Is it fraud or thinking ahead?
Seerialmom
new house (not brand new..but newer than where they are now). When
asked if they had sold their current house or if they were going to
rent it out; this person disclosed that they were still current on the
house payment where they are now....but once they move into the other
house they're buying the old house would eventually go into
foreclosure. Aside from the major "ding" on the credit rating for the
next 7 years....I'm still trying to figure out if this was smart
planning on their part or just outright fraud? At the least maybe
unethical? Just curious if anyone had heard of doing this before?
h
"Seerialmom" <seeri...@yahoo.com> wrote in message
news:e0c06e12-f44d-4d78...@e6g2000prf.googlegroups.com...
Sounds bogus. How would they have qualified for a new mortgage without
selling the old house? If they have sufficiently decent credit to qualify
for a new mortgage, why wouldn't they sell the old house and pocket the
profit? Even if they owe more than the old house is worth, the bank will
require some sort of downpayment. I sense either a tall tale or someone who
will be very disappointed at their closing, when the bank refuses to cough
up the money. The only way this makes sense is if they have enough money to
afford both mortgages AND the old house is worth less than they owe. Then
they are just being sleezy by walking away from the old one, but at least
their credit will be ruined.
George Grapman
If the foreclosure and ensuing sale does not cover the amount owed on
the house the lender can go after other assets such as the new house.
Al Bundy
There are some programs where certain lenders are allowing "deed in
lieu of foreclosure" as a way to speed up the lengthly process of
taking the property and selling it. The person in question may feel
they will be accepted for this program. I believe they would need to
also lie about their finances to qualify for such a program. I wish
them bad luck. My sense is the mortgage company will come after them
for the deficiency.
Rod Speed
> Seerialmom wrote
But it isnt hard to have the new house in someone else's name in some situations.
Seerialmom
> "Seerialmom" <seerial...@yahoo.com> wrote in message
Supposedly "on paper" they make enough to qualify for a second house
(if you don't count things like childcare expenses for example). As
for selling the 1st house; the explanation was that they had bought at
the top of the market but houses are selling for much less in that
area; they'd be underwater. No profit at all. But your last sentence
is close to what was said; they are qualifying for the new house
before they were in arrears on the old one.
Seerialmom
That's one of the things I was wondering about myself; whether they
could recoup from other properties.
Rod Speed
> Ok...so yesterday someone I know said their family was moving into
> a new house (not brand new..but newer than where they are now).
> When asked if they had sold their current house or if they were going
> to rent it out; this person disclosed that they were still current on the
> house payment where they are now....but once they move into the other
> house they're buying the old house would eventually go into foreclosure.
> Aside from the major "ding" on the credit rating for the next 7 years....
> I'm still trying to figure out if this was smart planning on their part
It can be if you're upside down on the original house.
> or just outright fraud?
Corse it is if the foreclosure is deliberate.
> At the least maybe unethical?
Corse it is.
> Just curious if anyone had heard of doing this before?
Yes, its one way of operating when you're upside down on the original mortgage.
With the obvious downside of the big turd in your credit rating etc.
Thats not neccesarily a major problem for some, particularly when they can
move into the new house before letting the original one go into foreclosure.
Seerialmom
Believe me...I was pretty shocked that they had this plan at all.
Sort of reminds me of the people who rack up credit card charges for
trips and luxury items...and then go bankrupt. However they did say
that the lenders wouldn't even talk to them about refinancing because
the value was lower than what they owe..and because they were
"current" on the payments, so the old house is stuck with an ARM that
keeps adjusting.
Rod Speed
> Seerialmom <seeri...@yahoo.com> wrote
>> Ok...so yesterday someone I know said their family was moving into a new house (not brand new..but newer than where
>> they are now). When asked if they had sold their current house or if they were going to rent it out; this person
>> disclosed that they were still current on the house payment where they are now....but once they move into the other
>> house they're buying the old house would eventually go into foreclosure. Aside from the major "ding" on the credit
>> rating for the next 7 years....I'm still trying to figure out if this was smart
>> planning on their part or just outright fraud? At the least maybe
>> unethical? Just curious if anyone had heard of doing this before?
> Sounds bogus.
We'll see...
> How would they have qualified for a new mortgage without selling the old house?
Same way those who choose to rent out the original house do.
> If they have sufficiently decent credit to qualify for a new mortgage, why wouldn't they sell the old house and pocket
> the profit?
There may not be any profit available if they are upside down on that first mortgage.
> Even if they owe more than the old house is worth,
> the bank will require some sort of downpayment.
It may be quite feasible to provide that.
> I sense either a tall tale or someone who will be very disappointed at their closing, when the bank refuses to cough
> up the money.
Or someone who is upside down on the first mortgage and who is getting out from under that.
> The only way this makes sense is if they have enough money to afford both mortgages AND the old house is worth less
> than they owe.
And thats the most likely possibility given that the market has sagged considerably.
> Then they are just being sleezy by walking away from the old one, but at least their credit will be ruined.
