Why America will not work.

While i don't really agree with her decision from either a moral OR a business standpoint, honestly, (That house will be worth more again at SOME POINT) the bank loaned her the money, the house as collateral. As far as the bank is concerned, that's a $487k house. She's giving it up, not getting her money back, the bank gets the house back. That's the terms of the loan. You default on it, you're homeless, you deal with the situation.

She doesn't get to tell the bank "Well, it's only worth $225k now, so i'm only paying you that much," and the Bank doesn't get to tell her "We sold it to someone else for $100k, you still owe us $387k." It doesn't work that way.

The housing market is a calculated risk for the buyer, the seller, AND the bank. Any of the three can screw the other two.

She bought a $487k house using the $487k house as collateral, she'll lose the house, after paying the bank free money for however many years, and won't see the money back. The bank got the house back, as per contract.

Morally? I consider it just as wrong as the next person, but morals are like opinions, it's REALLY not our place to say if she's right or wrong like it's law, because it's not law. She's going to be held subject to the law, for better or worse. (Better for her.)

From a financial standpoint? She may have made the right choice. I can't honestly say that there is no way i would have ever done what she did. I wouldn't want to, but i can see the WHY of what she did.

Billyesq nailed it.

Many of you don't seem to realize that almost all mortgages have personal liability clauses. That means, that she can't walk away. The bank will foreclose, they have no obligation whatsoever to attempt to maximize to proceeds from the sale, and they can then hold her personally responsible for the shortfall.

It also means that the company that advised her to do so has given VERY bad advice. Maybe she can recoup her losses by suing him, just to keep it all in the family.

I know. I researched it carefully with an attorney when my mother considered it a few years ago.

93celicaGT2 wrote: She doesn't get to tell the bank "Well, it's only worth $225k now, so i'm only paying you that much," and the Bank doesn't get to tell her "We sold it to someone else for $100k, you still owe us $387k." It doesn't work that way.

I beg to differ. You are mistaken. It DOES work that way.

She ABSOLUTELY has the right to try to renegotiate with the bank. They can say no.

The bank did not offer her a trade of cash for a house. They contracted with her for repayment of a loan. The house is collateral, not payment.

But IF she chooses to breach her contract, the bank can claim the house as full or partial payment for the loan. That's what collateral is.

WHEN the bank forecloses, they own the house. They CAN sell it for whatever they want to.

But they also own the mortgage (the piece of paper which financially obligated her). It's a contract. She CAN be held liable. Just like if you sign a year long lease and move out in 3 months, you can be held liable for the rest of the year.

I actually agree with you- I'd rather it be like you described.

But it's not.

Mmmm... good point. It's a little too early for me still to be participating in a discussion like this on 3 hours sleep.

My bad!

wbjones wrote:

Jensenman wrote: Then they tell a BUNCH of their friends how bad they got shafted. Next thing you know the whole town knows what you did and how you conduct business, your clientele is gone and along with that your paycheck.

a company I worked for many yrs ago sent even us techs to their sales classes, and one thing I always will remember from those classes is that " a PO'ed customer will tell a hundred different people while a satisfied customer will tell a dozen....

We called it the rule of '3 and 33'. Happy customer tells 3. Mad one tells 33.

SVreX wrote: I don't buy it. It takes a huge amount of political clout to push through something like a major bailout. I seriously doubt that any individuals or companies could ever donate (bribe) enough people to get such legislation passed. There's no way they went into the game planning to buy their way out. They went in planning to win, but weren't smart enough to understand how badly they had screwed up. When it all fell apart, they got lucky. They may be smart, but they are still idiots. And they are not good capitalists. Warren Buffet didn't get wealthy by buying political favors. He got wealthy by being a good capitalist, and learning everything there was to learn about every company he ever invested in, and making wise long term decisions. Some people get wealthy in other ways. Doesn't make them good capitalists. Makes them lucky.

It doesn't matter whether you buy it or not. It exists. There wouldn't be high payed lobbyists on K street if this stuff didn't work. Those earmarks don't get in the bills by themselves. I would imagine the current health care bill would look a lot different if the lobbyists from the health insurance companies and the pharmaceutical companies didn't have a say in the procedures.

Some capitalists make their money through hard work. Others make money by paying off congressmen. Bribery isn't free speech. It's just unethical.

Come to think of it, wasn't Warren Buffet an Obama supporter?

wlkelley3 wrote: The point is we expect that everything except property loses value and is consumed when we purchase it but expect property to rise in value.

I've never fully understood this concept either.

