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Leperflesh posted:I think your wife's aunt should just sell the house. If she's underwater, she should try for a short sale. But then she doesn't get to live somewhere for free for 2 years which is the whole point of her doing this. I'm not saying you're wrong, and I'm also not saying that it isn't a shitheel thing to do, but she'll probably never go for this (or for paying rent while her nephew lives there) because it seems like in her mind the goal is less to get out from under a mortgage and more to scam a place to live for no money for as long as she can. As I said before I don't think defaulting is ethically wrong but the master plan she has is not only unsustainable but is definitely questionable (and possibly fraudulent, I have no idea).
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Jan 22, 2013 21:15
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I don't want to derail the thread but defaulting on that loan is very unethical. She's a flawed person for feeling that it's ok, and so are you. I understand that sometimes people have to steal to eat but when you knowingly take on a debt and then just stop paying it with no intention of ever paying your wrong and you deserve any legal recourse available to the debtor. Tell her to suck it up and do the right thing. Stealing from a big company is not a victimless crime.
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Jan 22, 2013 21:21
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Defaulting on a contract is not identical to theft. They aren't the same in the eyes of the law, and I believe they have a different ethical weight as well. This is surely not the right thread to debate the ethical implications of deliberately defaulting on a contract. From a legal standpoint, I believe (as a non-lawyer layperson) that it would only be fraudulent if she took out the loan with the intent to default on it from the beginning. You are correct, however, that doing this does have an effect. The bank will only be able to recover a portion of the loss from PMI, and the rest probably from their own insurance or other reserves; these losses in turn are distributed to all buyers in the form of increased premiums. I suggest that, for the purposes of the health of this thread, we focus on what is financially prudent (that's what BFC is all about) rather than argue about opinions regarding the ethics of deliberately breaching a mortgage contract.
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Jan 22, 2013 21:30
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Sophia posted:But then she doesn't get to live somewhere for free for 2 years which is the whole point of her doing this. I'm not saying you're wrong, and I'm also not saying that it isn't a shitheel thing to do, but she'll probably never go for this (or for paying rent while her nephew lives there) because it seems like in her mind the goal is less to get out from under a mortgage and more to scam a place to live for no money for as long as she can. How we handle money says a lot about us. Finances are a lot more complicated than discussing how Roth IRA’s work. How we spend money and on what is inseparable from our identities and I have absolutely no problem with this discussion of ethics. I agree that defaulting on a contract is not the same as theft. However the law looks at it, I believe intentionally defaulting on a contract and doing it in such a way to get two years of free rent *IS* the same thing as theft. Last year my roommate went beyond mere collecting things to becoming a hoarder and when I called him on it and told him to clean things up he stopped paying rent. (I own the house). Laws in Massachusetts drastically favor tenants and it took 4 months and two trips to court to get him out. Plus I was paying through the nose on legal fees. Meanwhile he is walking around like he owns the place and living there for free. Are you going to tell me that he didn’t steal from me because it was only breaking a contract? The right thing to do is if she really can’t afford it is to work with the bank and do a short sale.
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Jan 22, 2013 22:04
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Welcome to America, the land of entitlement. Meanwhile your hoarding, freeloading roommate was still probably complaining about the leaky faucets and parking situation.
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Jan 22, 2013 22:17
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Zeta Taskforce posted:How we handle money says a lot about us. Finances are a lot more complicated than discussing how Roth IRA’s work. How we spend money and on what is inseparable from our identities and I have absolutely no problem with this discussion of ethics. I can see I didn't make it clear, but the part where she continues to keep trying to live there as long as possible without paying is a part I consider unethical. Someone defaulting and walking away from a house totally I do not think is unethical, basically because the implicit trade in a mortgage contract is that you will live there as long as you pay the debt down. Once you stop paying the debt down, you don't get to live there, even if the legal machinery would take awhile to grind you out. For me the latter person is entirely giving up the collateral they put up against the loan, which is both within the bounds of the contract and a measurable risk for the bank that should already be factored into their rates. I guess that's my own business-like approach to ethics. It's much nicer to do the short sale deal if you can, of course, but simply giving back the house to the mortgage-holder as you stop paying for it and being marked as a bad future risk is not even close to theft in my mind. Even if I personally probably wouldn't do it. I totally agree that how you handle finances says a lot about you, though. I wouldn't trust this guy's aunt with money or contract matters ever.
