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twitterREAL ESTATE:
Underwater LV homeowners more likely to walk away, study says
Sam Morris
Foreclosure territory: Housing sprawls across the Las Vegas Valley. A study found that Southern Nevada is particularly susceptible to homeowners walking away from their mortgage responsibilities.
Fri, Aug 7, 2009 (3 a.m.)
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- Whether to walk away: Housing's moral minefield (3-22-2009)
- Builder: It is 'rational' for homeowners to walk away (3-13-2009)
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Las Vegas is at greater risk than other cities that its homeowners will walk away from their mortgages even though they could afford them, according to a study by two Chicago universities.
Not only are depressed home prices a contributing factor, but when neighbors and friends see someone they know defaulting on their mortgage, the moral constraints and social stigma are lessened and make it increasingly likely that more foreclosures will result, according to the study by the University of Chicago Booth School of Business and Northwestern University.
The study finds that 26 percent of all mortgage defaults are classified as strategic, meaning the homeowner can afford to pay.
Las Vegas, which leads the nation in foreclosures, is vulnerable. The recently released study shows that 17 percent of households would default even if they could afford to pay their mortgage if the equity shortfall reaches 50 percent of the value of their house.
The median price of homes sold in Las Vegas has fallen more than 50 percent since June 2006, and in its most recent study zillow.com said 67 percent of Las Vegas homeowners are underwater — when the amount owed exceeds the home’s current value — and more than 80 percent of the homes bought from 2005 to 2007 are underwater.
As the foreclosure capital of the nation, Las Vegas is vulnerable because the study shows that the willingness to default increases with the proportion of foreclosures in a ZIP code. People who know someone who defaulted are 82 percent more likely to declare their intention to do so.
Although the first wave of foreclosures was triggered by subprime loans resetting monthly payments beyond what people could afford, job losses and frustration among underwater homeowners will contribute to the next wave.
“I think Las Vegas is one of the worst markets from the point that a lot of people are underwater,” said Luigi Zingales, a professor at the University of Chicago who conducted the study with two other professors. “If the forecast is correct, the situation is not good.”
What will determine the number of Las Vegans who will walk away is how they see the future, Zingales said. If they see the market rebounding, they will stay in their homes for now.
Prices have stabilized over the past two to three months, and sales have reached record highs.
“I think it depends on how people perceive the economy and if they see home prices rebound,” Zingales said. “They will hold off and not walk away. But it they don’t see things improving, they will lose hope, and there can be massive defaults.”
That would add to the inventory of homes on the market, depress home prices and potentially stifle an economic rebound. That would also create more financial woes for lenders.
Jeremy Aguero, principal of the research firm Applied Analysis, said it’s not unusual for Las Vegas homes to have fallen from $400,000 to $200,000, and people are going to make the best economic decision for themselves. Aguero said he thinks the number of people who will walk away will be limited, but it’s still a scary scenario for the next six months.
“If people look at walking away for purely an economic decision, we are going to have a lot more people walking away from their homes,” Aguero said. “It would create a huge wave of problems and ramifications for the banks if a mass of people walked away from their mortgage obligations all together. It would be huge and a disaster.”
So home prices in the coming months will be a clue to what happens, the experts said. It’s a function of value and how people influence one another.
No households would default if their equity shortfall were less than 10 percent of the value of their home, Zingales said.
“Once the numbers become a bigger percentage of the value, the temptation is much greater,” he said. “If there are a lot of people negative, there is a very high risk. Our study shows there is a highly contagious effect.”
The social stigma of default lessens if others are doing it, Zingales said.
Richard Plaster, founder of Signature Homes, said the social constraints of walking away are lessened when people see people like the Fertitta family filing for bankruptcy protection for Station Casinos.
Plaster suggested any uptick in people walking away will be gradual as they realize they will continue to remain deep underwater despite any payment reduction they might get from their lender, Plaster said.
“I do believe we are going to see a lot more people as time goes on realize their first responsibility is to theirself and their family,” Plaster said. “They are moving in that direction because it is in their best interest. They are paying an anonymous investor on their home loan, and the problem was caused by malfeasance to some extent.
“They wonder why they should be buried unless they believe home prices are coming back. And when they see more people walk way, they won’t feel so bad. It could be a contagion where everybody does it.”
Plaster predicts those who are only 25 percent underwater are unlikely to walk away. Others will choose to live in their home for several months, not make any payments and use the money to pay down credit card debt and take care of other needs.
That could be good for Las Vegas because money would stay in the community instead of being paid to outside investors, he said.
Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream,” said she thinks the number of people who walk away will be limited because she doesn’t expect prices to fall much further.
Besides, it’s complicated for families because they have to find a new home and put their children in a new school, she said. Others will be unwilling to take a hit on their credit that could affect them for three to five years if they try to buy a new home or new car. It would affect their ability to get loans, and interest payments would be higher.
Olefson said she is concerned, however, that over time some will become fatigued with their home values and get more comfortable with the thought of walking away from their mortgages. Many are waiting to get loan modifications, but if that doesn’t happen, they are vulnerable.
Olefson said the decision to walk away is a conversation people should have with their pastor rather than their financial adviser. She said she considers it wrong for them to pursue walking away even though she understands people are angry when their neighbors go through the foreclosure process and that brings down others’ home values. It’s easy to make excuses because Wall Street contributed to the problem, she said.
“I think they should investigate every alternative before they seriously think about walking away from their obligation,” Olefson said. “It is un-American to walk away from obligations. Can you imagine if we all did that?
“Sarah Palin resigned as governor (of Alaska) because she did not think she could be effective in the last year in office. What if every politician left during their last year for the same reason?”
Discussion: 96 comments so far…
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its time for harry reid to strong arm obama and get those loans re-negotiated. pinning the blame on lenders, realtors and especially the home owners accomplishes nothing; fix it NOW before it gets worse. i cannot believe that the banks would be adverse in helping out their customers in light of all the TARP money they received from the government.
This could be rather interesting if analyst' are predicting half of all mortgage holders will be underwater by 2011.
http://www.reuters.com/article/GCA-Housi...
