Approx 70% of foreclosures are from people handing keys back to the banks. Quite a few can afford to pay the repayments, but prefer to let the bank take the hit:
Its honestly hard to blame her. Futher, I would suspect there are many more people who are in massive negative equity holes but are continuing to fund the mortgage while they see how things pan out.
At some point, $200k becomes too much of a headache to not walk away from, especially if your neighbour has just done it and now boasts about how much more disposable income they have by renting. There comes a point where standard of living is the over-riding issue and you don’t want to be the only mug who doesnt walk into an easier life
I would suspect people in Irl/UK would consider doing the same if it wasn’t for the personal liability aspect
On a 30 year mortgage for 500k it will take her **18 YEARS **to get the principal down to 300k.
So walk away from it today and have your credit clean in 5 years, or spend the next 18 years diligently paying off the mortgage just to get it down to what the apartment is worth TODAY.
Walking away is a no brainer.
IMHO the majority of the current 25-35 year generation who have purchased have been completely screwed by the government,banks,VI’s etc. and will be for a long time to come. Unless your over that age group and got involved in property speculation then you shoud be fine, anyone under that age in college,school etc will not have purchased, the only way out of this mess is house prices will have to plummet to much more sustainable levels so the people only entering the jobs market in the next few years where there will be far more competition so less wages will be able to purchase started homes.IMHO it will be a long long time before anyone who paid 3 or 4 hundred thousand for a 1 or 2 bed apartment will get their money back.
As I said on the other thread on this subject. This is the natural end of the road for the abusive and aggresive debt industry in the USA.
There was no morality or even honesty in the way credit was sold.
Having played dumb with a US mortgage broker to see how long it would take him to explain the implications of a 1% neg am mortgage I can tell you, he never would have.
If you didn’t know specifically the questions to ask when getting a mortgage, there was no way to get the right answers.
Anyone in the US who has enough income to go Off-Grid in terms of credit absolutely should walk away.
When this started evolving I would have thought that staying put and paying your pay out was a good thing to do, but forget it. The numbers now are too big.
The downside of staying is too big and the downside of leaving too insignificant.
Walk away. Pay cash for your next car, rent somewhere that allows you to save. You can buy a fine house many parts of the US for $100,000 to $200,000. Renting for 10 to 15 years should allow anyone on a reasonable income to save 100% of the cost of a house.
The Alternative is to live in your “500K” house that’s now worth “300K”, paying $500K level mortgage payments, and in 15 years you’ll still owe $300K.
If you think buying a bubble is stupid, try living in one after it has burst.
people should be bankrupted to repay the loans if that is what is required. nobody put a gun to anyones head and forced people to take out loans. they are responsible.
no - the banks should have known better, but they let their greed get the better of them.
they knew full well when they gave out these loans that they were non-recourse and the property itself was their only security - so tough shit.
The same thing is going to happen here, indeed it is already happening.
The difference is that it is people heading to foreign climes to escape their mortgage debt.
I know of one person on his way. I don’t know that many people!
If the trickle becomes a stream, they will be near impossible to trace. Can you really imagine the Irish state being able to track down hundreds of people when they can’t find one high-living solicitor?
It certainly happened,a lot,in the 80s. You stopped paying the mortgage, and banked the payments :- that was your starting point for your new life in wherever. You had 6 months before the mortgage arrears letters got serious :- in the last of the 6 months, you ran up the credit cards,and made your final arrangements.
On the way to the airport you stopped off and posted the house keys back to the building society, and the credit cards back to the back.
The same goes - and all the more so - for the developers.
In truth, while i strongly believe in personal responsibility I believe that there is some evidence to suggest that those holding the bigger debts and causing the bigger economic problems will get away with daylight murder and it’s the small people with their ladder aspirations who will have to pay the price.
Realistically, there is a modicum of split responsibility here which has to be faced up to. I didn’t fall for it, and I’m fortunate that I did not. But this sort of judgmentallism does not move the economy forward and slightly more people are concerned about that.
