Farewell to Homeownership: Lessons to Share
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are you my rik? Losing your home is a strange and alienating process. Mine is being lost right this minute, but it’s not the end of the world. Here’s what happened to me this year, and some advice from what I learned along the way. (See also: How to Avoid Foreclosure)
The Long, Slow Demise
The day my neighbor’s house —
twice the size of mine and renovated — sold at auction for $65,000, I knew we were in trouble. We paid $189,000 for 1,000 square feet of non-renovated 90-year-old American dream. But, I thought stupidly, it’ll come back up. Then, six months later, three more houses in our neighborhood foreclosed. It won’t be too bad, I said to myself. Those were old single-wide trailers. They have nothing to do with us. We’ve got a gem of a little house on an acre of land. Surely, it’ll still be worth something. Then, six months ago, the cute, refurbished, hardwood-everything house I coveted across the way sold at auction for $20,000. It had more bedrooms and baths than mine. We were done for.
I tried all last winter to modify our loan without success. We made too much on one application. Didn’t owe enough to other people and weren’t behind, so we didn’t qualify for another.
Then spring hit. Which wasn’t spring, really, but a second winter. Record snow. Record rain. The basement, where the posts and piers are, flooded three times. The water table was so high that the bathroom sink no longer drained. The septic, which had been drained and cleaned the summer before when we replaced pipes, was a mess. Contractors and plumbers said good luck with that — “You’ve got a year before you’re going to have to build a new one up the hill from you.” How much would that cost? All three contractors said $60,000. Oh, and did I mention the bathroom is sinking from the wet ground? I did some investigating, and apparently our whole town is built on top of mine caverns. One good earthquake, and it all comes down.
Math isn’t my strong suit, but even I know that my dinky house, now more than likely worth less than $20,000, is not worth a $60,000 new septic system built on top of a hillside that apparently is just caverns a few feet down.
The bank didn’t seem to think it was worth fixing either. It was worth it that we pay them our mortgage, but not worth it for them to loan us more or modify it for us to fix it. So earlier this year, we decided to leave.
Can’t Happen to Me
It’s not like us not to pay our bills. It feels weird. Especially the phone calls. We get them every hour from the mortgage company. Once every two weeks I pick up the phone and talk to them. I tell them the same thing each time — we are leaving our house because the plumbing issues and foundation issues have left it near to condemned. You wouldn’t help us fix it. Soon it will be yours.
The representatives are always pleasant. But what can they do? They tell us to apply for deed in lieu. In order for the bank to go for deed in lieu, the house has to be in move-in condition. That doesn’t work for a house with winter storm damage needing a new septic. We had been remodeling the kitchen but never finished. They tell us to short sale — and then they can apply what we make from the sale to the mortgage. No one who lives in our area is going to buy this house. Everyone here knows what the winter did to these houses, and that underneath the house is a cavern waiting for the house to fall in it.
Then I asked my lender the big picture question — which option is better for the home owner? Turns out deed in lieu and short sale are both better for the lender. But for us schmucks in the muck of home-owner disaster, it doesn’t matter much. What does bad credit mean in the US of A anymore?
So the bank calls me all the time now. I’m one of their dead beats.
The Silver Lining
With the savings of not paying the mortgage for a few months, I paid off a credit card, paid off medical bills, and was able to go see my grandfather before he died. None of these things I regret.
And there’s kind of a happy ending.
When I knew we were going to leave our house, I emailed a couple of friends of mine who have rentals. I stated I wanted at least a three-year lease so I wouldn’t have to move again soon. I’d need time to recover from all this madness. Did they have any open rentals or know a good landlord that did? My credit would be shot. I’d need someone who would take us on recommendation that we were decent people who would pay.
A friend wrote back. She had left the state but never sold her old house. It had been sitting empty for a couple of years. Beautiful house, but no one around here could afford to buy it, and odds are in the current market she couldn’t get what she paid for it. She wasn’t planning on selling it any time soon. She also bought a new house and wasn’t returning. She’d be less nervous about the property if someone was there to take care of it. Did we want to rent her twice-the-size-of-our-old-house, 70-years-younger, completely redone house? Yes, yes we did.
I’m writing to you from the new house. This feels like one of those "only in America" stories. The new home is in a nice area with lots of forest. The old home had a lovely view of my crackhead neighbor that used to weld in his garage at 3 a.m. Now I just have deer to contend with at night — a good trade off.
The Lessons for All of Us
It’s the community that will help you. It’s friends and neighbors with information. So many are suffering and in different stages of losing that we can all tell each other what’s going to happen next, which hoop to try, etc. I’ve gotten more information from my neighbors during our various yard and moving sales than from anyone in an official capacity.
