Have any responsible people here strategically defaulted ? ...or have friends who have? Does anyone have any anecdotes that have constructive lessons/strategies about responsible people who elected to default? This is NOT a thread for bashing idiots who overspend and do HELOC's for cars and boats. This IS a thread for people who can see beyond the "FICO brainwashing" that does so many people in.... [more]
Have any responsible people here strategically defaulted ? ...or have friends who have? Does anyone have any anecdotes that have constructive lessons/strategies about responsible people who elected to default?
This is NOT a thread for bashing idiots who overspend and do HELOC's for cars and boats.
This IS a thread for people who can see beyond the "FICO brainwashing" that does so many people in. (Sacrifice self, and make terrible decisions, and perpetuate horrible decisions, all in the name of keeping a good credit score... Idiotic and ignorant)
Also, this does NOT apply to NYC real estate, b/c it almost only goes up, but maybe you know people in other parts of the country?
If you can see beyond these factors, objectively, your input is welcome....
When it makes sense for a responsible person to default b/c he's just way too far underwater...
But, like when it would be foolish to stay, when the alternative is:
1) Stopping payment to allow foreclose process (Free rent for 1 year)
2) Downsizing into a small rented bedrooom while stockpiling cash for a few years (Or living with parents if person is unmarried, etc)
3) Coming back with warchest and putting 50%-100% down on the similar house you walked away from.
Compare that with trying to dig out of the hole for literally DECADES.
For example:
1) Mortgage = $270k
2) Appraisal = $200k.
3) Monthly carrying cost around $3000 (on salary of $80k-$100k)
4) Person could rent a small room or cottage for $1000 (or almost a third of current costs)
If they stay, it will take YEARS to just get back to $0 equity.
If they bail, they can go into austerity rental mode, and come back and buy the $200k house with a massive downpayment in 5 years,
and come out FAR FAR ahead than if they stayed. (Downside being living in a much smaller living situation in that interim)
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Response by Riversider
almost 14 years ago
Posts: 13572
Member since: Apr 2009
Seems like this was a 2009-2010 story....
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
W67 was a fan of this. He also had comments about paying taxes to the IRS.
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Response by dealboy
almost 14 years ago
Posts: 528
Member since: Jan 2011
Can you rehash please, or find the old threads?
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
lazy
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Response by jordyn
almost 14 years ago
Posts: 820
Member since: Dec 2007
Why would you ever need to strategically default? I thought buying a place automatically made you rich or something.
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Response by caonima
almost 14 years ago
Posts: 815
Member since: Apr 2010
don't need any strategy, just deadbeat and you win
this is a fvcking evil country, we slaughter millions of innocent women and children around the world, and keep rewarding the deadbeats/flippers within domestic
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Response by renterjoey
almost 14 years ago
Posts: 351
Member since: Oct 2011
and what about the bankers who screwed our country. Gave millions out in bonuses to their executives prior to and during the government bailouts. Yep it's okay for them but not for anyone else. I love this country.
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
caonima
13 minutes ago
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this is a fvcking evil country, we slaughter millions of innocent women and children around the world, and keep rewarding the deadbeats/flippers within domestic
What does "caonima" mean? I googled it ... is that right?
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
renterjoey
3 minutes ago
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and what about the bankers who screwed our country. Gave millions out in bonuses to their executives prior to and during the government bailouts. Yep it's okay for them but not for anyone else. I love this country.
I love this country too.
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Response by Triple_Zero
almost 14 years ago
Posts: 516
Member since: Apr 2012
"What does "caonima" mean? I googled it ... is that right?"
Hunter, cao (草, tsao) means grass), ni (泥) means mud, and ma (馬) means horse. It's an extremely dangerous animal found only in Mandarin-speaking China.
You need to be veeeery careful when around one of these animals. If you pronounce its name wrong just slightly (for example, saying "horse" in the first tone instead of the correct third tone), it'll think you insulted it, and will attack you. Happy hunting!
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Response by REMom
almost 14 years ago
Posts: 307
Member since: Apr 2009
Friends in VA considered defaulting bc their mortgage was underwater and they could not qualify to refinance. Interest was fixed at almost 7%. They didn't have enough cash to pay down the mortgage to qualify for a refi and saw that economically it didn't make sense to stay. With rising real estate taxes, gas, etc and pay freezes, they were getting a little bit more behind each month. In the end, they got a HARP loan which allowed them to refi their entire mortgage amount and reduce their rate to 4%. They are happy they can afford to stay and pay off their debt.
