high-end homeowners have chosen to pursue a "strategic default."

[shah269 0]

kelpdiver

I've been told a way out of this is to just not pay and save the money for downpayment on another home.

By the time the first home is forclosed on the second home is now picked up and thus the tax issue is solved.

Still find it dirty but....it's a dirty world?

But I guess the more liquidity you have the more options you have.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[DrewEckhardt 0]

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DrewEckhardt

That was very well put! I have to admit it now sounds more like a good idea.

What's it do to your credit rating and the possibility of getting another mortgage later on?

Not to mention your employability. Credit checks are pretty standard procedure in the hiring process.

It depends on the industry and the impact can be different if the default ends in a short sale instead of the nuclear option.

[kelpdiver 2]

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Not to mention your employability. Credit checks are pretty standard procedure in the hiring process.

It depends on the industry and the impact can be different if the default ends in a short sale instead of the nuclear option.

he went to business school - the jobs that leads to are the ones that actually care a bit about the matter. On the engineering side, much less so.

That said, the attitudes about this subject may evolve due to the scale of the number of foreclosures. Though I suspect it may be a polarized result where some people become more sympathetic, and those not affected may become less so. Shah's case is really not one that invokes great sympathy, imo. The more you know, the less you think of it.

[shah269 0]

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Shah's case is really not one that invokes great sympathy, imo

Hey I'm no better or worse than these highend home owners.

Yeah I bought it, Yeah I can afford it...but why?

It's a sinking investment. Any one with half a brain can see that! Thanks to how things are going I expect to loose another $40k-$60k on it.

So why not walk?

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[kelpdiver 2]

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kelpdiver

I've been told a way out of this is to just not pay and save the money for downpayment on another home.

By the time the first home is forclosed on the second home is now picked up and thus the tax issue is solved.

there's a potential tax liability on the ditched mortgage still. And I venture that this scheme would have been more achievable in 2007 when there were waiters with multiple half million dollar houses (Vallejo, CA).

So you don't pay your bank for all of 2012...that gets you what, 25k? That's basically a 10% downpayment on a similar house, but a lot of banks are holding out for 20%. And they're certainly going to notice you have a 270k underwater liability, one that is substantially in arrears. What dumb fuck is going to make another loan to you?

In a few years, I think you're going to look back and wish you had paid the measly 5k to get the refi, instead of reacting emotionally.

Or perhaps you should consider the advice to relocate to another part of the country where the costs/salaries are less bloated.

[shah269 0]

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In a few years, I think you're going to look back and wish you had paid the measly 5k to get the refi, instead of reacting emotionally.

Hum....don't read much do you!
Good at the attacks...bad at the reading.

I was in the process, I had just paid $500 for a home apparisal and was on my way but well...the banks said "Ah...you know what...go pound salt."

But hey we are not hijacking a good thread. So let's stop it before it gets too dumb.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[kelpdiver 2]

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In a few years, I think you're going to look back and wish you had paid the measly 5k to get the refi, instead of reacting emotionally.

Hum....don't read much do you!
Good at the attacks...bad at the reading.

I was in the process, I had just paid $500 for a home apparisal and was on my way but well...the banks said "Ah...you know what...go pound salt."

talking about 3 or 4 rant threads ago. 'Why should I pay more money into this POS investment??!!?!'

[nanook 1]

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But that's just me, maybe I'm oen of those dumb honest folks.

Tell you what. Here's the truth. Your loan isn't owned by a bank (BofA servicing is just a subsidy that sends your payment to the investors who took the loan off the bank's/originator's books.) Expecially since it's an 80/20. Depending on what "tranche", probably a mezzanine to subprime, there are credit default swaps still being traded despite the downturn and someone is going to make money off of you defaulting (or lost money on betting you would default earlier). Your loan is in an instrument that is bundled many times over to the point that there is no personal compassionate attachment to their end as it is on your side. These MBS's or CDO's are so large that your one default is just a grain of sand off the investors' sandbox.

Whatever decision you make, dont feel bad about it. but make it quick. The Law that protects the difference between the loan and the house that was "forgiven" expires in 2013. Right now it won't count as income. But look to see if your loan is a "recourse" or a "non-recourse". If it is a "recourse" depending on state laws, they can come after you for the difference.

_____________________________

"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

[DaVinci 0]

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I can afford my place, I just hate throwing money into a very bad investment.
But unlike these folks....I have this thing called a sense of responsibility.

That said, if they are doing it.....why shouldn't the rest of us?

