The real estate melt-down

[Dan C]

I do respect my elders but more so I respect intelligent, responsible thinking.

Off topic but still related... who here has downloaded music off the internet?

I think I remember someone here in particular stating, "I refuse to pay for music" or something along those lines.

Originally Posted by Merrida

In those circumstances, - 2 things:

1) Would your advice be any different?

2) Would the effects and repercussions be any different (such as how it affects your credit)?


Is the end result the same to the person doing the bailing, regardless of the circumstances? Is there any motivation for them to keep paying on something they cannot afford? I'd assume something must have happened if they (or your doctor friend) were able to afford the payments for X-Amount of time, and now they can't. There must be a reason.....should that be taken into consideration?

In both examples I gave in my initial post, the people's only experience was a decline in the value of their home which they purchased with 100% financing. There was no loss of income or catastrophic medical expenses or anything else that impaired their ability to pay. That is a big difference.

For someone who had a loss of income that could not be reasonably expected to be replaced, or incurred substantial medical or other catastrophic event expenses, I would be more understanding of a decision they made to "walk".

In any event, a "walk" will damage credit history and rating and should only be done with that complete understanding. From personal experience, I know the "power" of excellent credit and I will never do anything to jeopardize my rating, even when I no longer need to borrow money and that is, I believe, like right now.

I hope I have answered your questions (they were good ones).

[Dan C]

For some reason I was under the impression that this move would not mess up your credit. I take back my "wise financial move" comment but I still couldn't blame someone for doing it, especially if the difference was significant.

In regards to people burning their our own CD's and downloading free music, again, since there's no real face behind who your "getting over on", I don't see it as that big a deal. I'm not condoning stealing, which I understand Napster was allowing to some degree, but to the people (and it is more than one person who is profiting) who are "losing out" we're talking fractions of a cent really. It's akin to taking extra napkins from the neighborhood sub shop so you can put them in your glove compartment.

I realize I'm trying to justify these questionable acts because of petty loss, but I think my logic is sound.

***and why does my last post keep getting bumped back? How could Merrida quote me I posted it?

I'm lazy right now Dan so I will not respond to your post even though I would like to. If I can remember tomorrow, no guarantee, I may be back.

We had a server problem late yesterday and that caused post placement problems. Either that or Merrida is an amazingly intuitive person one step ahead of you. Be careful with her - she might be dangerous.

[Merrida]

Originally Posted by pierini

Either that or Merrida is an amazingly intuitive person one step ahead of you. Be careful with her - she might be dangerous.

That may be true. After all, I'm a rather unusual person who's into all sorts of unusual things. (insert eerie music ---> here <---)

[Firehawk]

Originally Posted by LiftGirl

So it's ok to steal, since it's easier? And yes, walking out on your mortgage is, IMO, stealing from the bank that lent you the money.

Let me try to put into words a little better where I'm coming from. Sometimes I have a tendancy to speak from emotion rather than think clearly about what I'm trying to say, and it doesn't come out right .

First of all let me say, I have maybe the biggest conscience on this planet. I feel bad when I go fishing for fun, snag a fish in the gills, throw him back and see him floating. Hence, you'll never see me trying to hunt down deer. I pay for things even if they're given to me for free, for instance, I went shopping last year to buy a new wardrobe, had 7 shirts on the counter, lady charged me 6 on the receipt. I noticed this after leaving the store, went back and paid for the 7th shirt. Things like that will eat at me all day long if I don't make it right, or try to. I have problems taking money from people that I do a service for.

Where I don't have a weakness for is big businesses, like insurance companies, banks, government institutions, etc. These places rob people DAILY, but they do it legally. Arguably that is debatable because these same people make the damn laws lol. Anyone that pays into health insurance knows EXACTLY what I'm talking about.

Secondly, I think that people who are wealthy or who are well off (whatever you want to call it) would laugh at you if you tried to tell them walking away from an investment that was going to cost THEM money was morally or ethically wrong. Most business people didn't get where they are (the well off ones) by worrying about consciences.