Abandoning your home when you are upside down is an economic no-brainer for most people- it's called Strategic Default....Google it.
Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream," said she thinks the number of people who walk away will be limited because she doesn't expect prices to fall much further.
Thinks the number... Doesn't expect...
Thanks for your opinion. Please give facts instead of your opinion. I have an opinion of your opinion, but they probably won't let me post what I think of your opinion here.
Fact: There were about $1 trillion dollars in Subprime loans that created this mess.
Fact: There are about $1.2 trillion dollars in Alt-A & Option-Arm loans that are going to reset starting RIGHT NOW through 2012.
This was reported by CBS in December 2008.
http://www.cbsnews.com/video/watch/?id=4...
Around the 3:46 minute of this video are all the FACTS I need to know that the housing crisis isn't anywhere near over.
That's without factoring in all the bad paper for Commercial Loans and Credit Card Debt. That's another mess of it's own and will be just as nasty.
Add in five years for unemployment to get back down to 5.5%, you can go to:
http://www.bls.gov/
And look up how long it took from 1983 to 1988 to get down from 10% to 5%.
I'm not trying to whizz in anybody's Wheaties, but I'm trying to point out the bus coming down the road. Get out of the way of the bus. This ain't over yet.
I wish the world was all sunshine and rainbows, but it's not. If Olefson is so sure of herself, then lets see how many homes she is "jumping" on here in Las Vegas right now. I bet she wouldn't touch this market with a ten foot pole. Let alone her own money.
checkout this image -> http://massinc.typepad.com/.a/6a00e54edf...
It shows the percentage of population who are native to the state their in. Take a look at Las Vegas. The majority of people living in Nevada aren't from Nevada. This means they'll probably be going back home to live with family if times get tough. People will go back to their roots.
This is why it's so easy for people in Las Vegas to walk away from their homes.
How is it that hard-working homeowners are somehow "obligated" to bail out the rich Wall Streeters and the bumbling "me-too'er" bankers who speculated the economy down a rat hole? With joblessness growing by the day, home values dropping by the hour, and working stiffs are supposed to continue sacrificing? It's getting really close (if we're not there already) for a little bit of healthy "every family for themselves." The darkly greedy Wall Street and banker low-lifes who caused this disaster MUST be punished. They should not be allowed to sit quietly in their posh offices and let goof-ball conversations fill the streets about how homeowners should be responsible and honorable about their mortgages which are not worth the paper they're printed on. Social justice, folks. Social justice. It's long overdue!!
Hey all. This week on In Business Las Vegas, we are talking about this trend and what it means for the valley's real estate market. That's Friday, Saturday, Sunday and Monday on Las Vegas ONE, Cox Cable Channel 19.
Don't walk away just quit paying your homeowner dues.
That was a remarkably well-written and informative article. Thanks LV Sun. Thanks for speaking with objective economists instead of the usual highly biased real estate dum-dums you normally love to quote.
Please keep doing more of this kind of work.
this is town is on a downward spiral now.
Did none of the numbies who speculated as investors or homeusers think for 2 seconds about what a mortgage (contractual obligation) is ? Did they not sign the note . It is not material that they were too ignorant or greedy to read the damn thing, of course, if they were among the 52% Nevadans who did not complete high school maybe they can get a walk or do-over. You are responsible for your own actions and there are consequences good and bad to all. How many of these losers ask for their slot money back after a losing session ? It is not the government nor lenders who called you in the night at home and said show up under subpoena to buy this house we have for you. Grow up and get real . Blame your life circumstances on anything and everything except you. Oh yeah, the majority voted for Mr. Obama, so he's supposed to make your bed a little softer. Hope it feels good when you get your first mandated proctology exam, but the gloves and lube didn't quite get delivered from the gov't warehouse.
Nevadans are gamblers and they know "when to fold 'em". Screw the banks, they're doing the same to you.
The LV market was and is inflated, and now it's also over-stocked. The gaming industry simply can't generate the number or quality of jobs needed to sustain the prices being asked, and without more well paying jobs the market is bound to continue its decline until it settles at a more sustainable level. (Find someone being paid the median gaming industry wage in the County, or your average retiree on a fixed income, and see how much house they can realistically afford -- on top of their other expenses & investments -- and you'll have your median mortgage payment for the County, which can be converted to a median home price based on a 30 yr fixed mortgage.)
The article lost all creditability with me when they brought Sarah Palin into the article..
There is always risk involved with purchasing real estate but you are not supposed to gamble with your primary residence. You buy a primary residence to live in for the long term, not hope to sell in a few years for a profit. That is what investment real estate is for. The people who are walking away but have not had a loss of income and can still afford the mortagage they agreed to pay monthly for 30 years, remind me of 5 year olds who quit in the middle of a game because they are mad they are not winning.
LVDJLV makes very good points. OverDoneinOverton makes the most important point.
Greedy bankers along with greedy wall street weasels caused this bubble and then greedy mortgage brokers conned decent people into these scams.
Don't buy into any of that "You are obligated to pay" horse crap! If it wasn't a rigged game from the beginning, I could understand the obligations, but it wasn't. It was a rigged crap game and if the house cheats they get nothing!
These banks have already been bailed out by the gov't or by the credit default swaps. The servicing companies make more money by foreclosing than they do my modifying.
Everything is stacked against the consumer/homeowner.
Walk away, get a decent bk lawyer and file a Chapter 13 to dispose of the associated tax liabilities and potential recovery lawsuit from the crooked cheating loan servicers. Tell them to eat dirt!
Line up a rental first, though. They are cheaper now than they were 20 years ago.
Do not buy into this stigma crap. It is all an illusion to continue the rape of the consumers in Las Vegas.
You have to protect yourself, because no politician, banker, scam debt relief crook, or district attorney is going to protect you.
I second that, AngryReader!
"Did none of the numbies who speculated as investors or homeusers think for 2 seconds about what a mortgage (contractual obligation) is ?"
Well, apparently the law allows for people to walk away from mortgages without deficiency judgments. Didn't the banks know about that before offering 100% financing? It's fair and square and well within the rules to walk away. There are benefits and detriments to doing this and it must be persued as a logical business decision, just like a business would with a little bit of careful cost-to-benefit analysis.
