The rich bail on their mortgages more than the poor

Are you even aware of the recent housing fiasco?

 

It is this mentality that keeps perpetuating the problem. The more these foreclosure homes hit the market, the more upside you become. You can either be a smart investor and be part of the problem, or be responsible and realize bad investments happen. What do you do when you make a bad investment? You either ride it out until it goes back up, or you sell it and take the loss. If the investors decide to sell it, they need to sell and cover the loss to the banks. The bleeding has to stop somewhere.

 

I read that Fannie wants to stop folks from walking on their mortgage, so they are saying if you walk, they won't approve you for a new loan for 7 years. 95% of the mortgages today are backed by Fannie, Freddie or HUD. You better like apt. living.

 

Are they really rich? Or are they just people who overextended themselves to live in a million-dollar home when they really didn't have the money to do so?

 

Thanks for the information.
I wasn't totally sure how that all worked.:redface:
I think part of the problem is that myself along with others have never been totally educated when it comes to living and life, they don't teach economics in public schools.
Also its like my old boss use to say, you use it or lose it.
Many of us are so busy raising kids and going to work everyday, dealing with issues we just plain forget things.

 

there are a lot of people that were not overextended and purchased typical middle to upper middle class homes they could afford. however, the economy took a lot of jobs from a lot of these people and the upper middle class life they were living and paying for, was taken away due to no circumstance of their own, other than being in a job sector destroyed by the economy. there are a lot of people like this that are losing their homes because lending institutions refuse to work with them. they make payments and try to make back payments on a schedule, but the back payments are refused because the lending institutions want it all and now. there is no working with these home owners who have done everything to try to be responsible and are trying to restructure their loans so they may make payments and stay in their home rather than having another home vacant in a glutted market. if the lenders wont work with them, there is nothing they can do and they lose their homes.

done believe me? it is happening to a good friend of mine. they lost their income due to the economy and did everything they could working what they could just to keep food on the table. this was NOT a lazy person unwilling to work. it is a smart well educated person with an advanced degree that had their job hit because of the economy and lived in an area with very high unemployment. they got behind in their payments but are now making paynments and want to slowly catch up on back payments by paying what they can each month, but because savings were depleted, do not have what it takes to make the back payments in full. and the lending institution is refusing their extra payments, refusing to restructure their mortgage, or even set up a payment schedule. they will soon be out of their home.

this is not "bailing". this is losing a home for all the wrong reasons and because an institution that received a huge bailout is saying "i got mine, phuck you". it will cost them more in the long run to have one more house sitting vacant, but they would rather do that than not get it all now.

rant over.

 

It's an interesting debate. On one hand, you made a deal and should honor it. On the other hand, the guy lending you the money understood the risks of the transaction that he was investing in. One investor is going to lose out. I haven't decided if I would feel a moral obligation if I was upside down in a house. I hope I never have to find out.

 

Good post, the whole thing.
Like I said earlier in this post this is happening to my friend.
Although most would say I am pro business and Capitalism I was still against the bailouts.
You simply let businesses fail, be bought out, etc.
I am against most bailouts but if you have to bailout someone it should be the American people who all of this has happened through no fault of our own.
WE have to pay consequences for our terrible, irresponsible government.
Btw we are upside down in our place but we are still here for now.

 

my friend is trying to honor it by making back payments. yes, he made a deal, but when back payments are refused by the institution so they can say you are unwilling to pay, something is wrong. given he lives in an area that is one of the top 5 worst housing markets in the country (possibly top three) with number of homes under water and at how much, it makes no sense to kick someone out of their home that WANTS to make back payments to catch up on their mortgage. the lending institution is refusing to work with him by even setting up a payment schedule, let alone restructuring the mortgage to reflect the new value. and for what? so another house can sit there vacant and falling apart, losing more value and bringing surrounding property values down? when the institution could get their money from this person, just not all now?

it is immoral and it is a bad financial decision.

what pisses me off is they got their bailout. they wanted charity from the govt and got it, but they are unwilling to work with homeowners that want to do the right thing because its not all and now. that is greed. pure and simple.

and it is going to make matters worse because if i know someone, and he knows of a lot of others that are in this boat (and just keep expanding that circle), think of how homes that could be saved for both the home owner, and that the lenders would get their money. this will just further depress the housing market by adding god knows how many homes to the market driving values down even more. so it is also freaking stupid.

 

I don't think people are fiscally conservative in their personal lives. I think what the average middle class joe thinks he can afford, he probably can't, according to my way of thinking.

I set some goals for myself when I was 35, and McDermott was walking folks out the door every day. Most were not remotely prepared for it and there were some sad stories.

My plans:

1. Get 6 months salary in the bank, that you never touch for any reason (put and keep savings, not for a car, or TV or college).
2. By age 40, be prepared to weather a 1 year out of work situation.
3 By age 45, be able to live on your interest income for a couple of years, knowing you will have to cut expenses to the bone. (this included realization this would limit the size of house one can live in, so as to keep a note that you can handle in a long term layoff).
4. By age 55, be able to limp off into a meager retirement if you can never work again (most probably cause, an accident or sickness)
5. Be able to retire in reasonable comfort by age 60.
6. Pay for 3 kids college educations.

I was driving an Accord to work and my friends all said "you can afford a BMW, why do you drive an Accord?". I said I could afford the notes on a BMW, but I couldn't do that, put 3 kids through college, and retire when I'm 60. They said I plan too much. I think they didn't plan far enough ahead, and many are wondering when they will be able to retire.

Being able to meet the notes does not mean you can afford something IMO. You can afford something if you can make the note, and meet your long term goals.

You have to plan for the unexpected bad news, like layoffs or illness. I have been lucky, all my employers have provided Long Term Disability insurance policies and that is a planning pillar I counted on in case I was in a serious accident or illness. My wife took care of our kids for 20 years, so I really needed that coverage.

I don't think people plan adequately for life's contingencies, and when they get caught, they aren't prepared. They can probably afford less than it appears.