This page has been archived and commenting is disabled.
YouWalkAway.com: Bringing Moral Hazard To A Deadbeat Near You
Tonight's feel-good story of our time is a desperate stroll through the reality of the US housing market for millions of individuals (as opposed to the hope-driven must-say-something-positive spin the home-builder CEOs have been spewing recently). Notices-of-default jumped 33% in August, a nine-month high and largest month-over-month increase since August 2007 and it is becoming increasingly acceptable to walk away from contractual agreements as strategic default becomes the New American Dream.
Fox Business runs the story: The New Face of Foreclosure: Strategic Defaults:
"There are 3 million to 4 million seriously delinquent mortgages that under normal circumstances would be in foreclosure but have been kept out by procedural delays and paperwork problems," says Rick Sharga, RealtyTrac senior vice president. The recent spike in foreclosure starts suggests lenders are "hitting the restart button" on cases that were delayed by documentation problems such as robo-signing, he explains.
YouWalkAway.com surveyed several hundred of its clients earlier this year, and just 23% said they had previously shirked a financial obligation. "The people we are now seeing are nearing retirement age, who never missed a payment on anything in their lives," says Jon Maddux, co-founder and CEO of the Carlsbad, Calif., firm. "They are trapped. They can't sell or get a modification and they need to downsize or move for a job."
Attitudes toward default have also shifted, Maddux says. "Back in 2008 people were very emotional, very scared, in disbelief or denial," he says. "Now they are simply fed up. It's a very calculated, black-and-white business decision. People feel very relieved."
A more widespread understanding of the consequences of default may be a factor, says Brent White, a University of Arizona law professor and author of Underwater Home.
And an example of the justification - for better or worse:
"I was looking for a way to get back to a larger city, and this was the only way I could get out of this house," says Kessler, who paid $800 to YouWalkAway.com to help guide him through the process known as strategic default.
"I don't feel guilty at all about walking away from the place," he says. "The banks really did it to themselves. They made a ton of money with me over the years. I owned four or five houses. But I don't think I'll ever buy another house. I'll probably just rent until they put me in a nursing home."
So, we have dramatically bad unemployment in the youngest age demographic, middle-age demographics have seen net worth crushed in the last few years and are lucky to have a job, and now the elder demographic is increasingly opting for strategic default. All-in-all, not such a rosy picture (but but corporate profit margins are at record highs).
»
- 24518 reads
- Printer-friendly version
- Send to friend
- advertisements -
A lot of people must be buying utilities to get yield as they keep hitting new highs. I was buying but once the yield drops below 5%, it doesn't seem attractive to me.
Just wondering, Do you believe the whole economy is a Ponzi waiting to crash at some poin? If so, why not wait before buying? Nobody knows what will happen, but many here recognize the BS stock market for what it is-a totally corrupted overpriced system dominated by HFT, and wall street makers and insiders.
As through life you ramble,
And as through life you roam,
You will never see an outlaw, drive a family from their home...
Woody Guthrey
I'll keep paying on my underwater mort.....not because of some misguided oath to my contract, but because I could not do much better in the rental market.
I saved for 10 years, built a great credit rating, put 20% down....and I'm now stuck in a house worth half of what I paid for it. I got 4.6 fixed in 2005...Nobody had a better rate than me.
The "great rate" I scored would have my initial loan payed off in 13 years......with an additional 17 years of monthly profit payments to the bank. Swell.
Like I said..I'm still paying.....for now.
Give me, yes, GIVE! ME! Principle reduction NOW! I could give my money to the bank, or spend/save/invest it in ways that would help all and not just pad the banks bottom line.
To the "You signed a contract" folks..... Go. Get. Fucked.
The problem with walking away is you loose what you put in. If you have no plans of moving from the area, stay where you are. Like you said, not much better renting. You can always default. Meanwhile, you don't have any losses until you book them, dontcha know?
