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

[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.

Virginia is a recourse state. So you're personally liable for the amount of the mortgage, regardless of what the house brings in foreclosure. Not really a good option.

[Anonymous]

Anonymous wrote:

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.

This is a distinction without a difference. If all you wanted was a place to live, you'd rent. But everyone wants to build equity, and not "throw money away" renting. So whatever the ancillary benefits,buying a house IS an investment, with all the risks that an investment entails.

[Anonymous]

NP here. First, we are not currently underwater (only because we brought $80k in cash to the table to refinance last year**), but our house could probably sell for about $100k less than we bought it for in 2005. I, personally, am not asking for anyone to bail us out, not the government, not the bank, not our neighbors. If our house had just held its value, i.e., if we could sell it today for the exact amount we paid 6+ years ago, (absent the refi), we would have over $100k to use on a down payment on a forever home (we're currently in a 2 bedroom TH with 2 kids) plus the $80k we had saved specifically for a down payment. Certainly no one should be crying a river for us just because we would like a forever SFH that we can't buy right now (because we don't have the down payment), and we are very fortunate that neither of us has lost a job or dealt with any other catastrophies. Still, for me, the crappy part is just that this investment (and, yes, it's just a bad investment but there is also an emotional component) will affect us financially for the rest of our lives. I imagine it will be another 5 years or so before we can save the down payment for our forever home after we dumped our down payment savings into the refi (and I'm not talking large, just a simple 3bed SFH in the mid burbs of NOVA). We bought when prices were high, we can't afford to buy now when rates/prices are low(ish), and by the time we can afford to buy again, rates and prices might be high again. It's just frustrating because I feel like we're forever in the wrong part of the cycle, and I did not foresee raising my kids til they are late elementary school in a small TH. Again, I realize there are real problems in this country and in this area, but it really does feel like an emotional and financial dead end, and like we've been set back financially 10 years or so as it will be 10 yrs later that we buy our forever home, 10 years later that we pay off the mortgage, etc. So, we're just going to be patient and keep saving and keep paying our mortgage (since that's the only way we'll gain any equity it seems), but that doesn't mean it isn't discouraging. And people who aren't in this situation (of having it good in terms of affording the payments, having jobs, etc but having it bad in that they're stuck in a house/condo that they didn't plan to be stuck in for 12+ years with no options) don't really get it. They seem to assume that if we're saying "this sucks" then we're expecting a bailout, and that if we're in this situation then we must have bought more house than we could afford and those things aren't necessarily true for everyone.

**We refinanced because we used a 7 year ARM in 2005, planning to sell the house and leave the area in 5 years, but giving ourselves a 2-yr cushion as well. Last spring when rates were fairly low and it seemed the economy might recover, we were afraid to wait any longer to refinance before the rate started resetting in Dec 2012. We could afford any change but didn't want the uncertainty. We couldn't sell because we didn't have enough to bring to the table, pay realtor fees, AND have enough to put down on a new house plus closing costs. We couldn't rent it out because we would be in the hole $800/month between the rental rate and the mortgage payment. So we refinanced and brought our payment down substanially but we have a long way to go to save enough for a down payment on a SFH again.

[Anonymous]

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.

Actually, for generations and generations, people bought a house and stayed in it. MAYBE they upgraded once. They bought and held real estate for a long time, which allowed it to appreciate slowly, and at the same time they paid off the mortgage, so at some point they owned the house free and clear (regardless of what it was worth). And that is EXACTLY what would happen today - if people paid down the mortgage and didn't worry so much about what the assessment is worth. This brings us back to the OP's question, by the way. Homeowners who can make their payments aren't "drowning" because they're underwater. Sure, they lack flexibility, but that's not the same thing. Drowning means your income can't meet your obligations. But inherent in the question is that the homeowner CAN meet her obligations, but is stressed because her house is worth less than her mortgage. Which stinks, but isn't a good reason to modify the mortgatge, in my opinion.

[Anonymous]

I just don't buy the emotional component.

A house is an investment. If you stay in it long enough, it is bound to bring back some kind of return, but who knows what. I personally feel worse for the people who lost 80% of their retirement funds b/c of the stock market. So many companies have declared bankruptcy and the equity goes "poof" - good bye.

At least people who invested in real estate still have something to show for it. You just need to wait it out longer.

