Why not fake default to get a lower rate

[SD Realtor]

The purpose of the bailout (of which workouts are a component of) has nothing to do with kind heartedness to homeowners. We have been through this right? It is simply to try to keep some trickle of a return to investors. You cannot do that by a “rapid workout”. All you will do is get another month or two of payment and the homeowner will belly up and default again… and again… and again. In fact it is probably much more of a pain in the butt to rework a loan then it is to simply suck up the short sale or let the property go reo.

For the other post about walking away with the deficiency, as a homeowner if you do indeed have a recourse loan then yes you have to cope with the possibility of that deficiency following you around for a long long time. However you can also get the lender to release you from that deficiency if you negotiate with them even if the loan is a recourse loan.

SD Realtor

[DaCounselor]

“anyone think that the banks would concede to this kind of commando/in your face/I’m gonna screw you if you don’t sweeten the pot kind of attitude or would they say F you, get out, we’ll just foreclose..even though they will take a bath if they foreclose on the house???”
_________________________________

Using the 80/20 financing example, if the comps are 20% less than the purchase price, the piggyback lender is essentially unsecured. They are actually looking at a total loss at a value drop of less than 20% due to carrying and foreclosure costs. So how will a piggyback lender in such a valuation scenario (which I think we have already reached and exceeded in some areas) react to a borrower who simply stops paying them?

I see three choices – 1) foreclose and get $0 (or even take a further loss) after paying off the 1st and costs; 2) do nothing and hope values go back up; or 3) negotiate a short pay and take what you can get.

#1 simply makes no sense. Not going to happen.

#2 is a possibility but it becomes a completely non-performing loan for who knows how long?

#3 seems to be the most likely result. Take what you can get and write off the rest.

If it plays out this way, the borrower with ability in his $800K (purchase price) home forks over maybe $10K – $15K to the piggyback lender and wipes out a $160K 2nd. Now he’s got a first of $640K that he can already afford and he’s freed up $1K/month cash by wiping out the piggyback. Not a bad end result. Assume he was upside-down 25% – now he’s only upside-down 5%, can easily afford his mortgage and he has an extra $1K/month to play with. And of course the piggyback lender will not report him as delinquent once the deal is done so there is a minimal if any credit hit.

Piggybacks are going to get creamed.

[DaCounselor]

“anyone think that the banks would concede to this kind of commando/in your face/I’m gonna screw you if you don’t sweeten the pot kind of attitude or would they say F you, get out, we’ll just foreclose..even though they will take a bath if they foreclose on the house???”
_________________________________

Using the 80/20 financing example, if the comps are 20% less than the purchase price, the piggyback lender is essentially unsecured. They are actually looking at a total loss at a value drop of less than 20% due to carrying and foreclosure costs. So how will a piggyback lender in such a valuation scenario (which I think we have already reached and exceeded in some areas) react to a borrower who simply stops paying them?

I see three choices – 1) foreclose and get $0 (or even take a further loss) after paying off the 1st and costs; 2) do nothing and hope values go back up; or 3) negotiate a short pay and take what you can get.

#1 simply makes no sense. Not going to happen.

#2 is a possibility but it becomes a completely non-performing loan for who knows how long?

#3 seems to be the most likely result. Take what you can get and write off the rest.

If it plays out this way, the borrower with ability in his $800K (purchase price) home forks over maybe $10K – $15K to the piggyback lender and wipes out a $160K 2nd. Now he’s got a first of $640K that he can already afford and he’s freed up $1K/month cash by wiping out the piggyback. Not a bad end result. Assume he was upside-down 25% – now he’s only upside-down 5%, can easily afford his mortgage and he has an extra $1K/month to play with. And of course the piggyback lender will not report him as delinquent once the deal is done so there is a minimal if any credit hit.

Piggybacks are going to get creamed.

[DaCounselor]

“anyone think that the banks would concede to this kind of commando/in your face/I’m gonna screw you if you don’t sweeten the pot kind of attitude or would they say F you, get out, we’ll just foreclose..even though they will take a bath if they foreclose on the house???”
_________________________________

Using the 80/20 financing example, if the comps are 20% less than the purchase price, the piggyback lender is essentially unsecured. They are actually looking at a total loss at a value drop of less than 20% due to carrying and foreclosure costs. So how will a piggyback lender in such a valuation scenario (which I think we have already reached and exceeded in some areas) react to a borrower who simply stops paying them?

