“Foreclose Me… I’ll Save Money”
January 25th, 2008I love it. The f@*&%! buyers and the banks are now in a Mexican standoff.
The banks have a hell of a lot more to lose than the slobs who are upside down on their stucco boxes.
Via: Los Angeles Times:
A homeowner who can’t sell his house tells the L.A.Times, “Foreclose me. … I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.”
Banks and lenders fear this kind of thinking — that walking away from a house could be the smart economic move — appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: “… people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties…”
Calculated Risk notes this is “one of the greatest fears for lenders … that it will become socially acceptable for upside down middle class Americans to walk away from their homes.”
A commenter on L.A. Land this morning writes, “I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.
“Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I’m not a ‘hardship’ case they’d apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won’t even talk to me until I miss a couple of payments.
“I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.
Wachovia fears that homeowners may be capable of doing simple math and resolving to act in their own best interests….
It could happen.
A lot of people are also realizing the same math applies to their credit cards. That 33% interest rate bites, and if you default all they can do is put a lien on your (allready upside down) home. This is the bank’s worst nightmare!
I can’t see that happening for too much longer because those in power will find some way of stopping it by enacting legislation to prevent it. When students in Canada were defaulting on paying back their student loans in record numbers, the government enacted a piece of legislation basically saying you can’t declare bankruptcy on your student loans until 10 years after you leave school thus causing undue hardship for thousands of poor former students who flunked out of school or who weren’t able capitalize on their education they received. You just watch people will end up being tied to their ridiculously high mortgages one way or another. The banks strong lobbying of the government will make sure of that.
I guess that’s why I’ve never done drugs…real life is crazy all on its own!
I could make a comment about aesthetic risk, but I think I’ll quote Neo instead: “the problem is choice.”
Walk Away Protection Plan & Kits
@Brad
Faaaaaaaaantastic!