Some of you just come across as spoiled brats ("I wanted to move in 5 years and now we can't move without bringing $25k to the table..."). Please....get over yourselves. If you really want to move, do what I did - save AGGRESSIVELY and put 20% down on a new house and rent out your other home. Rental prices are pretty good right now. You just need to actually save money. The added benefit will be that you have - 20 years down the road - a nice rental property that you now own outright...

[Anonymous]

Anonymous wrote:
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

You make absolutely no sense. Not everybody loses equally in the stock market. Different stocks perform at different levels...duh. Just like homes, people buy stocks at different times and sell at different times - some are winners and some are losers. How is the housing market any different? Some people were more savvy about it than others. Honestly - even back in 2003, which is when we bought, there was at least some talk of a housing bubble. We bought a house in a hot area, but that needed tons of work. We have not lost money and even refinanced to update the place. Some of our neighbors sold at the right time and made serious cash. Some didn't and lost money, but that is just how it goes.

I bet most of the people on here whining about how they lost money bought in the middle of fucking nowhere - Ashburn, PWC, etc. - a newish house on a tiny plot of land that looks the same as almost every other house in the zip code. If you buy a house in a place where land is cheap, then - yes, you probably have lost a ton of $$$. But this notion - that land appreciates and homes depreciate - hasn't changed. You just weren't smart or were greedy and wanted your brand new cookie-cutter home.

[Anonymous]

Anonymous wrote:I just don't buy the emotional component.

A house is an investment. If you stay in it long enough, it is bound to bring back some kind of return, but who knows what. I personally feel worse for the people who lost 80% of their retirement funds b/c of the stock market. So many companies have declared bankruptcy and the equity goes "poof" - good bye.

At least people who invested in real estate still have something to show for it. You just need to wait it out longer.

Some of you just come across as spoiled brats ("I wanted to move in 5 years and now we can't move without bringing $25k to the table..."). Please....get over yourselves. If you really want to move, do what I did - save AGGRESSIVELY and put 20% down on a new house and rent out your other home. Rental prices are pretty good right now. You just need to actually save money. The added benefit will be that you have - 20 years down the road - a nice rental property that you now own outright...

You're being shortsighted. Most of these people aren't talking about bringing $25k to the table; it's much, much more than that, plus realtor fees, plus a down payment, plus closing costs, etc. And renting out the property isn't much of an option when you'll take a huge loss every month on the rent. Again, you're assuming too much by assuming that people aren't also saving aggressively. I don't know how much you make, but it's going to take us quite a while to save $80k-$100k. I'm the "we're being patient" poster so I get your point, and, if nothing else, this has been a huge lesson in patience (and will continue to be for the next 5+ years), but, frankly, what you are suggesting would be a dumb financial decision (for us anyway). We're trying to do what is financially responsible and that is why we're stuck in a too small TH.

[Anonymous]

Anonymous wrote:
Actually, for generations and generations, people bought a house and stayed in it. MAYBE they upgraded once. They bought and held real estate for a long time, which allowed it to appreciate slowly, and at the same time they paid off the mortgage, so at some point they owned the house free and clear (regardless of what it was worth). And that is EXACTLY what would happen today - if people paid down the mortgage and didn't worry so much about what the assessment is worth. This brings us back to the OP's question, by the way. Homeowners who can make their payments aren't "drowning" because they're underwater. Sure, they lack flexibility, but that's not the same thing. Drowning means your income can't meet your obligations. But inherent in the question is that the homeowner CAN meet her obligations, but is stressed because her house is worth less than her mortgage. Which stinks, but isn't a good reason to modify the mortgatge, in my opinion.

This is correct, but, completely OT, this makes me think of Willie Loman.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
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

You make absolutely no sense. Not everybody loses equally in the stock market. Different stocks perform at different levels...duh. Just like homes, people buy stocks at different times and sell at different times - some are winners and some are losers. How is the housing market any different? Some people were more savvy about it than others. Honestly - even back in 2003, which is when we bought, there was at least some talk of a housing bubble. We bought a house in a hot area, but that needed tons of work. We have not lost money and even refinanced to update the place. Some of our neighbors sold at the right time and made serious cash. Some didn't and lost money, but that is just how it goes.

I bet most of the people on here whining about how they lost money bought in the middle of fucking nowhere - Ashburn, PWC, etc. - a newish house on a tiny plot of land that looks the same as almost every other house in the zip code. If you buy a house in a place where land is cheap, then - yes, you probably have lost a ton of $$$. But this notion - that land appreciates and homes depreciate - hasn't changed. You just weren't smart or were greedy and wanted your brand new cookie-cutter home.

