10 ms·

Not too long ago, the fact that I've paid my mortgage every month for over a decade (even during times of unemployment) would have been considered a sign of res

Not too long ago, the fact that I've paid my mortgage every month for over a decade (even during times of unemployment) would have been considered a sign of responsibility and financial security. But reading this, I can't help but think that doing so simply makes me look like a chump.

toomuchtodo 12y ago
Conversely, I walked away from my townhome because it was ~$150K underwater. I lost my downpayment (~$20K), plus whatever principal was paid over ~4 years. After losing almost $60K-70K in a home I couldn't sell nor could I rent (HOA restrictions), why would I throw good money after bad? New mortgage guidelines stipulate only a 3 year waiting period from foreclosure date to get a new mortgage, even less if you document a financial hardship caused your foreclosure.
- Domenic_S 12y ago
  Were there other circumstances, like you had to move for a job or something? Walking away in a downturn for its own sake seems like a bad decision, like selling stock because it took a hit.
  - toomuchtodo 12y ago
    I bought new construction, my builder went bankrupt, and Bank of America sold the land to a new builder for pennies on the dollar. When the new homes started going on sale for half what I paid, I did the math on how long it was going to take at historical real estate appreciation rates (roughly 3%/year). I stopped paying, tried to work out a modification to reduce the principal with Bank Of America (who completely botched it), they transferred it to a "specialty servicer" who specializes in modification (who also botched it), and then ended up just letting it go into foreclosure. Was 3-7 years of less than perfect credit worth it? It appears so. Houses in my old neighborhood are still significantly underwater. This isn't isolated though. ~17% of homeowners are underwater, and appreciation has slowed to a snail's pace, meaning those people aren't going to be able to sell for a long time [1]. From zillow: > In the fourth quarter of 2014, the U.S. negative equity rate – the percentage of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9 percent, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year. > While this may not seem very notable (after all, overall negative equity didn’t go up, merely flattened out), this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come. [1] http://www.calculatedriskblog.com/2015/03/zillow-negative-equity-rate-unchanged.html http://www.calculatedriskblog.com/2015/03/zillow-negative-eq...
    - Domenic_S 12y ago
      Thanks for taking the time to type this up, it's really interesting. It is fascinating to me that being underwater in a house is such a big deal to people; almost every car you see on the street is underwater yet people don't care nearly as much about that. The computer I'm typing this on is definitely "underwater" in that it's worth less than I paid. Almost every investment transaction (stocks, etc) are underwater the moment you make them because of transaction fees. If your ability to pay is unchanged and you don't need the liquidity (ie, you don't need to move today), I don't see the problem. You got the short end of the stick, sure, but it was your deal to make or not make in the first place. Further, if you're considering a home purchase in financial/investment terms, you've got to consider the time scale - real estate operates in terms of decades. A lot of people got used to multi-digit yearly appreciation and to this day think anything else is a bad deal, when it's actually more on-par with other investment vehicles after the adjustment. > Negative equity is decidedly here to stay, and will impact the market for years to come. I wonder how much of this is because low-money-down lending (FHA, VA) has opened back up, with down payments barely (if at all) covering transaction costs. It could actually be a good indicator for affordability. Anyway, I assume you're at peace with your decision and I'm not trying to convince you otherwise. Just trying to understand the logic. No offense meant.
      - toomuchtodo 12y ago
        > If your ability to pay is unchanged and you don't need the liquidity (ie, you don't need to move today), I don't see the problem. > Anyway, I assume you're at peace with your decision and I'm not trying to convince you otherwise. Just trying to understand the logic. No offense meant. None taken at all. I made a mistake, and I paid for it. Keep in mind, no one cares when their car is underwater because you can cough up a few thousand dollars to get out of it. When your house is underwater for tens of thousands of dollars you're effectively trapped in it, and can't move if you need to (whether its for work or personal reasons). Those homeowners underwater are limited in their mobility now, thereby reducing their earning potential if they could possibly move for a better opportunity (either pay or experience). While that might contribute to keeping wage inflation in check, it also limits any economic growth we might realize from those people having more mobility. TL;DR Housing shouldn't be viewed as an investment, and we're going to feel the pain from the 2008-2009 crisis for many years to come.
liveoneggs 12y ago
you could also declare bankruptcy as a form of renegotiation or (like a really big company) stop paying all of your bills and wait for your creditors to accept lower offers. When you gamble you win some and you lose some. Do you have the stomach for it? Maybe this lady in the article is just better at playing hardball. -- If the banks fail to show up in court, fail to file the correct documents, etc etc etc, why should they be treated any better than a normal person who does the same thing?
- MrZongle2 12y ago
  Do you have the stomach for it? Maybe this lady in the article is just better at playing hardball. Maybe I'm old fashioned, but it seems to me that making ends meet is the way hardball is played. The woman in the article looks like she just relied on running the clock out in order to get the game declared a tie. I have little sympathy for the banks. But I have little more for folks who choose not to meet their financial obligations.
  - liveoneggs 12y ago
    luckily neither party in this story is asking for sympathy, only money.
- MCRed 12y ago
  It shows the inefficiencies of the courts... whether it helps or hurts businesses or individuals doesn't matter. Not providing an efficient and sufficiently staffed, well run court system is the crime here... and society pays the costs while never blaming the cause. Note the rapid rise in arbitration and arbitration agreements-- it's a private system that is far more efficient, and thus a lot cheaper to get issues decided. This is why billion dollar companies have arbitration agreements-- they can afford the lawyers for a court battle and are big enough to get heard, but they'd rather have it settled (even not in their favor) by arbitration.
  - Lawtonfogle 12y ago
    Arbitration is on the rise because one side has massive power in picking who does the arbitration, and being a private system that system has an incentive to keep the one who picks it happy so they won't change. Thus arbitration will favor the side who sets the terms of the contract.
rayiner 12y ago
Buying a house with a mortgage is just a market transaction. There is no moral dimension, and it's naive to inject one. These people went into the transaction in good faith. Now, the law gives them the right to invoke the statute of limitations, and the banks knew that when they made the loans. There is nothing wrong with their invoking the legal rights they have. If the shoe were on the other foot, the banks would do exactly the same thing.
- mikeash 12y ago
  Why can't there be a moral dimension? It's a market transaction that involves making a promise. Lots of people think that fulfilling promises is a moral thing.
  - jackmaney 12y ago
    > Why can't there be a moral dimension? Because despite what too many capitalists would tell you, corporations are not living beings, much less people.
    - cma 12y ago
      Neither are families, what's your exact point here? Moral free reign against groups but not an individuals? I'm not arguing against using the statue of limitations to keep your house; I'm just wondering exactly what you have shown by reiterating that a corporation is not in fact an individual human being.
    - harryh 12y ago
      Corporations aren't people but they are groups of people and hence have some rights as an organization.
  - rayiner 12y ago
    The terms of the promise implicitly incorporate each party's extracontractual legal rights.
  - imgabe 12y ago
mikeash 12y ago
I sometimes feel the same way. But it passes. Think of it like this: there are a lot of stores out there that are pretty lenient on shoplifters. They believe, rightly or wrongly, that they're better off that way, either because coming down on shoplifters puts their workers in danger, or it scares off legitimate customers, or whatever reason they come up with. Does that make you a chump when you go into one of those stores and pay for your stuff like you're supposed to? No, that's just decent behavior. Thinking about it that way makes me feel better about it all.