"The article lost all creditability with me when they brought Sarah Palin into the article.."
It wasn't the article, it was one quote from one ditsy commentator. It was a bad idea to quote her on that. It's partisan and it's distracting. In addition, I think a lot of people would completely disagree with her assertion that (it would be bad) "if every politician left during their last year for the same reason?" A lot of people would gladly have them all rounded up and shot right now.
The tendency to walk is very strong, especially in smaller homes that have no backyards where extra money has been spent on pools, patios, etc.
When you owe over 200K on a home that the exact plan is selling on your street for less than 100K, it is not in your financial best interest to stay.
"You credit will be great again, long before that house will be back to what you owe!"
WALK ........
It's a business decision, and one I'm confident that homebuyers who are under water will consider carefully.
The article lost all creditability with me when they brought Sarah Palin into the article..
******
That's what I thought too! Maybe since she's not the governor any longer, she bought some properties here in Vegas!!!
AngryReader and WhosLaughingNow
I hope then you would understand that the government should garnish wages on these "homeowners" who walk away since they are just renting. They have been getting years of tax breaks with the mortgage interest deductions and as a renter I want these un-disciplined "homeowners" to pay back taxes. Don't you want to screw the guys making money from these deals which include the "homeowner"?
Remember to look in the mirror when you are looking for "weasels" and "greedy people" as that is my definition of "homeowners" who walk away from a mortgage and pocket the tax deduction.
I bought my home 11 years ago. When the "values" skyrocketed, and I was getting offers to refinance or sell, they were valuing my home at more than 3 times what I paid for it. This could have been a massive windfall. I didn't take the bait because I knew that prices would eventually come down again, the market would stabilize, and I would end up owing more than the home was worth.
I'm not a real estate guru or anything. Did people really think the houses they bought at exhorbitantly inflated rates would retain the value? Did people really think that when they took enormous amounts of inflated equity lines of credit that their home would retain the inflated value?
I don't think people are that dumb, but I could be wrong.
It's called personal responsibility. Get some.
People should not have bought what they could not afford. If we allow everyone who doesn't like paying their mortgage to bail with no real consequences, where would it end? Why not quit paying all your bills?
People keep talking about mortgage adjustments but I have not heard from one person that has successfully renegotiated their mortgage with any lender. Have any of you heard of a "success" in this arena? There appear to be plenty of legal group profiting from the hope (for $3000 - $5000)they give to homeowners that they can work an adjustment through the system.
Any evidence that mortgage adjustments are being done?
Gee, I think I'll talk to my Pastor about my housing situation. Thanks, Shari Olefson. What the Hell does a pastor know about layoffs, lack of money for food and the mortgage? Yes, pray and pray and pray, and then you're screwed bigtime when the constable comes a 'knockin'. Whatta' you do, move into the Rectory? Christ, you'd be better off speaking to Mr. Ed. And Un-American? So you walk away, and now you're a traitor to your country? What kind of George Bush phony patriotism links with thieving banks and lenders giving out loans like drug dealers? Shari Olefson, you are a fool. Go away. Please-Now.
the reality is that right now...if you walk and file bankruptcy your credit will be good and repaired ( assuming you have income and don't get into debt all over again ) way before your home that you bought for $250,000 that is now worth $125,000 gets back to $250,000.
the core companies in las vegas are starting to crumble. it's slow, but it's happening.
a missed debt payment here, a missed earnings projection there.
it's like watching a tomato grow. it's hard to sit and watch it grow, but you know it's growing.
Those of you advocating that people severely underwater should walk away from their mortgages are neglecting the fact that the banks can pursue a deficiency judgment against the homeowner. I know that in the past banks tended to not do this, but things are different now. Unlike typical foreclosures in the past, strategic defaulters actually have assets that the bank can claim. Couple that with the bank's goal of intimidating homeowners into not defaulting and you can see why the banks could and probably should pursue deficiency judgments against those people who have the resources to pay their mortgage, but choose not to for financial reasons. If I knew that I would have to pay the bank what I owed even if I allowed the property to go into foreclosure, then I would definitely continue paying the mortgage. I would rather own the house and pay what I owed as compared to not own the house and still have to pay what I owed.
No one asks about the tax savings these "homeowners" have received?
The government should go after these tax cheats, people who foreclose after taking income tax deductions.
Deficiency claims? Not in a million years. The banking sector gorged on $750 billion in TARP cash to pull them back from the brink of a collapse their actions created.
Now they're booking massive profits... and continuing to foreclose on millions of houses while mostly ignoring pleas to restructure mortgages. Oh, and most of 'em haven't paid back that TARP money yet.
That has politicians and Main Street seething already.
What do you think would happen if the bankers not only foreclosed on millions of Americans, but attempted to seize every last nickel they had?
Forget whether they have the legal right to do so. If they did it, they would touch off a political explosion that would likely end with banks broken up and forced to operate under regulations stricter than anything FDR ever dreamed of.
Never going to happen. If it does, the bankers are dumber than I thought.
Hey, azbycx0918, name me one person who you know with a deficiency judgment against them. Right, none. 5 years from now, you still won't know anyone with one. Why-well first it costs 30-50,000 smackers for the bank to file. Secondly, the bank, if they even did pursue you would be immediately hammered with suits asking why they gave out these ridiculous loans in the first place. Secondly, the banks turned many of their loans into CDO's. This means the loans are owned by God knows who in God knows where.
Let's see. We have 30,000 homes in various forms of distress in Clark County. Let's see, 30,000 x $30,000=? You do the math fool, you are wrong. Dead wrong.
Anonymous,
I see your point, but I also think that there is a great deal of anger out there for homeowners who are getting a free pass in this mess. As a citizen, I am equally appalled by the greedy behavior of the entire housing industry AND individual homeowners who are basically living rent-free for a couple years then walking away from their responsibilities. I personally would not be upset to see banks pursue deficiency judgments. I fear that if all these people simply walk away from their homes then my own residence will be worth a fraction of what I paid for it in 1999. Something needs to be done to prevent the mass exodus that many are predicting.