"Strategic Defaults" have been normal business practice in commercial real estate, but when a homeowner does it, its one of the deadly sins?
agree
http://www.youtube.com/watch?v=L1F6bPoHVT0
home
where the earthquakes roam
where the tornado wind blows
where the Tsunami wave hit
where the volcano spits
where the hurricanes don't quit http://www.youtube.com/watch?v=RZviknsJMK0
where the flood drowns the kids
where fires consume
where the meltdown looms
where the banker bonus rests
where the beast eats Net
...as the drone bombs drop hellfire. http://www.youtube.com/watch?v=SADGrg30YGU&feature=related
http://bible.cc/luke/9-58.htm
In a world where there are no laws, - there are no laws for anyone predatorclass biiiiaaatches!
http://bible.cc/matthew/8-31.htm
...no law(s)! Lol. Uh, what was that Jeopardy answer? Oh yeah, ''Death''.
...Bitchez. http://www.youtube.com/watch?v=eKGpyhU9w8U
Corporate profits at record highs because they don't need the American middle class anymore; they have an entire planet to feed off of now.
Ireland now holds the #1 slot for top debtor nation with a debt % to GDP of 1,382%. In fact the European nations beat the U.S. for top debtor awards according to this data from world bank:
http://www.americanpendulum.com/2011/09/the-20-top-debtor-nations-europe-in-the-lead/
I suppose the only good business in Ireland these days are the breweries and pubs.
"I suppose the only good business in Ireland these days are the breweries and pubs"
And Botox clinics..............seriously. A friend of mine owns one in Dublin and is doing very well. I asked him recently if he was seeing a downturn in business and he said "No, not at all, it`s pretty shocking what women can cut from the family budget and yet still spend on Botox"
WOW!! I had no idea the negative mechanics in Ireland was so excessive! The cocoon spun these days is truly amazing... I fear what kind of 'creature' hatches from this madness...
It is said that bombs, brothels, & baileys are Bear market darlings in downturns though. I must say the intelligence of ZH'ers is incredible!!! beyond belief!!!... I wonder how many think-tanks eagerly go to this sight daily-hourly even to take the pulse of Herr bloggers! Tyler!!!!!??????
Good night!!!!!!!!!!!!!
from Pebblewriter
must read!
http://pebblewriter.blogspot.com/2011/09/news-so-big-it-had-to-wait.html
why is there a picture of a half naked women when I want to share it on facebook? :D
China's gold output went up by 4.2 metric tons, or 2.21 percent year-on-year, to reach 194.5 metric tons in the first seven months of this year, the Ministry of Industry and Information Technology (MIIT) said yesterday. In July China produced 30.08 metric tons of gold, down from 32.39 metric tons in June, according to the MIIT.
The ministry said domestic gold prices continued their upward trend in July due to growing expectations for another round of quantitative easing by the US Federal Reserve. The move was widely anticipated amid uncertainties resulting from the European sovereign debt crisis and the budget deficit problem in the US.
The combined output value of Chinese gold producers totaled 143.29 billion yuan ($22.43 billion) during the January-July period, up 21.88 percent year-on-year, compared with 23.37 percent in the first half of 2011.
It was Hank Paulson who talked about Moral Hazard. Yet, he was talking about wipping out Shareholders on the Mortgage Lenders that were taken over by the Banks.
Yet, the real Moral Hazard came to the Banks when the People got the message it was Ok to walk away from your negligence or losses because someone else will make up the loss, not them.
The People took notice that the Banks made bad bets, bad Mortgages and were rescued by the Fed. They were given Money to make up for their losses.
Well, call it "Trickle Down Economics" The Banks got Bail Outs with Tax Payer Money. The People thought well the Banks got Free Money from the Fed so that Money should be mine, I do not have to pay my Mortgage as that Free Money should "Trickle Down" to me. After all it was my Tax payer Money to begin with.
Maybe the Fed and the Government should have given the Bail Out Money to the American People. That way they would have had enough Money to pay their Mortgages and the Banks would not have needed the Bail Out as they would not have had all of the Foreclosures.
I have watched the Banks dump properties on the Market for 25% less than the Market Value just to get rid of them. Then the next Banks dumps their Property for 25% less than the last Banker.
Yes, the Banks get that one House off their Books but it ruins the Resale Value of every single House in that Neighborhood. Regular People then cannot Sell for Hell or High Water. This is where the problem comes in.
Again, in my opinion the Banks have done it to themselves again. By them lowering the Property Values all over the United States they in effect caused the situation. If the Banks did not lower the Property Values by dumping Properties on the Market for substancially less than Market Value we would not have this problem
People would be able to Sell at Market Value if the House became to expensive and move into a cheeper House. For Seniors to downsize, for those with adjustable Mortgages they could Sell to get out from under the loan.