toomuchtodo 12y ago

Conversely, I walked away from my townhome because it was ~$150K underwater. I lost my downpayment (~$20K), plus whatever principal was paid over ~4 years. After losing almost $60K-70K in a home I couldn't sell nor could I rent (HOA restrictions), why would I throw good money after bad? New mortgage guidelines stipulate only a 3 year waiting period from foreclosure date to get a new mortgage, even less if you document a financial hardship caused your foreclosure.

Domenic_S 12y ago
Were there other circumstances, like you had to move for a job or something? Walking away in a downturn for its own sake seems like a bad decision, like selling stock because it took a hit.
- toomuchtodo 12y ago
  I bought new construction, my builder went bankrupt, and Bank of America sold the land to a new builder for pennies on the dollar. When the new homes started going on sale for half what I paid, I did the math on how long it was going to take at historical real estate appreciation rates (roughly 3%/year). I stopped paying, tried to work out a modification to reduce the principal with Bank Of America (who completely botched it), they transferred it to a "specialty servicer" who specializes in modification (who also botched it), and then ended up just letting it go into foreclosure. Was 3-7 years of less than perfect credit worth it? It appears so. Houses in my old neighborhood are still significantly underwater. This isn't isolated though. ~17% of homeowners are underwater, and appreciation has slowed to a snail's pace, meaning those people aren't going to be able to sell for a long time [1]. From zillow: > In the fourth quarter of 2014, the U.S. negative equity rate – the percentage of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9 percent, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year. > While this may not seem very notable (after all, overall negative equity didn’t go up, merely flattened out), this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come. [1] http://www.calculatedriskblog.com/2015/03/zillow-negative-equity-rate-unchanged.html http://www.calculatedriskblog.com/2015/03/zillow-negative-eq...
  - Domenic_S 12y ago
    Thanks for taking the time to type this up, it's really interesting. It is fascinating to me that being underwater in a house is such a big deal to people; almost every car you see on the street is underwater yet people don't care nearly as much about that. The computer I'm typing this on is definitely "underwater" in that it's worth less than I paid. Almost every investment transaction (stocks, etc) are underwater the moment you make them because of transaction fees. If your ability to pay is unchanged and you don't need the liquidity (ie, you don't need to move today), I don't see the problem. You got the short end of the stick, sure, but it was your deal to make or not make in the first place. Further, if you're considering a home purchase in financial/investment terms, you've got to consider the time scale - real estate operates in terms of decades. A lot of people got used to multi-digit yearly appreciation and to this day think anything else is a bad deal, when it's actually more on-par with other investment vehicles after the adjustment. > Negative equity is decidedly here to stay, and will impact the market for years to come. I wonder how much of this is because low-money-down lending (FHA, VA) has opened back up, with down payments barely (if at all) covering transaction costs. It could actually be a good indicator for affordability. Anyway, I assume you're at peace with your decision and I'm not trying to convince you otherwise. Just trying to understand the logic. No offense meant.
    - toomuchtodo 12y ago
      > If your ability to pay is unchanged and you don't need the liquidity (ie, you don't need to move today), I don't see the problem. > Anyway, I assume you're at peace with your decision and I'm not trying to convince you otherwise. Just trying to understand the logic. No offense meant. None taken at all. I made a mistake, and I paid for it. Keep in mind, no one cares when their car is underwater because you can cough up a few thousand dollars to get out of it. When your house is underwater for tens of thousands of dollars you're effectively trapped in it, and can't move if you need to (whether its for work or personal reasons). Those homeowners underwater are limited in their mobility now, thereby reducing their earning potential if they could possibly move for a better opportunity (either pay or experience). While that might contribute to keeping wage inflation in check, it also limits any economic growth we might realize from those people having more mobility. TL;DR Housing shouldn't be viewed as an investment, and we're going to feel the pain from the 2008-2009 crisis for many years to come.

