I did everything right...right?

[JayBobBoy]

Fellow Burners:

Curious about your thought on this...thanks for reading.


We did everything right. We were in love and dated for a long time until we were financially stable and mature enough to get married. Before beginning our family, we purchased a home within our means in a growing community. Our children were born and we became a part of our community. As sports coaches, scout leaders, volunteers, and taxpayers we gave back to our community and we were happy with our lives and prospects for the future.

We did everything right. We realized the same growth in equity as all our neighbors did in the 2000’s. While we did not “cash in” like so many others, we borrowed against our equity to improve our home and attempted a business venture that, like so many others, was very promising until the economy changed directions.

We did everything right. We closed the business venture and minimized expenses. We found and kept gainful employment with long commutes. We survived after being let go from our jobs due to a merger and quickly found new employment. We were current on our mortgage and our bills and stayed out of debt. We worked long hours and kept our heads above water, food on the table, and provided for our children.

We did everything right. As our neighborhood declined and more than half the homes on our street fell to foreclosure, we kept our home in good repair and helped with neighboring properties to keep our community looking decent. As renters replaced homeowners, the decline in the quality of life in our neighborhood was apparent. The feeling of community became harder and harder to believe in. So went the schools, the city budget, and the feeling of cleanliness and safety. Through all of this we kept involved in the community, with increasing dismay.

We did everything right. I was taught at an early age that if you worked hard, lived an honest life, cared for your family and your community, and lived within your means, things would work out. So here we are. After 14 years in the same house that has seen its value rise from $120K up to over $450K and back to about $150K today. We now owe $225K on a property that shows no sign of regaining value anytime soon. With the best possible real estate trends, I could expect to have positive equity in my house after 10 to 15 years or longer.

We did everything right. While the bankers allowed all kinds of crazy borrowing and made unbelievable profits, we kept simple and did not follow the masses of overextended borrowers being lured by easy money. Those borrowers are now in foreclosure and have walked away from their debts, leaving us behind to clean up after the destruction.

We did everything right. So, what do we have to show for it? Not much, besides a life’s worth of wonderful memories, which are valuable and precious. Now we have to decide where to go from here. What’s the right thing to do now? Do we stay in a declining neighborhood? Do we owe an obligation to our mortgage company? Do they have an obligation to us? Where do we go from here? How can we just leave our home after so many years?

I will continue to do the right thing. Going forward, we are releasing ourselves from any types of moral obligations regarding banking agreements. It is clear these institutions are not held by the same convictions. It is business and I will treat it as such. What would a corporation do with this type of investment? Liquidate. We will find a way to emotionally release ourselves from our earlier version of the American Dream. It is time to start fresh and create a new version.

I will continue to do the right thing. I will pursue a short sale for our home and hope that the bank is willing to work with us. I will be as honest as possible in a system that is designed to work against us, and when that doesn’t work, I’ll do what’s right for my family and our future.

I will continue to do the right thing. We are blessed that we have an option to move in with a family member in a nicer community that has plenty of room and the desire to let us come. We will invest in our new community as we have done in the past and will start a new chapter in our lives. I consider us to be a very lucky minority that has an option to move on from this disaster and start anew. There are so many that are stuck with no way out. Who knows, in 7 -10 years, when our credit is restored, we might try it again.

Somehow I’ve managed to get it all wrong, after doing everything right…while others seem to have gotten it all right, after doing a lot of things that were so very wrong.

[Shambala]

It sounds like a standard story taking place all over the country. Is this your story?

[JayBobBoy]

Yes, this is my story. I wrote this about three months ago when I was distraught about the whole thing. It was very cathartic.

I just though this would resonate with folks and might help them come to the same realization that I did. You owe the banks and mortgage companies nothing. Especially not your health and peace of mind. Release yourself from the emotional connections and move on. Don't look back.

Thanks

[trilobyte]

To those would-be borrowers out there… Be very, very careful whom you borrow from. Just because a company is offering an attractive deal or an advantageous rate does not mean that they're a company that you want to be doing business with. You are giving these people not just your business, but your future. Do your due diligence, if the company is involved in risky or otherwise questionable lending practices - go elsewhere.