Thirdly, I would not see it as stealing from a bank if you walked away from a mortgage when the bank loaned you money, because you are doing it within the confines of the law. Stealing is illegal, thus, it is not stealing.

Fourthly, if you have ever copied a disk, game, song, software, movie, for anyone, you just stole from someone or some business. You just took profit out of their pocket. This is illegal, although not well policed. Just remember that when you are condemning people.

Feel free to pick apart what I've said, I look forward to hearing your retorts.

No further counterpoint from me on what you have posted Dave.

But I suggest you print your post and save it. Go back and read it in 20 years and see how you have matured. Then show it to your children and tell them "this is how Daddy used to think. I don't want you do think like this."

[Firehawk]

In 20 years at this rate, things will be far worse than they are now pierini.

Originally Posted by Firehawk

In 20 years at this rate, things will be far worse than they are now pierini.

For me or for you?

I'm planning that they will be better for me and directing my efforts accordingly and asking God for all the help he will give.

I personally think the best is yet to come.

[Firehawk]

For this country, wasn't making this a personal issue.

I think the worst is yet to come for this country.

[arbit]

Originally Posted by LiftGirl

Sure it's unethical (and not smart business) to give someone a loan they don't have much chance of repaying. Obviously, they don't do this as much as we think or they wouldn't be making money.

All I'm saying is that since there will always be unscrupulous lenders, it's your job to do the research and figure out 1)if you can repay the loan and 2)if your mortgage company/bank is reputable.

And walking away when you could pay but just don't want to is shady no matter how you slice it. How was the bank supposed to know you'd decide to walk away even if you can afford it but just don't want to, like Mr P's client?

Here is how I look at mortgages. I go to the bank and say I want to buy a house at $x. The bank does its own research and agrees that the house is indeed worth $x, and agrees to finance me. There is always a risk that a person might default a few years down the line, but then the bank gets to keep the house, and all the intermediate payments. So even if the house prices fluctuate a bit, bank is OK. As a business, the bank must in fact take into account that the house prices may go down in the future, and set interest rates/ downpayments accordingly.
I cannot go and get a $1M mortgage on a $100k house (even if I have full intention of paying the $1M, say by investing it elsewhere.)
In a mortgage, both the lender and the borrower share the risk. Even if the borrower walks away, the borrower takes a hit, in lost downpayments and lost mortgage payments, and a credit rating hit. I see nothing unethical about the bank also taking a hit along with the borrower.

I in fact think it is better for society if people walk away if prices fluctuate too much. The possibility of people walking away reduces the chance of prices getting artificially inflated. Itīs an instrument for making the market more efficient, just like shorting stocks.

Based on the "knowledge" you have showcased in your post, you would probably me more valuable here to other DF members by limiting your future posts to fitness topics.

That is about as kind as I can say it (but you are free to ignore my suggestion).

[arbit]

Originally Posted by pierini

Based on the "knowledge" you have showcased in your post, you would probably me more valuable here to other DF members by limiting your future posts to fitness topics.

That is about as kind as I can say it (but you are free to ignore my suggestion).

Wow, a personal attack Mr P ?

I'm really sorry arbit. <fingers crossed behind back> I'm only human.

Keeping the thread topic on focus, there was an article in my newspaper this morning about this topic, focusing on an element of the foreclosure problem being stated-document loans. These are loans obtained by only stating your income and not having to prove it. These type of loans have been around for some time but became very popular during the last real estate boom.

Seems like a high percentage of people using a stated-income loan to purchase their home, lied about their income, stating that they made more income than they actually do. Based on my professional experience as an advisor, I do see the proper role of stated income loans but I also see the great potential for their abuse.

So who is to blame? Both the borrower who lied about his/her income and the financial institution for peddling the loan, but not just the financial institution. Again, nobody put a gun to the head of the borrower and said take this loan or I will blow your brains out."

[arbit]

Originally Posted by pierini

Seems like a high percentage of people using a stated-income loan to purchase their home, lied about their income, stating that they made more income than they actually do.

Isnt that illegal ?


There was some talk a while back about the state helping people by making part of the mortgage payments...