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Jan 22, 2013 22:23
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I'm thinking about taking a USDA loan out on the house I'm renting, and putting nothing down if my landlord is willing to sell. The house is in the 150 range, built in the 80s houses around it are 250s, we love the neighborhood (old, established, huge trees) and see ourselves here for at least 4-5 years. I'm paying 1300/mo in rent, switching to a mortgage would get me to around half that, a little more once you include PMI, taxes and insurance. My wife would have to quit her job for us to qualify, but the income loss wouldn't be great as right now half her paycheck goes to the sitter for our 7 month old, and the difference between renting and owning would just about cover the other half of her check, but not quite. I have good credit (700+) and a steady job in my mid twenties. savings is pretty much all in the roth 401k-- 3500 or so which is employer matched (only had the 401k for a year or so, I know it's not much). i don't think I want to touch that but I just might. I've got a decent bit on a 0% credit card that I'm paying down and hopefully will have paid off before we buy. I'm loving crazy right? e2: I have a 2001 suburban i could probably get a few grand for that I don't really use. Think I'm going to bite the bullet and sell it. PuTTY riot fucked around with this message at 22:40 on Jan 22, 2013 |
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Jan 22, 2013 22:30
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Capslock Holmes posted:I'm loving crazy right? Just stop and think about this: to hit the requirements to qualify for a mortgage, your wife has to quit her job so you two can check off a requirement. You're talking about selling your vehicle for a couple grand like it means anything. You have $0 for a downpayment. You have $3500 to your name, in retirement savings. Basically if you get in an at-fault car accident you're completely and totally screwed, much less something happening to your infant child or 1980s house.
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Jan 22, 2013 23:09
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I think the idea of your wife quitting her job in order for you to buy a house is crazy, yes. A USDA loan isn't so much better than a FHA or other type of loan that it's worth losing a big chunk of your income. I can understand the part about how expensive child care is, though. You also shouldn't buy that house without at least an appraisal and thorough inspections. And 4-5 years is on the low end of a reasonable time horizon before selling. But most importantly, I suspect you may not be including all the costs in your estimate. You need to consider maintenance of the property, utilities, and perhaps additional things like appliances or furnishings. Maintenance in particular is a non-trivial expense. If you're not using your Suburban, I'm all in favor of selling it, though. That's a good idea. Why do you have no dollars for a down payment? Do you have no savings? Or do you only have enough savings to comprise your emergency budget (6 month's living expenses) plus stuff earmarked for retirement? Even if you can get the USDA no-down loan, without any equity you are effectively underwater from Day 1 (it costs a lot of money to sell the house), and you'll be paying interest on the entire sale price so it will take a long time to build equity.
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Jan 22, 2013 23:14
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Zeta Taskforce posted:I don’t know what it means that she can make the payment but she can’t save much money. If that means she is struggling, she has cut everything out and there is zero margin in her life, then she probably needs to get out of the house. But if she is going on vacations, leasing cars, going to starbucks every morning, and that’s part of the reason she can’t save money, then it’s a different issue. She's legit struggling, I don't think I need to go into her whole personal life but I would hate to be in her situation and I don't think it's necessarily her fault. She's a really good person and under normal circumstances she would probably never consider doing something like this. Yeah, like others have said I don't feel like defaulting on a loan is unethical. I agree that squatting is unethical but less so than deducting the cost of a dancing horse from one's taxes as a medical expense, subprime mortgage loans or commodity speculation as well as a host of other things that are perfectly legal but highly unethical. Where's the outrage in BFC for a person investing in oil and therefore inflating the price of gasoline on everyone else? Should we discourage people from trying to legally deduct as much as they can from their taxes? Should I sell my home to a person I suspect isn't aware that he can't afford the amount of debt he's taking on? Zeta Taskforce posted:You can do what you want, but if it’s me there is no way I am intertwining my life with your wife’s aunt’s life. If you like the house that much then go to your bank and get your own loan and buy it from her. Otherwise you are in this open ended deal with no clear cut end where there is one way everything works out fine and multitudes of ways it ends in disaster with family taking sides about who screwed over who. The problem with getting a loan and buying it from her is that I won't get the special low mortgage rate that she managed to get through a refinance/loan modification a long time ago, it also doesn't help her (A close family member) save money for her planned move. I'll definitely think this over a lot and yes, my primary concern is any potential family drama you mentioned. Sephiroth_IRA fucked around with this message at 00:28 on Jan 23, 2013 |
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Jan 22, 2013 23:59
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reflex posted:Just stop and think about this: to hit the requirements to qualify for a mortgage, your wife has to quit her job so you two can check off a requirement. You're talking about selling your vehicle for a couple grand like it means anything. You have $0 for a downpayment. You have $3500 to your name, in retirement savings. Leperflesh posted:I think the idea of your wife quitting her job in order for you to buy a house is crazy, yes. A USDA loan isn't so much better than a FHA or other type of loan that it's worth losing a big chunk of your income. I can understand the part about how expensive child care is, though. Thanks for the advice guys. The wife quitting her job wouldn't be just to qualify for the USDA loan (it caps out around 75 here). We're also thinking about the benefit of her being at home with the baby, which is more than just a financial decision, though this is the finance forum I guess. Honestly, buying the house came as an afterthought to a recent incident where we thought we'd have to fire the sitter. As to why we have little savings--- the kid wasn't exactly planned years in advance, and we have spent the past 18 months or so getting everything she needs (along with stuff like a washer/dryer, lawn mower, furniture, etc etc), along with a sitter who works 120 hours a month or so at $9/hr. The high rent price is the main reason I've been considering this. Perhaps we need to negotiate the rent price with the landlord (lease ends in may) and wait another year. I'd just like to stop paying 15 grand a year in rent, especially considering how cheap a note would be right now, but I really don't want to move again. Obviously I'd do a (real) appraisal/inspection and all that, I work in the mortgage industry (as a server janitor) so I'm fairly familiar with the process. I'm not planning on doing this tomorrow, this would be months down the line. And yeah, the suburban is a 3rd car, I bought an Accord a year ago but kept the suburban cause I figured the dealer wouldn't give me anything for it anyway and I kind of wanted to keep it around. Also, there are a lot of people around here (bought car in a different state) who buy old Suburbans to 'fix them up' and give them giant sparkly wheels worth more than the truck itself and fake intake vents, so I should be able to get something for it. I live in a growing college town where the rental market is pretty saturated, and rental prices keep going up and up and up. I'd have no problem renting it out within a couple of weeks if we needed to move (wouldn't want to do this, but I could), which I don't see happening. As far as the 0 equity in the house thing--- another thing I have looked into is the 203(k) FHA loan (Obviously I'd need that 3.5 or more down). I could conceivably do that, redo the kitchen and/or bathrooms and in theory create equity while enjoying a kitchen that doesn't have blue laminate countertops.
