I posted yesterday on the Wall Street Journal article Report Sheds Light on Why Homeowners Walk Away. A couple of commenters on the WSJ article said why they were walking away from their mortgage, and I thought their comments were interesting enough to repeat. The first walker says that as a good borrower he is unable to have his loan modified, the second blames bank policies:
The banks (my lender is CITI) are unwilling to modify mortgages for the people able to pay. I suspect if the people underwater, but with money and good credit – you know, responsible people – were able to secure a more reasonable APR that made their monthly payments less painful, they’d more easily tolerate paying on that over-valued house.
I have no outstanding debt other than my mortgage. No credit debt, no student loan, no car note – nothing. I can afford my house. But the 6.9 APR irks me. I’ve tried for months to get a MODIFIED better rate – something in the mid 4s. But because of no hardship and being underwater, the banks refuse. After 10 months of trying for a better rate I HAVE NO QUALMS walking away in a non-recourse state. For what – keeping an 800 FICO score? Screw that!
The wife’s credit and our cash will secure the new home – a better house, larger, with a better APR – and the bank can bite me. H***, when our old house goes up for auction maybe I’ll convince my brother to buy it for half its current cost. If banks like CITI, who egregiously borrowed tax payer money, are unwilling to help those same taxpayers who are their customers they deserve to get screwed- especially by people in non-recourse states.
Here’s number two:
I’m walking away because of the absurd policy of the bank. Let me explain:
Because of the economy, my income took a hit and I now make about two thirds less than what was the norm a few years ago. After exhausting a large safety net of savings, I declared bankruptcy. I have NEVER been late on my mortgage, it was always the first thing I paid but the bank now refuses to report my payment history to the credit bureaus after my bankruptcy. They cite it is their prerogative to do so, but if I was to reaffirm the debt, they would be happy to report my timely payments to the credit bureau, which would help me, rebuild my credit.
So I call an appraiser I know to get a feel as to what my home is worth and I find out that I am $160K upside down. So I basically can keep my home but not get any credit for never being late in payments or for continuing to be an on time customer, or I can walk away since after all the bankruptcy did discharge the debt. Also, after looking at a few rental homes, I can rent the same home for half what my mortgage payment is.
So let’s see, I can put a roof over my head for half the price monthly, walk away from $160K of negative equity, and the bank thinks they are doing me a favor by offering me a deal to start reporting to the bureaus in exchange for reaffirming the debt. Yea right!
The bank can keep the house and the loan is held by Fannie so they can sustain the loss. I will restore my credit by other methods. By the way, one of my cars was financed and I was also upside down in that and they tried the same tactic. I gave them back the car.
Whatever excuses these walkers might have, I can’t help but get the feeling that the real problem is they can get a better deal elsewhere. Number one says The wife’s credit and our cash will secure the new home – a better house, larger, with a better APR… Number two says I can put a roof over my head for half the price monthly, [and] walk away from $160K of negative equity.
There was a great quote in John’s post today by Vincent Reinhart. He said:
I think the American Dream is not homeownership, it’s getting rich quick. And if you can make levered bets on an asset class, government will encourage you to do so, you’ll do it, when you think that you’ll get double digit returns.
I wonder how many people would have been willing to pay the bubble prices that they did if they hadn’t expected not just a place to live, but a healthy ROI as well. When the American Dream of easy money disappears, the American Dream of homeownership can quickly loose its appeal.
you can tell a lot about people by their vocabulary. “screw that” and “bite me” is really all i need to hear to know what kind of person this is. he signed up for 6.9% and that is what he has. if he can’t qualify for the loan mod it is because he doesn’t NEED a loan mod. i would question the “800 fico score” though. I don’t know anyone that has income and an 800 score that took a loan at 6.9%????
and the next one wants credit for their payments on their credit score???? it’s not credit if there is legally no debt owed. if you want to rebuild your credit then reaffirm the debt. it’s that simple. the only reason NOT to reaffirm is if you have no intention of paying it off. if that’s the case, why should you be able to rebuild your score?
these people have to do what they have to do. i’m not judging either of these individuals as that is not my place, in my opinion. but i also have absolutely NO sympathy for either situation. i could qualify for a loan mod (i’m the ideal candidate) and i am slightly underwater right now. but i don’t need one and my lender gave me a rate that was more than fair. i also signed a contract and still believe that means something. i know many people think that is foolish and financially irresponsible, but i guess that is what i think part of the problem is….too many people today think ONLY in financial aspects. i do agree with igor though…both of these people are “lame.”
one more thing i’d like to mention regarding everyone yelling “but the economy and depreciating home values!!!” when it comes to their belief that they should be given a discount. our practice currently faces a/r collection issues DAILY. it’s always the same when i call a client to ask about payment for his invoice….”but the economy???” thay all want a discount because the economy is down. i simply ask them “did we ever charge you a premium when the economy was great?” some of them are really struggling and we have NO problem working something out. but most of them just want us to discount our fees because they don’t make what they did two years ago. i spend a good part of my week explaining to clients (mostly r/e agents or investors) that we never charged them more during the years they made hundreds of thousands of dollars, virtually doing nothing.
AZSALUKI – Obviously I don’t know what the 6.9% guy’s mortgage circumstance is/was, but my *guess* is that he had an ARM that reset to the 6.9% after being, ahem, artificially low for a while, and that is why the lender refuses to refi. Like I said, just a guess.
Maybe twist has some data or anecdotes about lenders refusing to modify old ARMs.
Agnostic-
Virtually all my info is anecdotal. I don’t think I’ve seen any stats on the percentage of loan mods that have been declined. The government touts how many have been completed, but not how many are declined. It seems that for the most part the success stories you hear are told with some smiling politician standing next to them.
In real life, I understand that they are usually tough to get.
i’m dealin with a VERY small sample size but i can tell you that about 15 of my clients have tried a loan mod. 2 were successful and 3 or 4 are still in the process (going on 6 months now). the rest were unsuccessful. to be fair, a few of these clients shouldn’t have even tried (2 made WAY too much money to get a bank to modify and one was unemployed and appeared to have NO ability to pay anything). beside being tough to qualify for, they are even more difficult to just apply for. wells fargo simply “lost” one clients’ tax returns TWICE and another client had his app packet returned three times asking for different info. they appear to be stalling as it seems as though they send back the app initially by default. a number of people have had their app returned with a request for something that was clearly included originally. i think the banks just don’t have the time and manpower to deal with this so they try to find ANY reason to kick back your app and put the process back on you???
oh yeah….and i have had my clients include my contact info with instructions to the bank to call me if they need ANYTHING to assist them in the process. i have yet to receive a single phone call from any of them. however, during the refi boom, the phone rang OFF THE HOOK with calls from lenders requesting the same type of info (tax returns, w-2’s. 1099’s, financials, etc). but i suppose back then, they had $ to make with the refi’s and they really have nothing to gain by puting the same effort into a loan mod.