Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 13:43:53 GMT -5
Honestly, for 50-60K underwater, I don't know if it is worth the trouble. If it was closer to 100K, then the answer would likely be yes, closer to 20K & the answer would be no. You are kind of in the midpoint where I'm not sure if the potential ramifications & the effort this will take is worth it. I think only you can really answer that question. You also need to consider the long term impact of taking money from your IRA. Also, look at what kind of rate were they willing to give you. You would want a pretty good rate because I'm guessing you would have a tough time refinancing in the next 3-5 years. Yes, I am kind of in the grey area, where it might or might not be worth it. I'm not thrilled with the prospect of taking money from my IRA. But I do like the idea of having a mortgage payment $400 or so a month smaller, which could be used to help repair IRA damage. I have excellent credit at present, so expect I would get the going rate, 4.75% or so on a 30 year fixed. Definately there would be no re-finances in my future for some time to come.
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sil
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Post by sil on Feb 9, 2011 13:58:15 GMT -5
I wouldn't walk away if I were $50k upside-down, but I did recently short-sell our home in CA that was >$120k underwater.
However, in 2012 if RE in your area is still moving downward and you come to the conclusion that your neighborhood is taking a turn for the worse, I would strongly consider it before the Mortgage Debt Relief program expires.
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whoisjohngalt
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Post by whoisjohngalt on Feb 9, 2011 14:31:43 GMT -5
I love love LOVE!! this kind of logic. Hey, John and Mary did it, I can do it too. And yes, it is absolutely, 100% about morals. You are either an honorable person who stands by their word or you are not. Sometime shit happens and you made a wrong decision, but walking away simply bc it's not good for you anymore, that's immoral, regardless whether it's a good business decision or not.
We all get oh so righteous and so angry at all those corporations who do wrong things in the name of making money. Guess what? Those corporations are made of the same people who make decisions just like you and I. So, if that's ok for you and I to be immoral, just bc it makes sense financially, why shouldn't big corporations get the same pass?
Lena
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Firebird
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Post by Firebird on Feb 9, 2011 14:43:41 GMT -5
I love love LOVE!! this kind of logic. Hey, John and Mary did it, I can do it too. And yes, it is absolutely, 100% about morals. You are either an honorable person who stands by their word or you are not. Sometime shit happens and you made a wrong decision, but walking away simply bc it's not good for you anymore, that's immoral, regardless whether it's a good business decision or not.
I don't like the logic either, if we're talking about doing something you absolutely believe to be wrong. If I absolutely believe it is wrong to eat meat on Friday, the fact that my office is ordering pizza with sausage doesn't make it okay for me to have a slice.
However, we're not necessarily talking about overriding a moral conviction. We're also discussing the actual rules of the game. What people are trying to point out is not "oh, okay, it's fine for me to do this because the big banks are" but rather "hey, the banks had a heavy hand in creating this situation, they helped write the rulebook, and now they have to reap the consequences of other people playing by their rulebook."
Corporations should have to answer for their actions like anyone else. They often don't. This is one way that they actually do have to deal with their own mess, when regular Joes turn the tables on them.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 14:45:27 GMT -5
I wouldn't walk away if I were $50k upside-down, but I did recently short-sell our home in CA that was >$120k underwater. However, in 2012 if RE in your area is still moving downward and you come to the conclusion that your neighborhood is taking a turn for the worse, I would strongly consider it before the Mortgage Debt Relief program expires. Yes, if I do it I definately want to do it in time to be covered by Mortgage Debt Relief Act. Right now, I am on the fence. If property values in general were to plunge further, or my particular property, that would tip it for me.
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Firebird
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Post by Firebird on Feb 9, 2011 14:45:38 GMT -5
But with the cell phone, you haven't really received anything yet. They don't have to provide service till the end of the contract. With the mortgage you have. You have already spent the money.
Untrue. Most of the time, you received a heavily discounted cell phone in exchange for that one-year contract. By bailing out of the contract early, they lost money on your phone.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 14:51:03 GMT -5
Lena, it's irrelevant to me what John, Mary, and corporations are doing. None of them are going to support me. I am going to support me, so I want to make the best decisions for me that I can. I understand for you this is a moral decision. That's fine. For me, it's an economic decision.
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Angel!