They may not care if they can get the mortgage on the new one before defaulting on the first one.
Rod Speed
They cant if you are careful with ownership, like for example
having the new house in one of the adult kid's names etc.
Seerialmom
That's pretty much the plan from what I understand.
Rod Speed
>>> or just outright fraud?
>> Corse it is.
Yeah, I can see why some do that, particularly when the market
has turned down substantially and they are on an ARM etc.
Clearly unethical, but then plenty of banks are that in spades and bankruptcy is that as well.
George Grapman
I knew someone many years ago who knew he was being terminated from
his job in a few weeks. His plan was to run his cards up to the limit
and then file for bankruptcy. One of the creditors checked with what had
become his former employer and they volunteered the fact that the
company had given him 45 days notice that his contract was not being
renewed. The creditor informed him that running up a debt when you know
that you will not be able to repay it constitutes fraud.
He wound up marrying an obnoxious ,demanding woman whose family
happened to have money and paid off his debts. I saw him a few years
after the wedding and what had been a happy go lucky person had become a
silent defeated man.
hchi...@hotmail.com
You continued on to say they had an ARM that the bank was not willing
to renegotiate, which is a very important part to have left out.
What you are seeing is called hardball.
The owners tried to negotiate their way out of a mortgage that was
going to be increasingly bad for them, with the house upside down AND
the bank wanting to charge more interest.
Since they approached the bank, and the bank refused to accomodate
them, they then took the clause in the mortgage contract that
ORDINARILY works only to the advantage of the lender - foreclosure.
In foreclosure, the collateral of the home usually has enough equity
that the bank or lender does not lose a dime, and sometimes actually
gains money. Heck, I did that on a mortgage that I held. The people
walked away, I took back the house, and resold it for close to twice
the amount they had paid, and only had a years worth of missed
payments to eat. If the next buyer had repeated that performance
again, while the market was still going up, I would have been elated.
Now, when the house is upside down, the bank or lender takes a hit
when it has to foreclose. If I had held the paper, I would have seen
the writing on the wall and been as accomodating as possible to avoid
having to foreclose. I'd even have forgone interest payments for a
year if I had to, just to keep the owner in the house to keep it safe,
and to have some income coming in.
If both parties signed the documents in good faith, and the collateral
for the loan was only the property, then all the buyer is doing is
exercising a little used clause of the document. The fact that it
dings their credit and makes the bank eat the loss is beside the
point. It fits the legality of the document they both agreed to.
I'll finish the thought out after this sidebar:
If you think this is odd, you ought to be privey to some of the tenant
landlord negotiations and shenanigans in shopping centers.
A few years ago, motion picture exhibitors were going bankrupt by the
bucketload. In order to secure positions in major shopping centers,
the landlords had increasingly required rents that were far above the
grossing potential of the theatres. The companies went along, having
the older theatres support the new ones, until a breaking point was
reached. At that time, they went into bankruptcy and forced the
landlords to rewrite the lease terms or lose them entirely. All of
this was seen as just business as usual by all parties. It was, after
all, the free marketplace in action, warts and all.
Similarly, the homeowner simply leveraged his position, and when the
bank played hardball by refusing to negotiate, he played hardball
back.
Remember back in the old days when if Gramma Jones was a little short
for grocery money until the crop came in? The smart store owner would
cut her a little slack and give her some credit. A lot of businesses
have lost that concept, so they reap the empty field instead of the
crop that eventually comes in.
Now to continue the thought from before:
There is a minor sleaze factor, but in most cases those ARMs were sold
to people who didn't have a rats ass chance of ever meeting the bump
in rates, and the lenders knew it. The deception was on the part of
the lenders, and the buyers were too caught up in the game to
recognize the downside. What some folks don't think about in all
these foreclsures is that the lenders were banking on the idea that
the borrowers would have to bail out because of the ARMs _WHILE THE
MARKET WAS STILL GOING UP_
The ARMs were DESIGNED for people to have to dump them. Unfortunately
for the lenders, the dump is happening while the market has tanked,
and each foreclosure is dragging the market lower. The lenders are
only getting back what they tried to foist on their customers.
Welcome to Capitalism 101.
Sleaze factor? If I were the homeowner, I wouldn't worry about it.
Seerialmom
> On Tue, 11 Mar 2008 12:37:18 -0700 (PDT), Seerialmom
>
Good explanation. I don't think they're concerned at all and I guess
the "bright side" is that someone else was able to sell a house? In
other words, they didn't just walk completely away from home ownership
and perhaps the old house will go to a first time buyer who is smart
enough to get a fixed rate. Who knows...maybe it'll go into one of
those "auction" houses we hear about and get sold for the same owed.
barbie gee
so why the hell don't they just rent the 2nd place out?
Rod Speed
Because that is unlikely to cover the mortgage payments with an ARM.
h
<hchi...@hotmail.com> wrote in message
news:p9udt39d98n82t0ii...@4ax.com...