I always thought it was due as much to the land the property was on, as it was the structure its self. I've noticed though that manufactured homes - even when they're on actual lots(not rented, trailer park, etc.) - lose value. So what is the underlying factor that causes the expected growth in property value?

Modular and mobile homes on acreage around here maintain value but do not grow in value like regular homes on similar property.

petegossett wrote:

wlkelley3 wrote: The point is we expect that everything except property loses value and is consumed when we purchase it but expect property to rise in value.

I've never fully understood this concept either. I always thought it was due as much to the land the property was on, as it was the structure its self. I've noticed though that manufactured homes - even when they're on actual lots(not rented, trailer park, etc.) - lose value. So what is the underlying factor that causes the expected growth in property value?

Answer = inflation + artificial housing bubble

ignorant wrote: Jensenman Et all; You guys sure are looking for a fight. When you run a business the idea is to continue the business as a profitable concern indefinitely. If a company routinely screws its customers or does illegal/underhanded things constantly, They wil find themselves out of business or scrambling for a new business model after the US court system gets through with them. The actions of Arthur Andersen (sp?) and Enron were entirely short sighted. Their business is now non-existent or they are defunct. Bad business practices are like steroids for a body builder. They get your instant results that everyone loves, but causes major health problems down the line. People who ignore the long term consequences of their actions are idiots and horrible capitalists. Lets see some examples of what I meant by companies doing right by the world...... Timberland Stonyfield Yogurt Green Mountain Coffee 1st Solar BP Solar Ben and Jerrys (before they sold out to Unilever) Toms of Maine ( before they sold out to Colgate, even though they still operate independantly) Honest Tea ( before they sold out to Coke) I'll ignore all the pointed attacks that blatantly attack my schooling or current position. I once worked for a CEO who hated MBA's and booked learned engineers. So all the booked learned people eventually left. Since they all left the company has stopped it's 45 year profit growth and is now stagnating in a sea of waste, poor marketing practices, and bad acquisitions. got any more questions PM me..

Haven't read the whole thread, but I agree with all of this ^^^. Put it in the history books ;)

What's hilarious to me is the concept of "Houses have been a good investment for a long time, so if I pay an over-inflated price for a house and it's worth less in 5 years, I got boned." Unbelievable. Meanwhile, I guaran-gat-damned-tee you that 90% of the dip E36 M3s who got in over their head don't see any problem with buying a $25,000 car, knowing that it'll be worth $2,500 in ten years; cuz, you know, they deserve it. It's part of the American dream, right?

I don't make a lot of money. I didn't make a lot of money when we bought our house. So instead of listening to the mortgage company who said: "Well, you know you could afford a $200+k home," we built the cheapest house we could in a decent neighborhood with a decent amount of land and privacy. Needless to say, we probably wouldn't MAKE money on it today, but based on sales in the neighborhood, we wouldn't be bringing a check to closing either.

Not being all "Hey, look at me, I'm the most fiscally responsible person who ever lived," because I'm absolutely anything but. But I have a REALLY hard time feeling sorry for somebody who planted their ass in a half-million dollar home EXPECTING that it'd be worth double that 5 years down the road. And I'm really really really berkeleying sick of the "I'm a victim" mentality.

poopshovel wrote: Not being all "Hey, look at me, I'm the most fiscally responsible person who ever lived," because I'm absolutely anything but. But I have a REALLY hard time feeling sorry for somebody who planted their ass in a half-million dollar home EXPECTING that it'd be worth double that 5 years down the road. And I'm really really really berkeleying sick of the "I'm a victim" mentality.

A - effing - men brother. No one wants to take responsibility for anything.

strategic forclosure = pus_ies

In reply to poopshovel: *high five *

We're working out of the same playbook here.

poopshovel wrote:

ignorant wrote: Jensenman Et all; You guys sure are looking for a fight. When you run a business the idea is to continue the business as a profitable concern indefinitely. If a company routinely screws its customers or does illegal/underhanded things constantly, They wil find themselves out of business or scrambling for a new business model after the US court system gets through with them. The actions of Arthur Andersen (sp?) and Enron were entirely short sighted. Their business is now non-existent or they are defunct. Bad business practices are like steroids for a body builder. They get your instant results that everyone loves, but causes major health problems down the line. People who ignore the long term consequences of their actions are idiots and horrible capitalists. Lets see some examples of what I meant by companies doing right by the world...... Timberland Stonyfield Yogurt Green Mountain Coffee 1st Solar BP Solar Ben and Jerrys (before they sold out to Unilever) Toms of Maine ( before they sold out to Colgate, even though they still operate independantly) Honest Tea ( before they sold out to Coke) I'll ignore all the pointed attacks that blatantly attack my schooling or current position. I once worked for a CEO who hated MBA's and booked learned engineers. So all the booked learned people eventually left. Since they all left the company has stopped it's 45 year profit growth and is now stagnating in a sea of waste, poor marketing practices, and bad acquisitions. got any more questions PM me..