If we were a corporation, we wouldn’t have thought even twice about cutting our losses and getting out of there. On the books it just doesn’t look right. Why put money into a failing investment? My husband and I are too old for that mortgage deal to ever have worked in our favor. We’d have been dead by the time we owned it anyhow.
Home ownership tends to be emotional, and just like we wrap up our worth in what we do for a living instead our humanity, we wrap ourselves up in our home's success or failure. I, frankly, have had enough of that.
Yes, America, I lost my house this year because by and large I was gullible and stupid and many people took advantage of my stupidity and gullibility. Stupidly, I thought that if I owned my own home I’d feel like less of a loser. I’d feel (there’s that emotion again) that I did something right and worthy of approval. I’m sure I’m not the only one that’s fallen into that trap.
But if there’s any Wise Bread reader out there about to lose his or her home and is freaking out — don’t freak out. We’ve all gone home with the wrong guy before. You didn’t die, and no one broke up with you for a cute young blonde. You helped yourself get screwed by a big giant corporation. They enjoyed it, and you feel cheap and easy. Get your clothes back on, grab your car keys and go. Hold your head high.
I’m a happy renter now. I love my landlady — she’s laissez faire about the right things and concerned about the right things. I love living in a house where everything was fixed and up to code. My kids are enjoying the 1,500 extra square feet. I’m enjoying paying out 300 less a month for a better house in a nicer neighborhood. Maybe finding a good landlord and a decent rent so that we pursue more important dreams than purchasing homes could be the new American dream.
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Maggie, thank you for sharing your story. I hope it's a help to someone else also facing a hard situation.
Yes, social capital is so important for keeping us afloat. We're not all on our own and we need to rely on friends and neighbors who can help us muddle through.
I hope that someone else reading this facing similar problems will also look into help from local nonprofit housing organizations. HUD.gov has a searchable map to help find housing counselors who can provide foreclosure counseling and sometimes, renovation, rental, and other help.
And the NeighborWorks network at nw.org has a search window to find nonprofit agencies throughout the country.
Only a small fraction of the folks who need help get it. Because they don't realize help is out there.
I hope you and your family enjoy your new home.
Touching story. Definitely feel your frustration. And certainly don't blame you for being a "deadbeat", given the circumstances. Unless you REALLY own a home (no mortgage), your home owns you. And it sounds like you found out the hard way, that is the case. Best of luck moving forward.
I have to say after this story, after you tell your readers that it is OK or better yet, a good idea to just forget about your responsibility's I will never be reading this blog again. You committed to the bank, you told them you would pay the loan, that is not their fault but yours. We all make mistakes but that does not mean that we can just walk away. I am disgusted that someone would do something like this and then write about how good of an idea it was. You need to take responsibility for you your decision and not just leave the bank holding the bag on your bad choices. This does not even begin to describe the anger that I feel about this. I am someone who manages to pay his bill's and stick to the commitments that I make and what you have done just raises the cost for those of us to do take responsibility. I still cannot even believe that I am reading this...wow
Goodbye! No one will miss you. Take your anger and enjoy it all by yourself, on other blogs, with other angry people who have no empathy.
seriously, i think you're sense of self-righteousness will definitely have you suffereing from embarrassment one day.
My question to people like you: If the bank decides to close your account because you *MAY* be a risk to them, its ok. If a LLC decides to walk away from a rental property, when they already own 14, because cost to repair isnt fiscally sound, its ok. If a person walks away from their house investment, all of a sudden you're disgusted with them? I think you're arrogant and sanctimonious AND HYPOCRITICAL, and honestly not someone I would want to be around.
And, if you were living in a house that was overvalued by 120k, and had to make 60k worth of repairs, i know for a FACT you would walk away too, so walk a mile in someone else's shoe, you'll sound like less of a fool.
Congratulations, Rob, you who haven't lost your job or been socked with huge medical or car repair bills. My guess is you own or work at a high level in a business that increases its profits by not giving raises, cutting hours and cutting jobs. Those actions, of course, qualify you for a bonus. Bravo.
I think it's great that you are able to honor your financial commitments; emphasis on "are able to." You may not always be able to, so please try not to be so smug. Bad choices can be made, that's true. I've made my share. But sometimes things just happen, which is also true with me.
I am fighting to keep my home. I work fulltime and am also a freelance writer. There's no reason I shouldn't be able to live comfortably, other than the fact that my house payment is too high and my hours at work have been cut. And groceries and everything else keep costing more.
Hang in there, Rob. Hope you never feel the way a lot of Americans, including me, are feeling right now. I also hope you develop a little empathy, and a sense of charity.
Maggie:
Thanks for sharing your sad tale. I was happy to read the silver lining and about your upbeat approach.