>
> The ARMs were DESIGNED for people to have to dump them. Unfortunately
> for the lenders, the dump is happening while the market has tanked,
> and each foreclosure is dragging the market lower. The lenders are
> only getting back what they tried to foist on their customers.
> Welcome to Capitalism 101.
>
Shrug. I still have the same ARM I got in 1985. Since it can go up OR down
once a year, I rode the wave down from the original 11% (good rate at the
time) to a low of 4.0% a few years ago. It can only go up or down half a
percent once a year, so my rate now is 5.5%. Why would I want to shell out
money to refi a 25k loan?
John Weiss
First, in this fiscal environment it is unlikely they will get a mortgage for a
second house if the first one is not sold (or at least for sale in a reasonable
market) or leased out.
Second, the bank may well go after them AFTER foreclosure for all the $$ they
lost in the process. Among the actions they could take are garnishment of wages
and putting a lien on their new house.
It's certainly not smart. Depending on the assertions they make to the new
lender regarding the old house, it may become fraud. I consider it unethical,
since they are likely stealing from me: The loan guarantee they likely have is
funded from my taxes...
I've heard of it, but not when the person plans on staying in the same area...
John Weiss
> You continued on to say they had an ARM that the bank was not willing
> to renegotiate, which is a very important part to have left out.
>
> What you are seeing is called hardball.
>
> The owners tried to negotiate their way out of a mortgage that was
> going to be increasingly bad for them, with the house upside down AND
> the bank wanting to charge more interest.
You have some interesting thoughts here, and I'll trim out some of the excess
while commenting...
> If both parties signed the documents in good faith, and the collateral
> for the loan was only the property, then all the buyer is doing is
> exercising a little used clause of the document. The fact that it
> dings their credit and makes the bank eat the loss is beside the
> point. It fits the legality of the document they both agreed to.
IF that was as far as the legality went, it sounds logical. However, the action
of buying the new house will invoke additional legality, including some
statement from the owner regarding intentions on the old house. I once bought a
house in VA when I still had one in WA. Though I had a verbal commitment for a
lease (I had not yet moved out) could easily afford both mortgages for some
time, it became very difficult to get the lender to agree to the new mortgage.
I wound up having to get a letter of intent from the prospective renter of the
old house before they would close on the new.
In this case, I suspect some similar document expressing the owner's intention
would be required. It would turn to fraud if the owner misrepresented his
intention to allow the old house to fall into foreclosure after moving into the
new one.
Another factor is that the lender's reach does not stop at foreclosure. There
is likely a recovery clasue that will allow the lender to attach assets to
recover losses in the foreclosure, if the owner has them. While the lender may
not be able to "take" the new house, they could well put a lien on it that would
cloud the title and make it near impossible to sell prior to settling the lien
with the old lender.
> If you think this is odd, you ought to be privey to some of the tenant
> landlord negotiations and shenanigans in shopping centers.
Yeah, but that's "business," and "everybody" expects businesses to declare
bankruptcy and escape their debts... ;)
> Similarly, the homeowner simply leveraged his position, and when the
> bank played hardball by refusing to negotiate, he played hardball
> back.
Unfortunately, his position of power may be VERY temporary, and while he could
be successful in the short term, it could backfire on him BADLY!
> There is a minor sleaze factor, but in most cases those ARMs were sold
> to people who didn't have a rats ass chance of ever meeting the bump
> in rates, and the lenders knew it. The deception was on the part of
> the lenders, and the buyers were too caught up in the game to
> recognize the downside.
I totally agree that the bulk of this "mortgage crisis" was caused by greedy
lenders attempting to cash in on marginal or ridiculous mortgages. I have
little sympathy for them, but it is apparent that the politicians are working to
protect those sleazeballs MUCH harder than they are to protect the swindled
and/or ignorant owners.
However, this does not appear to be the case here... If the owner has enough
paper assets for a mortgage on a second house, he clearly has enough assets to
continue to pay or refinance the current mortgage. He has decided to
pre-emptively cut his losses on the old house so he can buy a new one. It
appears he COULD continue to pay the $$ he contracted to pay, but he doesn't
WANT to do so.
> Sleaze factor? If I were the homeowner, I wouldn't worry about it.
In this case, I would. I think he's setting himself up for a BIG fall!
Rod Speed
> "Seerialmom" <seeri...@yahoo.com> wrote...
>> Ok...so yesterday someone I know said their family was moving into a
>> new house (not brand new..but newer than where they are now). When
>> asked if they had sold their current house or if they were going to
>> rent it out; this person disclosed that they were still current on
>> the house payment where they are now....but once they move into the
>> other house they're buying the old house would eventually go into
>> foreclosure. Aside from the major "ding" on the credit rating for
>> the next 7 years....I'm still trying to figure out if this was smart
>> planning on their part or just outright fraud? At the least maybe
>> unethical? Just curious if anyone had heard of doing this before?
> First, in this fiscal environment it is unlikely they will get a mortgage for a second house if the first one is not
> sold (or at least for sale in a reasonable market) or leased out.
Wrong if the second one is in a different name to the first one.