Haven't read the whole thread, but I agree with all of this ^^^. Put it in the history books ;) What's hilarious to me is the concept of "Houses have been a good investment for a long time, so if I pay an over-inflated price for a house and it's worth less in 5 years, I got boned." Unbelievable. Meanwhile, I guaran-gat-damned-tee you that 90% of the dip E36 M3s who got in over their head don't see any problem with buying a $25,000 car, knowing that it'll be worth $2,500 in ten years; cuz, you know, they deserve it. It's part of the American dream, right? I don't make a lot of money. I didn't make a lot of money when we bought our house. So instead of listening to the mortgage company who said: "Well, you know you could afford a $200+k home," we built the cheapest house we could in a decent neighborhood with a decent amount of land and privacy. Needless to say, we probably wouldn't MAKE money on it today, but based on sales in the neighborhood, we wouldn't be bringing a check to closing either. Not being all "Hey, look at me, I'm the most fiscally responsible person who ever lived," because I'm absolutely anything but. But I have a REALLY hard time feeling sorry for somebody who planted their ass in a half-million dollar home EXPECTING that it'd be worth double that 5 years down the road. And I'm really really really berkeleying sick of the "I'm a victim" mentality.

I couldn't agree more. I really wish our modest, affordable homes were closer to each other.

Hey! I live in a modest, affordable home too! Woot!

Maybe we're twins!?

Ditto: My mortgage broker tried to get me into a ~$200k house 6-years ago, when I was looking for a sub-$80k one. I knew there was NO WAY I could swing that kind of mortgage earning $34k with a wife & kid. Yet they were sure eager to lend it out!

And those people who got sucked into mortgages with a balloon payment, won't they be having a hell of a time trying to finance that now???

Short answer- yes.

I loved the conversation Joel and I had when he was deciding to buy his house. He got it for half as much as the average house because he was a smart shopper and it had no garage. Now it has a garage and two Miatas.

SVreX wrote: Hey! I live in a modest, affordable home too! Woot! Maybe we're twins!?

I'm jealous of your modest, affordable home. And the big garage.

poopshovel wrote:

ignorant wrote: Jensenman Et all; You guys sure are looking for a fight. When you run a business the idea is to continue the business as a profitable concern indefinitely. If a company routinely screws its customers or does illegal/underhanded things constantly, They wil find themselves out of business or scrambling for a new business model after the US court system gets through with them. The actions of Arthur Andersen (sp?) and Enron were entirely short sighted. Their business is now non-existent or they are defunct. Bad business practices are like steroids for a body builder. They get your instant results that everyone loves, but causes major health problems down the line. People who ignore the long term consequences of their actions are idiots and horrible capitalists. Lets see some examples of what I meant by companies doing right by the world...... Timberland Stonyfield Yogurt Green Mountain Coffee 1st Solar BP Solar Ben and Jerrys (before they sold out to Unilever) Toms of Maine ( before they sold out to Colgate, even though they still operate independantly) Honest Tea ( before they sold out to Coke) I'll ignore all the pointed attacks that blatantly attack my schooling or current position. I once worked for a CEO who hated MBA's and booked learned engineers. So all the booked learned people eventually left. Since they all left the company has stopped it's 45 year profit growth and is now stagnating in a sea of waste, poor marketing practices, and bad acquisitions. got any more questions PM me..

Haven't read the whole thread, but I agree with all of this ^^^. Put it in the history books ;) What's hilarious to me is the concept of "Houses have been a good investment for a long time, so if I pay an over-inflated price for a house and it's worth less in 5 years, I got boned." Unbelievable. Meanwhile, I guaran-gat-damned-tee you that 90% of the dip E36 M3s who got in over their head don't see any problem with buying a $25,000 car, knowing that it'll be worth $2,500 in ten years; cuz, you know, they deserve it. It's part of the American dream, right? I don't make a lot of money. I didn't make a lot of money when we bought our house. So instead of listening to the mortgage company who said: "Well, you know you could afford a $200+k home," we built the cheapest house we could in a decent neighborhood with a decent amount of land and privacy. Needless to say, we probably wouldn't MAKE money on it today, but based on sales in the neighborhood, we wouldn't be bringing a check to closing either. Not being all "Hey, look at me, I'm the most fiscally responsible person who ever lived," because I'm absolutely anything but. But I have a REALLY hard time feeling sorry for somebody who planted their ass in a half-million dollar home EXPECTING that it'd be worth double that 5 years down the road. And I'm really really really berkeleying sick of the "I'm a victim" mentality.