Shlomo
Excellent post. We lost our business, then we lost our house. Now we are renting a home from a wonderful woman who is very laid back and easy going. Our rent is a full 1/2 of what our mortgage was. I'm ok with all of this, my husband feels like a failure at times, and can't wait to buy again.
I'm in the same boat, paid $175,000 and now valued at $34,500 by the county for taxes. Thirteen home on one street 1/3 of a mile long that have been forclosed on. With only 7 years left on a 15 year mortgage I'm going to pay off my debt. Many on my street bought with no money down and when their houses went under, just walked away. Many after trashing the house, the one my father bought for $100,000 showed that they worked on it before they left it a complete and udder mess. People thought they'd make easy money and just walk off. When they became underwater, they thrashed the place and said so long. Instead of giving everyone in America a home they should earn it. 30% in cash down plus insurance so if they walk away, they have something to lose instead of what could be termed rent payments.
There is so much emotion tied up in home ownership, you are exactly right. When I remarried at the age of 48, my husband was adamant that we purchase a home together immediately (we had both been through bankruptcies and given up homes as the result of divorces previously). Now we own a tiny brick ranch home which has gone down in value significantly in the last few years. I'm torn between thinking we should have continued to rent until we could save up for a larger house, or maybe just continued to rent indefinitely. For too many of us fiftyish people, our houses are the bulk of our estates. Since both of us are public employees, we haven't received any salary increase for nearly five years, but the mortgage doesn't get any smaller, the cost of living keeps going up and things keep needing to be repaired. Thank God properties haven't depreciated here as drastically as what was described in this article!
What? Where did you find this story? Lol. Change a few things and this is my story with a funny twist! Like you, we are now renting, but we no longer have to drive 120 miles per day to get to/from work (I'm now less than 3 minutes away; my husband is 12 min away from his); our daughters' Christian school is now only 15 min. away and she can finally participate in after school activities, sports, etc.; I don't have to worry about repairs; I don't have to save up for that twice a year property tax; I don't have to pay for a gym membership because my complex has a beautiful gym, pool and hot-tub; our apt. complex is gated and in a nice area, and I have more money to do the things that really matter, because I am no longer paying for space I don't use or need! Yep, once you get over the emotional part, the "reality check" allows for a soft and happy landing : )
this is exactly why i have chosen not to buy a home. i may always be a renter which at the moment is perfectly fine with me. i am a single female. as a renter i do not have to worry about maintenance, a yard, property taxes, etc. i am so, so, SO glad that i did not buy a home when others kept telling me to do so about 5 years ago! i knew what i could afford and a home (with a mortgage) just wasn't it.
Thank you for sharing this, Maggie. Your story is a refreshing balance to some of the harsh postings here about people who get caught up in a difficult situation. I'm glad things seem to be working out for you, and I wish you the best of luck as you move forward.
Yup, selling homes to people without the means to pay for it tends to lead to trouble. Now we all pay for the failure of others. Deabeat? Maybe, burden to society? Absolutely. It is the sad sacks such as myself that have worked their entire lives, paid every bill and do not take charity since I plan for issues such as this economy that foot the bill for the stupid, lazy or unfortunates of the world. This system only works if teh sad sacks outnumber the stupid, unfortunately the stupids are winning.
I think you missed the point entirely. The author isn't a "deadbeat". After honestly trying to work with the banks in order to keep the home, it became impossible through no fault of their own. Don't make it sound like they've deliberately lost their home just so they could live off you. Stuff happens and one day it'll happen to you. I'm sure you will feel quite affronted when someone calls you a "stupid deadbeat".
Thanks everyone for your comments. Sad Sack, please note that we too sunk a chunk of money into this house but we didn't know when we purchased this house that we had caverns under us and would be able to build a new septic nor build a new house on the space due to the land itself. Nor did we expect the value to fall so drastically that we wouldn't have the cash to handle the issue. I don' t have a spare 60K lying around for the new septic which more than likely would not pass inspection at this point given the state of the ground underneath. So is the solution to camp in it for the next 15 years and tell the kids to pee in the yard?
If the banks we bailed out do not want to work with homeowners who were willing to pay then we arrive at this point---walking away. We aren't walking away because we couldn't afford the mortgage as much as we are walking away because the house in its present storm condition was unlivable and the bank refused assistance in trying to fix it. My guess is someone will tear it down and rebuild at the top of the acre instead.
Thank you for sharing your story. Same as many I'm sure. I am glad you're in a happier place.
The Citizens United case last year essentially defined corporations as persons, with the rights we Americans enjoy. Businesses have no problem at all with cutting bait on bad deals. So why can't us ordinary Americans act like corporations and cut bait on bad housing deals?