The true shame of it is that all of this have ruined so many peoples lives and future.
What would have been a good idea would have been to forgive 6 months of Mortgage Payments (with no credit ding) as long as their House was on the Market for Sale at a price negotiated by the Bank and the Owner. This way the House could be sold in good condition with someone living in it and taking care of it.
What your saying WS certainly accels and accentuates the decline of home values; however, I think the prices needed to, and would have come down, regardless. There was, and still is, a bubble that needs correction on an income to home price value affordability basis.
Your thoughts are logical but I think that the real problem is not House prices. The problem is Wage Stagnation. Wages have not gone up enough to keep up with inflation. Housing prices are hard assets that will normally go up because of inflation, like gold.
No one is complaining that the price of Gold should come down because most people cannot afford it.
The problem in my opinion is that so many good high paying Jobs like Engineers, Scientists, etc. have been outsourced Overseas. This takes Money out of our Economy. It has also lowered our Wages as Americans are being now compaired with the cost of a job say in India by Corporations.
Agreed. Jobs need to be created in the energy field by opening up to the promulgation of USA energy; GDP growth is directly correlated with cheap energy. It might never be cheap again, but if we stop fiat inflation, and concentrate on devloping our own energy, there just might be hope in the distant future. Use some of the funds from the no-end wars to get things going for a start.
Got a family of Mexicans next to me that live 12 to that house and have people moving in and out all year long. He is an illegal alien working as a landscaper and hiw wife who I believe is legal is a cleaning lady. They somehow qualified for a $365k loan to buy that place in 2006. They are still there to this day making my life miserable and giving me roaches. I've already talked to a lawyer about dumping my place as well. Just a matter of time at this point. Without a doubt in the next 12 months, most likely sooner. The entire town is now full of section 8 and illegal aliens and some of the worst traffic in the DC area. Can't WAIT to get the hell out of here.
DC is still a very healthy Real Estate Market. The time to sell my be now. Especially if you were to move from DC where prices have not fallen that much to somewhere else where prices have fallen you could make some money in the move.
Remember it is all relative anyway. If you sell your house for a little less you will also be able to buy another house for less.
.
Strategic Default. Funny that for all the complicated, 3-D math models that go into banking/lending/trading bla bla bla.......................they were relying on the Guilt Factor of buyers. Seriously, they must have assumed that the very thought of defaulting or stigma of breaking the contract would be enough to keep people lashed to their homes.
Several lessons learned from the housing bubble and bailout.
1-If banks , CEOs, etc get away with fraud, the little people will try to as well. That's why it's called "leadership". Folks follow.
2-Deflationary spiral in housing with no end in sight as evidenced by the comments above. The worse it gets....the worse it becomes.
3. The ONLY stable asset class over our modern history was housing. It was unofficially the bedrock foundation for our entire society. Housing provided a stable tax base, usually a non-declining asset, a basis for community, etc. Now it has turned into a casino, with even worse odds.
Sad.....but true.
Well said.
Its not fair to call these people deadbeats, honestly most of them are victims of circumstance and fraud, even if they were to pay off these homes, some other financial institution would come hounding them for money threatening to foreclose some years down the road.
I know for a fact that these banks are selling forged copies of all these notes, sometimes 2 - 5 times over.... imagine paying off your home in full and finding out you owe 3 - 4 other people the full amount on your principle?
These banks commited fraud, the entire derivatives market is a giant paper scam.... it is made up of what essentially amounts to counterfeit copies of mortgages.
You can never have redemption on your mortgage until the original wet ink signed promissory note is delivered to you, but its impossible because these documents were essentially insured by the government and then they were destroyed so that the banks could collect on the "loss" even though they couldn't prove a loss even if they had a gun to their head....seeing as how the banks use the strawman principle to "produce" the money for the loans out of nothing but the borrowers signature in the first place.
The banking system is going to collapse, everyone should just stop paying into the ponze scheme, let it collapse and then we can start fresh without all this meaningless debt floating around.
ok its going to collapse, except JPM.
I borrowed from my Credit Union, 20% down, the mortgage never left the CU, and I got the original wet ink signed promissoary note in my hand.
I did not have any "insured by the government" loan although I was eligable for a VA loan, but why would I get one - they charge a fee don't you know?
