San Diego Housing Bubble News and Analysis

It seems fair that the bank wants to make it painful for homeowners to walk away. Personally, I hope your friend's credit takes a beating. I certainly don't want the "walkawayers" back in the buying pool until I make my purchase and pick up some nice investment property. I don't want them to be able to compete with my perfect credit.

If I were in their shoes, I certainly wouldn't expect to get away for free.

But they do seem to expect just that!! To walk away and be able to buy yet another property.

I'm stunned by the entitlement attitude some of these people have.

Yesterday, I saw a local news piece (I think it was the LA Fox station) that showed one woman's home. The rubbish that she left behind filled a 24' truck.

The cleanup crew said that they find dying pets in these abandoned homes (what kind of person leaves their PETS behind?), unimaginable trash, filth and just angry destruction. They make a mess - financial and trash - and expect everyone else to clean it up.

Ugh!

In this person's case it's not malicious. They moved from Phoenix a few years ago for work and bought a home for $650k. They have the money and can afford it. His company went belly up so he moved back to phoenix and thought he'd rent his home here while the market did it's thing. Well he just cannot afford to make up the mortgage that the rent doesn't cover. he wants to sell his home but comps in the area are about $100k less. He just wants out of this deal and/or was thinking about selling and taking the loss. The bank won't let it happen that easy.

Most people who are in this case are not malicious either. But that's no excuse. He could have stayed and try to find another job here. No one is forcing him to move back to Phoenix. He chose to move and he chose to buy a house. Buying a house comes with responsibility and the down side of buying a house is you can't move as easily as you can while renting. We all know that. If he doesn't, well, he's finding out now.

alex_angel: first you mention your friend wanting to short-sell, then you mention he just wants to sell and "take the loss". Which is it? Or does he just want to sell and let the bank take the loss? Tell him to man up to his mistake and pay the difference.

He wanted to talk the loss but after speaking to an RE agent the guy told him not to and do the short sale. The RE is now driving his decisions which IMO is crazy. He took the banks advice and stopped payment.

He did try to find work here but after 4 months nothing happened. His old company in Phoenix ask him to go back with a raise so he did that after exhasting his options here.

Most of you know that the job market in SD sucks donkey testicles right now.

Your friend should speak with a real estate attorney and tax advisor to help him make the best decision for himself and his family. The real estate attorney could lay out the legal issues and also possibly try to negotiate with the bank for him; the tax person could explain the tax implications for a short sale vs foreclosure. I believe that the a bill was passed in 2007 that was related to foreclosures which erased the debt forgiveness tax to those who did a short sale if the property was their primary residence, but being that his CA home is now a rental, I would guess he would have to pay debt forgiveness tax. If his loan(s) were nonrecourse because he originally bought it as his primary residence and didn't refi, he shouldn't have any tax issues.

I'm sorry your friend is going through this, it really sucks to be in his situation.

Actually I should take that back about the non recourse issue. I am not certain how the non recourse loan works if the property is turned from owner occupied to rental. I believe if you buy an investment property the purchase loan is recourse, but I don't know how the bank sees it if it was owner occupied and then turned into a rental - does it keep it's non recourse status? Does anyone know?

What is credit anyway??? The whole credit worthiness scam is a joke - unfortunately it's a joke which at it's end point adversely affects everyones lives.

I am not one of those folks who think your friend is completely at fault... Based on your explanation, I wouldn't assess his fault at more than 20%. Americans have credit thrown at them, from the time they graduate high school till they die. The credit companies including banks, credit card companies, retailers will give anyone credit then get huffy when some people can't pay anymore. It's a scam, because they make up the lost money on the people who are still paying their bills....

If credit is so easy to get, it should be easy to get away from, if credit is hard to get, it should be hard to walk away from.

Imagine if it was an absolute requirement to put down 20% and you couldn't get a second mortgage???? Or if you did get a second it would have to correspond in a direct investment in your home which improved it's value by that amount or more. Imagine if you did only have 20% equity in a home that you would be constrained from other debts???

This is the way it should be. Credit is ok as an economic lubricant but when it is abused by the creditor granters, they deserve to be left with nothing...

If you give anyone credit and don't require even the smallest amount of due diligence on their ability to pay, you deserve to lose your business.

The banks deserve contempt for their easy lending and the government deserves even more for bailing the banks out. I feel bad for the homeowners and the level of credit advertising they are subject to - i think the whole credit situation in our country is beyond disgusting!!!

REMEMBER::: This crisis was created by easy lending. Easy lending and artifically low interest rates created the house price increases... If the government interferes it will only make things worse or destroy us in the long run as it will increase our debt and reduce the value of our currency...