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Jan 23, 2013 00:02
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Capslock Holmes posted:Thanks for the advice guys. The wife quitting her job wouldn't be just to qualify for the USDA loan (it caps out around 75 here). We're also thinking about the benefit of her being at home with the baby, which is more than just a financial decision, though this is the finance forum I guess. One other piece to consider is rejoining the workforce when your kid's a little older. If your wife is in a situation where it's possible to go part-time (or find a part-time position), that would make coming back way easier. The job-search situation is a lot easier when you're already employed.
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Jan 23, 2013 03:41
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Orange_Lazarus posted:She's legit struggling, I don't think I need to go into her whole personal life but I would hate to be in her situation and I don't think it's necessarily her fault. She's a really good person and under normal circumstances she would probably never consider doing something like this. So she got a loan modification already. That was the bank doing a favor and readjusting the contract to help her better afford the home at their considerable loss. Her struggles to maintain the payment at that super low rate that you're worried about losing suggests that she is not a victim of the bank. Instead, she's a victim of her life choices. Have you thought about what you might do if she decides that her poor circumstances are your fault and renigs on any agreement you make?
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Jan 23, 2013 03:47
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Randomly posted:So she got a loan modification already. That was the bank doing a favor and readjusting the contract to help her better afford the home at their considerable loss. Her struggles to maintain the payment at that super low rate that you're worried about losing suggests that she is not a victim of the bank. Instead, she's a victim of her life choices. It is completely flabbergasting to me that anyone would recommend moving out of a house she owns just to avoid...something. You aren't squatting if you are living in a home that you own.
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Jan 23, 2013 04:30
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When you stop repaying your mortgage you relinquish ownership of the house in ethical terms, even if it takes the bank awhile to figure out that that's what you've done. Legally you still "own" it until they cotton on, but that's a knowledge timing issue for the bank and not a moral high ground for you. In a case like this, where it's not like, you just paid a week late or the check got lost in the mail, but a specific intent to stop paying permanently, I don't think it's that hard to figure out why people are saying that at that point the house is ethically bank property. Or why it might be considered ethical theft. Just because the gas station attendant never figures out that you drove away without paying that doesn't mean the gas in your tank is yours.
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Jan 23, 2013 04:41
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edit: eh I'm tired of this derail, people have already spoken their minds about strategic defaults and we've already established that it's a bad idea to try and squat, either for ethical or the obvious practical concerns, your choice. Originally my intent of asking was to see if I left out any practical reasons why squatting would be a bad idea in my conversation with her last night and I received some answers, thanks.
Sephiroth_IRA fucked around with this message at 06:27 on Jan 23, 2013 |
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Jan 23, 2013 05:44
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Orange_Lazarus posted:edit: eh I'm tired of this derail, people have already spoken their minds about strategic defaults and we've already established that it's a bad idea to try and squat, either for ethical or the obvious practical concerns, your choice. Originally my intent of asking was to see if I left out any practical reasons why squatting would be a bad idea in my conversation with her last night and I received some answers, thanks. I've already said that this is not a derail, and I don't know why you equate strategic defaults with investing in oil or taking legal tax deductions. Going back to ethics, the bank already took a partial loss on their investment by doing the modification. There was something in it for them since they didn’t want to take an even bigger loss, but they certainly didn’t take this loss so the borrower’s niece’s husband could get a really sweet deal. I don’t believe in some mysterious karma bank where the world gives you back exactly what you put in. That said, just as I’ve said that giving money away benefits you as the donor because by thinking of others you carry yourself differently and you are more attractive to people and the opportunities they bring, playing fast and loose, and thinking you are going to get ahead by playing the system makes you repulsive to people. Even if they don’t know what you are doing on the side. I don’t know if we convinced you that your wife’s aunt makes poor decisions with money in spite of being a really sweet woman and that being her landlord is a crappy idea, but if we haven’t, I hope it works out well for you.
