Agree, pencilneck. The ones in quiet desperation have 1-3 yo defaults on their record and their credit report is pockmarked by 30/60/90/120-day lates on one or more notes secured by trust deeds (by possibly multiple creditors).
I think having an SS or foreclosure on one’s record and having one’s FICO score fall by 150-300 pts is due comeuppance for being stupid (simply buying at the peak) but not necessarily enough for extracting equity. As for whether this is enough “punishment,” ask yourself if YOU would want to be in the position right now of having only ridiculous credit terms offered to you, if any at a time of tight money, a time where UI benefits of 99 weeks are now history and a time when food and gas combined are at all-time highs?
Most of the FB’s who extracted equity during the “millenium boom” (esp copious amts) and have defaulted since 2007 have now been foreclosed upon.
The ones who accepted mods in order to stay in their properties are trapped. The only way they could qualify for the trial mod was to have a steady source of income that is not already attached by garnishment. Even if these “owners” lose their jobs and/or are offered better jobs somewhere else in the coming years, they can’t move without selling short and taking a big hit on their credit report. If their mod agreement even allows them to rent their properties out, it is such a negative cash flow every month for them to do so that it doesn’t make sense to take the better job elsewhere!
I think a lot of underwater “owners” who accepted mod terms in the past couple of years did so out of FEAR. Their credit was already shot due to late payments and/or default so a foreclosure wouldn’t have made that much difference on their credit report, if any. This fear lies not with singles or older/retired underwater owners but with parents-of-minor-children underwater owners. Many of these parents absolutely REFUSE to send their children anywhere else to public school but the one the they are currently attending in the area they purchased their white elephant (that they could never afford in the first place). This fear is irrational, IMO, and is prolonging their pain and preventing them from moving on with their lives and allowing their credit scores to eventually heal with time.
Perhaps they think they can “hang” long enough with their “mod programs” until their kids graduate. If their kids are currently in HS, this might be doable. But I don’t think agreeing to these loan mods is either feasible or even smart for the long haul. These parents who do so are shortsighted as the older their children get, the more expensive they become.
From this blog, I’ve come to the conclusion that the vast majority of Gen X and younger parents have extremely high expectations in that the majority of them seek to control their families’ environment to the nth degree. This phenomenon is prevalent regardless of the parents’ current capacity to pay for it and the current demand in the local economy for their services.
These FB parents are simply prostrating themselves in the name of their children but at the expense of their own lives and future … just to maintain this illusion of “control” over their families’ “environment.” Not only does this place their children at a distinct disadvantage in coping with the everyday world when they go to work and move out on their own, it causes the parents to have to pay PITI (+ HOA dues, if applic) into a bottomless pit into eternity when they could no doubt rent for far less money every month and put the difference towards college or retirement funds.
In SD County, unchecked urban sprawl in the last 10-15 years is partly to blame for this grandiose mindset of homebuyers now in the prime age for purchasing a home (25-45). In attempting to outbid each other for the “new-construction crap in the stix,” they helped and are still helping (along with loose-lending practices of late) to screw themselves out of having a RE market to choose from that is in line with fundamentals.
Even though painting these families somewhat as “victims,” Elizabeth Warren stated the above so eloquently in this (reposted) video of her 2007 speech at UCB, where she refers to this phenom in SD (SEH). Start listening at 40.00 minutes in:
Parents of earlier generations didn’t have all of this crap in the stix crammed together like sardines to choose from when deciding where to raise their families, lol ….