When each of us signs for a mortgage, the lender states that if we don't make our payments they get the house. Fine. Why continue to pump good money into a losing proposition? Lenders don't want to work with us to address a problem that so many of them created (one which affects ALL homeowners even if they've paid off their mortgage or bought prudently)? Fine.
There's more than enough blame to go around for this mess, from lenders who approved "liars' loans" without checking the figures, to the opportunistic people who filled out those forms, to public policies which encouraged home ownership even if it wasn't the best financial choice for some buyers, to a real estate industry which implied that real estate would always get more expensive.
The corporation is king in America. The bailouts exist for them; the rule-breakers go scot-free. I'm not quite sure what continuing to throw money in a hole (for Maggie, a literal hole) proves to anyone.
This is a sad story, and I do feel for the people caught in this position. However something just feels wrong to me about walking away from a mortgage that you actually can afford to pay. The concept of "a deal is a deal" should come into play somewhere. The mortgage company made the deal in good faith, and I believe Maggie and her family took out the mortgage in good faith as well. Then things went dramatically downhill - but while Maggie wasn't to blame (except perhaps for not doing enough research before buying), the mortgage company wasn't to blame either. If instead of "mortgage company" you were talking about money borrowed from a friend, family member, or just a stranger - how would everyone feel about someone just walking away from a debt? How would you feel if you were the person that loaned the money in good faith to someone who decided, for very good reaons, to just walk away? For that matter - what if the reverse had happened. If instead of turning into a money pit - the house suddenly became worth 5 times its value when she bought it, would anyone think Maggie should give some of that extra to the mortgage company? Of course not, but somehow the mortgage company should be on the hook when things go wrong. It just doesn't feel right.
By the way - unless the debt has been cleared by a bankruptcy, the mortgage company still has the option of going after Maggie for the value of the mortgage.
Dobie, you're personalizing lenders just the way they want you to.
There used to be a similar compact with employment in this country -- you stayed at a company for years -- decades, even -- as long as you wanted to and as long as you kept your nose clean. America grew fat and happy on this plan. Now, the incessant drive for quarterly profits (even at the expense of long-term prospects) gets rid of older employees simply because they're more expensive than younger employees; entire lines of business are sold off or dissolved because the powers that be don't like the percentage of profit being made. It took a while, but most American workers wised up and realized they had to take care of their own careers -- and that it was gravy for the employer if their staff stuck around long enough for them to earn back any investment in the employee.
And now this is happening with "strategic default". Tried to talk with your lender about restructuring your mortgage payments when one of you loses your job? Had to sell a house recently due to illness or death or divorce and couldn't wait however many years it will take for housing prices to approach where they were? You'll find that "good faith" you mentioned has vanished into thin air.
We did our bit with an appropriate down payment and regular mortgage payments. We improved the house year by year, in a way that most people would find attractive. Then, in 2009, we had to sell the place. The price of the house declined every few months for more than a year as it got showings but no offers. Our house was competing with half-a-dozen similar homes already on the market and a growing number of short sales and foreclosures.
We ran the numbers: there was no way we could rent it at a market rate and not keep losing money, and, based on market projections, there was no way we'd ever make back in the sale price a few years of mortgage payments for a house we couldn't occupy. So ... forget about saving for retirement and other major expenses (car repairs, etc.)? Or realize that the market had been gamed by many people who chose NOT to deal in good faith, and walk away?
A mortgage is a business deal. The lender makes plenty after your 15 or 30 years of payments. If they have helped manipulate the market to a loss, they certainly can share in that grief, too.
Yes, I suppose I am personalizing the mortgage lender a bit. But does it really matter if the person giving you a loan is a faceless company or your mother? Nothing in Maggie's post led me to believe the mortgage company did anything in the least questionable. Okay - they refused to loan her additional money, but they were under no obligation to do so nor were they obligated to modify the original loan. What bothered me was that Maggie clearly stated that she was walking away from a loan that she actually could afford to pay - to me that is dishonorable. It is one thing when people simply cannot pay because they have lost a job or had their income slashed, but this wasn't the case here. Maggie was walking away because this simply wasn't a good deal for her anymore. Now there were some extraordinay circumstances in Maggie's case, but there are thousands of people making the same decision with these extra incentives. I know this is hopelessly old fashioned - but a person's word (and signature) is their bond, and not just when it is convenient.
Dobie, I understand your point of view, and I laud you for sticking to your beliefs. I, too, was raised to view a good credit rating as important and to honor one's commitments. Believe me, a strategic default took some thinking to even consider.