> Second, the bank may well go after them AFTER foreclosure for all the $$ they lost in the process.
They cant if the second one is in a different name to the first one.
> Among the actions they could take are garnishment of wages and putting a lien on their new house.
Not if the second one is in a different name to the first one.
> It's certainly not smart.
Wrong again.
> Depending on the assertions they make to the new lender regarding the old house, it may become fraud.
Proving that is a different matter entirely.
> I consider it unethical, since they are likely stealing from me: The loan guarantee they likely have is funded from
> my taxes...
Or maybe it isnt.
> I've heard of it, but not when the person plans on staying in the same area...
No reason why it cant be done that way too.
barbie gee
I really hope serialmom lets us all know how this turns out!
John Weiss
>
>> First, in this fiscal environment it is unlikely they will get a mortgage for
>> a second house if the first one is not sold (or at least for sale in a
>> reasonable market) or leased out.
>
> Wrong if the second one is in a different name to the first one.
I saw no proposal for, or indication of, a name change.
Rod Speed
> <hchi...@hotmail.com> wrote
>> You continued on to say they had an ARM that the bank was not willing to renegotiate, which is a very important part
>> to have left out.
>> What you are seeing is called hardball.
>> The owners tried to negotiate their way out of a mortgage that was going to be increasingly bad for them, with the
>> house upside down AND the bank wanting to charge more interest.
> You have some interesting thoughts here, and I'll trim out some of the excess while commenting...
>> If both parties signed the documents in good faith, and the
>> collateral for the loan was only the property, then all the buyer is
>> doing is exercising a little used clause of the document. The fact
>> that it dings their credit and makes the bank eat the loss is beside
>> the point. It fits the legality of the document they both agreed to.
> IF that was as far as the legality went, it sounds logical. However, the action of buying the new house will invoke
> additional legality, including some statement from the owner regarding intentions on the old house.
ONLY if the old and new house are in the same name. They dont have to be.
> I once bought a house in VA when I still had one in WA. Though I had a verbal commitment for a lease (I had not yet
> moved out) could easily afford both mortgages for some time, it became very difficult to get the lender to agree to
> the new mortgage. I wound up having to get a letter of intent from the prospective renter of the old house before they
> would close on the new.
And the obvious way around that is to have
someone else have the new house in their name.
> In this case, I suspect some similar document expressing the owner's intention would be required.
Not if the new house is in a different name.
> It would turn to fraud if the owner misrepresented his intention to allow the old house to fall into foreclosure after
> moving into the new one.
Not if the new house is in a different name even tho its still technically fraud.
> Another factor is that the lender's reach does not stop at foreclosure.
Yes but it does stop at the individual whose name the mortgage is in.
> There is likely a recovery clasue that will allow the lender to attach assets to recover losses in the foreclosure, if
> the owner has them.
But that wont work if the new house is in a different name.
> While the lender may not be able to "take" the new house, they could well put a lien on it that would cloud the title
> and make it near impossible to sell prior to settling the lien with the old lender.
Not if its in a different name.
>> If you think this is odd, you ought to be privey to some of the
>> tenant landlord negotiations and shenanigans in shopping centers.
> Yeah, but that's "business," and "everybody" expects businesses to declare bankruptcy and escape their debts... ;)
And plenty of individuals do that too.
>> Similarly, the homeowner simply leveraged his position, and when the
>> bank played hardball by refusing to negotiate, he played hardball back.
> Unfortunately, his position of power may be VERY temporary, and while
> he could be successful in the short term, it could backfire on him BADLY!
Not if he organises the detail properly.
>> There is a minor sleaze factor, but in most cases those ARMs were sold to people who didn't have a rats ass chance of
>> ever meeting the bump in rates, and the lenders knew it.
So did the borrower.
>> The deception was on the part of the lenders,
Nope.
>> and the buyers were too caught up in the game to recognize the downside.
Lie. Most of them thought that they could flip the house before the higher
rates became due, and found out that it doesnt always work that way.
> I totally agree that the bulk of this "mortgage crisis" was caused by
> greedy lenders attempting to cash in on marginal or ridiculous mortgages.
Corse there was no greed at all with any of the borrowers, eh ?
> I have little sympathy for them, but it is apparent that the politicians are working to protect those sleazeballs MUCH
> harder than they are to protect the swindled and/or ignorant owners.
Because those are the ones that matters as far as the collapse of the economy is concerned.
> However, this does not appear to be the case here... If the owner
> has enough paper assets for a mortgage on a second house, he clearly has enough assets to continue to pay or refinance
> the current
> mortgage. He has decided to pre-emptively cut his losses on the old
> house so he can buy a new one. It appears he COULD continue to pay the $$ he contracted to pay, but he doesn't WANT
> to do so.
Or that its possible to look good on paper long enough to get the
second mortgage and then let the first one go into foreclosure.
It isnt hard to do that if you realise that you are
upside down on the first mortgage early enough.
>> Sleaze factor? If I were the homeowner, I wouldn't worry about it.
> In this case, I would. I think he's setting himself up for a BIG fall!