There are the nasty assumptions again. Not true, for us anyway. Alexandria section of FFX County.

[Anonymous]

They seem to assume that if we're saying "this sucks" then we're expecting a bailout, and that if we're in this situation then we must have bought more house than we could afford and those things aren't necessarily true for everyone.

PP, your attitude does you credit, and the situation does indeed suck. One quibble, though - many on this thread ARE in your situation and are asking for some sort of bailout. You're not, but many are.

[Anonymous]

Anonymous wrote:

Anonymous wrote:


I bet most of the people on here whining about how they lost money bought in the middle of fucking nowhere - Ashburn, PWC, etc. - a newish house on a tiny plot of land that looks the same as almost every other house in the zip code. If you buy a house in a place where land is cheap, then - yes, you probably have lost a ton of $$$. But this notion - that land appreciates and homes depreciate - hasn't changed. You just weren't smart or were greedy and wanted your brand new cookie-cutter home.

PP here, but I don't think I whined...

Yes, my house is in PWC, our jobs are in PWC--so I don't exactly think it "wasn't smart" or "greedy" to buy close to our jobs.

[Anonymous]

Anonymous wrote:Actually, for generations and generations, people bought a house and stayed in it. MAYBE they upgraded once. They bought and held real estate for a long time, which allowed it to appreciate slowly, and at the same time they paid off the mortgage, so at some point they owned the house free and clear (regardless of what it was worth). And that is EXACTLY what would happen today - if people paid down the mortgage and didn't worry so much about what the assessment is worth. This brings us back to the OP's question, by the way. Homeowners who can make their payments aren't "drowning" because they're underwater. Sure, they lack flexibility, but that's not the same thing. Drowning means your income can't meet your obligations. But inherent in the question is that the homeowner CAN meet her obligations, but is stressed because her house is worth less than her mortgage. Which stinks, but isn't a good reason to modify the mortgatge, in my opinion.

You know, the housing bubble of the early 2000's when the prices were skyrocketing annually, lead many to jump on the bandwagon late. By the mid-2000's I saw and heard of many people who thought that they *HAD* to buy then or they would get priced out of the market and then bought more than they could comfortably afford expecting that they could do what people did 5-10 years before which was buy on speculative financing and then refinance, or "take the equity" out of the house, or sell for a quick profit in 5 years and then move on to the house of their dreams.

This is akin to people buying a hot stock...the real investors buy early, and wait for all the speculators to buy into it and when the major investors bail taking their profit, the price plummets and you have the latecomers stuck with a much weakened stock and a cash loss. It's unfortunate that this has happened to so many, but as pointed out, buying 2-3 houses and getting bigger and bigger each purchase is a very recent phenomenon, say the last 20-30 years. Before that, people behaved as the PP says. Unfortunately the latecomers are stuck on the back end of the housing parabola of this relatively new paradigm.

I'm sorry you don't get the profit, sell and move on, but that was never guaranteed. It does not justify mortgage modification. I think mortgage modification should be reserved for those people who can no longer afford the mortgage they have, e.g. those who have lost jobs, those who have a family member with a prolonged illness, especially one that was one of the income earners. These are the ones that need the bailout. For those just dissatisfied with their location or home size, unfortunately, I don't think the government really can afford to bail you out and you'll have to "wait it out" as the other PP said he has to do.

[Anonymous]

Oh woe is you. And I have retirement accounts that have flatlined despite my continuing to pay into them.

No one promised you a rose garden. Much less a 4,000sf rose garden on a quiet street in the right school district.

You came in the game late and you lost. We bought in 96, paid $141K and the house is currently assessed at $550K.

Welcome to capitalism.

[Anonymous]

OP doesn't get a simple different when comparing underwater RE with the stock market and other investments. When losing in the stock market you don't have an option of walking away from your responsibility. Your account can get wiped out and you won't be getting it back and if you get a margin call and must pay over what you had invested, you won't get away from it easily. In this whole RE mess people walk away from their loans and don' thave to continue to pay into the hole of the overpriced mortgage. It is especially easier for those who put zero down and were making interest only low payments. The banks screwed themselves lending such loans and making it so easy for people to walk away without losing much of their own cash. I guess, those who did put money down and some significant equity and planned to stay in their homes are feeling the tinge of jealousy as they did everything right, were responsible and are now trapped.

[Anonymous]

Also there's the little matter that stock losses can be written off while losses on personal residences have no tax benefit at all.