The real estate melt-down - Page 5

18-Nov-07, 11:42 AM

There is nothing illegal about stated-income loans, although you will see less of them in the future.

It is a crime to lie about your income on a loan application - illegal sounds too soft for me.

arbit · 18-Nov-07, 12:10 PM

Are a lot of people being put in jail for lying about their income ? Are banks actively pursuing this if it has been abused a lot ?

**Firehawk** · 18-Nov-07, 06:56 PM

Banks essentially created this mess, didn't they?

I mean, even if you have piss poor credit, you can still get loans without super-inflated interest rates, isn't that correct? If not, please clarify, I don't have a financial degree, only heresay.

Only reason I ask is because I've heard of people filing for bankruptcy, but being able to get other loans without TOO much trouble shortly after, maybe a year or two later. You hear the advertisements all the time. I still think it's smart to maintain as good a credit rating as possible, but it seems lately that doesnt' matter AS MUCH today as it did 10 years ago. Maybe a sign of the times?

**MAURER** · 18-Nov-07, 08:16 PM

i think thats naive. the fact is, any advertisement aimed at catering to people with bad credit are mostly likely geared toward taking advantage of the fact that these people will most likely continue to make bad decisions.

**Firehawk** · 18-Nov-07, 10:25 PM

While I agree with you that banks run those advertisements with the hope that people will continue to make bad decisions, that basically proves my point. Banks bring it on themselves don't they? I mean, they get people to borrow more money, these same people that can't pay end up owing even more, hence credit crisis. This isn't waht Mr. P started with in this thread, I just thought it was interesting to note. To blame the consumer is irresponsible. If you're going to provide loop holes, then you need to expect that people will take them. If you are going to offer super low intrest rates and entice people to buy a house well over their heads, then that's the business' fault in my opinion.

Dan C · 19-Nov-07, 09:16 AM

Quote:

Originally Posted by Firehawk

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'd feel bad about that too, but I've never been fishing for fun. If I go fishing, I've got a sandwich in mind!

Just like I don't hunt for the "thrill" of it, I'm trying to cook burgers and steaks!!! I don't necessarily agree with hunting animals for sport, I eat what I kill and only kill what I'm going to eat.

Varmint/pest control and crop damage is another story though.

**Firehawk** · 19-Nov-07, 10:00 AM

Quote:

Originally Posted by Dan C

I'd feel bad about that too, but I've never been fishing for fun. If I go fishing, I've got a sandwich in mind!

Just like I don't hunt for the "thrill" of it, I'm trying to cook burgers and steaks!!! I don't necessarily agree with hunting animals for sport, I eat what I kill and only kill what I'm going to eat.

Varmint/pest control and crop damage is another story though.

Maybe you fish in ponds or lakes where the fish don't glow.

Dan C · 19-Nov-07, 10:51 AM

Fish killer!

**Firehawk** · 19-Nov-07, 12:43 PM

Hey, i still feel bad even though I kill a radioactive fish...

ajarvis · 19-Nov-07, 01:41 PM

I would never willingly default on a loan. Ever. I feel it's wrong. If you lose your job, can't make payments that is completely different. Just because you're "allowed" to doesn't mean you should. If I take out a loan I consider whether or not I can afford it. If I was buying the property as an investment then I would treat it as such. If your investment goes south then you lose. You wouldn't default on the loan if the property value was going up!

On a side note you see the same type of ridiculousness at my job (I work for the phone company) even though it's smaller amounts of money it really irritates me. They will owe us say $300 - $600 and will go bankrupt. then when hey call in to set up a new phone line they don't have to pay that amount. Even though half the time they sign up for phone and internet at about 80 - 100 a month. They could take a basic phone line for just over 20 and put the rest towards their debt - that would be the right thing to do.

**LiftGirl** · 19-Nov-07, 03:36 PM

Quote:

Originally Posted by Firehawk

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.

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.

FH, could you elaborate on what you mean insurance companies, banks, government institution, etc are robbing people? No one is forced to take out a loan. You could rent an apartment, pay cash for your cars, and never take out a loan.

We will have to agree to disagree about whether walking away from a mortgage you could pay but don't want to is stealing. Just because something is legal doesn't make it ethically or morally right. It could still be stealing even if it's lawful.

