The recession has meant job loss or at least a decrease in income for many people, including my partner and me. We can't afford our mortgage anymore. We have to sell, which means a short sale. The OP's question makes me think a lot of you on DCUMs have not experienced a decrease in income. There will have to be RIFs, you know.

This is actually a fascinating and personal topic to me. We were stationed here in 2006, started trying to buy in 2008 after watching the market carefully for some time, and were successful in 2009. We read the Virginia Housing Bubble blog obsessively, made spread sheets and trips to the county records office, and came to know local real estate better than most.

Our friends who bought between 2002-2007 did so because everyone told them "buy now or be priced out forever.". They took all of their savings, borrowed from family, got first and second mortgages, and bought the most house they could at the time, often with ARMs, hoping to move before the rate reset. Many bought new construction. Some refinanced to consolidate debt.

Out here in PWC, entire neighborhoods lost 60-70% of their value. My friends are not underwater $50K, they are under $250K. They have no equity, they can't refinance, their families have grown, and they can't move. They are killing themselves to keep up with the payments while their new neighbors pay less than half for the same house every month. These are not McMansions, these are townhouses and cute(?) little pop-ups with no basements or no garage or no yard or no privacy or no personality or no granite countertops. So I think that counts as drowning.

They followed conventional wisdom, tinged with hysteria. They tried to make the best decisions for their families. They lost. And you should see how poorly they are treated by the banks that threw money at them a few years ago when they try to improve their situation. Tragic.

Anonymous wrote:this thread is so 2008/2009. OP you're weird.

It really is. If you don't get it by now, you never will.

One word: layoff. We didn't anticipate that our HHI would drop by 50%.

Luckily, our house has NOT lost value, and we can, on a tight budget, afford the mortgage on what we're making now. And if things don't look up or god forbid get worse, we could sell and be ok. But it could have been truly awful.

We can afford the payment, but the 30% of the purchase price we've paid in the past 6 years is just gone. Yes, we'd need somewhere to live but if we were renting (the comparison to money being just gone) we'd have made different choices about what we chose to pay. We had hoped to refinance in a way that rolled a second mortgage into the first. Yes, we can still afford them both, are still prepaying, and will soon only have 0 equity and not actually be underwater, but it's still frustrating.

We live in PG, not Fairfax, DC, or MoCo, and the tax assessments are down 30% from the peak and still dropping in some areas. Even in nice neighborhoods there are foreclosures that are sitting empty and a glut of houses on the market. So yes, if you have a secure government job (again, which we do) it is no big deal to be stuck in a house for 15-20 years. If you are a contractor or don't have the seniority to avoid being early in the rounds of cuts that are the next logical step with all the budget gutting, it's even more stressful.

this thread is so 2008/2009. OP you're weird.

Anonymous wrote:

Anonymous wrote:When we bought our house, I was shocked at how easy it was to get a mortgage. Our real estate agent kept pushing us to spend more. She kept saying we could easily afford a bigger house. And when we financed, they tried to push us into one of those adjustable mortgages. I had to finally had to ask the lady point blank why on earth woudl I ever consider doing an adjustable mortgage when I could lock into a low mortgage for 30 years. She laughed (as in, "you got me") and backed off.

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount.

So, they are stuck paying a higher mortgage, which they can't get out of through re-financing and can't get out of from selling due to the crappy market. Then - one of them loses a job or gets paid less or has a kid (I don't know about you, but the kid expense amazed me). And suddenly, you are under water.

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.

Kudos to you!! that is the only way anyone can fight back, because the banks are greedy. Unfortunately for first time buyers, they dont educate themselves enough to realize they are getting screwed. They figure ehh i have x years to worry about this. Then lo and behold they cant refi because house values have dropped substantially. Then what? someone i know did a loan on interest only and have one more year on it. Cant sell because they arent going to sell for enough to pay off the loan. Rented the condo but, not getting paid enough to cover the loan payment. they have one more year left and trying to decide what to do with the condo.

Lots of people don't anticipate having to move, but then an illness, death, divorce, military or other job transfer or job loss happens. And the banks WERE pushing exotic mortgages even to people whose credit qualified them for traditional, conservative fixed-rate products. So there a lot of people who bought in 2006 who have a balloon coming due, or whose payments are going to spike.

Anonymous wrote:When we bought our house, I was shocked at how easy it was to get a mortgage. Our real estate agent kept pushing us to spend more. She kept saying we could easily afford a bigger house. And when we financed, they tried to push us into one of those adjustable mortgages. I had to finally had to ask the lady point blank why on earth woudl I ever consider doing an adjustable mortgage when I could lock into a low mortgage for 30 years. She laughed (as in, "you got me") and backed off.

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount.

So, they are stuck paying a higher mortgage, which they can't get out of through re-financing and can't get out of from selling due to the crappy market. Then - one of them loses a job or gets paid less or has a kid (I don't know about you, but the kid expense amazed me). And suddenly, you are under water.

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.

Anonymous wrote:I don't understand people who bought homes with balloon mortgages and then when the payments ballooned, they suddenly can't afford it. Barring extraordinary circumstances like a job loss or something similar, people surely crunched the numbers and determined whether they could afford the increased monthly payments that they would eventually be owing.

Because i think a lot of people figure by the time the payments ballooned they would either #1 sell the house or #2 refinance. However then they find out their cant do either and are stuck with it. Like someone else said, realtors push to sell higher priced homes because they make more profit. They win, you lose.

I don't understand people who bought homes with balloon mortgages and then when the payments ballooned, they suddenly can't afford it. Barring extraordinary circumstances like a job loss or something similar, people surely crunched the numbers and determined whether they could afford the increased monthly payments that they would eventually be owing.

Anonymous wrote:So wait a minute, this just means you can't move right? not for the forseeable future anyway. If you bought a house in the first place, wasn't your plan to live there as long as possible?

Usually the intent of buying a house is to stay in it a very long time. Agreed BUT what happens when circumstances happens? Job changes, relocation, separation and or divorce....my need it to move to care for my aging parents. Which in the next year will have to happen no matter what, if not sooner. Then what?

So wait a minute, this just means you can't move right? not for the forseeable future anyway. If you bought a house in the first place, wasn't your plan to live there as long as possible?

Yes, this is all true, however, the market wasn't guaranteed to go up, buying a home is just like any other investment, and with investments comes some risk. I feel for those who have homes that are underwater, but buying a house was ultimately their decision, and guess what - they need to live with that decision. The market will go back up, it always does. Just my 2 cents.

Anonymous wrote:But....can you still afford the payment? That's the question. You still have to live somewhere. If you stay long enough, you will pay the fucker off. So I don't buy the "OMG, I will never have any equity EVER!" argument, ESPECIALLY not in Northern Virginia. People are constantly like "OMG, my house lost 50K!" Meanwhile, 50K is less than 10% of their house value.

ok...well, I've never complained that I am "drowning" but...

We bought our house in 2006...it hasn't lost $50,000, it's lost about $200,000, possibly more....We paid $570,000...and judging by recent sales in my neighborhood we could probably get somewhere around $375,000 right now.
We put a down payment of about $200,000--so after figuring realtors fees we would still be out money if we were to sell right now.

Sure, we can afford the payment right now, that part hasn't changed, but what if Dh was to get a job transfer and we had to move? I don't think we'd be able to get a renter to pay enough each month to cover the mortgage payment. Plus, there's always a chance that it would take several months to find a renter...or we'd get a bad renter that stopped paying, etc. Then we'd be paying our mortage PLUS whatever housing costs in our new location...

Yeah, I could see that as "drowning"