But, as I mentioned in my very first post, the system was being gamed. Neither you nor I approved loans to borrowers knowing they were unlikely to ever pay them back. Neither you nor I found appraisers who would okay almost any purchase price, even when it was much higher than the property really was worth -- more money for the lender and the real-estate agent that way. Neither you nor I took a hardball stance against homeowners suffering through the worst recession since the '30s.
Likely Maggie's lender didn't do most of those things, either. But plenty of lenders did and now the every homeowner has been hurt, including you and me. The banksters got a slap on the wrist; a few of them went out of business, leaving golden parachutes floating toward earth. Based on the articles I've read lately, the banks seem to be doing okay for themselves once again.
So where does that leave the people acting in good faith? Sure, people like Maggie and like me and my partner could have continued to pay on houses in which we could not live. I figure it would have taken *us* the better part of a *decade* to pay off the difference between what the mortgagor said the house was worth and what it actually turned out to be worth. And that does not include the additional cost of insuring and maintaining an empty house. Meanwhile, we're old enough to have to worry about ever being employed if we lose our jobs and to think about whether we've saved up enough money for any kind of retirement. The tens of thousands we would have had to pay for that underwater house could go to much better purposes.
And, frankly, it's not like we walked away from this unscathed. There still was a lot of money spent getting the house on the market. And our credit will be dinged for *years*. Did you know that a bad credit rating can disqualify you from being hired for some jobs? It wasn't easy to choose a strategic default. But, financially speaking, maintaining the high moral ground in the mortgage market is a very expensive pursuit.
SD said: "But, as I mentioned in my very first post, the system was being gamed. Neither you nor I approved loans to borrowers knowing they were unlikely to ever pay them back. Neither you nor I found appraisers who would okay almost any purchase price, even when it was much higher than the property really was worth -- more money for the lender and the real-estate agent that way. Neither you nor I took a hardball stance against homeowners suffering through the worst recession since the '30s. "
I agree with this. And if someone defaults on a loan that never should have been made - that is something completely different. Don't get me wrong - I do believe that the person taking the loan is just as responsible as the mortgage company making the loan and that both should suffer for their bad decision. As for appraisers - I don't really blame them much If someone is willing to sell a property for a price, and someone else is willing to buy it at that price - then that is what the property is worth. I did not do anything to prevent "homeowners suffering" as you put, other than refusing to participate in the bubble. I am not quite sure what I could have done.
SD said: "Likely Maggie's lender didn't do most of those things, either. But plenty of lenders did and now the every homeowner has been hurt, including you and me. The banksters got a slap on the wrist; a few of them went out of business, leaving golden parachutes floating toward earth. Based on the articles I've read lately, the banks seem to be doing okay for themselves once again.
So where does that leave the people acting in good faith? Sure, people like Maggie and like me and my partner could have continued to pay on houses in which we could not live. I figure it would have taken *us* the better part of a *decade* to pay off the difference between what the mortgagor said the house was worth and what it actually turned out to be worth. And that does not include the additional cost of insuring and maintaining an empty house. Meanwhile, we're old enough to have to worry about ever being employed if we lose our jobs and to think about whether we've saved up enough money for any kind of retirement. The tens of thousands we would have had to pay for that underwater house could go to much better purposes. "
I'm sorry, but that argument sound a lot like "other people did bad things, so now it's okay for me to do bad things to other people". I do not agree with that. I'm not arguing that bankers didn't really mess things up. I don't think most of them even got a slap on the wrist. And yes, if I had my way, there would be a lot more unemployed bank execs/mortgage dealers/etc. But that doesn't change the fact that most real estate transaction come down to a buyer saying "I want that house and I am willing to $x for it.". There was never a guarantee that the house would go up in value, or that it wouldn't go down in value. Granted, no expected the drop in home prices that happened in the last couple of years - but at the end of the day it is the same house that the buyer wanted. At one point in time the buyer was willing to pay the price that was asked.
SD said: "And, frankly, it's not like we walked away from this unscathed. There still was a lot of money spent getting the house on the market. And our credit will be dinged for *years*. Did you know that a bad credit rating can disqualify you from being hired for some jobs? It wasn't easy to choose a strategic default. But, financially speaking, maintaining the high moral ground in the mortgage market is a very expensive pursuit."
Yes, there are consequences to a "strategic default". I do not mean to be harsh - but there should be consequences to breaking your word and I actually think they should be more severe than they are, not less. I don't want to come off as being holier-than-thou. I have never been in your or Maggie's situation and I hope I never am. But you cannot just, as you put it, maintain the moral high ground when it isn't costly. It's easy to do the right thing when it doesn't cost you much - the real test is if you do it when it is expensive. I don't know if I would pass that test or not. I don't think anyone knows until they are actually in that situation. It's easy to type an answer on a forum, and a lot harder when it's your home, money and future actually on the line. I do understand that. But the fact that people do it, doesn't make it right.