I did used to illegally download music, however, I have deleted all my downloads and no longer do it. I do think that record companies, movie studios, etc are way overcharging, so I try to buy used. Amazon and ebay are my friends. As for software, I use as much open-source or freeware stuff as I can, Firefox, Thunderbird, OpenOffice, etc. For programs I find useful, I send in a small donation to the creator.

ajarvis · 19-Nov-07, 05:10 PM

Not to mention you don't "need" a loan for a house you can save up the money. Back in the 80s when it was booming out here one of the builders had stories all the time about how imigrants would all live in the same house they'd save every penny and then show up to buy a house with a big shoebox worth of money! Then they'd all help the next family member save, and so on. It is possible to buy everything cash if you are so determined - just may take you longer.

Merrida · 20-Nov-07, 12:05 AM

Arguments are being made about people walking away from loans that they can still afford to pay.

What about the couple who could pay for their mortgage for the first 10 years, and now, perhaps something catastrophic happened, perhaps a pregnancy found the couple with quadruplets, something they couldn't have foreseen, or pay changes, a loss of income, a sickness in the family,....what if NOW they can no longer afford the payments.

Is it "okay" to walk then?

They're not intentionally defrauding the bank, or to put it another way, they never intended for any of these situations to happen, but after a period of showing they're above board, low risk, timely payers,.....suddenly something happens,....is it wrong to walk away? What are they to do if they find themselves in an unforeseen situation where they just can't pay their mortgage?

It isn't a moral issue where they just don't feel like paying anymore,....it becomes a matter of their very livelihood, and the very reality of their new situation.

From pierini's perspective, I'd like to know: What would you advise your customers to do in this regard, if they still display moral integrity because they've been trying hard to pay back what suddenly became impossible. Genuine question: What is the correct way to handle this? What if the house doesn't sell because of the market (so that isn't an option)? Is there a way to resolve this situation that does not come across as if the owners are trying to put one over on the bank?

Remember, everything started very upfront, and was even maintained for years.... What should be done?

arbit · 20-Nov-07, 05:01 AM

Quote:

Originally Posted by LiftGirl

FH, could you elaborate on what you mean insurance companies, banks, government institution, etc are robbing people? No one is forced to take out a loan. You could rent an apartment, pay cash for your cars, and never take out a loan.

True, but house prices would be lower if banks were not giving out loans. House price in US economy = real house price + % tacked on by bank because of the loan.
The % tacked on by bank is to compensate them for their risk.

You pay cash, and you are "donating" that % to some bank, or to the seller.

If everyone were to pay without taking loans, the house prices would be significantly lower.

Look at this another way. Suppose you are buying a car for $10000. You find a local seller, and find he is also selling it for $10000 on ebay. You go and check out the car, and want to buy it. If you buy it on ebay, and pay by paypal, ebay+paypal will take away $1000 and the seller gets only $9000.
So, you offer the seller to pay $9000 in cash, and buy it outside of ebay.
Seller refuses, and says $10000 is the price, even in cash.

Now, if you buy on ebay, and pay by credit card, you get some additional services, like credit card fraud protection, chance of a chargeback etc.

The logical choice is then to buy on ebay. Otherwise, you are just donating $1000 to the guy

**Firehawk** · 20-Nov-07, 06:46 AM

Merrida has a good point. So it's considered stealing if you walk away before you take a loss on your house (if you forsee it coming), but it's not considered stealing if you lose your job, can't pay the bills, and default then? Sounds like that is what people who think it's wrong to walk away from a note are saying here.

I'll be sure to tell the cop I had to put food on the table so I robbed a bank. I'm sure he'll understand.

I agree with alot of what arbit said. It is unrealistic to expect people to pay cash for every big purchase. If everyone waited to own a house outright, the property value and resale just wouldn't be there. With vehicles, everyone needs one (or 99% of us), and regardless of what you might like to think, most people can't afford to buy cars outright either, especially when there's something called "having to eat" on a daily basis, feed your family, keep the electricity, gas, and water on, etc. Sure, buy a beater for a grand or two, then spend 5 grand over the next year fixing it.