Anonymous wrote:

Anonymous wrote:Because most of the people that took out starter home loans for 5 year arms planed to only be in the home for five years or less

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.

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.

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 wrote:

Anonymous wrote:Because most of the people that took out starter home loans for 5 year arms planed to only be in the home for five years or less

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.

the good news is that your rate may actually fall.

Anonymous wrote: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.

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?

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 wrote:Because most of the people that took out starter home loans for 5 year arms planed to only be in the home for five years or less

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 wrote:Because most of the people that took out starter home loans for 5 year arms planed to only be in the home for five years or less

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.

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.

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.

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.

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 wrote:

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.

The entire nation doesn't live in No. Virginia. Houses underwater are crippling this country. You will have to pull yourself out of the DC bubble to get that. The people that are paying their underwater mortgages are stuck in the same neighborhood as people who lose their jobs, get transferred to other parts of the country, etc. So, even if you are paying you and your neighborhood feel the ripples.

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.

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.