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Post by Angel! on Feb 9, 2011 15:06:28 GMT -5
We all get oh so righteous and so angry at all those corporations who do wrong things in the name of making money. Guess what? Those corporations are made of the same people who make decisions just like you and I. So, if that's ok for you and I to be immoral, just bc it makes sense financially, why shouldn't big corporations get the same pass? Lena Maybe you get mad & angry at all those corporations, but I don't. As long as they are following the laws, then why should I not expect them to try to make as much profit as possible & do what is in the best interest of their company? Same with the OP - as long as she is not breaking any laws, then why should I expect her to not do what is in the best interest of her family? You may consider it a moral decision, but many do not. For me, morals don't come into play in this any more than they would in deciding to break my cell phone contract. As firebird said - it is essentially the same thing.
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Angel!
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Post by Angel! on Feb 9, 2011 15:08:14 GMT -5
What kind of cell phone contract do you have where you recieve no service till the end of the contract?
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Firebird
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Post by Firebird on Feb 9, 2011 15:14:22 GMT -5
We all get oh so righteous and so angry at all those corporations who do wrong things in the name of making money. Guess what? Those corporations are made of the same people who make decisions just like you and I. So, if that's ok for you and I to be immoral, just bc it makes sense financially, why shouldn't big corporations get the same pass? Lena Maybe you get mad & angry at all those corporations, but I don't. As long as they are following the laws, then why should I not expect them to try to make as much profit as possible & do what is in the best interest of their company? Same with the OP - as long as she is not breaking any laws, then why should I expect her to not do what is in the best interest of her family? You may consider it a moral decision, but many do not. For me, morals don't come into play in this any more than they would in deciding to break my cell phone contract. As firebird said - it is essentially the same thing. Lena, FWIW I don't think that "business decisions" should be completely divorced from ethics. I mean, human trafficking can be an awfully profitable venture but most of us would never do that out of simple decency. I do think people should weigh ethical considerations when making business decisions (and that goes for corporations too-- if anything, I think that corporations have a certain obligation to try and make the world around them better with every decision they make). I don't think that walking away from a mortgage is 100% ethically sound. However, neither do I consider the negative ethical weight significant enough to outweigh major economic benefits which can be achieved in certain situations. To me, it's more or less a "morally neutral" decision-- and that's almost entirely because the terms of your mortgage allow you to stop paying, and in signing the contract you allowed for the possibility that one day you would stop paying, just as the bank allowed for that same possibility. It's a gray area, for sure. And I wish we did live in a society that set a higher premium on people keeping their promises. However, we haven't-- and so this is the situation that we're dealing with right now.
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Firebird
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Post by Firebird on Feb 9, 2011 15:15:27 GMT -5
What kind of cell phone contract do you have where you recieve no service till the end of the contract? I had the exact same thought! I was a little fuzzy on her meaning there too, which is why I focused on the tangible thing that you DO receive at the start of your contract-- a phone.
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sil
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Post by sil on Feb 9, 2011 15:21:08 GMT -5
Petunia, let me know if you decide to make such a move a few months down the road and you want an estimate of how bad it will hit your credit score (from your posts, Im guessing we were in the same range as you before our short sale.
We just sold in October, so Im waiting a couple more months to make sure everything has been reported before I start tracking our score
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whoisjohngalt
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Post by whoisjohngalt on Feb 9, 2011 15:24:29 GMT -5
Again, you make it seem that bc someone else did it (banks), it's OK for OP to do it. Let's assume for this argument that that banks did contributed to the problem. So what?
I guess the way I was raised was pretty simple: you do what YOU think is right, regardless of what anyone else is doing and you don't "pay back" anyone with wrong actions even if they did it to you.
So, I am not going to lie to you, just bc you lied to me. I am not going to steal, bc John and Mary did it.
As far as comparing it to the cell phone contract - again, no logic what-so-ever. In that case, you go to the company and say, "hey, I want to modify our contract, here is my consideration, cancellation fee, I want your consideration to be to end the contract"
What OP is doing is different. She is leaving mortgage company no choice and giving no notice. She is saying "hey, I am done with my side of the contract, deal with it".
Is it an economic decision? Sure. But her decision is guided by her understanding what is right and what is wrong, which is, by definition is morals.
So, my original point was that our morals are pretty low, if we can find a justification for pretty much anything now days.