This is where the saying "You made your bed now lie in it" applies. No one held a gun to your head to make you buy a house with a crazy mortgage. If you thought that home prices could rise 20% a year forever and you could just sell your way out of a problem, then you are a fool. First time home buyers should not have gotten 3000 sq ft homes with no money down. A little common sense would have done a world of good. When I bought my home before the boom, the lender said "You qualify for twice that amount, don't you want to go shopping for a bigger house?" Common sense told me not to. So, IF you still have your job and can make your payments then you should suck it up and pay your mortgage. YOU signed it, YOU should pay for it. Banks have always been greedy, don't cry and say "I didn't know they would cheat me". Cowboy up crybaby.
YnotJohn,
The gov't lost any claim to recover a nickle when it failed to reign in these scams and protect the public. As I have mentioned before, the mortgage interest deduction (for me at least) was less than the standard deduction.
The government failed to regulate and oversee the ponzi schemes that the ARM backed securities dealers and the mortgage bankers were building up.
If the gov't would have allowed all these players to fail and fall into bankruptcy you would have a point. But they didn't. So why should individual tax payers have to become the bagholders for bailed out corporations?
If you want to keep your home and pay the inflated price due to the ponzi scheme run by large corporations that have already been cashed out, good for you. That is your decision.
If you decide that playing in a rigged game is unfair and you refuse to pay a cheating system then good for you also.
Who with eyes did not see this coming?
Angry Reader
It has been a rigged game for homeowners over renters. At some point you did receive a tax deduction for your mortgage be it your first home or this one.
As a renter, seeing alot of foreclosed "homeowners" with 2nd mortgages that they used for toys and vacations and now walking away from the debt, of course I am angry.
I hope a lawyer at least files a class action suit on behalf of renters against these "homeowners" to at least reign in the greed factor that "homeowners" have.
"It is un-American to walk away from obligations."
Olefson is hopelessly naive to say that. If you've been cheated/defrauded that can void the obligation. According to credible bankruptcy experts, about a third of all entities foreclosing don't have a legal right to the property.
Some of this was covered here on June 2nd in http://www.lasvegassun.com/news/2009/jun...
Spend some time and Google "produce the note" -- there's good stuff in there. Ordinary people are making this happen. It's good to see bench and bar finally taking some action instead of just rubber stamping what big finance wants.
Walking away - great idea. Moreover, you do not have to file bankruptcy after doing so (it does you no good). The only reason you would file bankruptcy is to avoid a deficiency judgement and/or wage garnishment (but just ask yourself - do you know ANYONE with a deficiency judgement against them - NO). Just allow the debt to fall off your credit report over 7 years.
There is no difference between a "homeowner" who plans on price appreciation to get a profit and a banker or mortgage lender who views real estate as a profit center.
Therefore the government should claim debt reduction as income to these "homeowners". They are acting like businesses by viewing the mortgage as a finance decision and walking away from "unprofitable" situations.
Why should working class renters be the bagholders for bailed out or walk away "homeowners"?
The government recently decided that debt reduction due to foreclosure IN NOT TAXABLE and that is even more of a reason to walk away. You can look this up at www.irs.gov.
As MResortLover is correct in pointing out. The new government tax laws are fostering Foreclose homeowners to become SCAM ARTIST just like Wall Street.
It just shows Pres. Obama and both sides of Congress are not for the working class but just the politically connected.
Hey, azbycx0918, name me one person who you know with a deficiency judgment against them. Right, none. 5 years from now, you still won't know anyone with one. Why-well first it costs 30-50,000 smackers for the bank to file. Secondly, the bank, if they even did pursue you would be immediately hammered with suits asking why they gave out these ridiculous loans in the first place. Secondly, the banks turned many of their loans into CDO's. This means the loans are owned by God knows who in God knows where.
Let's see. We have 30,000 homes in various forms of distress in Clark County. Let's see, 30,000 x $30,000=? You do the math fool, you are wrong. Dead wrong.
For all of the Socialist/Liberals needing to pay for programs, tax the homeowner! Remove the mortgage deduction and make them pay national real estate taxes. This will remove the profit incentive that fuels home buying.
Let me give you kooks that think the bank will be coming after you if you walk away an example of why you are stupid. In 2004, I refinanced my little house to a 5.5% fixed 20 year loan. In the course of the conversation, the Countrywide talking head says "Hey, want another loan?" I said no, that I was retired, and had little income. He asked "How much do you make a year?" I said, with my small pension and Soc Sec, I made $18,000 a year. He said "Hold on a second." Then he comes back and says "Hey, I just got you approved for $300,000." All based on my high credit score-since they had no idea of my investment portfolio, since they took over the servicing of the loan from those useless b*stards, Quicken Loans.
Sure, I turned it down. But I assure you, azbycx0918, and all you other fools that if I had done the deal, and subsequently walked away from the house, and was sued for a deficiency judgment, the first thing that the judge would ask Countrywide, now Wells Fargo is "What were you thinking?" And I would win. But it will never happen, anyway. Shari Olefson, you need to go out and meet the real world. azbycx0918 and his buds will be glad to cry over a beer with you...
Many people from other states with expensive housing are probably keeping an eye on us. Even if people walk away, there will be buyers. If the banks wont help refinance a house with a 250k loan, hopefully they'll be more inclined to help finance it when it's down to 100k.
I also think there are a lot of potential cash investors sitting on the sidelines, waiting to snap up several properties at a time, at bargain prices. Will they become rentals? Who knows.
All and all, we need to rethink things. Gambling and hospitality have always been our core industries. We should consider focusing on other industries, such as agriculture. Notice how so much of our food comes from California? Why not build greenhouses, powered by wind and solar, with water that's recycled. Let's become self-sufficient for a change. Arizona has one of the largest indoor tomato operations in the country, so why can't we do something similar?