No money down means you shouldn't be buying it, meaning anything of value, be it a car land or house.
Add to the mix the fact that even if they pay the "loan" in full they might not come out with a clear title. The statute of frauds demands all conveyances of real property be IN WRITING. If the property went into the MERS system or was securitized, there are multiple transfers of the Deed of Trust. These where either electronic or not done at all. That means no one can sign a release/satisfaction of mortgage. Theses facts in and of themselves constitute a false inducement in the procurement of the Deed of Trust. People entered into these deals thinking at the end of the line that they would have a marketable property. I think in atleast 80% of the cases, that is now impossible. The legal remedy is to get a Writ of scire facia to annul/void the deed of trust because it was entered into based on the false suggestion that if the debt was paid there would be a proper conveyance of legal title.
I wish we had non-recourse mortgages in europe.
What kind of mortgages do you have? I never knew a European who had a mortgage, I am curious. Most I knew rented or owned outright.
I "lost" my home of 17 years almost 3 months ago. Actually, I did not lose it. The bank stole it. This was my first house. I made a nice down payment, had a conventional 30 year fixed (later switched to a 15 yr) and never used it like an ATM.
I was an still am self-employed. I can't begin to tell you how many sacrifices I made starting in 2007 (when recession hit for me) just to make my mortgage payment - on time. In the end, it didn't really matter. And if I had to do it all over again - I would not do it.
My problems started when I called about the possibility of a modification. Not a principal reduction, mind you but a temporary interest rate reduction. I was current at the time. The next thing I know I receive a call from a neighbor who advises someone is walking my property and taking photos. A week later I receive a letter stating my property has been reported "vacant." Things spiraled out of control from there. My carrier was notified by the bank of this so-called vacancy and promptly dropped my coverage. The bank immediately started foreclosure proceedings and as a result, I could not find another carrier to insure my home. Lender placed insure was forced down my throat at double (and later 4X the cost) with no protection for my personal possessions.
I hired a lawyer who encouraged me to continue to make my payments sans the ridiculous attorney fees they slapped on my account. Each month I would send my payment certified mail and each month the bank returned it because it was less than the full amount due. I filed a complaint with the OCC but they did nothing. I contacted my state AG. His office did nothing. My situation is currently in litigation.
I truly believe that one call I made about a modification start this whole crazy ball rolling. I have since found out that most banks utilize software which can "predict" when a homeowner is about to strategically default. I also have to believe that there is far more money in foreclosing than servicing. A bank charging you $100+ to have someone ride by your property once a month (that they pay $15) is proof.
Bottom line is nobody cares. Not the banks, not the OCC, your AG or neighbors. It's all about self-preservation. Don't drink the Kool Aid.
So sorry for your loss. I agree, it probably was because you asked for a Modification. You probably should have immediately called your Insurance Company and had them come out to see you still lived there and reinstate your policy. You could have made a call to the Insurance Commissioner to complain for unwarranted termination. Although, I know that when you are under stress it is really hard to figure out what to do at the time.
I have also found that you should also always get at 30 year mortgage and pay the extra toward principal to effectively make it a 15 year mortgage. That way it is easier to make the lower 30 year loan payments in difficult times.
I guess it is all wooda shooda cooda at this point but you will know in the future. I wish you well and hope it all works out for you.
This is what I said in one of my other posts that this Bank fiasco has caused so many people financial and emotional hardships.
P.S. When you think you may have financial problems in the future borrow every penny you can while your credit is good. Either you will go down really big or it will buy you time to get back on your feet.
If you have an old Car go out and buy a new car right away. That way if you run into financial problems at least you will have a reliable car for 10 years. I will be difficult to buy a new car once your credit is ruined and even if you declare bankruptcy they will not take your car because there is no equity.
While most of your advice was good (and some of it new for me), hurrying to buy a new car on credit is ridiculous advice.
First, ever heard of reposessions?
Second, you can buy a very reliable 6 year old car for less than $10k, and then invest some time to learn the basics what few things to watch and do maintenance on, so it remains reliable for little cost.
Malek,
You are going to need a reliable car for 10 years so buying new makes sense. Especially with Dealer Rebates and low interest rates. You will get at least 4 years without any major repairs. If you do not have to pay a Mortgage you should easily be able to afford a new car payment. I have been looking for a car and you can get a really nice car new for between 18,000 to 24,000. Payments around $460 a month. Of course I am not advocating buying a Lexus or such.
