure in the past and are now re-buying back into the marketplace," said Matt Weaver, a lender with PMAC Lending Services in Florida.
The bulk of those borrowers are using a new program launched last summer by the FHA, the government's insurer of home loans. The program requires that applicants show they lost at least 20 percent of their income for at least six months and that that caused them to lose their home. They then must show they recovered from that hardship and have had clean credit for at least one year. The loans are fully documented, with all the borrowers finances considered.
"You still have to have the right housing-to-debt ratio, that's key," said Sylvia Alvarez, executive director of the Housing & Education Alliance in Tampa. "If you are over-indebted, you're not going to get a mortgage."
Once borrowers clear the hurdle, they are eligible for regular FHA loans which can carry low interest rates and require just a 3.5 percent down payment. The FHA has no hard number yet on how many borrowers have taken advantage of the new program, but it is a tiny percentage of those who lost their homes.
"Based on the fact that the homeownership rate isn't rising again and demand for single-family rentals is historically high, the comeback buyer is not a significant phenomenon in the market," said Mark Fleming, chief economist at CoreLogic. "Given the duration of the recovery, it's likely that many of the initially foreclosed borrowers have repaired their credit and are now creditworthy, but the scale at which they will enter the market is not sufficient to significantly influence demand."
While the opportunity to get a home loan may be increasing for those with damaged credit, housing affordability is deteriorating, and confidence in both housing and the overall economy is still wavering.