[Ugly Dougly]

Jay Boy, I am sure you did your home work to the best of your ability. Sorry to hear about your plight.
I'm grateful that I have not had that experience, and I am not quite as diligent as some.

[ygmir]

yeah, that "I owe the bank nothing" is a double edged statement, to me:

They (your specific bank) did loan you the money, no?
I'd assume, you're intelligent, and did not do some sort of weird mortgage, that upended on you, and, that they did not lie to you, in the process?

They, paid the seller, as you agreed, and you repaid them, at a known (ahead of time) and agreed rate?

If it were an individual, who held your mortgage, would you feel differently? If that person were to suffer, because you "walked away", even though, it's no more their fault, than yours, the circumstance extant?

And so, is it just a moral decision?

If you borrow money, and in good faith, on both sides, and then things change, for you, are you no longer obligated to repay? Is it ok, to walk and let "them" pick up the pieces, and see if they can recover some or all of their investment?

Any interest paid, was agreed to?
In the contract, does it say "well, when you've gotten enough back, I am no longer obliged to pay you"?

I'm not trying to be harsh, but, it seems simple (as long as there was no cheating, or deceit , in your original deal and contract).
It would seem, a simple: borrow money, agree to terms = pay money back.

of course, if you have no choice, and can't make the payments, well, you gotta walk.
but, just "walking" because you feel "upside down" in the deal........seems, "unfair" as well.

good luck

[ibdave]

Yes, this is my story. I wrote this about three months ago when I was distraught about the whole thing. It was very cathartic.

I just though this would resonate with folks and might help them come to the same realization that I did. You owe the banks and mortgage companies nothing. Especially not your health and peace of mind. Release yourself from the emotional connections and move on. Don't look back.

Thanks

my story, the guy down the street story, across town story, across the nation story.. yup.. you and I and others that held on to the right dream now, after draining all resources are starting to fall. Friends(not really) bailed early and are now rebounding but at what cost? They left $100Ks on the books and walked.. I/we couldn't. yup JayBobBoy, right with ya... and not to mention the mental health damage it's inflicted on fellow burners. manOman..
2012 election is huge...

[JayBobBoy]

Thanks UgDug,

I must confess I was kind of of apprehensive to read your response, but ready to laugh my ass off...

The worst part is I am employed, current on my mortgage and all my bills, have great credit, and can afford to keep my home...so they won't refinance or make any adjustments. There is absolutely no incentive to stay.

I appreciate your point Yggy and I struggle with that too. I do not intend to default on purpose or walk away, nor do I promote that. However, any business entity today with an investment like this on their books would do everything in their power to divest and move on. That is what I intend to do.

All that moral shit on the side...the banks fucked us all on our equity by building the housing bubble in the first place. Soooo many loans were give to people who were buying investments using equity from other homes. I could go on and on...but that does not help me solve my problem. But it does make it quite a bit easier to rationalize.

[wh..sh]

Bare with me, I going to be the devil's advocate here.

Agreed that bank screwed us over, but the root of, root of all the issues is that somehow, somewhere along the way it was OK to live above and beyond our means.
My parents always taught me to not spend the money I don't have. So if I can't afford to own a $500,000 home, I won't own it. I don't care how tempting the bank's offer was to give me a credit.
I am not talking about your specific situation, but the general issue that seems to be prevelant... living on "unreasonable" credit and the horror of it being an accepted lifestyle.

I am sorry so many people are going through horrible times and I really wish things would look up.

[JayBobBoy]

+1

[ygmir]

and, thanks, Jaybobboy, for taking my post, as intended. It was not an attack on you.
and, that you are trying to work it out, with integrity and honesty, is laudable.
I tip my hat to you.

and what Woosh said:

yup, a lot of folks, didn't take the time, to figure, then realize, what they were buying, was beyond their ability to repay. Well, dang for them, and, sorry but, sometimes yer just not lucky.
On the other hand, some were flat out lied to. Yes, had they done their homework, and math, they should have caught the lie, but, well, dang.

It's so complicated, and rife with emotion..............

I do get frustrated, though, with those who decide to walk, because they made a "bad deal" and just look at their bank and say "screw you"...............if the individual bankers, were honest and up front, we should be, too. IMHO.