Lena
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Firebird
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Post by Firebird on Feb 9, 2011 15:32:40 GMT -5
Again, you make it seem that bc someone else did it (banks), it's OK for OP to do it. Let's assume for this argument that that banks did contributed to the problem. So what? I guess the way I was raised was pretty simple: you do what YOU think is right, regardless of what anyone else is doing and you don't "pay back" anyone with wrong actions even if they did it to you. So, I am not going to lie to you, just bc you lied to me. I am not going to steal, bc John and Mary did it. As far as comparing it to the cell phone contract - again, no logic what-so-ever. In that case, you go to the company and say, "hey, I want to modify our contract, here is my consideration, cancellation fee, I want your consideration to be to end the contract" What OP is doing is different. She is leaving mortgage company no choice and giving no notice. She is saying "hey, I am done with my side of the contract, deal with it". Is it an economic decision? Sure. But her decision is guided by her understanding what is right and what is wrong, which is, by definition is morals . So, my original point was that our morals are pretty low, if we can find a justification for pretty much anything now days. Lena But what do you say to the idea that your mortgage allows you to stop paying as long as you give the house back to the bank? I mean, that's a pretty clear-cut contractual obligation. If you give the house back, you're still "modifying your contract" in a way that the contract itself permits.
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whoisjohngalt
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Post by whoisjohngalt on Feb 9, 2011 15:36:31 GMT -5
That's not modifying the contract, that's giving back something that doesn't belong to you. You can't modify a contract if the other party doesn't know that you are doing it until much much later.
Lena
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8 Bit WWBG
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Post by 8 Bit WWBG on Feb 9, 2011 15:42:27 GMT -5
Who was the guy on the old boards who did a strategic default and posted the time line? It looked like he got away with it. He bought the new, better, cheaper place, let the old one go, banked the cash, and got the forgiveness.
My question is though: eventually resources will free up and I bet banks will go after some of those strategic defaulters. Thats a long time to stew over the consequences.
If however, it really is like people make it sound: buy a cheaper house, bank a bunch of mortgage payments, and let the old place go without paying a penny... at this point you'd be stupid not to.
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Firebird
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Post by Firebird on Feb 9, 2011 15:42:31 GMT -5
So you'd be okay with it as long as Petunia gave her bank enough of a heads-up to work with her first?
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whoisjohngalt
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Post by whoisjohngalt on Feb 9, 2011 15:48:02 GMT -5
I'd be OK if she did a short-sale. THAT is modifying the contract. Stop paying and walking away is not.
Lena
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Firebird
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Post by Firebird on Feb 9, 2011 15:48:57 GMT -5
Got it. Thanks for clarifying. I agree with you in many ways, Lena.
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Angel!
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Post by Angel! on Feb 9, 2011 15:52:35 GMT -5
Who was the guy on the old boards who did a strategic default and posted the time line? It looked like he got away with it. He bought the new, better, cheaper place, let the old one go, banked the cash, and got the forgiveness. I believe you are thinking of LexLuther
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Angel!
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Post by Angel! on Feb 9, 2011 15:54:30 GMT -5
I'd be OK if she did a short-sale. THAT is modifying the contract. Stop paying and walking away is not. Lena I'm a little confused as to the difference. Banks won't work with you on a short-sale until you stop paying. At that point they have the choice of working with you on a short-sale or pursueing a foreclosure. Most homeowners would likely prefer a short-sale also, but they have to stop paying to get the option & even then, the ball is in the banks court as far as what happens.
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whoisjohngalt
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Post by whoisjohngalt on Feb 9, 2011 15:57:50 GMT -5
We weren't discussing what banks would prefer or what happens in different situations. Unless I missed it, nowhere she suggested anything except just walking away, justifying it by saying that she needs to look out for herself. My responses were based on that.