The simple fact is this. If you sign the papers and agree to terms, you should honor your end of the deal. Those of us who stayed in our small house we bought 20 years ago, and got laughed at in our face by neighbors who "got out" and moved to more expensive neighborhoods, do not want to hear them cry about being in over their head. If they negotiate an interest break with the bank, that's one thing, but I do not think anyone should get a pass if they walk away. They should be banned from any new mortgage until they pay up. Yes, the banks were wrong to lend to some risky people, but you do have to be an ADULT to grt a mortgage. Now I do think it is wrong to jack up credit card interest if a cardholder is 5 minutes late. By the way, the neighbor who laughed in my face as he told me about his fancy new place 4 years ago.....He's living in his van now......Serves him right. He came by wanting to "borrow" 20 bucks. I told him NO! (The tightest slot machine in Vegas is more likely to return the 20).
Pay now or pay later the fact is that in Nevada the bank has a right to claim any money lost on the mortgage due to foreclosure and that includes legal fees associated with collecting that amount.
These idiots that are claiming none of the banks in Nevada are going after people for payment are fools. Over a 1000 case in Clark County court have already been processed. Some banks have even set up reclamation departments to recover this money. If you do walk away be ready to hide your assets and income for the next few years. Wages can be garnished for payment of the balance owed vs. what the bank received after sale.
People can blame the banks, lenders, realtors, developers, politicians, presidents, or whomever else all they'd like. No one was forced to buy a house, it was a personal choice. People got caught up in the housing frenzy, even more than the dot-com stocks 10 years ago. We're a country of dreamers, with many citizens unable to differentiate between fantasy and reality. Time to wake up, accept responsibility for your actions, and quit looking for a convenient scapegoat. There are some shady people in real estate, but they're in every business (car sales and repairs, showbiz, doctors, etc). It doesn't hurt to get a 2nd opinion. Sure, it might cost you a few hundred dollars, but that's a small price to pay in order to protect your house, your credit, and your dignity.
nednougat and bdover,
Since you have decided to call me a fool, I feel compelled to remind you that past performance does not guarantee future results. Just because banks have not pursued deficiency judgments in the past doesn't mean that they won't in the future. It only takes one judgment against a homeowner who took your uninformed advice to walk away from their mortgage to ruin that person's financial situation.
You two seem like the type of person who makes hasty decisions without considering all possible ramifications of your actions. If I had to guess, you both hastily bought homes during the boom and are now screwed because things didn't turn out the way you had hoped. So now, you are going to default on your loan without thinking about what your life will be like if the bank does in fact sue you for the full amount of your debt. Since your such an @$$hole, I hope that happens and forces you into bankruptcy.
The only benefit of including comments by Shari Olefson in the article is that I now know not to read her book.
"talk to your pastor"
"it is un-American"
She sounds like Ann Landers. What a load of BS.
FOR THE PERSON WHO SAYS THAT HE WAS OFFERED THREE TIMES THE VALUE THAT HE PAID FOR HIS HOUSE ORIGINALLY: EITHER YOU WERE A PLAIN FOOL OR YOU WERE A GREEDY F0OL PROBABLY EXPECTING THAT YOUR HOUSE WOULD GO EVEN FURTHER UP IN VALUE. IT WAS OBVIOUS THAT THE REAL ESTATE MARKET WAS A PONZI SCHEME. YOU SHOULD HAVE ACCEPTED THE OFFER AND RENTED THE CHEAPEST CONDOMINIUM POSSIBLE.
The law doesn't recognize concepts like "personal responsibility" or "social justice". It is concerned with enforcement of legal contracts. If a homeowner wants to walk away from his or her mortgage, get legal advice about the best way to do it. I think that many home buyers were conned by realtors, mortgage folks and appraisers into thinking that they were buying at a reasonable price when in fact they were buying the stuff dreams are made from.
Over the years failed loans were not the norm so banks just wrote off loan balance. Now it's different. There's a bonanza out there. If the banks are unwilling to pursue you, the credit collection vultures will. You can bet the vultures are going to line up and buy the banks bad loan portfolios and come after you. Enjoy swimming with the bloodthirsty sharks.
Whether banks took a bailout or not, they are required to set aside reserves to cover potential loan losses. With so many houses in foreclosure and the threat of many more coming down the pipeline, they are putting more money into the loan loss reserve. Let's not forget that many of those banks that financed houses also financed commercial real estate, which is on the edge of default disaster. Also, it's kind of hard to lend when payments are not being received. So because a bank is not lending does not mean they are greedy or lazy. Unlike during the boom, many banks have tightened up their lending standards and are unwilling to lend to potential defaulters.
As many of you know, a huge percentage of home buyers, almost 40% in Las Vegas and Phoenix, are speculators. Add in those newbies who can only afford the down payment with the governments $8000 assistance, the housing market isn't as healthy as the "experts" claim it is. Judgement day has been postponed.
As far as the advice about don't pay your homeowners association dues, read the bylaws. Don't pay your dues and the association can possibly foreclose on your house. There have been articles where associations have foreclosed on only a few thousand bucks due.
NJCRUSHER,
Why would I want to sell the beautiful house that I love with lots of room, pool & spa, and a huge yard to go live in a cheap condominium that I hate?
I have a St. Barnard for crying out loud!
No amount of money is worth that kind of misery!
Changing the subject to healthcare reform for a moment:
Please go to the following link and listen to Bill Moyer's interview with Wendell Potter, the former Cigna executive turned whistleblower who testified before Congress in June. Potter describes the methods used by the insurance industry to maximize profits, at the public expense, and the coordinated efforts to kill a public health care option. Paul's column today describes only one of those efforts. After watching Potter's interview, please e-mail the link to your relatives and friends. Everyone needs to watch this interview:
This is the link to the Potter interview:
http://www.pbs.org/moyers/journal/071020...
the reason banks did not come after deadbeat homeowners in the past was that it was easier to resell the home because prices were going UP.
now that they are going down, i hope the banks go after all the deadbeats and take everything they got. a contract is still a contract.
Nednougat here are names of people with deficiency suits with judgments against them in clark county civil court all are linked to foreclosure properties, Sergio armandariz, Jason garman, Peter Pszyk, Michael tapia, and Soledad v Vasquez. There are many pending in civil court right now most are the private mortgage insurers who paid the claim to the bank. While the deficiency lawsuit is rare they have 6 months from trustee sale date to sue on first mortgage and 6 years to sue for any secondary and or helcos.