Not necessarily, depends entirely on how the detail is organised.
Rod Speed
> Rod Speed <rod.sp...@gmail.com> wrote
>>> First, in this fiscal environment it is unlikely they will get a mortgage for a second house if the first one is not
>>> sold (or at least for sale in a reasonable market) or leased out.
>> Wrong if the second one is in a different name to the first one.
> I saw no proposal for, or indication of, a name change.
Irrelevant to whether that was done anyway to avoid the problems you claimed.
Its hardly surprising that the full detail wasnt spelt out to an acquaintance.
skar...@gmail.com
Here is an article on the same subject. Apparently there is a business
that is helping in that effort.
Rod Speed
And they wont necessarily do that if the income is high enough to be able
to pay both mortgages at the same time if the first one doesnt rent.
George Grapman
because they can dispose of the property and keep the proceeds.
A few years ago a friend was sued and was worried about losing his
car to a judgment. We talked about selling it to me while he still used
it. We never looked into any risks because he was able to get the case
dismissed.
hchi...@hotmail.com
<jrweiss98...@NOSPAM.comcast.net> wrote:
>However, this does not appear to be the case here... If the owner has enough
>paper assets for a mortgage on a second house, he clearly has enough assets to
>continue to pay or refinance the current mortgage. He has decided to
>pre-emptively cut his losses on the old house so he can buy a new one. It
>appears he COULD continue to pay the $$ he contracted to pay, but he doesn't
>WANT to do so.
You raise some good counterpoints. Tossing in a possible rebutal,
people in business for themselves may often have the house in the
spouse's name only, to protect it from being attached if the business
goes south. In a case like that, she could default, and he could buy
the next house, or visa versa.
I'll agree with you that there are some potential pitfalls, however, I
don't think they will amount to much. Going back to the S&L crisis in
Texas again, I know personally of people who walked and never heard
anything further from the lenders. The scope of the problem was too
big and when the bureaucracy stepped in to try to clear up the mess,
the ones who walked were not held responsible.
In a major crisis, how many debt collectors can be hired, how much of
that paper debt can be recovered without court fights and long and
costly battles? There are going to be _thousands_ losing homes in
this next few months. Courts aren't going to be looking favorably on
lenders trying to bleed the last money from these people, and the
public relations nightmare alone would be enough to kill any hope of
any business that tried from garnering any future business.
To put it another way- it sure doen't look like he has much to lose,
even if he tries and fails. That is part of the anture of hardball,
you play it from a position of strength, and being able to duck into
bankruptcy is a position of strength when your creditors won't
renegotiate.
Seerialmom
<jrweiss98155NOS...@NOSPAM.comcast.net> wrote:
> "Rod Speed" <rod.speed....@gmail.com> wrote...
As far as I know there wasn't. And because it's a community property
state...his debt is her debt and vice/versa. But it is possible they
"said" they were going to rent out the house in order to get the 2nd
house. Hard to tell. I figure 3-6 months from now I'll know what
actually happened.
Seerialmom
> On Wed, 12 Mar 2008, John Weiss wrote:
>
> - Show quoted text -
I will. Again this just came up in a casual conversation the other
day; I'll know in a few months whether it actually went through as
"easily" as this person claimed. Personally I'd rather not have a
default judgement on my credit record.
George Grapman
Relating to the above- At one point I suggested that my friend go to
one of those places that lends you money on your car,holds a lien but
allows you to keep the car. I thought a small loan with low payments
would work but I learned that is someone had a judgment they could pay
off his loan and get the car after the lien was lifted.
I know one person who was going overseas for a few months and needed
to store her car. She pawned in for $1,000 returned three months later
and retrieved it for something like $1,4000. Viewed as interest it was
very high but viewed as a parking charge of less than $100 a month in a
large city it was a bargain. Also, the business has a vested interest in
making sure they car is protected.
Seerialmom
Similar I suppose. Except in the article that company is charging a
price to do what the homeowner could do himself without spending
$995. And they don't get another house to buy in it's place?
Rod Speed
> John Weiss <jrweiss98155NOS...@NOSPAM.comcast.net> wrote
>> Rod Speed <rod.speed....@gmail.com> wrote
>>>> First, in this fiscal environment it is unlikely they will get
>>>> a mortgage for a second house if the first one is not sold
>>>> (or at least for sale in a reasonable market) or leased out.
>>> Wrong if the second one is in a different name to the first one.
>> I saw no proposal for, or indication of, a name change.
> As far as I know there wasn't. And because it's a community
> property state...his debt is her debt and vice/versa.
But isnt true of adult children etc.
> But it is possible they "said" they were going to
> rent out the house in order to get the 2nd house.
Yep, plenty do that sort of thing for investment etc.
> Hard to tell. I figure 3-6 months from now I'll know what actually happened.
Bet it does work fine.
Rod Speed
> barbie gee <barbie....@NOSESPAMgmail.com> wrote
>>>> Ok...so yesterday someone I know said their family was moving into
>>>> a new house (not brand new..but newer than where they are now).