Lena
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Firebird
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Post by Firebird on Feb 9, 2011 15:59:53 GMT -5
Who was the guy on the old boards who did a strategic default and posted the time line? It looked like he got away with it. He bought the new, better, cheaper place, let the old one go, banked the cash, and got the forgiveness. I believe you are thinking of LexLuther Correct. That was a very instructive thread, one of the few that I saved from the old boards.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 16:00:09 GMT -5
Petunia, let me know if you decide to make such a move a few months down the road and you want an estimate of how bad it will hit your credit score (from your posts, Im guessing we were in the same range as you before our short sale. We just sold in October, so Im waiting a couple more months to make sure everything has been reported before I start tracking our score Thank you Sil, I will.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 16:02:44 GMT -5
I'd be OK if she did a short-sale. THAT is modifying the contract. Stop paying and walking away is not. Lena I don't know that a short sale would be possible. It's up to the bank if they want to agree or not. Since in their opinion I could swing both payments, I would guess they wouldn't agree.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 9, 2011 16:07:58 GMT -5
Who was the guy on the old boards who did a strategic default and posted the time line? It looked like he got away with it. He bought the new, better, cheaper place, let the old one go, banked the cash, and got the forgiveness. My question is though: eventually resources will free up and I bet banks will go after some of those strategic defaulters. Thats a long time to stew over the consequences. If however, it really is like people make it sound: buy a cheaper house, bank a bunch of mortgage payments, and let the old place go without paying a penny... at this point you'd be stupid not to. I suppose it is possible that in the future banks might decide to go after defaulters. However, I have only acquisition debt and I'm in a non-recourse state. I wonder if there is a statute of limitations on that for the banks? I wouldn't be able to bank any mortgage payments on my current house. I would have to keep it current until the new mortgage closed.
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achelois
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Post by achelois on Feb 9, 2011 16:41:06 GMT -5
Petunia, I think, doesn't entirely believe it is solely an economic decision. She knows and we know that she absolutely would save money by walking away. The subject was covered extensively on the old boards.
If it had been simply an economic decision, it would have been a done deal already. She just wants, and I am surprised by her, to ease that last little niggling, uncomfortable stirring of conscience that is telling her it is wrong
So, go ahead. Walk. You won't be any worse than a lot of other people. Lex Luther will be proud of you, even.
Just remember, you will give up the right to expect anyone else ever to keep any promise they may make to you in the future. They have to look out for themselves, after all.
I am very sorry for your loss.
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Angel!
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Post by Angel! on Feb 9, 2011 16:58:33 GMT -5
It isn't the seniors that will be buying this houses, it is the young people that were unable to afford a house before now or investors that will rent them out to others.
It is an economic decision that can impact many areas of her life...much like buying a house. Do people come on here asking advice about buying a house because they are looking for moral guidance? No, so why would assume she is asking our thoughts because her conscience is bothering her. It is a big decision even if you don't feel it is a moral issue.
Petunia - I talked to a real estate agent about foreclosing/short selling. I was told I could try to short sell, but until I stopped making payments the banks wouldn't even consider it. Even then, it may not happen or may take a year to go through the process - especially because I have a 2nd on the house & both lenders have to approve the deal. I was also told in my situation the banks would not likely accept a deed in leiu of foreclosure (an option you may want to look into). So, that would leave me the option to stop making payments & expect to live in the house anywhere from 6-12 months during the process. I don't live in a non-recourse state, so it would be possible for the banks to come after me. But, given the number of foreclosures & my assets, it would be unlikely & I was told I could declare bankruptcy should that happen.
I would suggest finding a real estate agent who specializes in these sort of transactions & have them explain the process in your state & lay out your options.
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achelois
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Post by achelois on Feb 9, 2011 17:08:42 GMT -5
How can it be such a big decision if it is a good economic one that will save her money. She lives in a nonrecourse state--so they cannot come after her, no big decision there.
Impact her credit score a couple years, she will already have a new house and she has a car--no big purchases to finance, so no worry there. Boyfriend will still have a good credit score if they really need to finance something unexpected and she also has some cash and will free up some monthly with the walk.
Nah, it is no big decision just economically speaking.
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Firebird
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Post by Firebird on Feb 9, 2011 17:08:43 GMT -5
It is an economic decision that can impact many areas of her life...much like buying a house. Do people come on here asking advice about buying a house because they are looking for moral guidance? No, so why would assume she is asking our thoughts because her conscience is bothering her. It is a big decision even if you don't feel it is a moral issue.
Agreed. Let's not be overdramatic. Even if this was a terribly unethical thing to do, it doesn't mean she can't expect fair treatment in the future. That's ridiculous.
Just to reiterate-- because this is important-- Petunia and anyone else who does this is playing by the current rules. They are acting in accordance with the terms of the contract they signed. If you think that it's immoral to stop paying your mortgage and allowing the bank to repossess your house, perhaps you should not sign a contract with a provision that allows you to legally do exactly that. The only problem is, you'll have a devil of a time getting a mortgage without one.
Why? Because the bank doesn't care about your good word. They want cash and collateral, not a handshake. You and the bank signed the same contract. If you choose to break that contract and abide by the consequences of doing so, then you are still living up to the contract.
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