First of all religion has absolutely nothing to do with the mortgage industry. So keep quiet stupid bible thumper. Second if it is unamerican to walk from our obligations then I guess bank of AMERICA is unamerican because they withdrew the financing they offered the developers of The Fountaine Bleu Resort which is also a financial OBLIGATION.
Shrek, STICK TO THE SUBJECT! I may disagree with Katie on a lot of her posts, but I do respect her for talking about the subject at hand. Her comments never stray from the subject. Even if I happened to agree with you (didn't read your link, so don't know for sure), this article is about housing, mortgages, foreclosures, banking, etc.
Bite the bullet? Or less your credit rating? Well since just about everybody is going to have lousy credit...
THanks Bakersfield!
I enjoyed reading all these posts; I found them very interesting and at times, educational if that could be the right word. THe dialogue between everyone was unusual - meaning everyone played "nice", except for a few posts here and there.
Contrary to a post I saw earlier - yes, there are a lot of smart, intelligent people that comment here.
BTW - people walking away from their houses should be snagged by the banks and prosecuted to pay the money. They signed binding contracts which, by law, can and should be enforced. I'm sorry - but if you fall behind a couple of payments on a credit card - the "bill collectors" start the annoying and at times nasty phone calls to try and get that money from you, and it certainly isn't in the hundreds of thousands of dollars. Why should these deadbeats who walked on their mortgages get away with this? ESPECIALLY if what they are saying is true - most CAN make their mortgage payments.
foreclosure and bankruptcy is not going to be as big of a deal anymore because SO many people lost their homes and are now unemployed.
more people will have bad credit than ever before.
The company I work for for wont hire anyone with bad credit. I guess because we work with credit applications (sales)they dont want a deadbeat handling someones information. They run a check on everyone even the delivery drivers and warehouse workers.
Lots of jobs are doing a credit check before they interview people. If you got bad credit you better do whatever it takes to keep the job you got because it is so cheap to run credit reports on job applicants that most companies will be doing it now. Bad credit can ruin your life and just because some of the idiots on here are saying everyone has bad credit dont fall for it. If your not getting called back for interviews on jobs check your credit report and see if you look like a deadbeat to them.
LasVegas2009
Losing your job is the first step in "ruining" your life because you have to make some very tough choices. Yes, some companies run credit checks but a lot don't do it UNTIL they hire you. But if someone has been unemployed for any length of time, chances are they had a very hard time keeping a roof over their head and paying for all the other necessary expenses, so the last thing paid are credit card bills. Unemployment only goes so far and here. So when you finally DO get a call back after sending out your resume, what does the prospective employer expect - someone with a 750 credit score? There are so many people that have not been able to pay their bills but having a job is the first step to correcting bad credit. It is unfair for the employer NOT to give the prospective employee a chance at employment because they fell on hard times. It should not be held against them.
Some of the places I interviewed at, I filled out the authorization for a credit check. But the only job that I was offered didn't do credit checks at all. If all companies refused to hire someone because of bad credit and the circumstances surrounding it, ie being on unemployment, they wouldn't have hardly any employees, especially here in Las Vegas.
Why don't the banks work with the people that are can afford their homes but would like to modify? Why wait until there is trouble? Doesn't prevention count for anything anymore?
With thousands of people applying for the same jobs in this town employers have a choice. They can chose a person who is responsible and pays bills on time or they can chose someone who is a deadbeat. The LA Times had a good article about states like Detroit who are trying to block credit checks by potential employers because it is such a problem there. What I am saying is that they are doing it in Las Vegas at most jobs where money changes hands. Like I said at my job they are even checking on warehouse and delivery drivers. Its a standard hair test (drugs), background check (arrest history) and also a Credit Check. My employer pulls my credit every year I know because I can see it listed on the report I get every year. I know people who have been forced out and I suspect because they had a bad report.
blame for everyone...
idiot bankers who lent 100% to anyone with a pulse and now cry about defaults.
idiot buyers who think housing values only go up and dont know what an ARM is.
idiot investors who bought these sub-par notes
I think all of the above should be in debtor prison making license plates or perhaps Sham-wows.
Correction NY times here is the link
http://www.nytimes.com/2009/08/07/busine...
Cash is king. If you're upside down in a mortgage, way upside down, then just walk away if you put nothing down, period! Live there for 8 months rent free and save money. Sell everything you can before you leave, the appliances, shutters, cabinets, granite counter tops, etc. Then save that money as well.
Step 2 is to give the shaft to all creditors! Don't pay anyone! Save the money. Don't go BK either unless you have a job where they take the money from your paycheck. Just blow them all off and wait 7 years. All the bad marks will fall off your report in 7 years and viola, no BK on your record for life! What a deal, eh?
Step 3 is my favorite. Take all of that cash you saved paying nobody over a 10 month period and living on beans and rice and buy a foreclosure in the $20-$30 range. That amount of money should be easy to save with 10 months of no mortgage! Put all of the stuff you couldn't sell in storage to fix up the new place. You can easily get a 3 bd 2 ba home in Vegas for $30,000 these days. Go to realtor.com to find those types of homes.
Now you'll be living the life! No mortgage payments. No HOA payment (don't move into an HOA!) No CC payments! Put a homestead on your new home so the scum bag banks and creditors can't take your home to pay off the debt you blew off.
This is what I call the average joe's stimulus package. F-um and feed'm fish!
The prophet has some more advise. Start your own business, a cash business so that Uncle Samstein won't be able to get his greedy hands on your hard earned money! Invest in gold, silver, and collectible coins. Store them at Mr Elliot's place. Grow your own food! Many of the $30 homes are in older areas and they have HUGE back yards! Buy a wind turbine and solar panel's and get off the grid as well. Do these things and you will find freedom as you have never known before. Let it be written, let it be done!
