What I don't get: When people complain that they are drowning because their house is underwater
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Anonymous
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DH and I can still afford our mortgage easily but we can't afford to sell and so we are cramming our two kids into a tiny 2 bedroom condo and that sucks. I don't think we're suckers or stupid for assuming that by the time we had two kids, we'd have dumped 20 or 30k into equity and could sell and use that for a down payment on a new place. We've paid down about $60k on our mortgage...but our house is worth 70k less than it was when we bought it and prices in our neighborhood are still falling fast.
Did YOU see the economic downturn coming in 2005, OP? If so, I guess you are far wiser than we are. Can you please look into your crystal ball and let us know when it will turn itself around? Nobody expects the Spanish Inquisition. |
Anonymous
| Sorry...I am PP, and our house is worth 90k or more less than when we bought it. Hit the wrong key. |
Anonymous
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That's nothing! When I bought my first house back in 2002, interest rates were at a then-very attractive 6 percent. I told the mortgage guy I wanted a 30-year fixed. He kept pushing a 40-year amortization on me. I said, no, a 30 year fixed. He agreed. So, I get to the settlement table and I'm reading the loan papers and ... it's a 5-1 ARM and a 40-year amortization! I called that guy and he basically says sorry it was all I could do. I was livid. I closed but raised hell with the State Corporations Commission in Virginia. The lender tried to blow me off but I was able to produce a commitment letter that outlined the 30-year fixed. State raised holy hell on my behalf and the lender (American Home Mortgage, which we later discovered was one of the really bad guys) was forced to buy back the loan and give me the terms promised. Small victories. Ironically, I ended up refinancing that 30-year fixed a year later when rates dropped a point. Sheesh. this I bought a home and an investment property here and neither one came to the table with the agreed upon loan terms. Both changed at the closing table after significant delays to the point the sellers were ready to take the next offer...so I closed anyway. Fortunately for 30 yr fixed loans though which I too had to fight to get vs the option ARM and other ARM products they kept pushing on me. I can't imagine how less savvy people handled the unscrupulous mortgage brokers back then. |
Anonymous
What DC bubble? Where I live in the DC metro area, my home has lost 35-40% of its value from the peak....fortunately I bought it in 2003 and not a stitch later so I am maybe only $10-$20k underwater right now...not including an equity LOC for some improvements. My investment condo in the area is worth 15% of what I paid for it in 2005. That is right...an 85% loss. Fortunately it stays rented out but at about $250/month less than the mortgage and annually rising condo fee cost which is partially due to all the foreclosed condos held by banks which are not paying any condo fees while the condos languish. |
Anonymous
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I'm still cracking up over the pp who thinks that losing a job in this economy is an "extraordinary" circumstance. Do any of you ever leave DC, ever???
But, since the subtext to this post is the presumed moral corruption of those who strategically default, my understanding from the reports I've read is that strategic defaulters account for maybe a quarter of all defaults. That is, admittedly, bad for the economy as a whole and a rotten thing for their neighbors but it still means that the vast majority of those who default (whether underwater or not), are suffering from "extraordinary" circumstances. The presumption, therefore, should be that unless told otherwise, the defaulter/underwater person is in a pretty terrible situation. |
Anonymous
| I have no problem with people who strategically default. Houses are a leveraged asset. Businesses default on leveraged assets all the time and it's regarded as a smart decision. |
Anonymous
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We bought a house we could afford, put down 20%.
when we divorced only 1 person could afford it and even then the mortgage payments were high for the 1 salary. Also, had a to get a whole new furnace. Would love to sell and get something smaller and more affordable. Tried renting rooms out and that did not work. Sometimes life just sucks Thought about renting it out completely, hoping the rent would cover the mortgage, but am afraid about the amount of repairs I will need to do when the tenants move out. |
Anonymous
| I agree with 7:06, I have no problem with it, sure it might screw over your neighbors but it is a business transaction. Do what is best for your family OP and don't worry about anyone else, sounds harsh to some I know but your family is your main priority. |
Anonymous
That was us - we were young and naive, I'll admit it, but it was supposed to be our 3-4 year home... 5 tops. Unfortunately, could never refinance and have seriously outgrown the place now that kids are in the picture (condo)... but we just got our notice in the mail that our ARM will be resetting soon. |
Anonymous
Probably true, but then again, those ARMs have reset to lower rates each year, instead of higher. I know ours has. It went from 4.265 to 3% today, after 2 or 3 resets. So that doesn't explain it. |
Anonymous
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It all depends on the circumstances.
People who bought houses that they couldn't afford balloon payments on but could afford the interest or teaser payments - nope. People who somehow counted on home values increasing like 2002-06 indefinitely - nope. People who couldn't be bothered to read their papers/loan terms - nope. People who're ready to upgrade but are $50-$100k under on a TH they've been paying on dutifully and were otherwise responsible about buying - sort of, but mostly yes. People who got laid off, or got sick - yes. People who were the victims of out and out fraud - yes. |
Anonymous
I often see folks on DCUM suggesting strategic default (where were you when I posted about my 60% underwater home last year!) but I don't see how that is possible - we live in VA (recourse state). Sure, walking away seems easy, but what about a $100k+ deficiency judgement? |
Anonymous
the good news is that your rate may actually fall. |
Anonymous
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We bought a 2br townhouse in 2006. It was going to be perfect for our soon to be growing family. Then, what do you know, twins!! So now we have almost 3 yo twins. Our mortgage is at 6%. We can neither move nor refi due to being underwater. Our salaries, which had been going up 5-10% every year or two have stagnated. We can and do pay our mortgage, but are squeezed by the increased costs of daycare for two, increased costs for groceries, etc.
It's just a lot at once. We will be ok, but feeling stuck, and especially not being able to refi sucks. I'll pay the whole sucker off- I took the loan, but why can't I get a 2-3% break!? |
Anonymous
Yes, I'm glad someone else said this. 5 and 7 year ARMs are often inappropriately put in the same category as interest only mortgages, balloon payments, 105% mortgages, etc. Yes, some are risky products (1 year adjustables based on the LIBOR, for example) but they are not responsible for people being underwater or drowning, at least not right now. Hell, as the PP said, anyone who purchased a home on a traditional 5-year ARM in 2003-2006 has seen their interest rate go down considerably. |