What I don't get: When people complain that they are drowning because their house is underwater

[Anonymous]

Anonymous wrote:Not sure when the last time you bought a house was, but when we bought in 2004, most of the professional advice was to buy as much house as you could afford, and to use something like a 5-year ARM in order to stretch further. Then if you were still going to be in the house, you could refinance later with the equity you'd inevitably make on the increase in value. In retrospect was that bad advice? Yes. But housing bears were few and far between back then.

We bought a house we could easily make monthly payments on, and we financed with a 30 year fixed. If I had had a crystal ball back in 2003, I would have bought double the house we did buy (on the Hill). We'd have a bigger house and even more equity. If I'd followed that advice in 2006-2007, in Manassass, we'd be massively underwater and part of the problem.

It's very, very easy to second-guess people's choices when things go wrong, with the benefit of hindsight.

As far as professional malpractice goes: we have a home mortgage industry because they provide the positive benefit of using their expertise to mitigate risk. That they failed so spectacularly at that *is* evidence of professional malpractice.

When we bought our home in Alexandria in '06, we decided to buy a home based on one income, though we both work. What if one of us loses our job? We were pushed from every direction possible to buy more, because on paper, we could afford 4 times the house we purchased. We thought carefully about the future, our future, our finances, and didn't want to make a mistake, or feel house poor. To make matters worse, we put 50% down, which caused more stir. But, no one held a gun to our heads and said we had to buy more house! Ultimately, it's the buyer who decides, not the bank. Sure, they can dangle a golden carrot, and perhaps you may think twice, but it's still the buyer's decision.

[Anonymous]

Id like to point out that strategic default and bankruptcy for that matter is probably not as big of a risk in this area because it also means risking your security clearance(s). So I think its just something over blown by the media.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Not sure when the last time you bought a house was, but when we bought in 2004, most of the professional advice was to buy as much house as you could afford, and to use something like a 5-year ARM in order to stretch further. Then if you were still going to be in the house, you could refinance later with the equity you'd inevitably make on the increase in value. In retrospect was that bad advice? Yes. But housing bears were few and far between back then.

We bought a house we could easily make monthly payments on, and we financed with a 30 year fixed. If I had had a crystal ball back in 2003, I would have bought double the house we did buy (on the Hill). We'd have a bigger house and even more equity. If I'd followed that advice in 2006-2007, in Manassass, we'd be massively underwater and part of the problem.

It's very, very easy to second-guess people's choices when things go wrong, with the benefit of hindsight.

As far as professional malpractice goes: we have a home mortgage industry because they provide the positive benefit of using their expertise to mitigate risk. That they failed so spectacularly at that *is* evidence of professional malpractice.

When we bought our home in Alexandria in '06, we decided to buy a home based on one income, though we both work. What if one of us loses our job? We were pushed from every direction possible to buy more, because on paper, we could afford 4 times the house we purchased. We thought carefully about the future, our future, our finances, and didn't want to make a mistake, or feel house poor. To make matters worse, we put 50% down, which caused more stir. But, no one held a gun to our heads and said we had to buy more house!

You've just described our situation as well.

Ultimately, it's the buyer who decides, not the bank. Sure, they can dangle a golden carrot, and perhaps you may think twice, but it's still the buyer's decision.

This is horseshit. If you think otherwise I'd like you to try walking into your local bank, tell them how much money you want, and wait for them to give it to you. Once upon a time, a lender had to practice sane lending. After the massive deregulation of the 80s and 90s, the brokers no longer had any incentive to do so. They'd cut loans, and sell them upstream to be bundled and resold again. The reason banks needed to be bailed out was that the fundamental distinction between commercial and investment banking was erased.

[Anonymous]

Anonymous wrote:Because people look at underwater properties as a chunk of money they have lost. Regardless whether you still have mtg on it or have managed to even pay it off, it is still money lost should you attempt to sell it. You cannot get your money out of it unless you wait and this wait may take many years just to get what you paid for it. Not any appreciation, not to keep up with inflation, just to get dollar to dollar what you put into it, you must wait years. This is why people are upset. don't see how it is so difficult to understand. Mtg amount and whether you can afford it today has not much to do with it. It's the feeling of loss of your hard earned dollars.

Some people are walking away from their underwater homes as they simply don't want to continue paying into the hole regardless whether they can afford their mtg or not, especially if they have put very little equity into the house. They just want to cut their losses. Others, like my friends in CA were able to negotiate a lower pmt with their bank on their home that's lost half of its value. The bank have agreed to make an arrangement for some sort of refinancing to keep them in this house when they prepared to walk away from it.

But the buyers gambled and lost. And now they want to blame the mortgage brokers and banks? So, if you buy stocks and the market goes down, is that the fault of your stock broker? Everyone takes advice from stock brokers, but everyone also knows that they don't have a crystal ball. They can only tell you what the market trends suggest, not what the market itself will do. If you go to Las Vegas and bet at the blackjack table, if the dealer says that most people hit on 16 and stand on 17, and you lose the hand, is that the dealer's fault?

