Will honest people start doing dirty/crooked things to bail out of their houses

[no_such_reality]

but for someone with 80/20 non-recourse purchase money it may make sense.

I’ve heard that if you’ve tapped an HELOC the non-recourse protections of your original purchase are voided.

Anybody know for sure?

For a second thought, yep, many are going to game the system, many will try. I wonder how many will discover their loan broker pulled shenanigans of their own now making them look like fraudsters complimented by the gray nature of their screw the banks move to a new home.

[no_such_reality]

but for someone with 80/20 non-recourse purchase money it may make sense.

I’ve heard that if you’ve tapped an HELOC the non-recourse protections of your original purchase are voided.

Anybody know for sure?

For a second thought, yep, many are going to game the system, many will try. I wonder how many will discover their loan broker pulled shenanigans of their own now making them look like fraudsters complimented by the gray nature of their screw the banks move to a new home.

[DaCounselor]

“2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.”
________________________________

You are mistaken as to the characterization of the 20% second mortgage as a recourse loan. It is not. It is purchase money and by CA law it is non-recourse. The lender has no recourse if you default other than seizure of the collateral. Doesn’t matter if the 2nd is called a HELOC or a Whozeewhatsit. It’s non-recourse.

[DaCounselor]

“2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.”
________________________________

You are mistaken as to the characterization of the 20% second mortgage as a recourse loan. It is not. It is purchase money and by CA law it is non-recourse. The lender has no recourse if you default other than seizure of the collateral. Doesn’t matter if the 2nd is called a HELOC or a Whozeewhatsit. It’s non-recourse.

[Coronita]

If my home goes down by 50% to $450k in CV.

I wouldn't buy another one and llet my current home be foreclosed.

 

1) I would definitely buy another home at 50% off, probably pay cash.

2) I would keep my current house too.

For me, screwing up one's credit on something $500k or less isn't worth the time or inconvenience frankly. If it's $5million on the other hand, well that would be a different story wouldn't it?

So i guess the question is might be how much is your credit really worth?

Also, as much as I want to believe in a 50% correction, I have to put this in perspective. Running my immediate neighborhood, a 50% correction would take us roughly back to 1998 house prices. Most of the homes that on my streets and immediate cross streets are original home owners who purchased in 1998. I would think that no matter what happens, most of these folks aren't going to move because their mortgage is so low and prop tax is so low. These are the stay put people….

The ones that probably would consider selling are the greater fool like myself who bought from the few sellers in this neighborhood. People like me make up about 15-20% of these on our streets, because I looked at the sales history, there hasn't been that much turnover. Out of the new purchasers, I would say at least half of them are asian….So, I would have to put on my "ethinicity" hat here, and say at least for the purchasers around me, most of them will be hanging on to dear life because they would probably fit the stereotype asian that refuses to let go. So I'm not really sure if the 50% discount will be possible in certain areas.

[Coronita]

If my home goes down by 50% to $450k in CV.

I wouldn't buy another one and llet my current home be foreclosed.

 

1) I would definitely buy another home at 50% off, probably pay cash.

2) I would keep my current house too.

For me, screwing up one's credit on something $500k or less isn't worth the time or inconvenience frankly. If it's $5million on the other hand, well that would be a different story wouldn't it?

So i guess the question is might be how much is your credit really worth?

Also, as much as I want to believe in a 50% correction, I have to put this in perspective. Running my immediate neighborhood, a 50% correction would take us roughly back to 1998 house prices. Most of the homes that on my streets and immediate cross streets are original home owners who purchased in 1998. I would think that no matter what happens, most of these folks aren't going to move because their mortgage is so low and prop tax is so low. These are the stay put people….

The ones that probably would consider selling are the greater fool like myself who bought from the few sellers in this neighborhood. People like me make up about 15-20% of these on our streets, because I looked at the sales history, there hasn't been that much turnover. Out of the new purchasers, I would say at least half of them are asian….So, I would have to put on my "ethinicity" hat here, and say at least for the purchasers around me, most of them will be hanging on to dear life because they would probably fit the stereotype asian that refuses to let go. So I'm not really sure if the 50% discount will be possible in certain areas.

[patientlywaiting]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today’s prices for a 10 year old Mercedes. Give it 15 more year and the purchase won’t look so bad.

[patientlywaiting]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today’s prices for a 10 year old Mercedes. Give it 15 more year and the purchase won’t look so bad.

[Anonymous]

Thank you SD Realtor!!
Can you imagine if we walked away from everything in our lives that go down in value? I wonder if the original poster ever purchased a new car on payments…a car loses 30% of its value when you drive it off the lot yet most of us continue to pay on it for years. Your house is your home. Common sense says you shouldn’t buy a house if your intension is to sell in a year or two. There are millions of people who purchased homes at the last peak of the market and saw prices drop dramatically–lots bailed and wish they hadn’t; others stuck it out and are happy today that they did. Stop reading the newspapers and just enjoy your home. If you purchased with a P&I loan, you will be very very happy in the long run.

[Anonymous]

Thank you SD Realtor!!
Can you imagine if we walked away from everything in our lives that go down in value? I wonder if the original poster ever purchased a new car on payments…a car loses 30% of its value when you drive it off the lot yet most of us continue to pay on it for years. Your house is your home. Common sense says you shouldn’t buy a house if your intension is to sell in a year or two. There are millions of people who purchased homes at the last peak of the market and saw prices drop dramatically–lots bailed and wish they hadn’t; others stuck it out and are happy today that they did. Stop reading the newspapers and just enjoy your home. If you purchased with a P&I loan, you will be very very happy in the long run.

