short sell and rent to get out of other debt or hold on and wait it out? - Page 5

[nichole]

I don't know if this discussion can ever go anywhere. The topic is just too upsetting and personal.

They did push ARMs on people who could not afford them. Everyone has told me that when you buy a house, you have to read the fine print and really think about what you are getting into. They also targeted people who did not speak English very well.

I did find it frustrating to watch people flipping houses for hundreds of thousands of dollars while we lived in a tiny apartment b/c we were too askeered to take on the risk.

[Ola_]

Originally Posted by dinahx

I totally understand why a homeowner would be responsible for making timely repairs, not wrecking the place, and making their payment on time.

What you are describing is renting. And if you don't want to take the risk of ownership of buying a home that is the route to go. Of course renting has it's own drawbacks, unfortunately there is no perfect solution here.

However, if the entire US enconomy tanks, the banks will get a bailout while the homeowners will get thrown under the train, together with their families. This is a risk no bank or banker ever takes. Banks don't go out of business, our government makes sure of that, they can make predaotry loans all day and get some fancy bailout.

I definitely agree. Then again I also don't think the bailout is a good idea because as you said, we SHOULD hold them accountable. It's ridiculous to me that the banks messed up and now the taxpayers are paying to fix it. But that is a story for another thread.

[velochic]

I've followed this thread but stayed out of it because I can see how emotional it is, but the news yesterday prompts me to say something.

I think it's important to mention that $100 billion has been released from TARP specifically to help the little guy... the homeowner.

It appears that what they will do (because it's the fastest route and time is of the essence) is that they will pay down the principal on mortgages where people are upside down so that their payments are lowered and the principal owed is lowered. You actually owe $250K, but can afford payments on $150K, so they will use the TARP fund to pay your bank $100K and bring your payments down.

What is going to happen is the government will pay the bank $100K to bring down your payments and upend you on your loan/worth ratio, but who is going to pay for that? The taxpayers, the taxpayers children, and the taxpayers grandchildren. And that's the best case scenario... the worst is that this bankrupts America and suddenly Chinese is a required course for all school children.

Meanwhile, someone who did their research and understood what they were doing and that buying a home isn't the same as buying a T-shirt... well, they have a home they bought for $150K. It's small and in a poorer school district, but they made sure that they bought something they could afford even when life's unexpected issues arise.

They now make the same payments as the person in the grand home in a great school district. How is it fair to the person who played by the rules?

The bottom line is that it doesn't really matter who is to blame. We now have no choice but to stem the hemorrhaging and it's no longer about what is fair. Greedy people will WIN this time and us poor, responsible, level-headed tax payers will be left holding the bill. The financial system is set up to absorb the foreclosures that are truly due to life-changes. These have happened all the time... someone loses a job and can't live there anymore. The system can handle that. What the system could not handle was people who were greedy and bought more house, agreed to the terms, then decided that when the terms didn't fall in their favor, they don't want to play by the rules anymore. Those are the people that brought the system to its knees. The system is down... now we have to fix it. It will take GENERATIONS to fix this... and beyond stopping the bleeding, they need to fix the root problem. I hope the greedy people (be it bankers or consumers) are happy that they have auctioned off our children's futures (and mine as well) to have a little more bling.

And that's all I'll say about it.

[shelleyd]

You know I've been trying to stay away from this thread because it is really personal but I can't stay away.

Don't people realize that there's no line in the sand of us versus them? It's not lazy people who did no research who thought buying homes was the same as buying a t-shirt and are now just walking away because they don't like the paint on the walls vs responsible researched people who paid cash for their homes who are now paying for the rest of us.

I have an ARM loan that I'm upside down on. When we bought our home, we didn't buy it to make some crazy profit in a few years. We bought our home on the advice of many experts. We thought we would be throwing money away to continue renting. We planned on staying for the next ten years in our home. We thought we could refinance once the ARM reset. We didn't buy for as much as the bank was willing to lend us. We took into account that I would stay home once we had children and so we needed to afford our home on one salary.

Well we obviously made some mistakes. But we thought that if for some reason dh ever lost his job, we could sell our home and move if we needed to. Well now we can't. Dh has lost his job and the market here is DEAD and our house isn't worth nearly what we owe on it. There is a comparable house on my street selling for $20,000. We owe $127,000. So now we'll foreclose and bring down our neighbors' property values even more. But we're affected by the foreclosures too. Maybe we could sell our house if there weren't a million foreclosures on my street. We pay taxes for the bailout too. We're on both sides of the issue just like most everyone.