I see three choices – 1) foreclose and get $0 (or even take a further loss) after paying off the 1st and costs; 2) do nothing and hope values go back up; or 3) negotiate a short pay and take what you can get.

#1 simply makes no sense. Not going to happen.

#2 is a possibility but it becomes a completely non-performing loan for who knows how long?

#3 seems to be the most likely result. Take what you can get and write off the rest.

If it plays out this way, the borrower with ability in his $800K (purchase price) home forks over maybe $10K – $15K to the piggyback lender and wipes out a $160K 2nd. Now he’s got a first of $640K that he can already afford and he’s freed up $1K/month cash by wiping out the piggyback. Not a bad end result. Assume he was upside-down 25% – now he’s only upside-down 5%, can easily afford his mortgage and he has an extra $1K/month to play with. And of course the piggyback lender will not report him as delinquent once the deal is done so there is a minimal if any credit hit.

Piggybacks are going to get creamed.

[DaCounselor]

“anyone think that the banks would concede to this kind of commando/in your face/I’m gonna screw you if you don’t sweeten the pot kind of attitude or would they say F you, get out, we’ll just foreclose..even though they will take a bath if they foreclose on the house???”
_________________________________

Using the 80/20 financing example, if the comps are 20% less than the purchase price, the piggyback lender is essentially unsecured. They are actually looking at a total loss at a value drop of less than 20% due to carrying and foreclosure costs. So how will a piggyback lender in such a valuation scenario (which I think we have already reached and exceeded in some areas) react to a borrower who simply stops paying them?

I see three choices – 1) foreclose and get $0 (or even take a further loss) after paying off the 1st and costs; 2) do nothing and hope values go back up; or 3) negotiate a short pay and take what you can get.

#1 simply makes no sense. Not going to happen.

#2 is a possibility but it becomes a completely non-performing loan for who knows how long?

#3 seems to be the most likely result. Take what you can get and write off the rest.

If it plays out this way, the borrower with ability in his $800K (purchase price) home forks over maybe $10K – $15K to the piggyback lender and wipes out a $160K 2nd. Now he’s got a first of $640K that he can already afford and he’s freed up $1K/month cash by wiping out the piggyback. Not a bad end result. Assume he was upside-down 25% – now he’s only upside-down 5%, can easily afford his mortgage and he has an extra $1K/month to play with. And of course the piggyback lender will not report him as delinquent once the deal is done so there is a minimal if any credit hit.

Piggybacks are going to get creamed.

[DaCounselor]

“anyone think that the banks would concede to this kind of commando/in your face/I’m gonna screw you if you don’t sweeten the pot kind of attitude or would they say F you, get out, we’ll just foreclose..even though they will take a bath if they foreclose on the house???”
_________________________________

Using the 80/20 financing example, if the comps are 20% less than the purchase price, the piggyback lender is essentially unsecured. They are actually looking at a total loss at a value drop of less than 20% due to carrying and foreclosure costs. So how will a piggyback lender in such a valuation scenario (which I think we have already reached and exceeded in some areas) react to a borrower who simply stops paying them?

I see three choices – 1) foreclose and get $0 (or even take a further loss) after paying off the 1st and costs; 2) do nothing and hope values go back up; or 3) negotiate a short pay and take what you can get.

#1 simply makes no sense. Not going to happen.

#2 is a possibility but it becomes a completely non-performing loan for who knows how long?

#3 seems to be the most likely result. Take what you can get and write off the rest.

If it plays out this way, the borrower with ability in his $800K (purchase price) home forks over maybe $10K – $15K to the piggyback lender and wipes out a $160K 2nd. Now he’s got a first of $640K that he can already afford and he’s freed up $1K/month cash by wiping out the piggyback. Not a bad end result. Assume he was upside-down 25% – now he’s only upside-down 5%, can easily afford his mortgage and he has an extra $1K/month to play with. And of course the piggyback lender will not report him as delinquent once the deal is done so there is a minimal if any credit hit.

Piggybacks are going to get creamed.

[contraman]

Multipropert,

They can walk away because it is in the documents they signed that they have the right to do so. I see them all the time. Like I said before, it is not YOUR HOUSE it is the banks until you pay them in full.

From my understanding, and anyone can chime in here, the new BK laws protect the Credit Card companies but you can still BK out of a deficiency judgment from a bank. I have a few friends who are doing it now…..