If you are way underwater and can't make your payment, wait. Hope that the city planners here pull their heads out of their ass and realize it is time to start limiting growth. Once that happens prices will stabilize and begin going back up. And if they continue to drop, them walk away, but definitely try to modify (even though you won't have luck), so you can say you tried, and get a lawyer to protect yourself. All you people that call this "contract obligation crap"-- can bite me. Businesses walk away from debt and contracts all the time (why are we not able to do the same), and they effect individuals (employees), where as someone that walks away from a house is effecting the bloodsucking bank industry. Seven years is a LONG time to have crappy credit, and remember, seven years ago houses cost what they do now, so a lot can change in nearly a decade.
in the above statement I meant can make you payment, not cant
Talk to your pastor? What an idiot!
If you are underwater WALK! Save your family and your money. Family first. F the bank.
The USA is a huge huge country, so why are you building houses on property sites, the size of postage stamps.
i wonder why LV dosen't have a moratorium on new home construction. can't those running the city see we need to sell the empty homes first? due to greed our home values are going down every day, get the existing homes sold and values will start to rise again. Stop building new homes, the construction companies all made BIG BUCKS during the boom, using illegals (and paying minimum wages)and selling for top $'s made them rich - they can afford to take a few years off till all the foreclosed homes are sold off. and for all of you who took large amounts of equity out of your home to buy toys - and now want to walk on your mortgage - please walk right out of town (or drive that new car you got)- we don't need people like you, vegas would be alot better off without deadbeats. and for those of you who got scammed by the banks - maybe you shouldn't enter into a financial deal until you smarten up some - read contracts first - and if you don't understand it ask questions - like whats an ARM and how does it work... people start using your brains and start looking at the big picture, stop being greedy and start being responsible.
lucygoosie,
Thats the way, tell them straight.
Please note that it is a much better idea to walk away from your primary residence than it is a rental. The IRS is now not taxing the debt forgiven on your primary residence. That is not the case for rental properties. This is to the best of my knowledge.
I buy stock in a company. The CEO runs it into the ground while collecting a big paycheck. Where was the obligation to me as a shareholder?
I work for a company for years. Because profits are down (not actual losses mind you) I get laid off. Where is the obligation to me as a worker?
I buy a product from a store. It turns out to contain lead paint and was made in China. Where is the obligation to me as a consumer?
But somehow I'm obligated to pay for a mortgage even though I cannot due to circumstances beyond my control. Banks made loans as a business decision and should have been a better job of qualifying borrowers instead of lending to anyone who can fog a mirror.
These banks could have loaned the money to a corporation that could have failed. Who should be held responsible then?
This is why we don't have debtor prisions in the U.S. People are allowed to get a fresh start through bankruptcy. More and more people are going to take advantage of the bankruptcy laws and no collection agency will be able to touch them.
If you think we should "go after" the people who walk away you should remember that these people have nothing to go after. You can't get blood from a stone.
sunnysideup and friends--i was born and raised in this city. I have been an active participant in trying to make this community a better place to live for my entire life. I also saw this disaster coming but greed and the rise of white trash with money could not be stopped. Unfortunately it has put us all in a tough spot. We are close to retirement and our income is declining, a recent illness has only made matters worse, normally I would have sold my home (which I did not buy in the upswing, and did not take out an equity loan) but I am unable to sell. Since you have all the answers I would like to get your advice, should I continue to make payments on a home that is now worth less than I paid for it 10 years ago, knowing that I will be dead and gone before I can sell it? Should I continue to drain my retirement fund and what is left of my kids college funds, so I can live on whatever the government thinks I should have? I like to believe I always do the right thing, I have workied my butt off and never asked or taken anything from anyone--but I truely feel like some of us are being screwed, should I allow this current system to continue to hose me or should I step back and rethink who I am truely obligated to?
They can chose a person who is responsible and pays bills on time or they can chose someone who is a deadbeat.
*****
They will also choose people who will accept the low salary they are offering regardless of that employee's experience AND credit score. AND....they will pick someone young before someone "older" ie 30's and 40's.
Yes, the credit checks are done if you are handling money,ie bank tellers, but again, most "white collar" employers do not do it unless you are hired, or not at all.
If you think we should "go after" the people who walk away you should remember that these people have nothing to go after. You can't get blood from a stone.
****
No, you go after the ones that walked that CAN pay and only walked because their neighbors did. There are quite a few of those, aren't there?
No, you go after the ones that walked that CAN pay and only walked because their neighbors did. There are quite a few of those, aren't there?
***
Easier said than done.
So Katie, do you require businesses and corporations to live up to those same high ethical standards, or not? Because, I sure don't see any corporations living by anything approaching those ridiculous standards.
Moreover, most of your advice is so far from mainstream legality and ethics that it drifts into crank territory. Mortgage contracts were never the one-way risk, one-sided arrangement that you're peddling.
The very fact that legal bankruptcies exist as a legal and acceptance practice to discharge such debt is more than sufficient evidence to prove that you're trafficking in delusion.
Don't mistake your personal beliefs for sound law or sound finances. Remember those bad, bad, stupid, bad people you are so ravenous to persecute often have families they need to feed and take care of first.
Welcome to reality. Please enjoy the stay.
I remember an old SNCC quote from the 60's, "When you're in Mississippi, the rest of America doesn't seem real. And when you're in the rest of America, Mississippi doesn't seem real". I can't quite figure out why Vegas residents crossed way over the line with respect to the subprime and Alt-A mortgages compared to the rest of America. Pursuant to a Deutsche Bank analysis this week, 48% of Americans will be underwater with their mortgages in 2011, while 90% of Las Vegans will be underwater. Yet, sales figures in Vegas are exploding the last few months. I remember when I lived there for a short time, while in the late 90's, so many of the unemployed were moving to Vegas from other states and they were living in their cars. If they were losers elsewhere, why did they think they could make it in a city that fed off losers. I told them to go back and get the hell out of Vegas. Yet, they stayed. I can't see why they made this decision, if they were losers elsewhere. Could someone please explain this to me and why sales are increasing now. I left shortly thereafter, once these same people were buying homes with no money down. Now, in spite of the evidence, there seems to be a buying uptick, though logic indicates they will all be losers by 2011. Yet, the local media feeds this false hope. Is it something in the water out there? I still love to visit Vegas periodically when I think I can make a profit on certain sports, but there is no way I would ever buy real estate there again. I sold all my properties there by 2005. What is it out there when the rest of America thinks, "Vegas doesn't seem real".