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Response by dealboy
almost 14 years ago
Posts: 528
Member since: Jan 2011
This person was DENIED a refinance because they are underwater.
They are paying over 6% on their mortgage.
If they could refinance, they'd consider staying.
But, they can not "afford" to keep making a $2800 payment on an $80k salary.
It is idiotic to do this, and very risky. No cash cushion, no savings.
This person ran into personal trouble (partner fled) and was left holding the bag.
This otherwise prudent and conservative person SHOULD be living in a $1200/mo apt, and NOT be stuck in an almost $3000/mo house they don't want, can't use, and can't sell. they are truly STUCK, and they need a plan.
To me, the only thing I see is to walk.
It would be idiotic to spend the next 20 years pouring $3000/mo (total of $672,000)
into a $200k house they don't even want... And only have $200k to show for it, in 20 years.
Living in a $1200/mo rental ($288k over 20 years) would net an extra $400,000 in savings.
Moronic, if you ask me.
As I said in the original post which was edited out, please refrain from the ethical/moral angle.
We all know that. That is not the discussion here. Just math, please.
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Response by dealboy
almost 14 years ago
Posts: 528
Member since: Jan 2011
Yes, this person has asked me to help them explore their options.
No one is predicting future price. House appraised for $200k. It may be $100k or $300k 4 years from now.
So, that is simply viewed as a constant. $200k house. Period. (Personally, I think it will be even lower, but whatever)
But, also, here is another detail:
The $270k is actually:
1st mortgage = $200k.
2nd mortgage/HELOC = $70k
Is it true that HELOC is non-recourse loan?
If so, that's all the less that can be attempted to be recoursed.
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Response by jordyn
almost 14 years ago
Posts: 820
Member since: Dec 2007
It's impossible to talk about recourse/non-recourse without knowing what state we're talking about.
By the way, the FICO thing isn't a myth. Defaulting will definitely kill your credit; with no savings, this can be pretty rough so she'll definitely have to make sure she's living well within her means and quickly build up a cushion again if she goes this route.
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Response by Brooks2
almost 14 years ago
Posts: 2970
Member since: Aug 2011
I know someone that lives in a sweet pad in Orange county, has not paid his mortgate in years and rents out the room.. going to have a low fico, but c-flow positive currently because of rent. not a banker either.. Tech exec that got a divorce then lost a job.. totally milking the system.. see anyone can do it.. you don't have to be a WS banksta!
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Response by renterjoey
almost 14 years ago
Posts: 351
Member since: Oct 2011
that recourse has to suck big time. If you walk or default the bank can garnish your wages and put a lien on your first born. Why in some states like CA you can simply walk away but others such as NY you'll have the bank stalking you until you pay them. I have to assume when you default the bank charges all kinds of admin and legal fees as well. I love these bankers and I love my country for allowing bankers to basically screw people when they have the opportunity.
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Response by Truth
almost 14 years ago
Posts: 5641
Member since: Dec 2009
Look for an upcoming New York Times and/or New York Magazine article on this topic. They read se for inspiration.
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
The names have been changed to protect the innocent. And the guilty.
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Response by Brooks2
almost 14 years ago
Posts: 2970
Member since: Aug 2011
Or ask Joe and Terrsa judice
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Response by renterjoey
almost 14 years ago
Posts: 351
Member since: Oct 2011
"Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe - even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, levy bank accounts, and try to collect the amount you owe.
A legal action to collect money after foreclosure is generally called a deficiency judgment. "
Don't you just love recourse loans. Now if you'ree Donald Trump and have one of your 100 plus different corporations own the property than you can a lot fun screwing banks. Banks make up their loses from guys like Trump by going after the small potatoes. Lot more small fries than big whales and that's where the meat and potatoes are for the banks. Everything else is just gravy. Have fun with your default loan if it's in a recourse state.
Seems like this was a 2009-2010 story....
W67 was a fan of this. He also had comments about paying taxes to the IRS.
Can you rehash please, or find the old threads?
lazy
Why would you ever need to strategically default? I thought buying a place automatically made you rich or something.
don't need any strategy, just deadbeat and you win
this is a fvcking evil country, we slaughter millions of innocent women and children around the world, and keep rewarding the deadbeats/flippers within domestic
and what about the bankers who screwed our country. Gave millions out in bonuses to their executives prior to and during the government bailouts. Yep it's okay for them but not for anyone else. I love this country.
caonima
13 minutes ago
ignore this person
report abuse
this is a fvcking evil country, we slaughter millions of innocent women and children around the world, and keep rewarding the deadbeats/flippers within domestic
What does "caonima" mean? I googled it ... is that right?
renterjoey
3 minutes ago
ignore this person
report abuse
and what about the bankers who screwed our country. Gave millions out in bonuses to their executives prior to and during the government bailouts. Yep it's okay for them but not for anyone else. I love this country.