>>>> When asked if they had sold their current house or if they were
>>>> going to rent it out; this person disclosed that they were still
>>>> current on the house payment where they are now....but once they
>>>> move into the other house they're buying the old house would
>>>> eventually go into foreclosure. Aside from the major "ding" on the
>>>> credit rating for the next 7 years....I'm still trying to figure
>>>> out if this was smart planning on their part or just outright
>>>> fraud? At the least maybe unethical? Just curious if anyone had
>>>> heard of doing this before?
>>> First, in this fiscal environment it is unlikely they will get
>>> a mortgage for a second house if the first one is not sold
>>> (or at least for sale in a reasonable market) or leased out.
>>> Second, the bank may well go after them AFTER foreclosure for all
>>> the $$ they lost in the process. Among the actions they could take
>>> are garnishment of wages and putting a lien on their new house.
>>> It's certainly not smart. Depending on the assertions they make
>>> to the new lender regarding the old house, it may become fraud.
>>> I consider it unethical, since they are likely stealing from me:
>>> The loan guarantee they likely have is funded from my taxes...
>> I really hope serialmom lets us all know how this turns out!
> I will. Again this just came up in a casual conversation the
> other day; I'll know in a few months whether it actually went
> through as "easily" as this person claimed. Personally I'd
> rather not have a default judgement on my credit record.
Sure, but thats not necessarily a big deal for some, particularly if they
save a substantial amount on the first house they are upside down on.
I'm basically rolling in it and couldnt care less about the credit record.
Not that I agree with that sort of unethical behaviour, but plenty
do, particularly when they decide that the banks are just as bad
when it suits them and have refused to renegotiate the original
loan when market conditions change etc. Thats the risk the bank
takes when it behaves like that.
John Weiss
>
> Here is an article on the same subject. Apparently there is a business
> that is helping in that effort.
>
> http://www.nytimes.com/2008/02/29/us/29walks.html?hp
Registration required: "Register for NYTimes.com."
Please post an excerpt or summary.
John Weiss
>> I will. Again this just came up in a casual conversation the
>> other day; I'll know in a few months whether it actually went
>> through as "easily" as this person claimed. Personally I'd
>> rather not have a default judgement on my credit record.
>
> Sure, but thats not necessarily a big deal for some, particularly if they
> save a substantial amount on the first house they are upside down on.
>
> I'm basically rolling in it and couldnt care less about the credit record.
That from a welfare hog dunnunda...
John Weiss
>
> You raise some good counterpoints. Tossing in a possible rebutal,
> people in business for themselves may often have the house in the
> spouse's name only, to protect it from being attached if the business
> goes south. In a case like that, she could default, and he could buy
> the next house, or visa versa.
>
> I'll agree with you that there are some potential pitfalls, however, I
> don't think they will amount to much. Going back to the S&L crisis in
> Texas again, I know personally of people who walked and never heard
> anything further from the lenders. The scope of the problem was too
> big and when the bureaucracy stepped in to try to clear up the mess,
> the ones who walked were not held responsible.
I was in the Mojave Desert of CA at that time, and the MANY affected residents
of the Palmdale/Lancaster area were abandoning their houses in droves!
However, the ability and reality of lenders keeping better [electronic] records
so they can pursue defaulters today is a significant change from the 1990s.
Also, since the crisis has expanded globally, there will be international
investors with LOTS of power who will demand that the local companies pursue
every dollar they can.
> In a major crisis, how many debt collectors can be hired, how much of
> that paper debt can be recovered without court fights and long and
> costly battles? There are going to be _thousands_ losing homes in
> this next few months. Courts aren't going to be looking favorably on
> lenders trying to bleed the last money from these people, and the
> public relations nightmare alone would be enough to kill any hope of
> any business that tried from garnering any future business.
Many of the companies (mortgage brokers, lenders) don't exist as viable entities
any more. Look at Countrywide -- they are [possibly] being acquired by another
major bank, likely for the possibility of recovering a significant portion of
the assets -- such an acquisition will NOT be to lose more $$! At this point in
the game, getting back 10% is a LOT better than getting back NOTHING!
> To put it another way- it sure doen't look like he has much to lose,
> even if he tries and fails. That is part of the anture of hardball,
> you play it from a position of strength, and being able to duck into
> bankruptcy is a position of strength when your creditors won't
> renegotiate.
I would have agreed with you in 1994; I talked with several co-workers at the
time who were seriously considering, or in the process of, walking away. The
majority of them, however, were older folx without kids to raise. We don't know
the age or circumstances of the OP's friend...
Today, though, I suspect the risk to the owner is MUCH higher, especially if he
is really capable of paying, but just doesn't "want" to...
George Grapman
ChairMan
Seerialmom <seeri...@yahoo.com>spewed forth:
Not only can it be a black mark, the bank/lender can 1099 the individual and
they will be responsible for tax obligation for forgiving the debt.