I realize that I have an obligation to the mortgage company. But you know what, I have an obligation to my children too. I won't leave them while dh and I both work 80hrs a week for minimum wage just to tread water. Not to mention there are no jobs here. It's not that I can't find my bootstraps people. I'm back in school so that when I'm done, we won't be in this situation again. Dh has looked for a job in half the states in this country and half of Cananda too.

I don't blame the people in my neighborhood who have foreclosed. I know that they most likely tried everything they could to avoid it just like we have. Nobody's an island.

[dinahx]

Thank you Shelly. It is the BANKS that have brought the system to its knees, that and the pop up homebuilders that built terrible vinyl siding stick masterpieces that aren't worth the land they are sitting on. The BANKS securitized the mortgage holdings and sold them as if they were worth something when they were worth nothing. Our loan was sold before we even signed the papers!

And now WHO gets the $$$? The banks do. They brought the market down with their shady practices and they are going to GET PAID as if they had been the most noble of public servants all along. How is that right? We just have this neuroticism in this country where it is a-ok to give billions of dollars to banks but not one red cent to help a person in trouble.

If you believe that 100 billion is to 'help the little guy' well I have news for you: Section 8 is mainly 'landlord assistance' too. Shocked? Section 8 helps landlords rent their apartments above market value for amounts that they would NEVER be able to charge in an open market. This is pretty much the same, IMO. Make the banks turn their ARMs into the fixed rate loans they should have been writing in the first place. No one FORCED them to make shady ARM deals, there isn't anyone who deserves that type of a deal.

But we have a government who will never force a big business to do anything. They would rather pay the business taxpayer money while its citizens wind up on the street.

[Dar]

I'm returning this thread, minus a few posts... let's keep it within the UA.

Dar

[chickabiddy]

Originally Posted by dinahx

No one FORCED them to make shady ARM deals, there isn't anyone who deserves that type of a deal.

And nobody forced consumers to accept shady ARM deals.

Shelter is a human right. Shelter of your choice on the terms of your choice, not so much.

[acegmom]

Originally Posted by shelleyd

I have an ARM loan that I'm upside down on.

I'm sorry. I just don't get it.

If you took an ARM, then apparently (in general, I apologize if YOUR situation is the "one" that is different) you could not, or chose not, to afford the fixed rate mortage at that time. Did you have 20% to put down?

I wonder if all the posters here that are justifying their behavior (walking away from a loan because there are better opportunities elsewhere. Or because they would like to "afford" children? And to stay home with them?) are very young. I am 44. I remember buying my first home. I remember calling EVERY DAY hoping for the opportunity to lock in an interest rate under 9.5%. In 1993. With 20% down. And with an 800+ credit score.

Honestly. I am shocked. Was anybody here raised with the idea that a legal contract was something you were free to "walk away from" because of personal desires? I hate to bring this up, because I will probably get us shut down again, but don't you have any pride? To fulfill your responsibilities? You know, those legal contracts YOU signed? And held yourself out to be capable of understanding? Were all of you just incapable? Or, are you comfortable hiding behind -- "That's what everyone told us." "That's what everyone said." "My kids needed separate bedrooms."

So, suddenly, your thoughts are supposed to merit weight among the the rest of us? (you know, those of us who will bear the burden of your "change of heart." Please note -- I KNOW there are situations described here that include true need. I'm talking about the idea of "I will not be a slave to my society.") If you were incapable or unwilling to think for yourself then, when making the largest financial commitment of your life, why, suddenly, do your decisions get to impact my bottom line?

Oh, and to the person who was so sure that when "people default on their mortgages your husband's bank doesn't lose money. Some large collection of investors -- likely pension funds, cities and counties, hedge funds and foreign investors -- lose money."

What about the pension holders? And the school districts? And the cities and counties that invest in these funds? When people feel free to walk away, and the value of these funds tank, are YOU prepared to provide for that senior citizen, or that student, or that community whose has to raise property taxes because of irresponsible behavior?

There is no such thing as a free lunch. And if a deal is too good to be true, it probably isn't. Just a little Econ 101...