The bank can sell your home for pennies on the dollar, forgive you for the balance due on the mortgage, then send you a 1099A, which you will have to pay taxes on. So lets say the bank sells the house for 20k and you paid 189k. You will be have to pay income taxes on 169k that was forgiven. So now you are looking at 50k in taxes on the forgiven debt on top of your regular income taxes.
They CAN do that. It doesn't mean that they will.
Hi Maggie! Im 29, lost my first house to foreclosure (not knowing everything i should have known), but I now own 2 properties, one bought with cash. I had to take the hit to my credit, although a year later its getting right on track. I HAD to lose that house to learn the lesson I now know. So, as I wait the requisite 4 years for when I can get a conventional loan again (at higher premium), Ive learned the REAL value of homes, how to buy only what you can afford, and to NOT be gullible again. I am on my way to early retirement now, but its all because of what I learned going through foreclosure.
For those that judge others, if someone decides to walk away, you have no right to judge them. They are suffering the consequences, and you shouldnt be casting any stones. This can definitely happen to anyone.
Thank you so much for sharing your experience. I too am in the midst of losing my home. With this comes feelings of failure, shame, and stupidity. It helps to hear from others going through the same situation. It helps to see you are not alone in this.
HI Dobie, If you re-read the post the major issue is the plumbing and structure. We can't live in the house. No county would probably let it pass inspection at this point. We do not have 60K to build a new plumbing system and an additional 60--70 for new structural changes to lift the house and re do the ground beneath---house is worth less than 20K. So we can pay the inflated mortgage on it but at the moment, we can't pee there.
Maggie - I did read the entire post. I do understand that you are in a very difficult situation. However nothing in your post leads me to think that any of the difficulties were caused by the mortgage company. I am assuming based upon your statement that you actually have the ability to pay the mortgage that this was not a case of someone making a loan to someone that should not have been made. I understand that the circumstances surrounding your decision were very unique - and it may be that you really didn't have much of a choice. But to me the article sounded very like (and please understand, this is my impression only) "I walked away from a deal, broke my word - and now life is great!" And that just feels wrong to me. I have a problem with the number of people walking away from mortgages because it is no longer convenient for them. I also have a a huge problem with the lack of shame, for lack of a better word, that people seem to have concerning welching on deals. As I said - perhaps I am hopelessly old fashioned, but I was brought up to believe that a person's word is their bond and a contract isn't something you lived up to only as long as it is convenient.
"It's the community that will help you." Well said, Maggie. I'm paying mortgage for my modest home and fortunately not facing a similar situation (yet). I've got a couple of friends who've had to move out last year but I haven't known anyone with such incredible resilience til I read your story. Keep it up!
Dobie, I can understand your impression. Life isn't great yet---as I mentioned we're going to have bad credit for quite awhile--but now we have a chance at recovery before we die. Interestingly enough our mortgage was sold twice. Our first mortgage company ---the one we entered into a good faith agreement with--flew the coup two years ago. The companies who bought the loan from them have been jerks---one wouldn't assign us and account number nor give us an address to send the loan payments to for six weeks. It's hard to feel like you're bonded to something that keeps changing on the other end. They've also gotten from me in interest payments the entire amount of the original loan.
Dobie, I can understand your impression. Life isn't great yet---as I mentioned we're going to have bad credit for quite awhile--but now we have a chance at recovery before we die. Interestingly enough our mortgage was sold twice. Our first mortgage company ---the one we entered into a good faith agreement with--flew the coup two years ago. The companies who bought the loan from them have been jerks---one wouldn't assign us and account number nor give us an address to send the loan payments to for six weeks. It's hard to feel like you're bonded to something that keeps changing on the other end. They've also gotten from me in interest payments the entire amount of the original loan.
Dobie is correct. My own opinion is that the owners took a gamble when they purchased the home. If prices had risen they would have gotten the benefit of that and would have felt entitled to it. But prices fell and the home had problems they did not expect. They took on that risk when they purchased the home but expect someone else to pay when their gamble loses. Everywhere people are looking for excuses and others to blame. I sympathize. I also had a home that I sold for a considerable loss, but I took on that gamble when I bought it and when things went badly I paid what I owed. You are a deadbeat. You and others like you are the cause of our housing crisis and a worldwide economic meltdown. I'm not bitter about it, just sad, sad for all of us. Maybe it is easier for you to blame others but that doesn't make you less responsible for what you did. Will you turn on your new landlord too if a problem arises there? Why do we make it so easy for people to walk away from their responsibilities and let them place the blame on others? When you find out you can go without paying some of your bills will you stop paying others as well? Default of student loans, credit cards? I do feel sympathy for you, not because you lost your gamble but because you are deluding yourselves.