The answer is in bold.

[BIGUN 1,486]

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Everyone keeps telling me I should do this.
I can afford my place, I just hate throwing money into a very bad investment.
But unlike these folks....I have this thing called a sense of responsibility.

That said, if they are doing it.....why shouldn't the rest of us?
Yeah I know credit score and all that jazz.

Its really not how much you paid and how much you owe or how "under water" you are... If you can afford the payments, then it's really about the tax deduction and a matter of property values coming back around... which they will and do every time there's a recession. I've been through four of them... none any worse than others when it affects your income.

I might suggest that you go out and buy something that says "Made in the USA."

Nobody has time to listen; because they're desperately chasing the need of being heard.

[BIGUN 1,486]

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The Law that protects the difference between the loan and the house that was "forgiven" expires in 2013. Right now it won't count as income. But look to see if your loan is a "recourse" or a "non-recourse". If it is a "recourse" depending on state laws, they can come after you for the difference.

Jerry, I have a question about this comment.... As you know, there's two kinds of "difference." One in which they come after you and pursue the financial amount between the sales price and the amount you owed. The other is "relief of debt" in which you receive the 1099 nastygram and owe taxes on the amount forgiven. Can you clarify your comment on which or if it's both that are forgiven until 2013.... I'm really just curious and haven't stayed up on it.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[shah269 0]

Nanook,
Thank you yes I have to have a very serious talk with my accountant and my lawyer.

I guess....as someone with more education than I once said.
Money doesn't buy you happiness it buys you options which may lead to happiness.

I guess these high end homeowners just have more options. They can simply walk away and not worry about the tax hit. Odds are many pay less taxes than I or a good portion of the population does.

That said, it's funny isn't it? How many people rant about middle class folks buying homes they could not afford or lower income folks not working hard enough for the homes they bought...here we have some people who supposedly have the means and the brains to be worth their salt and they are walking away.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[kelpdiver 2]

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I guess these high end homeowners just have more options. They can simply walk away and not worry about the tax hit. Odds are many pay less taxes than I or a good portion of the population does.

odds are more likely you're making shit up again.

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That said, it's funny isn't it? How many people rant about middle class folks buying homes they could not afford or lower income folks not working hard enough for the homes they bought...here we have some people who supposedly have the means and the brains to be worth their salt and they are walking away.

Your article noted that million dollar houses represented less than 2% of the foreclosures. While it's an increase from the past, it's still a rather small number. (and the bubble increased the number of 7 figure homes) And less you think that only 1%ers can afford such homes .... they are a considerable minority of homes around here, bought by DINKs and dual earners even with kids.

The primary difference, if the truly rich decided to walk, over a more middle class home owner like you, is that they aren't going homeless. They might have to 'slum' it in a smaller place.

[shah269 0]

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The primary difference, if the truly rich decided to walk, over a more middle class home owner like you, is that they aren't going homeless. They might have to 'slum' it in a smaller place.

Yup slumming it via.....dumping a non performing asset and giggling all the way to their next home.

It is what it is, the more money you have the more options you have.
Lucky them.

The rest of us have to find other ways out of our non performing assets i guess?

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[DrewEckhardt 0]

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Jerry, I have a question about this comment.... As you know, there's two kinds of "difference." One in which they come after you and pursue the financial amount between the sales price and the amount you owed. The other is "relief of debt" in which you receive the 1099 nastygram and owe taxes on the amount forgiven. Can you clarify your comment on which or if it's both that are forgiven until 2013.... I'm really just curious and haven't stayed up on it.

It's just the tax implication.

Home debtors are temporarily being treated like businesses for whom forgiven debt is not considered taxable income.

Presumably the debt needs to be written off before a 1099 form is generated, and that happening before the law expires for some one who's yet to default seems unlikely.

[DrewEckhardt 0]

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I guess these high end homeowners just have more options. They can simply walk away and not worry about the tax hit.

Many are in California cities where property values got even more inflated - in my last neighborhood it took $1,200,000 to buy a 1200 square foot 3 bedroom "starter home" in the form of a 1950s ranch house with updated floors, kitchen, and paint. California real estate loans for purchase (as opposed to refinance) are no-recourse loans. In effect there are two ways to comply with such contracts: pay the mortgage off, or return the collateral to the lender which produces no forgiven debt that constitutes taxable income.

[BIGUN 1,486]

Thank you

Nobody has time to listen; because they're desperately chasing the need of being heard.