It's like we're life mates.

Hetero life mates that is.

Same here, I'm far from the most responsible person with money, but I like to think I'm not the biggest goon either. The girlfriend and I purchased a house (well technically, I purchased it since it's in my name) but we still didn't buy anymore than either of us could afford if the other person no longer had any income.

I would like a 3 car garage instead of 2 though!

I live in an affordable apartment while i wait to save up to take advantage of the hilariously low housing prices that we're seeing out here, and i feel like they're going to be lower. If this continues, i expect to put a 50% downpayment on a house in 2 years.

Your property value drops because your neighbor walks away from their house? So what, your property taxes will be less.

The assessed values may go down but the assement per unit of value will eventually go up to cover the revenue deficit and you're tax expense in $ will be the same. If enough people walk away and a significant number of properties are sitting vacant for a length of time with no one paying the taxes the assesment will go up even more and those who are left will end up paying more in total taxes.

Is it amazaing that people who subscribe to a magazine named Grassroots Motorsports tend to buy less than they can afford or less than could be sold to them?

Incidentally, near as I can figger, banks don't want their money back. If you borrow $100 at 5% interest, that's $5/year profit (less some postage and web bandwidth). If you give them $50 back today, you just cut their profit in half. That looks bad on the financial statement at the end of the year. It's not even their $100 anyway. It's really your grandchildren's at best, or "vapor dollars" at worst. They do want you to continue sending in those payments, though.

Dr. Hess wrote: Is it amazaing that people who subscribe to a magazine named _Grassroots Motorsports_ tend to buy less than they can afford or less than could be sold to them? Incidentally, near as I can figger, banks don't want their money back. If you borrow $100 at 5% interest, that's $5/year profit (less some postage and web bandwidth). If you give them $50 back today, you just cut their profit in half. That looks bad on the financial statement at the end of the year. It's not even their $100 anyway. It's really your grandchildren's at best, or "vapor dollars" at worst. They do want you to continue sending in those payments, though.

Oh yeah... nothing will shut up a bank's customer service rep if they're giving you a hard time about being one day late on a payment because of blah blah blah faster than you saying:

"Alright, well, i'll just pay the entire thing off today, then, ok?"

"Oh no, that's not necessary sir, there's not a problem here, have a great day!"

Whoa. Big response. Yeah, seems like it's a grassroots state of mind thing. I'm all about the compound...as long is it's here in the mountains Black, white, young, old, democrat, republican; at least we can all agree to be cheap ass mother berkeleyers.

Oh, and let me ammend my earlier post. I said I have a hard time feeling bad for 'those folks;' which isn't entirely true. I hate to see anyone lose their home...right up until the point that they start crying that it's someone else's fault.

Speaking of, does the hatred for the banks not seem a little weird, considering the fact that the BANK didn't sell the house to sally-what's-her-runt? I suppose it helps people to think that they're getting berkeleyed by a big corporation, rather than admitting that they signed up to pay WAAAAAY too much to the seller/builder.

ARGH! And another berkeleying thing: Saying that the banks somehow "unfairly" profitted off of people paying too much for homes and deserve to get berkeleyed, is like saying "Hey Mike! I found a Hemi Challenger in a barn, and the old lady only wants 5 grand for it! If you loan me $4k, I'll pay you $210/month for the next 24 months, and you make a thousand bucks!" Then calling a week later and saying "Oh, my bad dude, it's a 318 and it's a rusted out piece of E36 M3 with no fenders. I tried to get my money back from the seller, but they told me to go get berkeleyed. I'm not going to pay you your money back, but you can come haul this piece of E36 M3 out of my yard, you greedy motherberkeleyer..." at which point, I'd ruin a little more than the borrower's credit.

93celicaGT2 wrote: Oh yeah... nothing will shut up a bank's customer service rep if they're giving you a hard time about being one day late on a payment because of blah blah blah faster than you saying: "Alright, well, i'll just pay the entire thing off today, then, ok?" "Oh no, that's not necessary sir, there's not a problem here, have a great day!"

I'm not sure how relevant this is to anything, but my wife and I always pay a little extra each month on anything we're paying interest on. Currently my bank is telling me not to make a payment on the Miata until next June. Apparently they feel they're getting gypped out of their interest. Too bad.