Please, stop thinking only about yourself, and start thinking about the fact that you ARE part of this society. And that someone WILL PAY for your behavior. It should be you. But if not, then think about the impact your behavior will have on others.

Or not. Which seems to be the "entitled" mindset in this thread.

Jill H.

(lucky mom to Amelia 18, Camille 16, Evan 13, and Gracie 11)

[dinahx]

I am the one who doesn't get it: My friend bought a reasonable house in a recently built neighborhood for 130,000. Now those houses are selling for 100,000 at best and the neighborhood is full of forclosures. How is this her fault at all??? Should she have to continue to live in a crime ridden neighborhood or short sell, lose her credit and rent for 7 years because the builders and lenders did a wrong thing?

How was she to know that the builders financed her neighbors in a shady way? (When she got a fixed rate) I just don't get how y'all want to hold individuals to this super high standard, while everyone with real power (banks and those in business) are sleazing their way right to the bank with ZERO personal consequences for themselves or their families. Why are individuals supposed to think of 'society' when those that built and financed their houses have no such obligation? Does your obligation to society end at 9 and start at 5?

IMO, no one is 'forced' to take an ARM, however, when someone is a banking PROFESSIONAL who does this ALL DAY and the person across the table from them is a first time homebuyer who has never done this before in their life, I think we can all see who the deck is stacked in favor of. Banks weren't writing ARMs because there was no other way to get these people into a home, they were writing them because they COULD and because they LIKE to make the bigger interest they can get from a sub prime, an ARM or a NINJA. Builders weren't just trying to help people into homes, they overbuilt houses (around here with ILLEGAL labor paid dirt), used cheap materials and then twisted lending standards to fill the houses that the market had no real demand for.

[dinahx]

Also, buyers haven't been required to put 20% down since the time of the Greeks and Romans. All of a sudden we are in crisis and older folks are being all like '20% down!' Whatever, no one had a problem with our 3% down payment 2 years ago, not the state, not the most conservative banks in town. People no longer put 20% down on anything but investment property and the idea that someone has to rent until they can get up 20% of even 100,000 is just ridiculous and NOT what caused this crisis.

[shayinme]

Originally Posted by dinahx

Also, buyers haven't been required to put 20% down since the time of the Greeks and Romans. All of a sudden we are in crisis and older folks are being all like '20% down!' Whatever, no one had a problem with our 3% down payment 2 years ago, not the state, not the most conservative banks in town. People no longer put 20% down on anything but investment property and the idea that someone has to rent until they can get up 20% of even 100,000 is just ridiculous and NOT what caused this crisis.

Actually we bought in 2004 and put down 20%, I think there are still quite a few folks who do. I can't imagine its that rare for folks to do so even in not dirt cheap areas (which I am not in).

Shay

[dinahx]

Not saying no one does this, heck the fortunate still put 100% down. I am saying that it hasn't been a requirement to get a loan for a LONG time.

[kmeyrick]

I'm jumping into this thread late. But I feel that banks, ultimately, are to blame for this mess. As financial experts they should have known better to do than what they did. They made outrageously risky loans on the assumption that the market could only possibly go up; economics 101 would teach you that is a fallacy. They misled the layman that not only could he afford this house, it was in his best interests to buy it since it would be his best investment. "Buy the house instead of the condo if you want to pay for your daughter's college." Was the layman foolish? Uninformed, I guess. I would be inclined to believe someone with a master's degree in business over my own lack of experience and know-how.

If it were just a matter of increasing income to repay the loan with honor, than economy is doing a lot better than I'm hearing on the news. The banking and mortgage industries were reckless, now they are going to suffer for it. The damage they have done to the country and our world is immeasurable. They are responsible- not the layman.

[acegmom]

Excuse me?

Originally Posted by dinahx

Also, buyers haven't been required to put 20% down since the time of the Greeks and Romans. All of a sudden we are in crisis and older folks are being all like '20% down!' Whatever, no one had a problem with our 3% down payment 2 years ago, not the state, not the most conservative banks in town. People no longer put 20% down on anything but investment property and the idea that someone has to rent until they can get up 20% of even 100,000 is just ridiculous and NOT what caused this crisis.