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Jan 23, 2013 17:18
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fivetwo posted:Is it smart to take a loan from my TSP to pay for down payment?
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Jan 23, 2013 17:34
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quote:I've already said that this is not a derail, and I don't know why you equate strategic defaults with investing in oil or taking legal tax deductions. Because a strategic default is perfectly legal, just like commodity speculation. The argument I keep seeing from some is that even though a strategic default is perfectly legal it's unethical because it harms society, it harms the banks and it can potentially harm my neighbors. Well, commodity speculation perfectly legal but is harmful to society as well because it inflates the prices of commodities, which negatively impacts everyone especially the poor. Should we then debate the ethics of commodity speculation every time someone mentions they're considering investing in commodities in the stock picking thread? quote:I don’t believe in some mysterious karma bank where the world gives you back exactly what you put in. That said, just as I’ve said that giving money away benefits you as the donor because by thinking of others you carry yourself differently and you are more attractive to people and the opportunities they bring, playing fast and loose, and thinking you are going to get ahead by playing the system makes you repulsive to people. Even if they don’t know what you are doing on the side. I wish this was true but it just isn't. You and I may find them repulsive but I'm fairly confident that the majority of American's do not. 49% of our voting population recently almost voted in a guy that kept a portion of his money hidden away in the Cayman's, bragged about firing people, said 47% of Americans were freeloaders, somehow managed to get 100 mil into an IRA and paid a significantly lower tax rate than the majority of working American's by deducting such things as a dancing horse (as a medical expense) from his taxes. Most Americans are not disgusted by that. Americans are instead more disgusted with a poor person getting medicaid for their kids than a person cheating on their taxes or finding other ways to cheat the system for their own benefit. quote:I don’t know if we convinced you that your wife’s aunt makes poor decisions with money in spite of being a really sweet woman and that being her landlord is a crappy idea, but if we haven’t, I hope it works out well for you. Once again it wasn't a decision. She just said she was considering it and I told her squatting was a bad idea, then I asked BFC if there were any other reasons why doing so would be a bad idea in order to convince her not to do it. Like I said though I appreciate the advice you gave me about living with her and will take it into consideration. Sephiroth_IRA fucked around with this message at 18:27 on Jan 23, 2013 |
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Jan 23, 2013 17:57
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Orange_Lazarus posted:Because a strategic default is perfectly legal, just like commodity speculation. The argument I keep seeing from some is that even though a strategic default is perfectly legal it's unethical because it harms society, it harms the banks and it can potentially harm my neighbors. Well, commodity speculation is harmful to society as well because it inflates the prices of commodities, which negatively impacts everyone especially the poor. So shouldn't I as a truly ethical human being antagonize individuals in the stock-picking thread if they invest in commodities? I would argue that commodity speculation is useful for society in that it creates a fair market price. Oil is always the poster child of speculation, but what is the harm if speculators drive up the cost of an increasingly scarce fossil fuel and by doing so, encourage conservation, use of alternatives and reduce pollution and global warming. This is a derail so if you want to keep discussing speculation, send me a PM. A strategic default is when someone can make the payments but they don’t feel like it anymore, and that drives up the cost of my rate, your rate, the fees on my checking account, causes the banks to lay people off and me to be on hold for an hour when I need to call. It is not a victimless crime. quote:I wish this was true but it just isn't. You and I may find them repulsive but I'm fairly confident that the majority of American's do not. People that cheat the system literally run society and 49% of our voting population almost just voted in a guy that kept money hidden away in the Cayman's, somehow managed to get 100m into an IRA and paid a significantly lower tax rate than the majority of working American's, deducting such things as a dancing horse (as a medical expense) from his taxes. America loves cheaters. I can speak only for myself, not 49% of Americans. Again, speaking for myself, my tenants sometimes pay me cash and it would be the easiest thing in the world to not report it as rental income. I do anyway. Others will approach it differently. quote:Once again it wasn't a decision. She just said she was considering it and I told her squatting was a bad idea, then I asked BFC if there were any other reasons why doing so would be a bad idea in order to convince her not to do it. That’s good to know.