As the PP mentioned, the buyers are ultimately responsible. They asked for advice, were given advice based on the then-current market conditions which changed. So, now it is the brokers and banks fault that they recommended what had been working for several years, but changed very soon after? No, the buyers took the risk. They were gambling that the market would go up and they would make money as had been the case for years. But it didn't. They are still responsible.

As someone who planned around this eventuality, I resent that my tax money is going to bail out homeowners who were less responsible. We bought in 2006 around the height of the market...put 20% down and that's all gone and we're still 50K underwater. But we knew that could happen and we planned to be in this house until we're ready to downsize, so for the long term. We have about 16 years more to pay off our loan and then we'll have whatever the house is worth. It may be less than we purchased, but we'll have had over 20 years of enjoyment of the house and whatever the house is worth. Other than people who were truly defrauded (not the majority), people who suffered calamity such as family illness or involuntary job loss, I am resentful of the irresponsible folks getting bailed out for making bad decisions and not living up to the commitments that they made when they thought they were going to make money on real estate, but lost instead.

[Anonymous]

PP do you understand that people are NOT being bailed out, but that banks are?

[Anonymous]

[b]

Anonymous wrote:I've been responsible for my finances - but I wasn't for everyone else's - as a result home prices in my area have plummeted - so I've lost the 90k I put down when I bought the house in '05 right before the shit hit the fan and am probably 150k MORE underwater. What do you assume I do there? I did not have a crystal ball - and sorely wish I did.

Nothing. But why do *you* assume housing prices only go up? It is your attitude that I find obnoxious. I'm sorry you made a bad investment decision. I've lost a buttload of $$$ in stocks as well, but you don't hear me crying about the $100k+ that vanished. Your house is no different. It is an investment. If you didn't want to invest like this, you should have rented.

The point OP was making was that why should you get to complain b/c you've lost money? You presumably can still afford the mortgage payments, right? Just like you'd be affording rental payments, no?

So STFU please.

[Anonymous]

Anonymous wrote:PP do you understand that people are NOT being bailed out, but that banks are?

What do you call HARP?

[Anonymous]

Anonymous wrote:PP do you understand that people are NOT being bailed out, but that banks are?

http://www.cnbc.com/id/43609086/Government_Mortgage_Bailout_Numbers_Still_Weak

So, these 32,000 people are all banks? Wow. Do they get FDIC backing for their new mortgages?

[Anonymous]

Anonymous wrote:[b]

Anonymous wrote:I've been responsible for my finances - but I wasn't for everyone else's - as a result home prices in my area have plummeted - so I've lost the 90k I put down when I bought the house in '05 right before the shit hit the fan and am probably 150k MORE underwater. What do you assume I do there? I did not have a crystal ball - and sorely wish I did.

Nothing. But why do *you* assume housing prices only go up? It is your attitude that I find obnoxious. I'm sorry you made a bad investment decision. I've lost a buttload of $$$ in stocks as well, but you don't hear me crying about the $100k+ that vanished. Your house is no different. It is an investment. If you didn't want to invest like this, you should have rented.

The point OP was making was that why should you get to complain b/c you've lost money? You presumably can still afford the mortgage payments, right? Just like you'd be affording rental payments, no?

So STFU please.

I never **assumed** it would go up but I also didn't count on big businesses raping america via their massive greed with the fraud that was MBS and for my home value to fall over 200k. I'm pissed b/c I see the big banks getting bailed out and people who should have never been in the homes to begin with getting bailed out on my back and the backs of other people who are responsible. Why should some people get to walk away from their bad investment without any long term ramifications (only losing their down payment) and the rest of us be stuck? At least if I invested in the stock market - which I have and lost - everyone loses equally unless there is insider trading. This scenario is not playing out that way. So STFU right back

[Anonymous]

The value of your house has gone down. So has the value of your 401(k), I'm betting. "Buy and hold" is key to investing in anything -- equities or real estate.

Back in the day, you weren't supposed to buy a house (or refinance) unless you were sure you'd be staying in place for at least 7 years. Otherwise, you risked losing money. Are any of the people who are now underwater living in a house they bought earlier than 2004? No refinancing (or at least only with a shorter term)?

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP do you understand that people are NOT being bailed out, but that banks are?

What do you call HARP?

We've tried it all - HARP, HAMP, BoA, you name it. BoA wanted us to bring $20k+ to the table and our payments would actually go UP several hundred dollars each month, which we can't afford.

80% of the responders on this thread can jump on me all they want - Anyone out there have any advice regarding strategic default in Virginia? They can have my near-perfect credit score.

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP do you understand that people are NOT being bailed out, but that banks are?

What do you call HARP?

You'll probably want to look into the numbers of mortgages that have been modified under HAMP/HARP. It's a joke, often used by lenders to squeeze extra money out of mortgagees before foreclosing on them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP do you understand that people are NOT being bailed out, but that banks are?

What do you call HARP?

We've tried it all - HARP, HAMP, BoA, you name it. BoA wanted us to bring $20k+ to the table and our payments would actually go UP several hundred dollars each month, which we can't afford.

80% of the responders on this thread can jump on me all they want - Anyone out there have any advice regarding strategic default in Virginia? They can have my near-perfect credit score.

