Strategic Default

Discussion in 'Money, Investing & Precious Metals' started by UncleJoe, Feb 26, 2010.

  1. UncleJoe

    UncleJoe Well-Known Member

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    This is becoming a hotly debated issue. Do you treat your mortgage as a moral issue or a financial one?
    Personally, I look at it as a contract with the bank. The bank gave you money and the consequences of not repaying them are clearly spelled out in the contract; they take the property. The same principal applies to a car loan. If you don't pay, you lose the car.
    What would you do if you were hopelessly underwater in you're mortgage? And no; we are not there. :rolleyes:
    Here is another persons view.


    The Obama administration, in its massive campaign to socially engineer America, is pressuring banks into renegotiating mortgage payments in order to keep people captive in their mortgages. The goal of the elites in power is to keep up the appearance of prosperity and keep folks in debt to the big banks. Mass defaults will injure Wall Street – Washington D.C’s favorite constituency. Additionally, there’s John Courson, an FOB (Friend of Banksters) who runs all over the country trying to spread the moral message to middle-class people who are pawns in this Bankster mess. Courson is the Chief Executive of the Mortgage Banker’s Association, so whose interests do you think he is representing? Courson advising homeowners on their moral and financial strategies is like a crocodile telling the neighborhood children they should take a shortcut home through the swamp. These so-called “leaders,” unfortunately, have the necessary wealth, political power, and media access that enable them to introduce their disingenuous platform and influence the masses. For those who aren’t empowered by the political establishment, there’s no equal opportunity for commanding the public stage.

    The schemers know they don’t have to deal with a level playing field, so yes, it is possible to shame people into debt subservience. In fact, the masses are already succumbing to the morality message. The elites don’t give a damn about the plight of average people who have little to no financial knowledge, feel trapped, and have nowhere to turn. That’s why those folks need to reach out to a local CPA or other financial advisor they can trust. Furthermore, they need to tune out the moralizing that flows from the fat cats and special interests that get wealthy by keeping them equity deficient.

    The entire article is here.

    Karen De Coster Why a Strategic Mortgage Default May Be Your Best Option
     
  2. pdx210

    pdx210 Well-Known Member

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    Dono?

    Did someone put a gun to the heads of homeowners to make them take a mortgage..second or equity loan ?..to be upside down in their homes I think many people are simply stupid with their finances. How about this, some of us are doing fine we didn't do stupid crap with credit, i could sell my home today and make money i could sell below current market value today and still make money

    it's like playing football you must learn the rules and pitfalls if you want to play the game
     

  3. sailaway

    sailaway Well-Known Member

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    I am like you pdx210, I could sell everything off, make money on it and retire, but I'm having fun and hoping to buy some more property when the time is right. The Bible warns against borrowing, I feel that it is morrally wrong to do it, but I do believe in leveraging comfortably and letting my rental property make my home mortgage. I also have a moral obligation to give my tennants a good place to live. The Bible says build your business then build your home. I never owned a house or had a mortagae on one until I was married at 42. My wife figured out what I had and got us a doosey. I have made rental property my business in life and always put it first, the payoff has been good. There are always headaches with it and some of them have been terrible, but it is what I enjoy. The ones who are really in trouble are the ones with the big EGOS who had to have it as big as possible, brand new, in the right neighborhood, right now and at the lowest payment possible. Those people never learned to crawl before they walked and to walk before they ran. I feel that the gubbimint wants us all to depend on it so they can control us all, when people like us are the last ones standing with our farmland and other property, I wonder how they will get us also. Enough jabbering for now.
     
  4. pdx210

    pdx210 Well-Known Member

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    another point here. If you default on your mortgage and the bank takes it back that doesn't mean you are free and clear.... let me explain

    -you have a 200K home and 30K equity loan
    -So a total liability of 230K

    lets say in this market the house is only worth 170 resulting in a liability of 60K the bank can go after you for that 60K
     
  5. mosquitomountainman

    mosquitomountainman I invented the internet. :rofl:

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    If you can pay for it you should pay for it.

    Banks should take some responsibility too though. If there are too many shaky loans out there then the bank should do some firing as well.

    As far as credit cards and banks go...any fool that would loan thousands of dollars to anyone without real collateral deserves to go belly up. It doesn't mean defaulting on a loan is right but lenders have some responsibility in this matter too and I'm tired of bailing them out!
     
  6. sailaway

    sailaway Well-Known Member

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    My cousin went through this situation with his house when it was reposessed. The bank sued him for the balance of the mortgage when it sold for less at the sherrifs sale. This forced him into bankruptcy. He is still working through his bankruptcy proceedings.
     