I've seen, and also been told of (by a real estate agent/Burner) of people who literally walk/short sell their house, and buy one just down the street, using a bank for a mortgage..........

[Ugly Dougly]

As near as I can see, many folk fell into the trap of assuming that house prices would keep rising.
I made that assumption, too, but could not afford to buy when prices were high.
Some folks that got caught were interested in speculation; they were hoping to make some money on an investment. I say, good luck on the slot machines; I'm not much of a gambler myself.
Other folks, like myself, just wanted to put a roof over their heads, and regardless of the current resale value, whether they are "under water" and still "under roof".

But to be laid off without resources, and still owe a mortgage, or any other debt, that's a mighty tough thing indeed. It's difficult to plan around that. I'm sure if it's a "decision to walk" at that point...

[jkisha]

Making the decision to walk away from your mortgage is a BUSINESS decision, NOT a moral decision. In today's world, business and morality haven't made each other's acquaintance. A person making business decisions based on guilt and morality are going to lose when the adversary is making decisions strictly based on their business interests.

I saw a 60 minutes episode recently that focused on Bank Foreclosures in Cleveland. Homes had lost more than half their original value, people owed more than twice what their properties were now worth. These same people were having trouble paying their mortgages because of losing their jobs, health problems, adjustable rates raising payments far beyond their ability to pay, etc.

So, does the bank even try to negotiate with the homeowner to find a solution that would be a win/win for both parties? No, they foreclose. Do they then even try to sell the property or rent the property? NO. THEY SIMPLY ABANDON THE PROPERTIES. And then guess what happens to them? THE CITY HAS TO COME IN AND LITERALLY BULL DOZE THEM TO THE GROUND AT A COST OF $8000.00 PER PROPERTY. Does the bank pay this charge? NO. And we are talking about a HUGH number of homes--numbers in the thousands.

It's a totally disgusting practice. And it doesn't even make any business sense. Just seems spiteful to me. Here's a link to a snippet of the show.

http://www.cbsnews.com/video/watch/?id=7392096n&tag=contentMain;contentAux

[5280MeV]

I think that the only thing that you did wrong - not morally wrong - but wrong in the sense of poor strategy in hindsight, was to buy into the collective delusion that the house was ever worth something like $400k.

I think that there was bad faith in creating this collective delusion, I think that the financial alchemists that devised the vehicles to turn sub-prime mortgages into triple-A rated gold and the economists who supported these vehicles at the very least should have known better. There was bad faith involved in the creation of these monsters: http://upload.wikimedia.org/wikipedia/c ... iagram.png

So you went to the bank believing that you had a house worth $400k, and you wanted to borrow against it to the tune of $225k. This was a loan with collateral, and both parties fully agreed that there was $400k worth of collateral backing the loan. Both you and the bank signed the agreement with the understanding that if you could no longer pay, you could unload the house for at the very least $300k, pocket $75k, and give the bank back its money.

However, once the music stopped, and the financial industry collapsed under the weight of its fools gold, the imaginary collateral vanished.

I think that you had an obligation to pay the bank their $225k as long as you could pay it. However, if you can't, then that is ok, the bank has their collateral, their $400k house. They knew the risks going in as well as you. They knew that businesses fail, and they had as much responsibility as anyone else to not be deluded into thinking that the house was worth $400k just because for the moment there was a mechanism in place to facilitate sales at such inflated prices. Give them their house, they should have known better - you have no remaining moral obligation whatsoever to repay the rest of the loan.

We as consumers should have known better, but the banks really should have known better, the regulators had an outright obligation to have known better, and the economists were nothing more than paid-off academic frauds.

[Shambala]

I had a situation many years back on a commercial property. I was happily making the monthly payments with no issues, but the bank felt that the value dropped below what they felt a comfortable ratio. Completely current, I was sent a damand letter to pay the loan off in full within 10 days. Since it was not paid in full per the demand, I was charged a $50,000 late fee.
Morally, ethically and realistically, I had no choice but to crush their nuts into dust. I did, and it cost the bank $100,000 to get rid of me. They credited the $50,000 late fee as well.
The banker that gave me the news of the demand, appeared gleeful that he had the power to bring someone to their knees. This little dick-head deserved to have his brains bashed in---and I did it.

