Anyone "walk away" from from their home mortgage?

Better solution, in my opinion: sell it to one of those places that "buy ANY house". I have a friend in a similar situation. She owes about $150,000 on a house that is worth about $100,000 (she is not very bright). I keep telling her to sell it to one of those places, because having $100,000 is better than having nothing, which is what she'll get if she forecloses (and she will if she keeps going at this rate).

 

Walking away is not going to absolve them of their debt, it will follow them. Since they are still able to make payments I'd advise them to continue doing that and wait it out. I do appreciate that waiting it out may take years, but I still think that is the best course of action.

 

Its a crappy situation to be sure. We're in somewhat of a similar spot, but not as severe. Our house is still worth more than we paid for it, but the reality is the value is arbitrary because no one is buying. We bough 6 years ago before we had kids. Now 1000 sqft with a 3 year old and a 6 month old is getting pretty cramped. Plus we're in a pretty crappy school district, and our oldest isn't that far from kindergarten. There are good deals out there in the suburbs, that have seen a much bigger decline in values. But given that we can't sell our house, and probably couldn't get a new mortgage anyway we're pretty much stuck here. That sucks, but thats the way it is. The idea of walking away from the house/mortgage has never occurred to us as a viable possibility. Its a good thing we refi'd our arm into a 30 year fixed about a year ago and didn't take out any equity.

The only people I know considering this are owners of rental properties. They bought two extra houses 3-4 years back, fixed them up and were renting them out for their retirement investment. Now both houses are worth less than they bought for, they can't keep renters in them (huge glut of rentals on the market now), he's lost his job, and they are basically screwed. So much for retirement.

Rob

 

I would agree with those who recommend waiting it out. They may never get right side up but it seems like walking out on a mortgage would trump any good credit they currently have. Not to be cold but it sounds like they were shortsighted when they got themselves into this situation. They purchased in one of the most overinflated markets in the country during peak bubble, far away from family and took out an ARM to boot. The ARM thing is interesting considering they had a 20% down payment.

 

Nevada is a recourse state.

 

Stay in the house if at all possible. Once the market recovers get the hell out of Vegas. Long term it's a dangerous place to be a property owner because of water issues (they haven't got any).

 

I realize that. But owing $50K is a lot better than owing $150K (since most of that is home equity loan, I believe she'll still be responsible for it even if her house is taken back by the bank).

 

They may be OK renting but the landlord is going to do a credit check and find they bailed on the house. A landlord would have to be pretty desperate to welcome a deadbeat tennant.

 

I they could rent and cover their mortgage then they should. A foreclosure on their record will haunt them much longer than a bankruptcy and I don't recommend it at all. I would stick it out for one more year and hopefully the market will increase. Don't sell your stocks now and don't sell an overinflated house now. They need to do their best to hold on for a little while. If they have to jump ship it is better to wait until it gets a little closer to the shore.

 

Tell your friend's to talk to somebody who knows the Real Estate Market in Las Vegas. All the rest of the "Free Advice" you read here is only worth what you paid for it.

Wildkow

 

+1, with bells on.
This is the best advice I have read on this thread.

Personally I'd sell everything but the house and wait till the market recovered before getting out, then again if the collapse in real estate is nation wide, now might be the time to buy into real estate.
But I'm just guessing.

 

You cannot fix one bad decision with another bad decision and expect everything to turn out better. They can make decisions based on personnel integrity or short term financial motivation....It seems they are about to find out how life really works. Don't overlook that they live in a city where screwing people for money is THE major occupation of most institutions there.

 

All I have to say is THANK YOU!!

The OP's friends need some serious, professional financial and real estate advice. They may get what they want, they may not, but they're going to need some professionals in this market.

What I do know, is that walking away is not going to solve anything for anyone. That kind of selfish disregard (based on the reasons sited) for the commitments they made is one of the root causes of our current financial crisis. No, their single mortgage isn't likely to change anything, but add enough of those together and you'll certainly see an impact.

I going to reserve any further comment as none of it would be complimentary or even constructive.

 

I know a fella that is a CPA that walked on a home in Lincoln Hills.

I told him before he bought it that $4800 a month was a steep bill for a state worker... but his wife wanted an image and a long driveway...

They are in a new subdivision in Rancho Cordova now in a home their family helped them get into for half the coins.

He found that the bank sold it for just a little over half of what he owed.

 

It seems that the Feds will have to have some remedy for people in this situation.
I would hold out until the next Presidency .
At least there will be a remedy for the resetting monthly payment.
This whole banking mess could have been avoided by bailing out homeowners .
It wont be solved until the foreclosures are stemmed.

 

So now they have half the house and the same size debt?
Great decission :rockon: not.

How did I work that out?
Bank sold house for half of one debt
I assume they borrowed to get the next house "for half the coin"
half plus half equals one whole when I went to school.

 

Who knows? The details are just a little sketchy on this one. My guess is that the bank had to write some of it down (the proverbial financial bath.) I'd further guess that on the new house, the new house isn't directly owned by these people; it sounds like at least one other person in the family is listed on the note and even be the primary borrower.

I'd like to think that our banks wouldn't write a loan to someone that they knew had defaulted on their previous mortgage, but then again, I'd have liked to think that our banks wouldn't have gotten in this pickle in the first place; I guess I always did under estimate greed.

In any event that write down I was talking about is yet another leg in the mortgage crisis. Though this one really should be laid at the feet of the banks themselves, at least mostly. No people shouldn't have signed deals like those, but the banks shouldn't have offered them in the first place. This is a very common story: bank offers an outrageous mortgage to someone that had no chance of realistically making the payments; said person agrees to mortgage and then defaults on the loan; bank acts surprised. Repeat that a couple of hundred thousand times and you get the mess we're in.

Sorry the whole thing just chaps my @ss.

 

The bank took it in the shorts... after the foreclosure the fella lost 120 sq/f and a lot of yard but his payments are now $1700, and he isn't responsible for the last house at all...

I think him & his wife thought that the value of the home would continue to climb and he could sell it later for double...

And while it was a beautiful home... it WAS above his level of earnings, and he didn't have to put too much in the transaction to move in...

Unlike any real estate I have ever bought where we always had to have 20+% plus points to move in.