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Jan 23, 2013 18:26
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quote:It is not a victimless crime. Not a crime. quote:A strategic default is when someone can make the payments but they don’t feel like it anymore, and that drives up the cost of my rate, your rate, the fees on my checking account, causes the banks to lay people off and me to be on hold for an hour when I need to call. Well, not everyone just decides to strategic default because "they don't feel like it anymore", I think giving people the option to do so discourages banks from predatory lending and other anti-social practices. quote:I can speak only for myself, not 49% of Americans. Again, speaking for myself, my tenants sometimes pay me cash and it would be the easiest thing in the world to not report it as rental income. I do anyway. Others will approach it differently. I'm glad you did the right thing, I would do the same thing because I don't mind my earnings being taxed progressively to benefit society. fakeedit: back to work. Sephiroth_IRA fucked around with this message at 01:26 on Jan 24, 2013 |
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Jan 23, 2013 18:35
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The ethical thing to do would be to contact the bank, find out what her options are, and deal with her inability to pay for the home. The unethical thing to do is avoid the bank, hope they don't notice, try to live there rent free, and essentially steal housing until they notice and kick you out. I think option 2 is as close to fraud as you can get. I guess we could argue if fraud is unethical. Dictionary posted:fraud
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Jan 23, 2013 18:37
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Orange_Lazarus posted:
Here's the derail you were looking for. Nice job figuring out a way to spin your political and social opinions into the discussions - and you started it with a complete non-sequitur by trying to liken Republican voters with a welcher. Do you really think Republicans are the ones who favor people like the wife's aunt who is (legally or not) planning on cheating the bank? Hell no. There are plenty of aspects of the Republican agenda that may be disagreeable to you and many others but you are completely missing the boat how Republicans feel about accountability. 49% of Americans (Republicans) are completely disgusted by the type of self-entitlement and lack of accountability in this country and that's why they voted against the overwhelming influx of government programs that give tax money away to people who don't contribute to the greater good. In fact, maybe the idea that purposefully defaulting on a loan you can afford to repay is just plain dishonest isn't a political issue at all. On a purely ethical scale, strategic default is quite obviously not the right thing to do. Just because the republican candidate used tax loopholes you don't find acceptable doesn't mean his situation is similar to someone who doesn't make payments on their mortgage just because they can get away with it. A good question is - why in the gently caress is strategic default legal? The "not my problem" treatment of mortgage loans is the single biggest reason this country is going to poo poo.
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Jan 23, 2013 19:11
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Orange_Lazarus posted:Because a strategic default is perfectly legal, just like commodity speculation. The argument I keep seeing from some is that even though a strategic default is perfectly legal it's unethical because it harms society, it harms the banks and it can potentially harm my neighbors. Well, commodity speculation perfectly legal but is harmful to society as well because it inflates the prices of commodities, which negatively impacts everyone especially the poor. Should we then debate the ethics of commodity speculation every time someone mentions they're considering investing in commodities in the stock picking thread? You also have a contractual obligation to maintain the property in good condition while you own it. I assume that once you ethically move out of the house you no longer ethically (but still legally) own, you continue to come back and mow the lawn and such, right? I mean, you wouldn't want to breach a contract and abandon the property. That would be unethical. e: You also have a contractual obligation to keep your home insured. I'm sure you would do that as well once you relinquish ethical ownership of the home. three posted:The ethical thing to do would be to contact the bank, find out what her options are, and deal with her inability to pay for the home. gvibes fucked around with this message at 19:28 on Jan 23, 2013 |
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Jan 23, 2013 19:15
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Spamtron7000 posted:A good question is - why in the gently caress is strategic default legal? The "not my problem" treatment of mortgage loans is the single biggest reason this country is going to poo poo.
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Jan 23, 2013 19:19
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gvibes posted:What false statement does she make to the bank? Avoiding the lender as long as possible and not letting them know you have no intentions to pay until they go through all safeguards to prevent them removing you unjustly, and waiting until they physically remove you counts as deception in my book. Dictionary posted:de·ceive
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Jan 23, 2013 19:31
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I brought up Romney in response to Zeta making some kind of philosophical assumption that financially ethical people succeed and financially unethical people do not, which I simply find untrue and Romney is a perfect example of that. If we're going to talk about the ethics of strategic defaults I really don't get why you wouldn't expect a political discussion to evolve out of that considering the 2008 financial collapse that people are still feeling the affects of. I'm wondering how you guys feel about all those people that strategically defaulted on their homes after the collapse. Should we have forced them to stay in homes with mortgage rates they couldn't afford or what? Also didn't the banks force strategic defaults on a lot of home-owners that had only been behind one or fewer payments? Strategic defaults are legal because it should discourage banks from predatory lending. If we're going to question strategic defaults shouldn't we also discuss the ethics of bankruptcy for both individuals and businesses? Sephiroth_IRA fucked around with this message at 19:41 on Jan 23, 2013 |
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Jan 23, 2013 19:34
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People who become filthy rich by using the most unethical borderline or actual outright illegal methods are just shrewd captains of industries or "banks" and deserve our respect and admiration. Poors who take advantage of totally legal financial options to help them feed and shelter them selves are unethical parasites because they might hurt the bottom line of the previous mentioned group and if those guys get inconvenienced it might hurt "society". Harming them in any way, even prosecuting their crimes, is just bad for society. PS why is housing and stuff so expensive?? It's because of unethical working class people right?