[VultureChow]

My two cents. Never, ever, ever feel bad about walking away from an underwater mortgage. If there is one thing in the whole downturn that has bugged me, it has been the suggestion that a homeowner has some sort of moral obligation to the lender.

Your only moral obligation is to follow the terms or your mortgage and the law. This isn't a gentleman's debt between two friends, it is a business transaction with a large corporate entity with a huge cadre of lawyers, and analysts. They are certainly better protected than you are.

Your agreement with them was to borrow money and pay them interest on that money with a physical asset as collateral. Assuming the loan is non-recourse, their sole remedy is to take the physical asset back. That was the deal, and they knew it. You didn't agree to pay them as long as you could, or to pay them before all other bills, or to blow through your savings to pay your mortgage.

And I say this as a commercial real estate developer. Hell, in our business, strategic default by non-payment is a well accepted practice. Because of CMBS loans, it may be the only way to actually get a special servicer to talk to you about a loan restructuring. It isn't something we've had to do yet, most of our loans are through banks we have good relationships with, but it's not exactly a mark of shame in this economy either.

[B the B]

A house is just bricks and morter. Money is just paper. Better you were given the opportunity to learn this now, then not at all. Never be afraid to fall, you can always get back up. I lost my Dad, job (Dad was boss), marriage, house, and found BRC all within 1 year. I'm not one of those that believes everything happens for a reason, but I believe everything that happens we can learn from. Stagger on my friend! A house is just bricks and morter. Money is just paper.

[Ugly Dougly]

Yeah, don't feel sorry for the banks, they have money flyihg out of their ears.
They're even making money by betting on which bundle of loans has bad loans in it.

[theCryptofishist]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

[VultureChow]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

I don't know about them as a residential lender, but M&T on the commercial side has always been very good to us and fair.

[theCryptofishist]

M&T? Mechanics and Technitions?
Murderers and Trannies?
Marigolds and Tyrannasaurs?

[ygmir]

My two cents. Never, ever, ever feel bad about walking away from an underwater mortgage. If there is one thing in the whole downturn that has bugged me, it has been the suggestion that a homeowner has some sort of moral obligation to the lender.

Your only moral obligation is to follow the terms or your mortgage and the law. This isn't a gentleman's debt between two friends, it is a business transaction with a large corporate entity with a huge cadre of lawyers, and analysts. They are certainly better protected than you are.

Your agreement with them was to borrow money and pay them interest on that money with a physical asset as collateral. Assuming the loan is non-recourse, their sole remedy is to take the physical asset back. That was the deal, and they knew it. You didn't agree to pay them as long as you could, or to pay them before all other bills, or to blow through your savings to pay your mortgage.

And I say this as a commercial real estate developer. Hell, in our business, strategic default by non-payment is a well accepted practice. Because of CMBS loans, it may be the only way to actually get a special servicer to talk to you about a loan restructuring. It isn't something we've had to do yet, most of our loans are through banks we have good relationships with, but it's not exactly a mark of shame in this economy either.

why, with this attitude, would anyone want to "loan" money to others?
Is it so lucrative, that they can eat loans and it not matter?
Or, has the system worked, because for the most part, people took it as an obligation, that if the borrowed money, they should pay it back, no matter who loaned it to them?

How about, you buy your house, or commercial property, for cash? then, no worries.
Oh, what, you don't have the cash? And, neither do your friends?
Hmm.....what to do? Who, to ask?

Of course, if you can't pay, you can't pay. But, I don't agree, with it being inconvenient, to live up to the agreement you made, so it's ok to "walk".

but, I don't understand, the cutthroat business world, anyway.

[jkisha]

And it doesn't make any difference if the institution that lent you the money to buy your home also conspired to make sure your investment would end up being worthless? Which, in essence is what the banks did.