The problem with a used car is most have over 50,000 miles on them. The easy non repair miles are gone. So you may save 9,000 in the purchase price but you will make it up in repairs over a 4 year time span. More than likely you are not going to have $1,500 or more for a transmission on hand. Then you are without a car and still have payments. Better to have steady payments without any money (repair) costs.
Also, if the car dies in 4 years and you need another car it will cost you an arm and a leg to buy another car with really bad credit. Assuming you can get a car loan.
That is my reasoning.
WFS, if you do your "go down really big" approach, you might better not have a car loan outstanding.
Myself I cannot imagine ever buying a new car. Just driving it off the dealer lot already makes you lose 20% of it's purchase price.
It makes a lot more sense to buy a 4 to 6 year old one that hasn't excessive miles on it.
End of 2007 I bought my current car 6 years old for $8400 with 78,000 miles on it. Now it has 110,000 miles on it, for $1500 I had the timing belt replaced as is mandatory every 105,000 mls, and myself replaced all brake pads at around 90,000 mls.
Last year I myself replaced all shocks for $650 plus paid $100 for the garage camber and toe wheel adjustment, and now it should be good to go for the next 110,000 miles, with only the usual small maintenance, and two or three more sets of brake pads. Maybe at some point I will need a new muffler.
For the money I saved against buying a new car, I can buy another used one if this one would break down badly, or someone crashed into it or I'd wreck it myself.
Plus I didn't have to pay the high extra premiums for comprehensive coverage all those years.
That's my reasoning.
You are very fortunate that you can repair your own car. Most of us cannot. What you are doing makes a lot of sense if you have good credit and can cover extra expenses thru a Credit Card or savings. But, If you lose your Credit things can become very difficult as you are then on a Cash Only program. Would someone be able to repair their Credit enough to be able to Buy on Credit another $10,000. Car or would they have to have the CASH.
As you said you bought a used car and have run it for 4 years with a $1,500. repair. Plus, how much would the repairs you did yourself cost the average person if done in a Garage? Most people would need to replace that Car now. Another $9,000. in 4 years.
New is best in the situation mentioned above in my Opinion because you will get the Factory Warranty and most of the New Cars have a 100,000 Drive Train Warranty.
Again you will more than likely not have any repairs for 4 years while you are paying off your car. Once it is paid off you would be in a better position to cover the cost of a Transmission, Brakes, Tires etc.
Plus, even if you go down Big you do not have to default on the Car loan. Even if you go into Bankruptcy they will let you keep the New car as there is no equity in the Car. So, you can exclude it from Bankruptcy.
Your situation definitely sucks. At least with mine I lost only the 3K a month for 3 years that I paid on it. I could have been renting for half that, so really I only lost about 54,000.
I was current on my loan. When I called my bank, they told me I would have to be behind before they would talk to me. Okay, fine. I lined up a rental, moved out, and then called them back. They wanted to play a game, ehh? I played right along with them. There was no way I was getting stuck there, and I was also not going to squat (which I still believe is immoral but to each their own). I moved out while my credit was still good, and I do not have even an ounce of guilt about it either.
Still not enough walkaways. One can only pity them.
Quoting myself:
From this blog:http://gonzalolira.blogspot.com/2011/09/what-i-learned-at-dartmouth.html?showComment=1316661691020#c7944495535454489422
Moral hazzard? Ben Bernanke is a moral hazard made flesh. Barney Frank is a motherfucking moral hazard. The Community Reinvestment Act is a moral hazard. Newt "Never been called out on removing Glass Steagall because it might embarass Bill Clenis Clinton too" Gingrich is a fucking moral hazard. Fuck C student Bush and who the fuck knows what his grades were Obama.The free eaters that do not pay taxes and actually make money when they file are a fucking moral hazard. I am not. The sons a bitches deserve a middle class revolt. Fuck the Northeastern corridor of power that has ruined us. Fuck the Sierra Club, Ivy League fucks for making electricity so expensive. Fuck 'em all...
Yes I am bitter. Every Generation Xer should be. Our prime earning years will be spent cleaning up this mess. Generation Y can at least still fuck around in grad school. We have kids, mortagages, college to pay for, and our own retirements to worry about...