Jessie, while I'm sure there were people who gambled on uncertain future incomes or outright lied on their mortgage applications, the rest of us did not take the decision to cut bait casually. There was a great amount of reflection and internal argument. We threw away thousands of dollars in mortgage payments as we looked at every alternative we could find. Nothing else made financial sense.
And don't think for a minute that we aren't getting dinged on this. Our credit rating is shot for several years to come. The dollar difference between the house's eventual sale price and what was owed on the mortgage may be taxed as income even though we won't see a nickel of it, leaving us with a very large tax bill with no mortgage-interest deduction to offset it.
It may be easy for you to characterize people like us as "deadbeats." I wonder if that's the term you would apply to those saving for their imminent retirement and finding themselves way short of their goals because the stock market took another severe beating. After all, the stock market is risky. It can go up and it can go down. Nevermind that most of us are not investing in speculative stocks and junk bonds.
We are not the reason the housing market is in the toilet. We were not responsible for the overbuilding, for the inflated prices supported by lenders which needed to maintain collateral for the garbage financial instruments they were peddling, for the shenanigans promoted by leading financial firms despite building on a rotten foundation. Blame us if it helps you sleep at night. We have made the best choice we could make for ourselves -- not pretty, but one which will not leave our finances drained for retirement or our other financial obligations. I hope you never find yourself in a similar situation.
As a homeowner with a septic system and a house sitting on tope of an underground spring, I find it hard to fathom that the homebuyer didn't know about the condition of the septic system and the caverns underground before she bought the house. Septic systems don't just fail overnight. A septic inspection would have alerted the buyer to the condition of the septic system and then the buyer could have made an informed decision about whether to assume the risk of failure. As to the backup into the house, I wonder whether the homeowner performed regular maintenance and pumping. Sounds like the answer is no. The seller should have disclosed whether or not the basement had ever flooded and might hold some liability if this was not disclosed. Then there is the issue of insurance -- was any of this covered by insurance or diaster relief assistance? I guess my point is that homes don't go from livable to uninhabitable overnight -- it sounds like the homeowners didn't do their due diligence before they bought the home and then failed to notice and fix problems before they escalated. That was not the bank's fault, yet it was left holding the bag.
Hi Guest,
We've been rural for a long time and are very used to tending to the septic. What the inspection did not notice (they don't dig up pipes, or septics on inspections) was that the area the seller and he both indicated a new one would eventually be built could not be built --and thus a new one would have to be built uphill from the house. We cleaned and drained on a regular basis, we re-did pipes etc over a five year period--I'd say we've sunk at least 20K just into plumbing. The amount of snow last year was way beyond what usually occurs and every house on our side of the street and the preschool next door have all been experiencing the same issues. And like I said---our bank left us years ago. The corporation that owns it now would not have been my choice of bank. It didn't go uninhabitable over night but when the lasted estimate is 3 times the value of the house. I'm guessing someone will come in and bulldoze it and rebuild up the hill from it. It sits on a beautiful acre overlooking a gorgeous valley. But whomever buys the property will have to either be a contractor him/herself or be independently wealthy.
Hi Guest,
We've been rural for a long time and are very used to tending to the septic. What the inspection did not notice (they don't dig up pipes, or septics on inspections) was that the area the seller and he both indicated a new one would eventually be built could not be built --and thus a new one would have to be built uphill from the house. We cleaned and drained on a regular basis, we re-did pipes etc over a five year period--I'd say we've sunk at least 20K just into plumbing. The amount of snow last year was way beyond what usually occurs and every house on our side of the street and the preschool next door have all been experiencing the same issues. And like I said---our bank left us years ago. The corporation that owns it now would not have been my choice of bank. It didn't go uninhabitable over night but when the lasted estimate is 3 times the value of the house. I'm guessing someone will come in and bulldoze it and rebuild up the hill from it. It sits on a beautiful acre overlooking a gorgeous valley. But whomever buys the property will have to either be a contractor him/herself or be independently wealthy.
The big bad faceless corporation is all at fault! Who cares if you screw them! They are evil anyway! They are the ones that caused this entire financial collapse and it is their fault that my house value has plummetted and the stock market crashed!!!