Older folks? I'm 44 -- like I said, you must be MUCH younger. And, FYI, in 1993 (not exactly the time of the Greeks and the Romans, but of course, you were exaggerating. Not that you would know, but I digress) 20% down was the norm. And the standard. And basically required. I don't know who you believed in order to afford something out of your price range, but less than 20% down is the reason there is PMI. Private Mortgage Insurance. (By the way, I did have 20% for my first house when I was 26 - I would have never bought if I would have had to pay PMI.)

I never said "required." But then you face PMI - you know, for when you DON'T have 20% for a down payment. And, then there were those lovely 80/15/5 or 80/10/10 loans available. And what in the world fooled you into believing that you could afford much less deserved a house with only 3% down? Oh, that's right. You wanted it.

Yes, the fact that there were loans available to people (like you) without the ability to put 20% down is EXACTLY what caused this crisis. Did the banks find a way around the requirement? Of course, because greedy people would agree to ANYTHING to avoid paying PMI. Including multiple loans. Remember, banks exist to make money for their stock holders. Fees are always good when it comes to the banks. Scary, really, that you would (and did) think differently.

Don't blame the banking system. Don't blame the free market. Don't blame anyone but yourself. This is why there were (and still are) lending standards. This is why people's credit worthiness is judged by their behavior, and this is why there are consequences to walking away from a legal contract that you signed.

Like it our not -- it's the truth. And if the prevailing wisdom leads us back to stability (to the time of the Greeks and Romans, as you say) it will be a good thing. For all of us.

Caveat Emptor

Jill H.

(lucky mom to Amelia 18, Camille 16, Evan 13, and Gracie 11)

[dinahx]

You don't know a thing about me or my financial situation. My husband and I bought a house we could afford. Sorry, not being stolen from and harassed and taken advantage of by landlords was at the top of our priority list. Did we 'want' to live with dignity? Yes we did. We have a tiny house that is smaller than most people would consider appropritate for a family. We will never go back to the world where 20% down was required, and I don't even believe it was 'required' in the 1990s.

We pay PMI, it is SO much better than paying someone with a trust fund or rich family's mortgage, thank you very much. We rejected a 80/20, but someone tried as hard as his little mouth would allow to talk us into one, using every piece of twisted logic in the book. My husband, a degreed engineer, actually bought it, it was only my hesistance that helped us out.

This has nothing to do with 20% down, it has to do with shady ARMs. Federal housing programs in each of 50 states help buyers NOT need such a hefty downpayment that they are locked onto the renting treadmill for the rest of their lives. We paid MORE in rent than we do in a mortgage. Guess what? When your rent costs more than a mortgage, you can't save a thin dime.

It is clear to me from this thread that there are many out there who want to use this banking crisis to take away the opportunity for anyone who is not over 40 or with serious family backing to ever own a home and limit home ownership to the economically fortunate. No thanks. We can have fair housing AND a strong economy, IMO.

Let's look at the QUALITY of homes, the amount of land they are built on and whether or not they are solid investments. There is an entire continent between a NINJA ARM and a 30 year fixed rate loan with a minimal down payment or down payment assistance. One is ludicrious and another is a leg up for people who deserve it.

[kmeyrick]

Yes, the fact that there were loans available to people (like you) without the ability to put 20% down is EXACTLY what caused this crisis. Did the banks find a way around the requirement? Of course, because greedy people would agree to ANYTHING to avoid paying PMI. Including multiple loans. Remember, banks exist to make money for their stock holders. Fees are always good when it comes to the banks. Scary, really, that you would (and did) think differently

And banks were all too willing to go along with this. Furthermore, prices had inflated to the point where only the very, very wealthy could make a 20% down payment without wiping out life savings, or at all. Even on very humble starter homes. Home ownership, as a rule, is good for a neighborhood and community. Crime goes down, homes are better maintained*, and heck, even schools improve. Home ownership is a good thing. Also, when housing markets are healthy, it is generally a wise decision to purchase. It would be wiser now since eventually the market will go back up. FWIW, I paid 10% down payment on my condo, at an extremely low interest rate. Right now, I need the rest of my savings in case I, like so many others, get laid off. I will rent out the condo, hopefully, or I will lose it. Not because I was greedy- I was very humble. Not because I am lazy or do a crappy job. I don't. It is a fact in America right now.

*I say that homes are better maintained because renters are not and should not be expected to invest in a home they do not own. It is a reflection on quite a few landlords.