Rod Speed
>> You raise some good counterpoints. Tossing in a possible rebutal, people in business for themselves may often have
>> the house in the spouse's name only, to protect it from being attached if the business goes south. In a case like
>> that, she could default, and he could buy the next house, or visa versa.
>> I'll agree with you that there are some potential pitfalls, however,
>> I don't think they will amount to much. Going back to the S&L
>> crisis in Texas again, I know personally of people who walked and
>> never heard anything further from the lenders. The scope of the
>> problem was too big and when the bureaucracy stepped in to try to
>> clear up the mess, the ones who walked were not held responsible.
> I was in the Mojave Desert of CA at that time, and the MANY affected residents of the Palmdale/Lancaster area were
> abandoning their houses in droves!
> However, the ability and reality of lenders keeping better [electronic] records so they can pursue defaulters today is
> a significant change from the 1990s.
Yes, but as the NYT article pointed out, there's a lot more involved in the cost of
doing them over than just records, so it doesnt actually happen that much in practice.
> Also, since the crisis has expanded globally, there will be international investors with LOTS of power who will demand
> that the local companies pursue every dollar they can.
They can demand all they like, doesnt mean that the cost of doing that makes it worthwhile tho.
In practice it doesnt happen much and wont in spades with the current sub
prime fiasco where who actually owns the mortgage is very complicated indeed
with so many securetizing most mortgages for the cash flow that produces.
And they arent that likely to throw good money after bad either.
>> In a major crisis, how many debt collectors can be hired, how much of that paper debt can be recovered without court
>> fights and long and
>> costly battles? There are going to be _thousands_ losing homes in
>> this next few months. Courts aren't going to be looking favorably on
>> lenders trying to bleed the last money from these people, and the
>> public relations nightmare alone would be enough to kill any hope of any business that tried from garnering any
>> future business.
> Many of the companies (mortgage brokers, lenders) don't exist as viable entities any more.
So they cant go after the defaulters.
> Look at Countrywide -- they are [possibly] being acquired by another major bank, likely for the possibility of
> recovering a significant portion of the assets -- such an acquisition will NOT be to lose more $$!
Yes, but they will do that with the asset that has been foreclosed on, they
wont be going after the borrower who has defaulted for the rest on the
whole because of the cost of doing that and proving who owns the loan etc.
> At this point in the game, getting back 10% is a LOT better than getting back NOTHING!
Yes, but that is done with the asset that has been foreclosed on, not
what other assets the borrower who defaulted may or may not have.
And its completely trivial to protect those other assets against any legal
action if you are deliberately defaulting on the loan because its upside
down. ALL you have to do is move those assets into someone else's name.
And the second house wont necessarily be worth much assets wise for
quite a while anyway, it will be the lender that is due most of the value
of the second house even if it does get sold out from under the defaulter
when the defaulter has been stupid enough to make that possible.
Which makes it even less likely that the original lender will bother
to spend the considerable money involved in trying to do that with
little prospect of getting any real return on that amount outlayed.
>> To put it another way- it sure doen't look like he has much to lose, even if he tries and fails. That is part of the
>> anture of hardball, you play it from a position of strength, and being able to duck into bankruptcy is a position of
>> strength when your creditors won't renegotiate.
> I would have agreed with you in 1994;
Its true in spades now with securetized loans and establishing who
owns the loan, and the deluge of defaults thats the result of the sub
prime fiasco and the original lenders going down like ninepins.
Thats ripe for exploitation by those who are now upside down on their loans.
> I talked with several co-workers at the time who were seriously considering, or in the process of, walking away. The
> majority of them, however, were older folx without kids to raise. We don't know the age or circumstances of the OP's
> friend...
It doesnt matter much, its an approach that will work today for almost
anyone except those who dont qualify for the loan on the new house.
> Today, though, I suspect the risk to the owner is MUCH higher,
Nope, MUCH lower actually, just because of the deluge of defaults that are happening,
and the securitization of the original loan thats become so widespread now.
> especially if he is really capable of paying, but just doesn't "want" to...
That doesnt mean any increased risk to the owner.
Those with loans in default wont even be able to afford to carefully analyse
the circumstances of those in default and go after those who look like they
might be the best prospects for the difference between what the foreclosed
property goes for and what was owed on that property before it was foreclosed.
They are having enough trouble just ensuring that they can actually survive
to be able to do that sort of thing currently.
And now the fed is swapping treasury paper for those bad loans, and
you can bet that no govt operation will have a fucking clue about how
to maximise the value of those loans that have been foreclosed.
Rod Speed
>>> I will. Again this just came up in a casual conversation the
So stupid that it cant even manage to work out what has always
been a mindlessly repeated lie from some stupid racecourse bum.
barbie gee
I thought Bush decided that was too mean, and had that removed. Let me
google...
barbie gee
here it is;
<http://www.govtrack.us/congress/bill.xpd?bill=h110-3648>
H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007
To amend the Internal Revenue Code of 1986 to exclude discharges of
indebtedness on principal residences from gross income, and for other
purposes.
basically, it's a way to weasel your way out of having the foreclosure
considered a "gain".
