Why shouldn't homeowner's walk away from mortgages & banks getting bailouts to cover losses??

[Anonymous]

I wanted to post this because it breaks my heart to see so many people making life decisions about there homes, stressing out, and even killing themselves over bills. This is merely my opinion and I would like other fico member's opinion as well.

Why shouldn't people walk away from there mortgages when the government used our money to bail out the same companies who won't return calls to help, or help these people refinance. I for one had a situation where my checking account was compromised. A month mortgage was returned to the bank and my mortgage company wouldn't return calls, faxes or anything until I got the Better Business Bureau involved. They wrecked my credit for several months even reporting 60 day lates while I was still making regular payments. It was very hard just to find someone to tell them what happened. I eventually after 3 mths got it straight but I can only imagine how other's are being treated when they call to say I just can't pay anymore.

How do you all feel about this.

[cobaltnv]

I understand your frustration. However, banks are not the only ones at fault here. Of course the problems you discussed are horrible and banks need to have better costumer service to help both lender and borrower. As a country we have gotten used to buying what we wanted when we wanted it and not worrying about when/how to pay for it. This lifestyle has now bitten our country in the ***.  I suppose one could take your line of thinking to other levels as well. What if I disagree with my tax dollars going to welfare, should I quit my job?  

Obviously (I hope) I am kidding about the welfare thing, but the line of thinking you have suggested is not going to help get our country out of this mess. In fact as more and more people go into foreclosure the economy will continue to get worse and worse. A big problem I see with recovery is that our economy is built on consumer spending increasing. If people go back to good fiscal responsibility with saving and spending (which I recommend) our economy will not grow as it has the past 20 years or so. We will need another internet revolution or increase in manufacturing (and exporting) to grow the economy. Just my 2 cents--it is certainly an interesting and frustrating discussion.

Cheers.

[Anonymous]

In a nutshell

You are right in one way that is is BS that banks are getting bailout money and not lending or working better to avoid foreclosures.  That said, they are getting better at it recently and there are tons of programs out there that are trying to help people.

The problem is that in alot of these cases, people bought houses they knew deep down they could not affors and they were being just as specualtive as the banks by buying on the hopes of equity gains. 

In the end, they can walk way if it is too much and there is probably much less stigma to this right now than there ever has been in our history.  That said, there are still (and should be) alot of bad consequences.  Most people who have truly suffered an emergency can get a modification or a refi of some sort.  The people having the hardest time are the people who should have never got into the houses they have so their is little room for the bank to maneuver.  You can't expect the bank to take a 40-50% hit on a loan if there is no reasonable chance for it to be repaid after a modification and according to alot of reports, most loan modifications end up delinquent within 12 months.

Also, you have to remember that since the loans are sold off to investors, the bank can not just decide to modify a loan very easily.

It sucks for sure though.

[Anonymous]

I see fault on both the buyer's side and the lender's side.  The lenders made stupid loans like interest-only and ARMs and let people stretch their finances too thin.  But the buyers agreed to it, signing the papers they should have read.  They can claim ignorance but they ultimately agreed.  I don't know what they thought would happen.  An adjustable rate adjusts and eventually principal has to be paid on interest only loans.  If they can afford to pay what they agreed to paid, it is immoral in my humble opinion to walk away.

If someone is deciding between putting food on the table or making the mortgage payment, put food on the table.  By all means, walk away before killing yourself.

I don't think it's fair that they bailed out banks for making bad decisions but that doesn't give people the right to walk away, in my eyes.  I do think it is in the lenders' best interests to work with people that are struggling.  I'm not talking reducing the amount owed but extending the term to 40 years or a temporary reduction in interest rate seems reasonable to me.  Or perhaps moving some payments to the end of the loan in some situations.  At the same time, it seems like a lot of modified mortgages still fail so maybe they are just saving everyone some time and heartache by letting the inevitable happen.

[Anonymous]

Wow, bound4success. You sure picked a hot topic for discussion!!!

Here's my 2 cents on the subject:

I agree that there's a LOT of blame to go around.

However, spreading the blame and pointing fingers at

each other doesn't solve the problem.

So to speak directly to your question: NO. I don't believe

homeowners should walk away from their mortgages

because 2 wrongs don't make a right. Just because banks are

getting away with murder doesn't mean that we should turn the

knife on ourselves by shirking our responsibilities, intentionally

ruining our credit and walking away from the roofs over our heads.

I think we've all learned some painful lessons over the last couple

of years as consumers:

First, your house is not an investment; your house is your HOME.

It's where we build memories, raise our families and create futures

for those we love. It is not a bank ATM, a personal piggy bank.or a

hot stock that can be bought and sold at will. 

Second, homes go up AND down in value. But it's still your home.

Yes, we can pull out equity for home improvement, to buy a

new car and to send our kids to college. But if you stop making your

payments every month, you give up the right to call a house your home

and you abandon your ownership stake in the American Dream.