I hear many people reciting the above. They take the attitude that "I am going to screw them because they already screwed me!" Is the banking industry to blame for all of this? Yes and no. The banking industry relaxed lending standards, something, I might add, those who fight for social justice have been demanding for years (because home ownership is a right blah blah blah). Of course they did not do this out of the kindness of their hearts they did it to cash in (via mortgages, fees, etc.) in the boom in home prices. Everyone is prequalified, everyone can buy a house! What happened is that many people who were not qualified got approved. Houses, even ones in bad areas and in bad shape were all of a sudden worth ridiculous amounts. People bought them, and when things went bad, they did what you did and they walked away. Those of you who wish to blame the banking industry need to realize that they are only a part of the equation, you are the other part to that equation! I know friends who bought 2 and 300,000 homes knowing full well they could never afford it, but they counted their OT wages. Now that they have no OT they can't pay their mortgage and they expect me and the rest of the country to bail them out. Kudos to you for walking away! You get to start over anew while people like myself who work hard and honor their debts get to pay for yours. Thanks for that, I mean really it's not bad enough I have to support the hordes on welfare or the idiots in washington, I really had too much money anyway. Since my home value plummetted perhaps I too will walk away? Then the rest of you can pay for my mistake too! God forbid I should "gasp" take PERSONAL RESPONSIBILITY for making dumb decisions and bad choices, I mean no one does that anymore do they?
Oh, there's still plenty of personal responsibility out there. Both my wife and I work 50+ hours a week in managerial jobs at companies which have been chipping away at staffing -- but not workload -- for years. Raises? Hah. We are both over 50 and need to think seriously about what medical premiums and Social Security and the stock market will look like in another 10-15 years (at this rate, despite what we've saved so far, we'll be where we are now). My wife and I both drive small 9-year-old cars which were nothing special even when they were new. Our remaining home is median-priced for this area, in a decidedly-unfashionable zip code, and offers a whopping 1100 square feet of space (by the way, it was purchased with 20% down even though the lender did not require it). We shop only when we need something -- shopping is not a sport to us.We do not take fancy gold-card vacations; nor does either one of us have expensive hobbies.
The house in question was purchased by one of us 23 years ago. The mortgage was paid steadily and the house improved over that time. Yes, there was some home equity refinancing that added a bedroom and a second bathroom to the house and updated the tiny kitchen and the 80-year-old mechanicals. Nothing was platinum-plated and names like SubZero and Macy's were never seen in that house.
The house was on the market for more than a year, with price reduction after price reduction. Any equity we had hoped for vanished. It finally sold after more than a year and a half, and only because we convinced the lender that it was not going to sell given the market for that kind of house and given our efforts to date. By the way, if you want to talk about "smart money moves," they agreed to the sale, so they must know something. There remain almost 1500 properties in this city alone registered as vacant and I know of several which aren't on that list yet. The market is getting better slowly, but making two mortgage payments a month on top of other commitments was sucking us dry.
The CEO of Wells Fargo made 19 million dollars last year. So did the CEO of Bank of New York. Jamie Dimon over at JP Morgan Chase felt fairly compensated at about 21 million -- including stock options granted to him in 2009, when the roof fell in (pay for performance??!?). $50-70,000 lost in a short sale is a rounding error to people like that. Why ruin ourselves beyond our credit rating when there's retirement to save for and we'll need cash to buy anything else because our credit is shot? Is *that* smart?
No, we're not one of *those* people who bought at the top of the market on money we didn't have. It's not like we were spending money lavishly everywhere *but* the house. The decisions to buy and remodel took place long before the housing market became a casino. Call it a "mistake" or a "bad move" if it makes you feel better, but there was no malice intended and, in fact, we would much rather have sold into the good market than have to beg for a short sale.
Guest, tell you what. If *you* have the key to always making the right financial move -- the decision which you *guarantee* will be smart a couple of decades from now -- I urge you to quit whatever job you have and to share your gift with humanity. We certainly need more people who think like you do. Good luck.
I sure don't envy you Maggie. I'm sure, in the end, it will be a learning experience you won't forget. I'm going to resist the urge to judge, one never knows when their situation will take an ugly turn.
To posters suggesting the bank might be coming after any assets, it depends upon the state foreclosure statutes. Some states are non-recourse (after the sale no recourse can be taken), unless they take you to judicial foreclosure. Most banks file a notice of default. I'm sure you've talked with a good attorney about that before you stopped paying the mortgage.
The banking pendulum has swung to the opposite side, they won't loan money to anyone. You can get a car loan for $60,000 in thirty minutes, it takes 40 days to get a home loan for the same amount with a high credit score and 20% down.
I was able to buy my home and pay it off in a few years. And, it's actually worth quite a bit more than I paid for it. I made a conscious effort to pay as I go and tackled no additional debt. We didn't overbuy or buy a fixer upper (almost always a money pit). My wife and I had quite a bit of experience with builders, so we knew what to look for and a reputable home inspector (even for a new home).
So many younger home buyers have no idea what they are doing, I've thought many times about doing some consulting work for buyers. Home ownership is such an emotional experience they let the idea of buying a home overshadow the facts.