  7. Neema

    Neema New Member

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    Before the recession, my middle class family was basically practicing a balancing act of budgets and debt. My mom lost her bridal business, and so she picked up work as a medical assistant after getting her neccessary education, and my dad could and still can lose his job as a teacher at ASU. Right now my family is $500,000 in debt, and barely paying the minimal payments on everything. Yet my parents still spend money on frivulous things they think of as neccessary. They still watch their ******** cable television that they can get for free online. They still buy more food than neccessary. They still waste quite a bit. This realization of both the grand amount of debt and my family's inflexibility towards changing their lifestyle (ironically, despite how they voted for the candidate of change), is what drove my liking of self sufficiency (or an attempt thereof) from an occassional fluttering thought to a goal.

    One problem is that people do not want to admit they are poor. They like to deny that they have become a lower socioeconomic level and so they keep on spending like they did when they made more money.

    Another is that the current system actually encourages debt. Think about it. A credit rating is basically how good you are about paying off your debt. You can not have a credit rating without having previous debt. So for some items, such as houses, you actually need debt to buy it or rent it. This sytem has made it where debt was not seen as a bad thing or a neutral thing even but rather as a good thing to have. Go in debt as long as you can atleast pay the minimum! x.x; Paying the minimum is a way to maximize profits to the money-lenders.

    I view debt as a fiscal obligation with no social ties to it directly. It can cause some social issues; I know a woman who broke up with her fiance because he was in massive debt and he tried covering it up; but the debt in and of itself is not social.

    A possible good thing is to introduce a concept I have learned from music shops; rent to buy. Basically, you rent whatever it is and have a monthly payment (negotiable; sort of like a payment plan on debt except your renting). When you have paid what it would have cost to buy it (I'm usnure if at current price or at the price of first renting), you then own the property you were renting. In essence, you can buy a car or a house gradually over time without debt hanging over your head.
     
  8. pdx210

    pdx210 Well-Known Member

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    Encourages, it must the whole system runs on debt, credit ,credit derivatives, phone creation of wealth, consumerism. Most people are brainwashed they don't understand a want from a need


    consider this, you don't own your home or property you rent it from government stop paying your property tax and watch what happens.
     
  9. Woody

    Woody Woodchuck

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    I went through buying a place 5 years ago. I was pre-qualified for much more of a mortgage than I could really afford. It was incredible they way the BANK actually manipulated my income, possessions, FUTURE earnings and FUTURE home value to come up with an approved loan amount. I could buy twice the home I could really afford and come out of the closing with $10,000 CASH in my pocket!!! They made me feel like a fool for turning it down.

    How did they do it? Projecting my future earnings using projected cost of living raises, projected promotions and estimated future bonuses. Projecting the future value of the house using the past few years of appreciation in the housing market. Making the payment as low as possible with the interest only payments for 5 years them balloon payment using the future interest rate (which of course they projected as being much lower than today’s rate). The cash in pocket was the projected value of the house in 5 years and loaning me 110% of the current value. Having me list my possessions and the value of them when new, or estimating on the high side. On paper, it looked fantastic! In reality it scared the piss out of me. But, again, they made me feel like an idiot for not doing it, it was shameful.

    I can not blame many folks who went for it and got themselves in deep doodoo simply to have a nice home. The bankers made it sound like there was no downside to it, only upside. For the folks who planned on turning the place at a profit, well, not every investment works out as you would like. I should not have to pay for their bad investment. As far as the banks? Any bank making these loans or buying derritives should suck up the loss. If they had no idea what they were buying maybe they should have looked into it a bit more then?

    I know what I could afford in a home and knew what I wanted. I wanted a mortgage payment that I could afford even if I had to work part time for minimum wage. No realtor would deal with me when I told them the price range of a place I was looking for. They all wanted to show me $250,000 homes that were in the banks pre-approved range. I did finally find a realtor who knew what I was looking for and worked hard to get me in it, he earned his 3.5% and I appreciated it.

    As far as what the house is worth compared to what I owe? Who the hell cares! When I first bought I made the decision that this is what I can afford and this is what I need as a home to live in. Be it $10,000 or $100,000, it is what it is and I made the agreement to pay my debit for a place to live. If I ever go to sell and it is only worth a fraction of what I bought it for, well sucks to be me. I had a place to live for all those years and I made a poor investment. Suck it up and move on. These folks who bail on their debits because of this are deadbeats and crooks in my book. Losing your job and not being able to pay is a different matter but perhaps they should have thought of this before buying with a mortgage that maxed out what they could afford???

    But back on the original topic… Yes, debit is a bad thing but in society today it is impossible to save enough to pay for a home in cash, unless you rent all your life before buying. A used vehicle possibly but not a home, credit is a necessary evil there but should be used wisely. Credit cards on the other hand are evil. It sucks that you need credit to get credit, I went through this years ago and actually had to finance several things BEFORE I could get my first mortgage.
     
  10. pdx210

    pdx210 Well-Known Member

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    Most lenders didn't care because they sold the not to someone else who packaged it into investment derivatives they where able to walk away from the liability. The problem isn't that this happened..thats part of capitalism it's that many investment and banking firms are being propped up with public money.