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Jan 23, 2013 19:41
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Spamtron7000 posted:A good question is - why in the gently caress is strategic default legal? The "not my problem" treatment of mortgage loans is the single biggest reason this country is going to poo poo. It's very important, and has been pointed out repeatedly, to distinguish between squatting in a vacant house you no longer pay for to exploit your knowledge that the bank is likely to be slow to evict you (especially if you could afford to pay rent), and the actual strategic default itself. The strategic default is envisioned in the mortgage contract. You have a secured loan, the security being in this case the property. Explicitly part of that arrangement is that if you choose to stop paying the loan, the bank repossesses the security. There is nothing unethical about exercising your right to terminate a contractual agreement. This is inherent in the concept of contracts, and contracts are foundational to how our civilization functions. People get this confused because they equate it (emotionally) with borrowing money from a friend or relative, where there is an added social context. If you borrow money and don't pay someone back, you've harmed them, and that's unethical. But the strategic default is a legal option which, I assure you, the banks are perfectly well aware of when they entered into the contract. And in theory the bank should have an asset which is worth at least as much as the money you borrowed (although in practice, a property which has depreciated so much that the owner is underwater may lose the bank money - but this is also an inherent risk which the buyer and the bank share when they take on a mortgage contract). If it were illegal to default on a loan, it would be far too risky for most people to borrow money. Why would I risk a mortgage that could destroy my life (e.g., send me to prison?) if for some reason I can no longer pay? There is a political football regarding who, exactly, is to blame for the mortgage crisis. One side points to borrowers who irresponsibly took on debts they couldn't afford to pay, often out of a desire to speculate in the real estate market. The other side points to banks who irresponsibly lent to borrowers who were in no way equipped to actually pay their debts in full - which was another form of speculation. Some folks in the middle suggest that both parties should share the blame. But in the end, it's actually just how the system we set up works. Banks can fall back on their insurers, and then ultimately the investors who purchased the packaged loans, to shift the burden of the losses they realized from irresponsible mortgages onto someone else. For several banks, that wasn't sufficient (because they were massively over-leveraged), and the taxpayer bailed them out (although, contrary to popular perception, most of this money was not just a gift, and much of it is likely to be paid back with interest). Borrowers, in turn, can fall back on bankruptcy court to discharge their debts... but only as a last resort, and often only after exhausting all of their other assets, leaving them nearly penniless. And of course, it is credit-destroying, which does have direct personal consequences. Again, though: it's not unethical to take advantage of the safety net to which you are legally entitled, especially given the other party has a safety net of superior construction which it readily takes advantage of. Which side you happen to take in the political argument over defaulted mortgages is up to you, of course. But I'd suggest that the "not my problem" treatment of mortgage loans doesn't actually exist, unless you're just not paying attention. When a mortgage goes bust, all the parties involved lose, but nobody should go to jail (or whatever punishment you envision) just because a business deal didn't work out.
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Jan 23, 2013 19:44
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Orange_Lazarus posted:Strategic defaults are legal because it should discourage banks from predatory lending. Right. Because 51% of this country believes its citizens are lemmings - incapable of independent thought and reasoning and need to be protected from their bad decisions by their big brother. It's completely unreasonable for a poor citizen to actually have to read and understand how a loan works to accept funding for their $500,000 property. Banks are obviously the bad guys here because they lend money to people who otherwise would be unable to afford to buy homes. They are so evil they EVEN MAKE MONEY FROM IT! I know what you're saying is accurate but it's a completely unAmerican idea. Seriously - what the gently caress is wrong with the world. Predatory lending is a term made up by people trying to further their socialist political agenda. "Don't worry about the banks or any of your other fiduciary responsibilities. Your government will protect you from your own incompetence." The poster's wife's aunt is a perfect example of how the idea of predatory lending has caused problems. There's no proof or mention of the bank doing anything wrong. Yet the borrower is still protected under a rule that was only intended to protect victims. She is no victim. She's a thief.
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Jan 23, 2013 19:47
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Spamtron7000 posted:Right. Because 51% of this country believes its citizens are lemmings - incapable of independent thought and reasoning and need to be protected from their bad decisions by their big brother. It's completely unreasonable for a poor citizen to actually have to read and understand how a loan works to accept funding for their $500,000 property. Banks are obviously the bad guys here because they lend money to people who otherwise would be unable to afford to buy homes. They are so evil they EVEN MAKE MONEY FROM IT! I’m not going that far. I believe there is a such thing as predatory lending and I believe the government is well within its rights to pass laws protecting people against themselves. If that’s socialism, that’s another discussion. I agree the aunt in question is not a victim of predatory lending. She already got a modification and the whole point of the make the aunt a landlord scheme is because he wants to pay a below market rate. The fact that you can get a 30 year mortgage in the 3’s tells me she has a pretty sweet rate.