John Weiss
>
> And its completely trivial to protect those other assets against any legal
> action if you are deliberately defaulting on the loan because its upside
> down. ALL you have to do is move those assets into someone else's name.
Maybe it's trivial for welfare hogs in Australia, but not in the US. The
mortgage standards for non-owner-occupied houses are significantly different
than for owner-occupied houses. Moving the new house to another name would be
difficult without a co-conspirator in the foreclosure scam. Besides, the OP
already told us that is NOT part of the plan.
> And the second house wont necessarily be worth much assets wise for
> quite a while anyway, it will be the lender that is due most of the value
> of the second house even if it does get sold out from under the defaulter
> when the defaulter has been stupid enough to make that possible.
It doesn't have to be "worth much assets wise." After the foreclosure
judgement, the lender on the old house merely attaches a lien to the new house.
The owner then cannot sell the new house until the lien with the old lender is
satisfied AND the new lender is satisfied. Rather than getting out from under
an "upside down" loan, the owner is saddled with significantly higher costs, and
his assets are encumbered as well. The cost to the old lender is insignificant
in context of the total foreclosure costs, and the future return is very
promising.
ChairMan
barbie gee <barbi...@NOSESPAMgmail.com>spewed forth:
but in this case the home is no longer their "principal residence". It's a
stretch, but if I was the lender, I'd file it and let them incur the legal
fees to fight it.
Rod Speed
>> And its completely trivial to protect those other assets against any legal action if you are deliberately defaulting
>> on the loan because its upside down. ALL you have to do is move those assets into someone else's name.
> Maybe it's trivial for welfare hogs in Australia,
So stupid it cant even manage to work out what's
always been a lie from a stupid racecourse bum...
> but not in the US.
Wrong, as always.
> The mortgage standards for non-owner-occupied houses are significantly different than for owner-occupied houses.
That second house isnt a problem, because as I said, the owner wont have
any real equity in that. Its the non house assets that you have to worry about.
> Moving the new house to another name would be difficult
Pigs arse it would. People do that all the time with
property bought as an investment, to be rented out.
> without a co-conspirator in the foreclosure scam.
And that is completely trivial to do with another family member.
> Besides, the OP already told us that is NOT part of the plan.
She doesnt know what the detail of the plan is. Neither do you.
>> And the second house wont necessarily be worth much assets wise for
>> quite a while anyway, it will be the lender that is due most of the value of the second house even if it does get
>> sold out from under the defaulter when the defaulter has been stupid enough to make that possible.
> It doesn't have to be "worth much assets wise."
Yes it does. There are substantial costs involved in going after other
assets than the forclosed property, so there has to be substantial
assets available to make the substantial legal costs involved worth it.
> After the foreclosure judgement, the lender on the old house merely attaches a lien to the new house.
They cant do that unless there is common ownership.
> The owner then cannot sell the new house until the lien with the old lender is satisfied AND the new lender is
> satisfied.
Pity about the costs involved in getting a court to do that
when the defaulted loan was securitized long ago and its
not trivial to prove who owns the original loan anymore.
> Rather than getting out from under an "upside down" loan, the owner is saddled with significantly higher costs, and
> his assets are encumbered as well.
Not when he's got enough of a clue to ensure that both loans werent in the same name.
> The cost to the old lender is insignificant in context of the total foreclosure costs,
Those foreclosure costs are completely irrelevant. What matters is the likelyhood of
ending up with a decent return on the EXTRA costs involved in going after the new house.
> and the future return is very promising.
Only in your pathetic little pig ignorant fantasyland.
Have fun explaining why so few who default on loans see the result you claim is so guaranteed.
The reason is as the NYT article pointed out, its nowhere near as easy as you pig ignorantly claim.
In spades when the fed has ended up with the securitized first mortgage.
timeOday
> Seerialmom wrote:
>> Ok...so yesterday someone I know said their family was moving into a
>> new house (not brand new..but newer than where they are now). When
>> asked if they had sold their current house or if they were going to
>> rent it out; this person disclosed that they were still current on the
>> house payment where they are now....but once they move into the other
>> house they're buying the old house would eventually go into
>> foreclosure. Aside from the major "ding" on the credit rating for the
>> next 7 years....I'm still trying to figure out if this was smart
>> planning on their part or just outright fraud? At the least maybe
>> unethical? Just curious if anyone had heard of doing this before?
>
>
> the house the lender can go after other assets such as the new house.
But they will have (virtually) no equity in the new home for years.
George Grapman
I have to correct myself. On Sunday the San Francisco Chronicle noted
that under California law if you walk away from a mortgage the lender
has no recourse. They will have a lower credit score but if they kept
current on their other debts that might get a new loan in a few years.
By the way, a mortgage broker told me that this immunity applies only
to a first mortgage but not a second.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/16/MNFFVI036.DTL&hw=walk+away&sn=002&sc=778
In California, purchase mortgages on residences are "nonrecourse," which
means lenders cannot pursue foreclosed homeowners for additional money.