[nanook 1]

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The Law that protects the difference between the loan and the house that was "forgiven" expires in 2013. Right now it won't count as income. But look to see if your loan is a "recourse" or a "non-recourse". If it is a "recourse" depending on state laws, they can come after you for the difference.

Jerry, I have a question about this comment.... As you know, there's two kinds of "difference." One in which they come after you and pursue the financial amount between the sales price and the amount you owed. The other is "relief of debt" in which you receive the 1099 nastygram and owe taxes on the amount forgiven. Can you clarify your comment on which or if it's both that are forgiven until 2013.... I'm really just curious and haven't stayed up on it.

Keith, Just like Drew said. The 2013 expiration is about the tax aspect of it (1099C reporting). The other "difference" is about the remaining debt left which you may still be liable for (recourse/non-recourse). The easiest way to check if liable for the difference is by looking on the 1099. If box 5 is checked, then its a "recourse" and you are liable to the company for the difference. Either which way, if a person forcloses between 2007 and 2010 they will not be taxed on it, up to 2 million difference.

_____________________________

"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

[BIGUN 1,486]

Excellent... thank you for the information.

The good news is... I don't have a mortgage

Nobody has time to listen; because they're desperately chasing the need of being heard.

[nanook 1]

Lucky you. I'm carrying three.

_____________________________

"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

[diverborg 0]

Realistically how much principle would you have left to pay if you did a short sell?

Are we talking 100,000, 50,000, 200,000?

And what is your current monthly payment with all escrow figured in?

IMO, I wouldn't foreclose, mainly because that shit will screw you for a long time. Good luck getting a lease on an apt, unless you have a friend that will let you live with him for the next 7 years. Credit checks are standard procedure for any white collar jobs anymore and also any job where security is important.

If you can negotiate a short sell with the bank, and figure up the terms of a loan to repay your negative equity for let say 70,000 (just a guess). Try to find another job anywhere else in the country where you can rent a nice one bedroom apt on $600/month. Then MOVE!!! I'm guessing what you would owe the bank on the shortsell plus the roughly $600 a month on your rent would still be drastically lower than what your current monthly payment is given you don't have to worry about property tax or homeowners insurance anymore. Take the extra money and either invest it or save it for a downpayment on a more reasonable home like the millions of well maintained 2000 sq ft homes selling all over the country for less than $150,000. Then you can buy another home when you finish paying off the remainder of your unpaid principle on the shortsell.

Banks do not like doing a shortsell because then you have a big loan floating around out there with absolutely no value tied to it. But they will work with you if they're led to believe thats your only option outside of forclosure. If you foreclose, they're stuck with that same amount of unpaid principle and now they have a piece of property they have to sell for likely a lot less than market value had they negotiated a short sell.

Then again this is all dependent on how far negative you really are on equity.

[shah269 0]

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Then again this is all dependent on how far negative you really are on equity.

I was having drinks with friends who are in the banking industry.
I don't talk much about this to them for though they are my good friends...and we did get my EMBA together......how shall i put it...their response the last time I spoke of this situation last year was "Who did the feds save? So why should we care?"

That aside they are great guys and I respect them and they respect me. Thus when they tell me the stats I take it to heart.

And per the info they provided, I'm just like a good 40% of the folks out there who are 35% underwater. For me that's about $100k. But I live in a very expensive part of the country and it's where my job currently is. Back when I was married and there were two incomes i was more liquid and thus had more options. And right now that would be nice!

Hence I wonder if that's what is allowing these well to do folks from walking away from their under performing investments? They are liquid enough to pay their ransomed and walk?

I don't know, have an appointment next week to talk to yet another professional. Yet all I have to say is thank god I don't have kids, and especially those who are about to go to university. I was at one of these "group help meetings" last week and there were a number of average middle class folks who were in tears that their homes have lost so much value that now their kids have to take out huge loans to go to school....and I'm talking local state schools. They had hoped that their children could graduate and be debt free via leveraging equity in their homes...now that's sacrifice. Sadly......someone made good money off their bones thus the kids will now graduate $60k+ in the hold....and who will make money of their kids debts? Odds are the same group of talented individuals who put us on this bubble?

Funny...how a little game of squeezing blood from a stone killed off one generation and is poisoning another before it even gets a chance to take one step.

To think, we put drug dealers away for life for destroying lives perhaps we should give white collar crime the same level of penance?

And for these well to do folks in their well to do homes who are walking, god bless you and your good fortune.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!