I love this country too.
"What does "caonima" mean? I googled it ... is that right?"
Hunter, cao (草, tsao) means grass), ni (泥) means mud, and ma (馬) means horse. It's an extremely dangerous animal found only in Mandarin-speaking China.
You need to be veeeery careful when around one of these animals. If you pronounce its name wrong just slightly (for example, saying "horse" in the first tone instead of the correct third tone), it'll think you insulted it, and will attack you. Happy hunting!
Friends in VA considered defaulting bc their mortgage was underwater and they could not qualify to refinance. Interest was fixed at almost 7%. They didn't have enough cash to pay down the mortgage to qualify for a refi and saw that economically it didn't make sense to stay. With rising real estate taxes, gas, etc and pay freezes, they were getting a little bit more behind each month. In the end, they got a HARP loan which allowed them to refi their entire mortgage amount and reduce their rate to 4%. They are happy they can afford to stay and pay off their debt.
This person was DENIED a refinance because they are underwater.
They are paying over 6% on their mortgage.
If they could refinance, they'd consider staying.
But, they can not "afford" to keep making a $2800 payment on an $80k salary.
It is idiotic to do this, and very risky. No cash cushion, no savings.
This person ran into personal trouble (partner fled) and was left holding the bag.
This otherwise prudent and conservative person SHOULD be living in a $1200/mo apt, and NOT be stuck in an almost $3000/mo house they don't want, can't use, and can't sell. they are truly STUCK, and they need a plan.
To me, the only thing I see is to walk.
It would be idiotic to spend the next 20 years pouring $3000/mo (total of $672,000)
into a $200k house they don't even want... And only have $200k to show for it, in 20 years.
Living in a $1200/mo rental ($288k over 20 years) would net an extra $400,000 in savings.
Moronic, if you ask me.
As I said in the original post which was edited out, please refrain from the ethical/moral angle.
We all know that. That is not the discussion here. Just math, please.
Yes, this person has asked me to help them explore their options.
No one is predicting future price. House appraised for $200k. It may be $100k or $300k 4 years from now.
So, that is simply viewed as a constant. $200k house. Period. (Personally, I think it will be even lower, but whatever)
But, also, here is another detail:
The $270k is actually:
1st mortgage = $200k.
2nd mortgage/HELOC = $70k
Is it true that HELOC is non-recourse loan?
If so, that's all the less that can be attempted to be recoursed.
It's impossible to talk about recourse/non-recourse without knowing what state we're talking about.
By the way, the FICO thing isn't a myth. Defaulting will definitely kill your credit; with no savings, this can be pretty rough so she'll definitely have to make sure she's living well within her means and quickly build up a cushion again if she goes this route.
I know someone that lives in a sweet pad in Orange county, has not paid his mortgate in years and rents out the room.. going to have a low fico, but c-flow positive currently because of rent. not a banker either.. Tech exec that got a divorce then lost a job.. totally milking the system.. see anyone can do it.. you don't have to be a WS banksta!
that recourse has to suck big time. If you walk or default the bank can garnish your wages and put a lien on your first born. Why in some states like CA you can simply walk away but others such as NY you'll have the bank stalking you until you pay them. I have to assume when you default the bank charges all kinds of admin and legal fees as well. I love these bankers and I love my country for allowing bankers to basically screw people when they have the opportunity.
Look for an upcoming New York Times and/or New York Magazine article on this topic. They read se for inspiration.
The names have been changed to protect the innocent. And the guilty.
Or ask Joe and Terrsa judice
"Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe - even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, levy bank accounts, and try to collect the amount you owe.
A legal action to collect money after foreclosure is generally called a deficiency judgment. "
Don't you just love recourse loans. Now if you'ree Donald Trump and have one of your 100 plus different corporations own the property than you can a lot fun screwing banks. Banks make up their loses from guys like Trump by going after the small potatoes. Lot more small fries than big whales and that's where the meat and potatoes are for the banks. Everything else is just gravy. Have fun with your default loan if it's in a recourse state.