Just because you don't qualify does not mean that people are not being bailed out. I understand that the qualifications are rigid. They're rigid because there is no way that the government can afford to bail out 3 million underwater homeowners. So they try to set the restrictions so that they can devote what money that they have to the focus groups. They have helped thousands. I know that is no salve to the hundreds of thousands that have not been helped, but there's a limit to what the government can afford to do.

As for the banks being bailed out...you think the economy is currently bad...you don't really want to see what would happen if those major banks were to declare bankrupcy. It could take decades for the US to recover from that economic disaster and there could end up being many cities in the financial straights of Detroit. It may be bitter, but it was necessary.

[Anonymous]

Ultimately, it's the buyer who decides, not the bank. Sure, they can dangle a golden carrot, and perhaps you may think twice, but it's still the buyer's decision.

This is horseshit. If you think otherwise I'd like you to try walking into your local bank, tell them how much money you want, and wait for them to give it to you. Once upon a time, a lender had to practice sane lending. After the massive deregulation of the 80s and 90s, the brokers no longer had any incentive to do so. They'd cut loans, and sell them upstream to be bundled and resold again. The reason banks needed to be bailed out was that the fundamental distinction between commercial and investment banking was erased.

Gimme a break. You're seriously claiming that in 2005-06, if you went into a bank with an income of $400,000 per year and wanrted a mortgage of $500,000, the bank would refuse? They'd simply insist on lendign yu $1,000,000, or nothing at all?

That, my friend, is horseshit. More accurately, it's a tepid attempt to deflect any personal responsibility for the consequences of your decisions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Because people look at underwater properties as a chunk of money they have lost. Regardless whether you still have mtg on it or have managed to even pay it off, it is still money lost should you attempt to sell it. You cannot get your money out of it unless you wait and this wait may take many years just to get what you paid for it. Not any appreciation, not to keep up with inflation, just to get dollar to dollar what you put into it, you must wait years. This is why people are upset. don't see how it is so difficult to understand. Mtg amount and whether you can afford it today has not much to do with it. It's the feeling of loss of your hard earned dollars.

Some people are walking away from their underwater homes as they simply don't want to continue paying into the hole regardless whether they can afford their mtg or not, especially if they have put very little equity into the house. They just want to cut their losses. Others, like my friends in CA were able to negotiate a lower pmt with their bank on their home that's lost half of its value. The bank have agreed to make an arrangement for some sort of refinancing to keep them in this house when they prepared to walk away from it.

But the buyers gambled and lost. And now they want to blame the mortgage brokers and banks? So, if you buy stocks and the market goes down, is that the fault of your stock broker? Everyone takes advice from stock brokers, but everyone also knows that they don't have a crystal ball. They can only tell you what the market trends suggest, not what the market itself will do. If you go to Las Vegas and bet at the blackjack table, if the dealer says that most people hit on 16 and stand on 17, and you lose the hand, is that the dealer's fault?

As the PP mentioned, the buyers are ultimately responsible. They asked for advice, were given advice based on the then-current market conditions which changed. So, now it is the brokers and banks fault that they recommended what had been working for several years, but changed very soon after? No, the buyers took the risk. They were gambling that the market would go up and they would make money as had been the case for years. But it didn't. They are still responsible.

As someone who planned around this eventuality, I resent that my tax money is going to bail out homeowners who were less responsible. We bought in 2006 around the height of the market...put 20% down and that's all gone and we're still 50K underwater. But we knew that could happen and we planned to be in this house until we're ready to downsize, so for the long term. We have about 16 years more to pay off our loan and then we'll have whatever the house is worth. It may be less than we purchased, but we'll have had over 20 years of enjoyment of the house and whatever the house is worth. Other than people who were truly defrauded (not the majority), people who suffered calamity such as family illness or involuntary job loss, I am resentful of the irresponsible folks getting bailed out for making bad decisions and not living up to the commitments that they made when they thought they were going to make money on real estate, but lost instead.

This is where you are wrong. You assume everyone but you *gambled* in the RE market and that is the reason they purchased their homes. Are you the only one who just bought the house to live in during the times of the bubble? Some people did speculate, wanting to flip properties and they got their butts handed to them when they joined the party a bit too late. This perhaps is more comparable to making risky decisions in the stock market, these people after all put their money to make quick cash. But for every one of such people there are those that just bought homes they intended to live in for many years. Some bought places they could not afford and were struggling with payments from the start go. Others bought homes they could afford, made conservative long term decisions, put 20% down and got 30 year loans. But are now underwater and cannot help the feeling that they are *trapped*.

This is exactly what it is, when you are living in a home that has lost its value, you cannot sell it and move when you need to unless you lose a good chunk of your hard earned money. This is not gambling or in any way comparable to putting your money into the stock market. These people did not intend to flip and get rich fast, they just wanted to do what people did for generations here and keep even, but they are not. Actually in the stock market you are much more liquid and don’t need to go through the drawn out process of selling your property, which is both expensive and emotionally and physically draining. People who lost in the market can at least get out what is *left* without nearly as much work and cost as eliminating RE.