SD Realtor makes a good point. It is very important to get them to agree to things in a contract when you are going through the foreclosure process. I do know that if they do not do a “judicial foreclosure” they waive the right to bring a deficiency judgment against you later. You can’t foreclose twice on someone…

As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.

Watch the movie “maxed out” when you get a chance.

Sincerely, Contraman

[contraman]

Multipropert,

They can walk away because it is in the documents they signed that they have the right to do so. I see them all the time. Like I said before, it is not YOUR HOUSE it is the banks until you pay them in full.

From my understanding, and anyone can chime in here, the new BK laws protect the Credit Card companies but you can still BK out of a deficiency judgment from a bank. I have a few friends who are doing it now…..

SD Realtor makes a good point. It is very important to get them to agree to things in a contract when you are going through the foreclosure process. I do know that if they do not do a “judicial foreclosure” they waive the right to bring a deficiency judgment against you later. You can’t foreclose twice on someone…

As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.

Watch the movie “maxed out” when you get a chance.

Sincerely, Contraman

[contraman]

Multipropert,

They can walk away because it is in the documents they signed that they have the right to do so. I see them all the time. Like I said before, it is not YOUR HOUSE it is the banks until you pay them in full.

From my understanding, and anyone can chime in here, the new BK laws protect the Credit Card companies but you can still BK out of a deficiency judgment from a bank. I have a few friends who are doing it now…..

SD Realtor makes a good point. It is very important to get them to agree to things in a contract when you are going through the foreclosure process. I do know that if they do not do a “judicial foreclosure” they waive the right to bring a deficiency judgment against you later. You can’t foreclose twice on someone…

As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.

Watch the movie “maxed out” when you get a chance.

Sincerely, Contraman

[contraman]

Multipropert,

They can walk away because it is in the documents they signed that they have the right to do so. I see them all the time. Like I said before, it is not YOUR HOUSE it is the banks until you pay them in full.

From my understanding, and anyone can chime in here, the new BK laws protect the Credit Card companies but you can still BK out of a deficiency judgment from a bank. I have a few friends who are doing it now…..

SD Realtor makes a good point. It is very important to get them to agree to things in a contract when you are going through the foreclosure process. I do know that if they do not do a “judicial foreclosure” they waive the right to bring a deficiency judgment against you later. You can’t foreclose twice on someone…

As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.

Watch the movie “maxed out” when you get a chance.

Sincerely, Contraman

[contraman]

Multipropert,

They can walk away because it is in the documents they signed that they have the right to do so. I see them all the time. Like I said before, it is not YOUR HOUSE it is the banks until you pay them in full.

From my understanding, and anyone can chime in here, the new BK laws protect the Credit Card companies but you can still BK out of a deficiency judgment from a bank. I have a few friends who are doing it now…..

SD Realtor makes a good point. It is very important to get them to agree to things in a contract when you are going through the foreclosure process. I do know that if they do not do a “judicial foreclosure” they waive the right to bring a deficiency judgment against you later. You can’t foreclose twice on someone…

As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.

Watch the movie “maxed out” when you get a chance.

Sincerely, Contraman

[SD Realtor]

Contra all of your recent posts have been dead on with the actual events I have been working on in the field. Same with your posts Counselor.

and finally…

“As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.”

my two cents here is that whoever follows George will do the exact same thing. There really is not much of a choice.

SD Realtor

[SD Realtor]

Contra all of your recent posts have been dead on with the actual events I have been working on in the field. Same with your posts Counselor.

and finally…

“As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.”

my two cents here is that whoever follows George will do the exact same thing. There really is not much of a choice.

SD Realtor

[SD Realtor]

Contra all of your recent posts have been dead on with the actual events I have been working on in the field. Same with your posts Counselor.

and finally…

“As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.”

my two cents here is that whoever follows George will do the exact same thing. There really is not much of a choice.

SD Realtor

[SD Realtor]

Contra all of your recent posts have been dead on with the actual events I have been working on in the field. Same with your posts Counselor.

and finally…

“As far as the banks being screwed (long term), not a chance, they are the bedrock of our economy. Benny will print money for them to lend from here to the end of time…..and Georgie will pass all these laws and acts to protect them from utter failure.”

my two cents here is that whoever follows George will do the exact same thing. There really is not much of a choice.

SD Realtor

[Author]

Posts