No, 90% of vegas homes will not be under water in 2011. Someone pulled that number out of their arse, obviously, and nobody has a crystal ball as to what will happen. Common sense however suggests that prices are leveling off and will only decrease by a little if any in the future. Why? You can now buy a property in Vegas and rent it for a positive cash flow! If you buy it for cash, it will generate enough income in 4 years to pay for what you paid (if you paid say 50-60K for a foreclosure that is renting for say $1000 a month, 3-4 bd, 3 bath) That means that there are plenty of investors, especially from China and asian countries that have savings to invest that will be buying up LV RE. Don't believe me, call any Realtor and ask them if they have any asian foreigners buying homes right now. I hear 20% of all LV sales right now are going to folks of that persuasion. Another 30% to Cali investors. The rest to investors from the states, first time home buyers, etc.
Dontjudge you are absolutely right! Do what is right for you in having to take care of yourself.
The people "walking" away" are not the ones with a vested ( $$) interest in their home. If you have a mortgage with equity in it....we all know what this is...will hold their ground. But if you obtained your property with zero down and no credit check and walked....you're not losing a thing. So clarify "who's walking" away.
I fully understand that walking away damages a credit report and causes problems in job interviews. However, I had the chance to walk in 2008 and start the 7 year clock ticking or walk in 5 years and start the clock then. I'd rather get this thing behind me and hopefully an employer will say in three years, "Well that foreclosure was a ways back and it will be off your report in a few years so let's not worry too much about it."
It's surprising Katie is so hard on people who foreclose. Just last week in another comment section she was explaining how she had to move back home because of being a "victim" of this recent downturn. It's funny how she sees herself as a "victim" and care's little of anyone else's circumstances.
Katie, you said something about not preaching to you.
Instead may I help you pull your head out of your @ss?
I think Katie's point was that people walking away from their financial obligations when they are in a position to uphold their end of the contract should not be given the same leniency as those who can no longer afford to keep their homes and maintain payments.
I think she has a solid point. Those people simply took advantage of the market, refinanced or purchased homes at the peak of the market, and should have known they were eventually going to have a house that was no longer worth what they owed when the market corrected itself.
If they walked when they could afford the payments, they should be held accountable for their contractual obligations. I feel these banks are eventually going to get around to these people.
Shari Olefson is a complete idiot. She is a perfect example of the liberal left wing thug. The point here is that we still live in a free society (for now). People have choices & circumstances that dictate their choices. Who said that home ownership was for everyone? Now people are finding out that it's not.
When your income has been reduced or you have none.. period, then it's time to walk away from those rediculously high mortgage payments. You have no one else to answer to except yourself & your family & they come first. As long as Harry Reid is your Senator in Nevada, you will get no relief. Vote the bum out. This country is slowly going downhill with the present administration. The lib's voted for a proven thug out of Chicago & now they are paying for it. If Americans stop paying attention & do nothing then this country will turn into another Nazi Germany.
Disagree. Shari Olefson seems more like a right wing lugnut than a drooling liberal. The Pastor stuff is right wing to a tee. The "must pay the mortgage" BS is out of the blind conservative AM radio education handbook. No, she's a Michael Savage/Weiner, Marc Levine, Rush, Doyle, Ann Co*untler clone.
bdover, that was real good analysis.
I bought a home in 2006 for $275,000. It is now worth <$125,000. Granted, my fiance and I make great money, and can afford the $2000 a month house payment, but what moron would do that? We tried to file for refinance, and principle reduction and our lender didn't even respond. We still own a home in Seattle, which has tons of equity. Trust me when I say, we will walk away from this house, move back there for 3 months, file BK, and let this house go back. Anyone to say its immoral to walk away from a obligation, I ask you this:
If you make a bad investment in any arena, it is your right to sell or give up that investment if it is not longer making you money. That makes good business sense.
Lets talk about immorality? Leaving your loved ones in such financial ruin that they will never have a thing when you die but your debt. Get real! No one knew that the housing market was going to crash, it was no ones fault but the institutions that created this. We've already paid them off via bail outs and them claiming their losses on their mortgage insurance. So be it!
WALK NOW!!!
FYI everyone! Bdover and NedNougat is the same person. I ran across an old post of Bdover, which had NedNougat@xoxoxo.com as his email address in the post.
What none of you commenting here have touched on yet is the FACT that many of us here in Las Vegas worked in Industries that have been DECIMATED by the bad economy. When I purchased my 3 homes, I ALWAYS put at least 25% down, lived in all 3 at different times as my primary residences, and then after 22 years as a successful Sales Executive in the Timeshare Industry, I lost my job and a 230K per year income. Now, what is my life like? I am in poor health (spinal trouble, inoperable) and have limited ability to work at anything physical. I have 6 mortgages; 1sts and 2nds on everything - because even with the 20-25% down I did piggyback to get the best loan rates. I can't rent my properties now to cash flow even on a break-even basis because of so many lowball investors coming into the market and buying foreclosures; and my husband, age 60 and in Construction, has been unemployed for over a year. Would you say it is 'ethical' for us, at our advanced ages, to worry about the banks making back our loan balances on properties that are now collectively worth maybe 300K, when we owe nearly 800K on them? Should we deplete what's left of our rapidly-dwindling savings to 'stay in the homes' and 'do the "right" thing'?? Or would we truly be better served by walking away after COUNTLESS attempts to get help from these banks (who won't even speak with us because we have til now paid on time!!). We have many many friends who have walked - older and in more debt than we are - and they have done it because there is NO END in sight to this freefall market. I have no employment prospects, nor does my husband. We are running out of money. We have decided to preserve what's left of our lives and WALK AWAY. We will make good faith efforts to sell on either Short Sales or Land Contracts on all 3 properties, but this is not worth the lack of sleep, the constant stress, and the diminishment of all we have slaved our entire lives to earn.
- not losing any more sleep, because the banks got a bailout - and won't help us.