Which leads me to my next point: Homeownership is not a right or

an entitlement. It is a privilege and a huge responsibility that, quite frankly,

not everyone is cut out for. I believe a sense of entitlement is the hidden

motivation behind why many people choose to point the finger at others

and play the blame game. After all, if someone else is at fault, it's not

your fault. Once you get others to buy into that line of thinking, you now

have the excuse you're looking for to walk away and send "jingle mail"

to your mortgage lender. 

We need to get back to basics and let common sense prevail.

Cash is King. Good credit is Golden. We need to protect these two

valuable commodities like our lives depended on it...because they do.

And for goodness sakes, pay your mortgage on time. If everyone pays

their mortgage, everyone builds an equity stake and homeownership is

always stable. When we stop making payments --- whether it's you or

your neighbors --- people fall behind, go into foreclosure, declare BK,

ruin their credit and destroy the stability of homeownership. And yes,

home values plummet as well. Then people are tempted to walk away

from their homes, which does nothing but make a bad situation worse. 

One last thing: I think the realization that people can actually end up

being upside down in their homes the same way we are wth our cars

has fundamentally shaken the psyche of our country. We have no

problem accepting the fact that the $30,000 car we bought 10 minutes

ago went down in value 20-30% the moment we drove it off the car lot.

But when it's our home, people are prepared to "make a business decision"

and simply walk away.

I don't buy that line of thinking for one moment. We buy cars and homes

because we want to OWN them. The fact that they go up or down in value

doesn't make our responsibility to keep them any less. Yes, I know that

cars and homes are not the same thing. But for most people, they are

the two biggest purchases we will ever make in our lives. So to me, it's

just more reason to simply do the right thing so that one day we can call

them our own.

CanDo

"The right attitude is everything" 

[Anonymous]

In my opinion it comes down to a single word "accountability".

When did it become the American Way that we blame everyone for our own mistakes and expect someone else to clean up the mess?

[teton]

The banks' role in the housing crisis has been well documented. However, when we enter into any kind of contract, it's our responsibility to understand what we are signing and the implications associated with it. If someone bought a house they could actually afford and then were hit with extenuating circumstances (long-term unemployment, illness, etc.), I can sympathize with them. The situation was out of their control. However, if someone bought a house with a mortgage that stretched their finances thin, or got hooked into questionable financing, that's a situation they chose. I think the banks should make an effort to help these homeowners, since foreclosed homes affect the market as a whole, but not by reducing their prinicpal or giving them some ridiculously low interest rate. Someone else mentioned extending the mortgage to 40 years or adding payments on to the end. I think this is reasonable. It's very disturbing to hear that more than 50% of homeowners who were recently bailed out have defaulted already. It's going to be painful, but in order to get our housing market back on track, I think a lot of homeowners will need to be put out of their homes. It will be interesting to see what the new administration does about this.

[Anonymous]

Can Do Attitude,

KUDOIS! You made a good point. After looking at the situation alot of people did get mortgages that even after the government programs they still aren't going to be able to pay it back because they will owe so much more on the loan than before.

I pray that this nation gets back on the right track and manage the debt. Oh, and let's not forget this year many more adjustable rates will increase so we better get ready for wave #2.

Thanks for the opinions everyone.

[Watchmann]

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@Anonymous wrote:

When did it become the American Way that we blame everyone for our own mistakes and expect someone else to clean up the mess?

---

It became the American Way over the last couple of generations who were brought up to believe by doting parents that they could do no wrong, and if something did not go right in their lives than it was somebody's elses fault.  How the Greatest Generation (Depression survivors and WW II victors) could produce such misfits as the self indulgent Baby Boomer generation (of which I am a member) and their subsequent children is a mystery.  The effects have been profound on this great nation.    However, one thing that MUST be done is to educate our kids in simple economics in grade school, high school, and college.  We send kids out into the world with zero real world knowledge of how economics works and how it will pervade every aspect of their lives.  This must change.  Shame on the adults and the education system for letting this benign neglect to happen. 

Message Edited by Watchmann on 12-30-2008 09:23 AM

[fishbjc]

My son is involved in this situation now.  Due to divorce he has been forced to rent an apartment.  She's still living in the home and paying the 1st mortgage.  He's paying the 2nd mortgage.

The house hasn't even had a nibble in 18 months and almost zero activity.  There is no equity at this point due to the decline in the market, they're currently -$10,000 not including realtor costs.

He wants to continue the payments because he is fiscally responsible.  Unfortunately she's mentally unbalanced and severely depressed over her *lack of funds*.  The home isn't heated because she can't afford it.  One dog has been put down due to insurance costs (angry animal).  She can't afford the upkeep and it's in disrepair.  We are VERY concered that she's so depressed that she is suicidal.

In this case, I think it's best to dump the house and move on.  Financial responsibility CANNOT be put before someones life.  Yes she needs to get help, but I don't see it happening.  Her family can't or won't help her.  Does my son take the chance that she kill him then herself?  He can't afford 1st mtg, 2nd mtg AND an apartment.  He already works two jobs.

I don't see another way out of this mess.  I toss and turn a lot of nights because I don't know what she is going to do...

Message Edited by llecs on 12-30-2008 11:35 AM  Thanks Mod for editing...just venting here!!!!!!!!!!

Message Edited by fishbjc on 12-30-2008 08:48 AM