If shit like that started happening I would say the Government should immediately change the Bankruptcy law, & change the 12 year period to 60 years & revoke citizenship for people who try this crap. If people don’t want to be ‘Citizens’ with all that entails, then why should they be entitled to just come back in 12 years with all their debts forgiven?
Why should those people who lived within their means be made to suffer & pickup the Tab for those who wanted free money ?
Foreclosure (i.e. the bank takes the property in full payment of the mortgage) hasn’t happened in Ireland in over 100 years (as far as I know, I wasn’t around then).
What the Irish banks do is they repossess the house, sell it, and continue to pursue you for the remainder of the debt.
For the people who leg it, they might think that the bank will give up after a few years, but they don’t. Like the terminator, the banks will never give up, they will never die, they will never stop until you are dead, and even then they will pursue your ghost (i.e. your estate).
Will they though? At what point does it become not worth it anymore?
Although I did see a poster point out in another thread that what is more likely is that the banks will sell your debt (at a loss obviously) to some debt-collection company who make this stuff their business and they’ll pursue you like the hounds of hell until they catch you and take it out of your hide. Scary stuff.
The banks do give up,as do the debt collectors. From memory, once they actually believed the individuals had left the country the case was pretty much shelved.
About the worst I heard of was some cases where they tried harassing parents to find out where the miscreants had gone, but that harassment was borderline criminal and if the parents told them to get lost and contacted the Guards it stopped pretty quickly.
Moreover,the banks don’t even remember. I know plenty of people who did the airport flit in the 80s who came back later and got mortgages, credit cards, car loans, the lot. Either the previous credit records had been lost/discarded or a decision had been made to ignore them.
If you haven’t seen the documentary “Maxed Out” I recommend renting it. It deals with credit card debt in the US and what lengths they go to in order to get their money.
The idea that nobody put a gun to there head is a tough one to reconcile. Most people haven’t a clue what they are signing. Maybe they should know but in some cases in this documentary its beyond their mental capacity.
Its shitty when banks have lower morals than your local gangland moneylender and IMHO its impossible to have sympathy for them.
My aunt (in her 50s) lives in San Francisco - there for about 5 yrs now, bought a 1 bed condo about 2 yrs ago for $210k in a nice area - now they can’t be sold for $90k - she said people are doing exactly as OP said… scary
I’ve read that US Banks (particularly Countrywide) are simply refusing to foreclose on properties.
The owner walks away or stops paying, the bank just does nothing so they can still show the loan as an “asset” on it’s books.
Read another post from a guy who is ‘managing’ his lender. He has no intention whatsoever of ever repaying his ARM mortgage, he just rings them every so often and cries about how hard he’s trying to pay his mortgage and makes a token payment to string them along for another while.
When they eventually foreclose on him (if ever), he’ll have saved at least two full years of mortgage payments, and the bank will be left with a huge loss. He can comfortably afford to pay, but he’s just going to let the bank eat the negative equity and freeload off them for as long as possible.
I have zero sympathy for these banks. None.
However - the US has been spending more than it earns for a long time, and their economy is heavily reliant on foreign investment to maintain their credit fueled consumer binge society and their warmongering.
WHO IS EVER GOING TO GIVE THE US ANY MONEY EVER AGAIN after they’ve defaulted on about $1-2 trillion dollars of debt and trying to inflate their way out of the rest of it by running -2.5% real interest rates causing a global inflationary spiral.
I hope the rest of the world learns some good lessons about investing in America after this. They might be smartarses “walking away” from this mountain of debt they’ve run up, but their collective credit worthiness as a nation and the intrinsic value of their currency is in ruins as a result.
So good luck with that, Uncle Sam.
I know that I’m simplifying this, but if we have this recession/correction over the next number of years - and when we come out the other side, the rest of the world decides that the dollar is no longer to be used as the reserve currency…
What would this mean for the eurozone? Would the euro be feted as the new reserve currency, or would there be more then one, or any at all?
That’s it in a nutshell - the banks were perfectly happy to keep it all going as long as possible, to keep offloading the crap to other people via wall street, and all while knowing that if the shit hits the fan, the losses would be absolutely massive.