7
   

a contemporary dilema

 
 
Reply Thu 24 Jun, 2010 02:34 pm
Ok, lets say you are inflicted with a protestant ethic. (it's not really your fault, it's almost genetic) anyway you live in Studio City California and have a mortgage of $450,000 and your house is worth $200,000. The bank refuses to refi. you can't sell because you will still owe $250,000. Do you walk out on the debt?
 
George
 
  0  
Reply Thu 24 Jun, 2010 02:41 pm
@dyslexia,
But wouldn't your Protestant Ethic have prevented you from buying
something you could not pay for?


[Picture a look of wide-eyed innocence as I ask this.]
dyslexia
 
  3  
Reply Thu 24 Jun, 2010 03:00 pm
@George,
every "professional" you asked (finance adviser) realtor, banker etc told you "good investment-can't go wrong" then (after closing) the bubble burst and you got down-sized.
PUNKEY
 
  1  
Reply Thu 24 Jun, 2010 03:31 pm
So have you been making the payments? Still employed?

If so, stay still. Things will come back.

If not, consider a short sale. Have a relative buy your house for the $200 grand and you rent from him/her.


0 Replies
 
ABYA
 
  1  
Reply Thu 24 Jun, 2010 07:28 pm
@dyslexia,
I feel for anyone who goes through this, having had my own house repossesed and being thrown out onto the streets with a wife, a child and a dog.
Is there anychance you could take in a lodger, or maybe even declare yourself bankrupt?.
Things turned out fine for me in the end, I hope that things turn out fine you also.
Best wish's.
George
 
  0  
Reply Thu 24 Jun, 2010 08:10 pm
@dyslexia,
If you took out a mortgage you could afford, then you should pay it.
If you took out a mortgage you could not afford, whose fault is that?
dyslexia
 
  1  
Reply Thu 24 Jun, 2010 08:29 pm
@George,
interesting.
0 Replies
 
ehBeth
 
  1  
Reply Thu 24 Jun, 2010 08:40 pm
@dyslexia,
It happened to former neighbours of mine in the last bubble/burst. They both ended up having to go back to work to keep the payments up. When the house value made it back to about 80% of what they'd originally paid, they sold up and moved to a less expensive community. Took 'em about 16 years. Pain in the patoot.
Finn dAbuzz
 
  1  
Reply Thu 24 Jun, 2010 08:53 pm
@dyslexia,
dyslexia wrote:

Ok, lets say you are inflicted with a protestant ethic. (it's not really your fault, it's almost genetic) anyway you live in Studio City California and have a mortgage of $450,000 and your house is worth $200,000. The bank refuses to refi. you can't sell because you will still owe $250,000. Do you walk out on the debt?


No.

The fact that your house, currently, is worth less than you owe, in no way impedes your ability to pay off your debt.

If the market turned tomorrow and your house was suddenly worth $500,000 I doubt that you would consider there was any ethical question to consider about the bank demanding you pay your debt in full or give the place up.
0 Replies
 
plainoldme
 
  2  
Reply Thu 24 Jun, 2010 09:02 pm
@George,
I would say the opposite is true. The Protestant so-called ethic would probably prompt you to buy an expensive house as a status symbol.

More importantly, however, is the fact that the statement that dyslexia made is a a snapshot of the end of the process . . . not the beginning. The house was affordable when purchased. We can blame the Protestant ethic for spinning the economy out of control.
0 Replies
 
plainoldme
 
  1  
Reply Thu 24 Jun, 2010 09:03 pm
@ABYA,
Bankruptcy is funny. Unless the owner of the home has credit card debt, he probably can not declare bankruptcy. I looked into bankruptcy, which is a sort of reward for the irresponsible.
0 Replies
 
plainoldme
 
  1  
Reply Thu 24 Jun, 2010 09:04 pm
@George,
Wrong point of view. The mortgage was probably affordable when taken out. This is CA.
dyslexia
 
  1  
Reply Thu 24 Jun, 2010 09:24 pm
@plainoldme,
the mortgage pmt was $2761 at closing, it is currently $4778.
0 Replies
 
Eva
 
  1  
Reply Thu 24 Jun, 2010 09:33 pm
An ARM, or is that a balloon payment?
dyslexia
 
  1  
Reply Thu 24 Jun, 2010 09:34 pm
@Eva,
arm. this thread is only a possible scenario, imaginary facts.
Eva
 
  1  
Reply Thu 24 Jun, 2010 09:44 pm
Oh, good! That makes me feel much better, knowing this is hypothetical.

This type of scenario is always what has kept me away from ARMs, btw. True, I'm not much of a risk taker, but the very idea of committing myself to payments in unknown amounts, which I would have no control over, has always seemed ludicrous.
0 Replies
 
George
 
  1  
Reply Fri 25 Jun, 2010 08:16 am
@dyslexia,
dyslexia wrote:

arm. this thread is only a possible scenario, imaginary facts.

My favorite kind.
0 Replies
 
George
 
  1  
Reply Fri 25 Jun, 2010 08:19 am
@plainoldme,
plainoldme wrote:
Wrong point of view. The mortgage was probably affordable when taken
out. This is CA.

The first set of payments were affordable.
But the mortgage includes all the payments.
0 Replies
 
chai2
 
  2  
Reply Tue 23 Nov, 2010 08:04 am
Continue to live in the house, rent out the extra bedroom(s)
0 Replies
 
roger
 
  1  
Reply Tue 23 Nov, 2010 02:28 pm
@ehBeth,
Canada? I don't think Canadian law lets you walk away and leave the lender without recourse. That could change the decision, though there are people who pay debts in spite of the law.
0 Replies
 
 

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