liveoneggs 12y ago

you could also declare bankruptcy as a form of renegotiation or (like a really big company) stop paying all of your bills and wait for your creditors to accept lower offers. When you gamble you win some and you lose some. Do you have the stomach for it? Maybe this lady in the article is just better at playing hardball. -- If the banks fail to show up in court, fail to file the correct documents, etc etc etc, why should they be treated any better than a normal person who does the same thing?

MrZongle2 12y ago
Do you have the stomach for it? Maybe this lady in the article is just better at playing hardball. Maybe I'm old fashioned, but it seems to me that making ends meet is the way hardball is played. The woman in the article looks like she just relied on running the clock out in order to get the game declared a tie. I have little sympathy for the banks. But I have little more for folks who choose not to meet their financial obligations.
- liveoneggs 12y ago
  luckily neither party in this story is asking for sympathy, only money.
MCRed 12y ago
It shows the inefficiencies of the courts... whether it helps or hurts businesses or individuals doesn't matter. Not providing an efficient and sufficiently staffed, well run court system is the crime here... and society pays the costs while never blaming the cause. Note the rapid rise in arbitration and arbitration agreements-- it's a private system that is far more efficient, and thus a lot cheaper to get issues decided. This is why billion dollar companies have arbitration agreements-- they can afford the lawyers for a court battle and are big enough to get heard, but they'd rather have it settled (even not in their favor) by arbitration.
- Lawtonfogle 12y ago
  Arbitration is on the rise because one side has massive power in picking who does the arbitration, and being a private system that system has an incentive to keep the one who picks it happy so they won't change. Thus arbitration will favor the side who sets the terms of the contract.

rayiner 12y ago

Buying a house with a mortgage is just a market transaction. There is no moral dimension, and it's naive to inject one. These people went into the transaction in good faith. Now, the law gives them the right to invoke the statute of limitations, and the banks knew that when they made the loans. There is nothing wrong with their invoking the legal rights they have. If the shoe were on the other foot, the banks would do exactly the same thing.

mikeash 12y ago
Why can't there be a moral dimension? It's a market transaction that involves making a promise. Lots of people think that fulfilling promises is a moral thing.
- jackmaney 12y ago
  > Why can't there be a moral dimension? Because despite what too many capitalists would tell you, corporations are not living beings, much less people.
  - cma 12y ago
    Neither are families, what's your exact point here? Moral free reign against groups but not an individuals? I'm not arguing against using the statue of limitations to keep your house; I'm just wondering exactly what you have shown by reiterating that a corporation is not in fact an individual human being.
  - harryh 12y ago
    Corporations aren't people but they are groups of people and hence have some rights as an organization.
- rayiner 12y ago
  The terms of the promise implicitly incorporate each party's extracontractual legal rights.
- imgabe 12y ago

mikeash 12y ago

I sometimes feel the same way. But it passes. Think of it like this: there are a lot of stores out there that are pretty lenient on shoplifters. They believe, rightly or wrongly, that they're better off that way, either because coming down on shoplifters puts their workers in danger, or it scares off legitimate customers, or whatever reason they come up with. Does that make you a chump when you go into one of those stores and pay for your stuff like you're supposed to? No, that's just decent behavior. Thinking about it that way makes me feel better about it all.