[quote=sdrealtor]I think its a very good article. He’s not looking for sympathy, he’s just telling his story. It shows less sophisticated distressed homeowners that they are not alone. That people of all education and income levels fell prey to the same thing. Its a story about risk taking and herd mentalities which are endemic in our society. Its not about fingerpointing anymore. Its about cleaning up the mess and we still have much work ahead of us.[/quote]
It IS a good article and I understand all this. I’d like to see the mess cleaned up, too. And I think short-sale is a fair option for those who fell prey to the “herd mentality” and purchased at the height of the “bubble” (2004 thru 2006) and never took cash out.
However, I feel SS should not be approved for those “strategic defaulters” and others who took “cash out,” ESP >$100K! It’s a “slap in the face” to those “pre-bubble” homeowners who kept their heads down and elected not to join the party.
Not only do I feel these people could have afforded the home and would have been able to keep it or sell it at break-even and thereby keep their “perfect” credit intact had they not taken “cash out,” I feel they got off way too easy (150 pt+ “ding” to their FICO score??) and don’t even have to pay income taxes on their “phantom $200K+ income.” It’s sickening to the rest of us.
I also think that a lot of young couples today buy properties where their back-end ratios are under 38% or so (lender approved) but that they probably can’t realistically afford. This purchase decision is (reluctantly?) agreed upon to please only ONE of the parties (often the non-working spouse) but ends up being a financial disaster for the entire family. I don’t think young spouses who choose not to work these days can afford to be too picky about houses and/or areas unless the working spouse is making bank (=>$200K annually) AND they have saved at least 20% down OR either or both of them have access to substantial and continuing passive income (trust funds, dividends, royalties, inheritances, etc).
Prior to this “millenium bubble,” one didn’t see young couples with children take out HUGE mortgages en masse like we see today. By and large, they bought what they could afford.
I have TWO friends that have owned rental homes in LV for many years (’70’s, ’80’s). And NO, they haven’t taken “cash out” but are DEVASTATED as to how the current RE sales market there has affected their own values. This young one-income couple with 4 young children to feed, clothe and care for is a shining representative of all those “homeowners” (using that term loosely here) who were able “work the system” for their own financial benefit and thus were part of the problem of why the LV market tanked into a depression in recent years.
Based upon this writer’s story, I believe that if SS had not been an option for them, they would have just hung in there, rented it out, or, as a last resort, let the property go into foreclosure. They didn’t really need to move. Since he was self-employed, he could easily figure out a way to claim a “hardship” on paper. In other words, they decided to default solely to get a SS approval.
Again, THIS is the fundamental problem that I have with a “cash-out” strategic-defaulter short sale.