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Jan 23, 2013 20:06
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For every person abusing the system, there's a hundred who honestly thought they'd be able to pay their mortgages, until they lost their jobs. A huge recession that skyrocketed unemployment contributed to the mortgage crisis. I like to think of it as being similar to how our legal system works (or is supposed to, anyway). We'd rather have ten guilty men go free, than convict one innocent person. I'd rather carry some percentage of freeloaders in our safety net, then eliminate the safety net and see genuinely deserving people destitute. Moreover, it's good for our society as a whole to keep people from becoming destitute. Even if that means some folks will take advantage of the system. Republicans focus on the abusers and are extremely concerned with fairness and ensuring there are severe consequences for mistakes. Democrats focus on the honestly-poor and are extremely concerned with social justice and the benefits to society as a whole that derive from safety nets. Personally I think republicans massively overestimate the impact that abusers have on the system. They seem to believe that for every deserving citizen down on their luck who needs a helping hand, there's ten abusers, illegal immigrants, welfare queens, and undesirables milking the system for every taxpayer dollar they can. But going back to the point - strategic defaults are not legal solely to keep banks honest. They're legal because it is fundamental to the operation of a successful economy that people be able to borrow money. Borrowing allows people to engage in ventures that, if they had to pay up-front for, would be impossible. Whether it's borrowing to start a small business, or to buy a house, this sort of economic activity stimulates growth and growth is good for everyone. But if the consequences of making a bad business decision - or simply running into some bad luck - are that you go to jail if you can't pay your debts, nobody will borrow and that system collapses. And when you consider contract law, this goes beyond just the need for legal relief from debt. If it were illegal to break a contract, nobody would enter into contracts if there were the slightest risk that the arrangement would go sour. That affects every business transaction, every legal arrangement... hell, when you hand someone cash in exchange for a good or service, you are engaging in a contract. Without the ability to escape contracts - casual verbal contracts, implied contracts, or explicitly written out and signed ones - you've got absolute anarchy. It's absolutely essential that a contract be escapable. Fortunately we have an entire body of law specifically dealing with contracts. We have courts whose sole purpose is to adjudicate contractual disputes. We have consumer protection laws designed around the implied contract of a purchase (e.g., if I give you money in exchange for a good, you have a contractual obligation to provide that good in good faith because we have entered into a sales contract; and if you fail to uphold your side of the contract, I'm entitled to relief, and may seek it in court. And vice-versa.) I'm getting a little astray here but the point I'm trying to get at is that you seem to be really angry about all those poor people leeching off of the system, and I think while they certainly exist, they're actually the minority. The favored Republican solution of burning down the system just to kill the leeches is self-destructive and wrong-headed.
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Jan 23, 2013 20:13
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Maintain occupancy of the home until the sheriff physically removes you from the home. Anything else is crazy. If the bank wants the house they will give you what is called cash for keys to vacate before the sheriff gets around to throwing you out. The costs of throwing you out are included in the cost of the loan. You are not getting anything for free. If you are in a recourse state you are going to be paying anyway unless you get it discharged by a court. I don't see how using something you own and are paying for is unethical. It is up to the bank to assert its legal or negotiated possession. There are no morals in contract negotiation. I can't believe the number of people that think banks are some naive participant in the process that are just getting screwed by everyone else.
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Jan 23, 2013 20:16
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Elephanthead posted:Maintain occupancy of the home until the sheriff physically removes you from the home. Anything else is crazy. If the bank wants the house they will give you what is called cash for keys to vacate before the sheriff gets around to throwing you out. The costs of throwing you out are included in the cost of the loan. You are not getting anything for free. If you are in a recourse state you are going to be paying anyway unless you get it discharged by a court. I don't see how using something you own and are paying for is unethical. It is up to the bank to assert its legal or negotiated possession. There are no morals in contract negotiation. I can't believe the number of people that think banks are some naive participant in the process that are just getting screwed by everyone else. Are you my old roommate? If someone lost a job and can't pay, I am on your side. Even if you did something stupid and you can't pay because of your own stupidity, I'm still on your side. Where I draw the line is if you can pay and you just don't want to anymore. I don't care what contract law says, I am not on your side. You are not Robin Hood stealing from the big evil banks and you are not a victim.
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Jan 23, 2013 20:29
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Spamtron7000 posted:I know what you're saying is accurate but it's a completely unAmerican idea. Seriously - what the gently caress is wrong with the world. Predatory lending is a term made up by people trying to further their socialist political agenda. "Don't worry about the banks or any of your other fiduciary responsibilities. Your government will protect you from your own incompetence." I totally disagree. When buying my home, the lender was trying their best to get me to borrow more, to lower my payments by doing an interest-only, 50-year loan with a 5-year balloon. If I had done that, I would probably be hosed right now. I am definitely the minority in those that knew what I could really afford, and stuck with a 30-year loan. I've still lost over 25% on the value of my home, and just barely have any equity on it. I bought in 2006, and 7 years later (after switching to a 15-year loan a few years ago) I still am just barely keeping up with the loss of my home's value. That's even with putting an extra $10k on principle a couple years back. gently caress the banks, and gently caress the predatory mortgage brokers. They misled people by promising them free money and low-payment loans. People are terrible decision makers at the best of times. How many people do you know have fallen for any time of get-rich-quick scheme? I can name 5 without even thinking hard about it.