[dinahx]

I can't believe anyone on MOTHERING dot com actually endorses a world where Banks are allowed to be predatory sharks and the little fish just better save some plankton and watch out. Yes Caveat Emptor indeed. If that is okay with you, I invite you to my next seminar: Economic Justice 101.

Again, my mortgage is in no way 'out of my price range' and I am in no way to blame for the housing crisis because we pay PMI. I am as entitled to live with dignity and to cut out the middleman between me and the bank as anyone else, and just because I didn't come to the table with a huge wad of cash from mommy and daddy, what difference does that make? I still got a fixed rate loan. I just can't believe there are people out there so eager to play 'us vs. them' and cast stones at their fellow mothers, while holding predatory lenders and builders harmless, because hey, that's capitalism. :eyeroll:

[kmeyrick]

Jill, I think you are pointing the finger at the wrong person- the layman, who didn't foresee a giant economic collapse and was given bad information is not the real culprit.

Banks are chock full of financial experts. It is their *job* to understand how the market works and to do quality risk assessment. Not predict the market, no one can do that, but knowing the basics, such as a housing market is cyclical and may not always go up. This crisis is a beast of their own making. How come there is so little consequence for the banks as opposed to the average person?

[lalaland42]

Originally Posted by dinahx

You don't know a thing about me or my financial situation. My husband and I bought a house we could afford. Sorry, not being stolen from and harassed and taken advantage of by landlords was at the top of our priority list. Did we 'want' to live with dignity? Yes we did. We have a tiny house that is smaller than most people would consider appropritate for a family. We will never go back to the world where 20% down was required, and I don't even believe it was 'required' in the 1990s.

We pay PMI, it is SO much better than paying someone with a trust fund or rich family's mortgage, thank you very much. We rejected a 80/20, but someone tried as hard as his little mouth would allow to talk us into one, using every piece of twisted logic in the book. My husband, a degreed engineer, actually bought it, it was only my hesistance that helped us out.

This has nothing to do with 20% down, it has to do with shady ARMs. Federal housing programs in each of 50 states help buyers NOT need such a hefty downpayment that they are locked onto the renting treadmill for the rest of their lives. We paid MORE in rent than we do in a mortgage. Guess what? When your rent costs more than a mortgage, you can't save a thin dime.

It is clear to me from this thread that there are many out there who want to use this banking crisis to take away the opportunity for anyone who is not over 40 or with serious family backing to ever own a home and limit home ownership to the economically fortunate. No thanks. We can have fair housing AND a strong economy, IMO.

Let's look at the QUALITY of homes, the amount of land they are built on and whether or not they are solid investments. There is an entire continent between a NINJA ARM and a 30 year fixed rate loan with a minimal down payment or down payment assistance. One is ludicrious and another is a leg up for people who deserve it.

I don't understand why you are getting so huffy about renting. We chose to rent instead of buying because I crunched the numbers and even thinking optimistically, we would lose around $10k when we were planning on selling. We rent a house that is just fine for us, in a nice neighborhood. Since we are renting, we will be able to accept a job offer for DH that will take us out of the US, a year earlier than expected.

For us, renting is paying off. Our house is even comparable to our MDC friends who own.

Buying a house is a financial transaction and shouldn't be undertaken so emotionally.

BTW, I have a friend who owned a condo in Seattle that he rented out. He certainly didn't become rich off it. He isn't a horrible person either. He just happened to own a condo that he wanted to move out of for logistical reasons.

[acegmom]

I'm confused...

Are you saying you could have put 20% down and only finance 80%, but instead chose to only out down 3% and pay PMI?

I never said 20% was "required." It removes PMI for the borrower and smoothes the way for the loan to be approved. But "required?" There would not be VA or FHA loans otherwise.

And how DARE you imply that I showed up to the table with a wad full of cash from mommy and daddy. Honestly, your ugly comments reveal you to be no better than those you claim to abhor.

Complain all you want. Regret that you are "forced" to live this way. Then move. I'm sure you would find life in any other country FAR superior than the one you are afforded here. Enjoy. There are hundreds of people (mothers with children, especially) who would give anything for a chance for themselves and their children in this country. But you feel cheated. Oh well. Good luck elsewhere...

Jill H

(lucky mom to Amelia 18, Camille 16, Evan 13, and Gracie11)