[Coronita]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today's prices for a 10 year old Mercedes. Give it 15 more year and the purchase won't look so bad.

 

I don't claim it to be. I was just pointing out most newer home owners that entered at a higher price will be more susseptiable to leaving and calling quits. If you have some family that's been living in the same house since 98, well then a 50% drop means nothing for a primary home imho. They're not going to sell to be foreclosed because they could buy something else equivalent. Doesn't make sense. There are exceptions to the rules, as a few families will go through unusual hardships, a few will be mismanaged and are living refinance to refinance.  there will be deals a plenty all over the place. But the idea of buying another and letting the current one foreclose would to me only work if it's a new home buyer who paid something like $900k for something that's worth $550k now. Then you have to wonder if they really would qualify with a second home.

 

Anyway, if it happens, and we see 50% corrections, I'd be happy. More homes for me 🙂 

 

[Coronita]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today's prices for a 10 year old Mercedes. Give it 15 more year and the purchase won't look so bad.

 

I don't claim it to be. I was just pointing out most newer home owners that entered at a higher price will be more susseptiable to leaving and calling quits. If you have some family that's been living in the same house since 98, well then a 50% drop means nothing for a primary home imho. They're not going to sell to be foreclosed because they could buy something else equivalent. Doesn't make sense. There are exceptions to the rules, as a few families will go through unusual hardships, a few will be mismanaged and are living refinance to refinance.  there will be deals a plenty all over the place. But the idea of buying another and letting the current one foreclose would to me only work if it's a new home buyer who paid something like $900k for something that's worth $550k now. Then you have to wonder if they really would qualify with a second home.

 

Anyway, if it happens, and we see 50% corrections, I'd be happy. More homes for me 🙂 

 

[HLS]

“If you purchased with a P&I loan, you will be very very happy in the long run”

And what makes you so sure that people will be VERY VERY happy in the long run ?? Are you a RE agent ?????

AND even if you are right, those who purchased with an interest only loan will be happy too. The thinking that P&I is CRUCIAL to someones success in real etstate is SOOOOooooo 40 years ago….

Thre is NO comparison to “the last peak”
Homes were much more affordable then, in relation to income.

You suggest they stop reading the newspaper and then what ?
Just listen to you ???

You just don’t understand that for MANY people it is a stretch to just pay full interest payments, forget about any principal. The extra couple of hundred dollars is just beyond affordability of many.

The carrying costs today to “hang on” and spend $40K+ a year waiting for the market to “recover” is irresponsible advice. People need to UNDERSTAND what they are up against and make choices that they can live with. The house may NEVER go back to the levels of 2005.

It’s attitudes like yours about housing and the stock market that have average people drinking Kool-Aid by the gallons. Pathetic advice.

SO,because so many people are delusional about the “value” of their house, they will remain in debt for twice what the house could be repurchased for in the not so distant future.
Govt gets exactly what they want. Keep people in debt way beyond what they can afford.

Keep the sheep BAA’ing waiting for the miracle cure.

[HLS]

“If you purchased with a P&I loan, you will be very very happy in the long run”

And what makes you so sure that people will be VERY VERY happy in the long run ?? Are you a RE agent ?????

AND even if you are right, those who purchased with an interest only loan will be happy too. The thinking that P&I is CRUCIAL to someones success in real etstate is SOOOOooooo 40 years ago….

Thre is NO comparison to “the last peak”
Homes were much more affordable then, in relation to income.

You suggest they stop reading the newspaper and then what ?
Just listen to you ???

You just don’t understand that for MANY people it is a stretch to just pay full interest payments, forget about any principal. The extra couple of hundred dollars is just beyond affordability of many.

The carrying costs today to “hang on” and spend $40K+ a year waiting for the market to “recover” is irresponsible advice. People need to UNDERSTAND what they are up against and make choices that they can live with. The house may NEVER go back to the levels of 2005.

It’s attitudes like yours about housing and the stock market that have average people drinking Kool-Aid by the gallons. Pathetic advice.

SO,because so many people are delusional about the “value” of their house, they will remain in debt for twice what the house could be repurchased for in the not so distant future.
Govt gets exactly what they want. Keep people in debt way beyond what they can afford.

Keep the sheep BAA’ing waiting for the miracle cure.

[Anonymous]

HLS, yes I am a Realtor. Are you a renter? You sound like the bitter renters I meet who think homeowners are idiots and get pissed off at your landlord because he has decided to sell and you have to move again.

And because I am a Realtor and a homeowner, as well as investor, I DO understand what a stretch it is to buy. Unfortunately, I wasn’t born rich so I had to scrape and save like other people should to buy a house and give up the idea of a new car and eating out to make a mortage payment. I have helped approximately 60 couples/individuals buy homes during the past 5 years an NONE of them have lost their homes. A few of them have pulled out cash and wish they didn’t. I never recommend flipping. I always ask people whether or not they can afford the home in the long run. You seem to think everyone in the real estate business is unethical. (I guess it’s similar to how I think people who rent for 20+ years aren’t very smart.)Yes, I’m a little old fashioned about the P&I but I want to retire without a mortgage, although I realize a lot of people don’t care.

I challenge you to find any unhappy homeowner who has lived in their home for more than 10 years and never pulled cash.

[Author]

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