[Bin Noddin]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

Short answer - no, there aren't any, at least not among the big regional and national players.
Once upon a time I practiced bankruptcy law. All of us in the business knew who the villains were among the lenders - banks like Fleet, Standard Federal, Countrywide - you could count on them to make shaky loans on terrible terms to shaky borrowers who were misled by all sorts of sales pitches. The "good" banks, like Wells Fargo and Bank of America got envious of the villains' bigger profits, so they bought the villains and became villains. Can't tell the good guys from the bad guys any more. Today's paper - B of A shelling out millions in restitution for Countrywide's illicit practices. You could look it up.

[5280MeV]

why, with this attitude, would anyone want to "loan" money to others?
Is it so lucrative, that they can eat loans and it not matter?

Yes, they can and do eat loans, and the interest rate that you are given is coldly calculated based on the probability that you can and will honor the agreement as given by your past reputation - in modern terms typically your credit rating. If you fail to honor your loans, your scores go down, and your rates go up.

Unsecured loans such as credit cards have a high rate largely to reflect the fact that they will be eating many of those loans. Mortgages have low rates because even if they do eat loans, they can still sell the house, and they also know that people really do not want to walk away from their home - part of why typical residential mortgages require you to reside in the house.

Of course, this is all subverted in the housing boom, where loans were initiated without any concern about the ability or willingness to pay the loan back. The initiator of the loan would just turn around and sell it to speculators, who then slice and dice it and with the aid of an absurdly stupid system on the part of Standard & Poors and the other rating agencies, actually convert this financial trash to AAA rated securities and pass it on to unwitting retirees.

An underwater mortgage, no matter how it has been dressed up, is just a cheap old junk bond. People who buy junk bonds should have the good sense to know that they are speculating on extremely risky investments. If we are to point the finger at anyone for being dishonest or dishonorable, point it at Moody's, S&P, Fitch, and the rest of the gang who abused the public's trust placed in them and rated the junk as low risk investment.

Deeply underwater mortgages should not even exist. If one is out there, then someone in the banking system is either dishonest or an idiot.

[Ugly Dougly]

why, with this attitude, would anyone want to "loan" money to others?

I got a feeling, Ygmir, that it starts with one greedy bastard with his eye on a commission. Do real estate agents and loan officers get to keep their commissions if the mortgage goes into foreclosure? I'll bet they do.

[JayBobBoy]

The banks have made their bed and must now lie in it...

Like Ygmir said, there are lots of people (me included) who have an emotional tie to their mortgages. They will feel like a failure for not being able to pay. They gave their word, and so on...

This is exactly what the banks are counting on and preying upon. That consumers will continue to pay large mortgages on underwater properties out of some moral obligation. It only works in their favor.

In my case, it took me a long time to free myself from these thoughts and feelings (It is easier for some people than others). It is a business deal and all I care about at this point are the legal ramifications.

I seriously doubt that executives at my mortgage company are losing any sleep over my situation. I really doubt that I have hurt their feelings. (Although, picturing them weeping around the boardroom table is kind of fun)

Thank you all for your insights...

[theCryptofishist]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

Short answer - no, there aren't any, at least not among the big regional and national players.
Once upon a time I practiced bankruptcy law. All of us in the business knew who the villains were among the lenders - banks like Fleet, Standard Federal, Countrywide - you could count on them to make shaky loans on terrible terms to shaky borrowers who were misled by all sorts of sales pitches. The "good" banks, like Wells Fargo and Bank of America got envious of the villains' bigger profits, so they bought the villains and became villains. Can't tell the good guys from the bad guys any more. Today's paper - B of A shelling out millions in restitution for Countrywide's illicit practices. You could look it up.

I was afraid of that.

*sigh*

[AntiM]

Our VA loan was through a small lender, and was immediately purchased by Wells Fargo. We are lucky, the house was under valued, and while the tax estimate has dropped, we're still above water on what it is worth. The neighborhood is still good, but I can see the terrible renters a couple blocks away. We really lucked out in that we used to live in the rental house next door, and it was eventually purchased by older neighbors who take care of the place rather than the biker who beat his stripper wife and thought lawncare was optional. The Bickering Biker and Brandy moved in right after we moved out (seriously, Brandy).

[JayBobBoy]

Yeah....there's nothing quite like having your new rental neighbors bring the couches onto the driveway and then park on the front lawn while listening to horrible music as loud as possible.