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Jan 23, 2013 20:39
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Elephanthead posted:Maintain occupancy of the home until the sheriff physically removes you from the home. Anything else is crazy. If the bank wants the house they will give you what is called cash for keys to vacate before the sheriff gets around to throwing you out. The costs of throwing you out are included in the cost of the loan. You are not getting anything for free. If you are in a recourse state you are going to be paying anyway unless you get it discharged by a court. I don't see how using something you own and are paying for is unethical. It is up to the bank to assert its legal or negotiated possession. There are no morals in contract negotiation. I can't believe the number of people that think banks are some naive participant in the process that are just getting screwed by everyone else. This is the most logical thing posted in this whole debate; you signed a civil contract stating you'd pay or they'd throw you out. If you stop paying, you can just wait until they exercise their option and throw you out. Not leaving immediately or whatever isn't fraud or evil or whatever - you did x, they have an option to do y, when someone shows up to chuck you out, you leave.
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Jan 23, 2013 20:47
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I know I encouraged this debate, but no one is changing each other's minds. Everyone gets to make a closing arguement/parting shot, but then that's it.
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Jan 23, 2013 20:55
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Anyhow, more on topic: is there an easy way to gather quotes for homeowner's insurance? I'm thinking I'm getting screwed by State Farm (constant 5-10% year over year premium increases) and wasn't seeming to find a way to get quotes other than find someone who's an agent for multiple companies. There something I've missed?
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Jan 23, 2013 21:09
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For my part, I appreciate the feedback. I sometimes overlook the fact that the banks have recourse inasmuch as they own the house when loans are defaulted. However, I do strongly feel that many American borrowers are smart enough to recognize how the laws that protect them can be abused to either default or sell short out of perfectly good and fair loans and that it's a problem. All the market risk is now passed on to the bank. Sometimes it's a fine line to draw between righteousness and fraud. Many Americans just don't care about that fine line - they're selfish and feel entitled to poo poo all over the same bank who lent them the money to help fulfill the dream of home ownership. That's what I don't like about the system. Someone I am very close to went to a short sale seminar to learn how to get out of a home she no longer wanted. She squatted and didn't make payments for 18 months and was able to use the situation to force the bank into a short sale (I don't know the details). Not only did she get out of a bad loan (not bad because the conditions were fair - bad because she made a bad purchase decision and was upside-down) but she ended up with those 18 mortgage payments ($50k) in her savings account after it was all said and done. This is someone I respect very much who feels she is very responsible but when she told me about this I was appalled. She kept $50k she owed to the bank just because she felt she deserved a mulligan. I recognize that the banks include this type of shenanigans in the cost of doing business and that they evaluate this kind of risk when they lend money. But that cost gets passed on to the rest of us who are responsible borrowers - or more likely they mean that other less qualified but solid, honest people may not be able to get their loan next time because the banks are slowly losing trust in us as borrowers. I admit to being a little high and mighty about all this because after my first marriage ended I got stuck with over $70k in credit card debt that quickly ballooned to over a 30% APR plus a few other debt surprises left to me by my beloved ex-wife. I could have gone a different route and chosen any number of debt relief options but I manned up and paid my debt - in all it cost me over $150k. I had to close my retirement account (substantial penalty) and live like a pauper for 4 years to pay it off but I did it. In hindsight it would have been better for me financially and better for my credit if I'd given up and let the vultures pick at scraps but I paid it off myself. I'm proud of that because I know I can take care of myself and I don't need the government or anyone else to bail me out or protect me from myself. It's funny how little credit companies care about this. All they see is someone who was consistently 60 or 90 days late while climbing out of debt - they don't consider whether I was truly accountable for my debts and because of FICO for a long time I looked worse to them than someone who filed for bankruptcy. Weird - I should be bitter toward the lending community for not giving me credit for repaying my debt. But instead I learned that I made a mistake getting all that credit in the first place (or co-signing for my ex-wife's credit) and I had no one to blame but myself. So when I consider situations like this I empathize with the borrower. What would I do? I'd re-pay my damned loan and I think other people should, too.
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Jan 23, 2013 21:33
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cstine posted:Anyhow, more on topic: is there an easy way to gather quotes for homeowner's insurance? I'm thinking I'm getting screwed by State Farm (constant 5-10% year over year premium increases) and wasn't seeming to find a way to get quotes other than find someone who's an agent for multiple companies. I went to an independent insurance agent who was able to get me quotes and verify coverage with 24 different agencies. This helped me a lot because Chubb was the only one who would offer a policy for my home due to fire risk and I would have had a really tough time finding a policy on my own. Now I call him for all my insurance - he does all the rate shopping for me.
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Jan 23, 2013 21:35
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