I like the thought of people taking a hard look at the economics of paying on a very upside down mortgage and using what they see to overcome their fear of a bad credit score.
Not only, as the story points out, would this enable David to put a gun to Goliath’s head to deliver the message “Help people who you helped get into this mess or else”, I wonder if walking away and taking the hit would be a catalyst for a more simple, less stressful life for a lot of people.
Paying on an upside down house is stressful, and so is filling it with the latest, greatest crap. Who really needs a 3D flat screen? How many times can you watch Avatar?
Walk away from your mortgage and all of a sudden you can’t get that no money down, miss a payment and its 30% interest credit from Best Buy.
I see this becoming a major trend in the ‘sand’ states and communities like mine that have lost 50%-70% of the value. Just can’t wait 10-15 years to recoup value when you can default and buy the same home for 50% less then what is currently owed three years later. And a modification with a fancy 3.5%-4.0% rate at 40 year amortization is not a great deal…..unless there is major principle reduction.
There is no guarantee that 3 years will remain as the time period for a foreclosure credit reset to obtain a mortgage. If rates rise as it seems they inevitably will, my tinfoil antenna says that the walkaways will get stung hard with double digit mortgage rates as they try to avoid having Big Brother as their landlord for the rest of their lives.
Brad: if you can lock in a 40 year mortgage at 3.5%-4% and repay in highly devalued obamabucks or Ameros, it is a good deal. Factor in a double digit inflation rate and that inflation adjusted 40 year loan repayment in present value gets chopped in half very 5 years or so.
I am not sure how Floridians, Nevadans, and other severely underwater Americans would react to this past Sunday’s “60 Minutes” piece. But I suspect that many Arizonans who only knew third-hand how simple (and increasingly common) the walkaway process is in AZ had their ultimate decision affected. Of course, even an institution like “60 Minutes” is not watched by everyone; personally, I watched it online.
Seeing Morley Safer standing on one of those half-vacant Maricopa County subdivision streets while the defaulter explains his position – it felt like a turning point. As much as I followed the housing bubble/bust in AZ, I was unaware that the 70%-plus price drops that I knew had occurred in outer suburbia were now happening in Phoenix historical district areas (the bungalow couple on the 60 minutes video).
I kind of wish it would just play out one way or another in a timely manner. I despised the tax credit/FHA combo because it hit the pause button on the solution to the problem – people buying houses that they can easily afford with meaningful down payments.
John Rowles says:
I like the thought of people taking a hard look at the economics of paying on a very upside down mortgage and using what they see to overcome their fear of a bad credit score.
Not only, as the story points out, would this enable David to put a gun to Goliath’s head to deliver the message “Help people who you helped get into this mess or else”, I wonder if walking away and taking the hit would be a catalyst for a more simple, less stressful life for a lot of people.
Paying on an upside down house is stressful, and so is filling it with the latest, greatest crap. Who really needs a 3D flat screen? How many times can you watch Avatar?
Walk away from your mortgage and all of a sudden you can’t get that no money down, miss a payment and its 30% interest credit from Best Buy.
Maybe that is a good thing.
May 11, 2010 — 5:08 am
Doug Quance says:
Many homeowners who I have spoken with are doing exactly that – walking away.
They can afford the payments – but would prefer not “paying for a dead horse”. Others are going the route of bankruptcy.
The other shoe hasn’t dropped, yet.
May 11, 2010 — 10:20 am
Keahi Pelayo says:
No single home owner will drag the economy down, a huge bank going down kills all of us.
Aloha,
Keahi
May 11, 2010 — 12:20 pm
Brad Yzermans says:
I see this becoming a major trend in the ‘sand’ states and communities like mine that have lost 50%-70% of the value. Just can’t wait 10-15 years to recoup value when you can default and buy the same home for 50% less then what is currently owed three years later. And a modification with a fancy 3.5%-4.0% rate at 40 year amortization is not a great deal…..unless there is major principle reduction.
May 12, 2010 — 12:53 pm
Thomas Johnson says:
There is no guarantee that 3 years will remain as the time period for a foreclosure credit reset to obtain a mortgage. If rates rise as it seems they inevitably will, my tinfoil antenna says that the walkaways will get stung hard with double digit mortgage rates as they try to avoid having Big Brother as their landlord for the rest of their lives.
Brad: if you can lock in a 40 year mortgage at 3.5%-4% and repay in highly devalued obamabucks or Ameros, it is a good deal. Factor in a double digit inflation rate and that inflation adjusted 40 year loan repayment in present value gets chopped in half very 5 years or so.
May 12, 2010 — 4:23 pm
Russ says:
I am not sure how Floridians, Nevadans, and other severely underwater Americans would react to this past Sunday’s “60 Minutes” piece. But I suspect that many Arizonans who only knew third-hand how simple (and increasingly common) the walkaway process is in AZ had their ultimate decision affected. Of course, even an institution like “60 Minutes” is not watched by everyone; personally, I watched it online.
http://www.cbsnews.com/video/watch/?id=6470184n
Seeing Morley Safer standing on one of those half-vacant Maricopa County subdivision streets while the defaulter explains his position – it felt like a turning point. As much as I followed the housing bubble/bust in AZ, I was unaware that the 70%-plus price drops that I knew had occurred in outer suburbia were now happening in Phoenix historical district areas (the bungalow couple on the 60 minutes video).
I kind of wish it would just play out one way or another in a timely manner. I despised the tax credit/FHA combo because it hit the pause button on the solution to the problem – people buying houses that they can easily afford with meaningful down payments.
May 13, 2010 — 4:35 pm