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December 5, 2011 at 12:22 PM in reply to: People who can’t afford their house but get to keep it?! #734069December 5, 2011 at 10:25 AM in reply to: People who can’t afford their house but get to keep it?! #734058
bearishgurl
Participant[quote=SD Realtor] . . . BG your posts make it sound like principal reductions do not exist. If you actually were practicing in the field in this decade or two decades, I may have a bit inclination to take seriously what you write. However clearly posting online takes much more of your time then whatever your profession is. Personally I wouldn’t make implications about things that I didn’t have hands on (in recent years) experience with, but I guess that is what the internet is all about. I have never been involved with one (principal reduction) but in my mind they would make absolute common sense for the investors holding the paper. The investors have one of three choices as I see it:
1 – Let the buyers default and then sell the home on the open market incurring the cost of the foreclosure process.
2 – Let the buyers short sell.
3 – Work out a program where the buyers get to keep the home and forgive a portion of the original loan amount.
It seems to me that in each of the 3 choices the bottom of bottom lines is that the investors lose money. In either case the home is going to get sold at market value, (even in case number 3) so the investors take a haircut. The real choice here is do the investors think that the buyer is credit worthy and worth the risk? If not then take avenue 1 or 2.
I think trying to pin someone down to every nitty gritty detail about a forgiven loan is ridiculous. I havent seen one personally but I have talked to a few different people who have claimed to have gotten them. I didn’t ask them for their loan docs. Maybe they were bullshitting me and maybe not.
In my mind, it doesnt really matter.[/quote]
Except YOU, (as a former trustee’s deed buyer?) have never seen them in practice, lol . . .
SDR, you act here as if your 3 choices are cast in stone and have been in practice since the dawn of time. In fact, only option 1 was in use until the recent “millenium boom.” There were (very few) short sales taking place during the “gulf war malaise” (’90-’92) but they were NOT approved if the borrower had 2nd (or subsequent) TDs filed against their property. The shorts were for minimal amts ($7-$15K) and the borrower was promptly issued a 1098 from their lender in the forgiven amt for this “phantom income” taken for the tax year in question (as it SHOULD be).
Your options 2 and 3 are currently in widespread use solely due to lender malaise and the ill-thought-out advent of CA Civil Code section 2923.5 (for “millenium boom” borrowers only). This increases the non-judicial foreclosure process for them from 111 days (min) to 141 days (min). It reads, in pertinent part:
2923.5. (a) (1) A mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g).
(2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower’s financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically. . . .(i) This section shall apply only to mortgages or deeds of trust recorded from January 1, 2003, to December 31, 2007, inclusive, that are secured by owner-occupied residential real property containing no more than four dwelling units. For purposes of this subdivision, “owner-occupied” means that the residence is the principal residence of the borrower as indicated to the lender in loan documents.
(j) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.(emphasis added)
Your options 2 and 3 are clearly not in a lender’s best interest. Lenders are screwing themselves royally by allowing FB’s to squat in their properties for many months and often years. As they do so, their losses build up to ridiculous proportions and we ALL pay for this one way or another.
As you are well aware, acc to CA law, lenders are to file a notice of default on a property after its payments are 90 days late in accordance with CA CC sec 2924. Then they are to adhere to a publication schedule laid out in CA Civil Code 2924f and post a Notice of Sale on the property, setting forth a sale date at least 20 days after the the Notice of Default is filed.
Lenders who conduct proper and timely non-judicial foreclosure in CA suffer far less loss compared to the other choices you mention here. Prior to the era of “loose lending,” a 2nd TD holder (investor) who desired to protect their position would typically appear at the courthouse steps at the time of trustees sale and bid one penny over the opening bid (and they very often did)! This bid amount consisted of the principal balance owing + 3-4 mos interest + 3-4 mos late fees + trustee’s fees. Upon the filing of the trustee’s deed in their favor, this (formerly 2nd TD holder) would take on the foreclosing lender’s note “subject to,” and usually evict the defaulted borrower and ready the property for sale. NO ONE PAID ANY WALKING $$ or “KEY $$!” Upon an eviction order, the (then) marshal’s office was sent out to evict the occupants and change the locks! No occupants died or fell off the face of the planet when eviction loomed. They all KNEW THEIR TIME WAS UP and many moved out to friends, relatives or a rental before the eviction date was set (often leaving behind household goods and junk when they had no place to store it).
I myself watched these (lunchtime) auctions regularly for a good many years in the 1980’s.
If all these (more recent) FB’s properties had been dumped on the market as REOs as they became available thru foreclosure (even many at once) and resold to new buyers between 2007 and 2010, ALL RE owners would have been able to see the light at the end of the tunnel by now. As it stands, lenders are coddling these FB’s and allowing them to support lifestyles they have become “accustomed to” but have never been able to actually afford. This is keeping values down for EVERYONE affected by RE values in this state, including longtime owners, free-and-clear owners and honest owners who bought what they could afford with a substantial downpayment and may be sacrificing to keep their payments current.
Many FB’s are now “working the current (failed hodgepodge) system” to get as much “free rent” as possible and also qualify for “key $$,” lol. It’s BS and they don’t deserve it. When word spreads thru word-of-mouth and the internet on the how-to’s of stiffing your lender(s) to the nth degree (even if you can afford to pay your mtg(s)), it just exacerbates the problem.
(yawn) … Nothing has changed. People have always wanted to live in areas they can’t afford and many want as much “cash out” as they can get from their property. It’s just human nature.
The failed practice of “short sales” and “mods” should go by the wayside in favor of non-judicial foreclosure, as it has ALWAYS been, IMO. As UCGal mentioned, that’s what borrowers “signed up for” when they signed the papers to buy properties which were out of their league or signed their (refi) 1st TD, 2nd TD or HELOC to take “cash out.”
Participant[quote=walterwhite]I am just going to buy some equipment and set up for squats in the yard here.
I want to grunt freely and frankly quite a bit louder. I’ve been restraining myself.
Might go pick up 400 lbs of rusty weights from perris later.[/quote]
scaredy are you shopping CL again? If its a nice freeweight set or barbells, you can always sand them down …
December 4, 2011 at 12:37 PM in reply to: How is Chula Vista as a place to live? Why such massive drop in price? #733995Participant[quote=ocrenter] . . . We do not live there. And we are still $200k above water from my purchase price in late 2008.[/quote]
Congratulations, ocrenter! You learn well from your experiences. Lots of people don’t.
December 4, 2011 at 12:26 PM in reply to: How is Chula Vista as a place to live? Why such massive drop in price? #733992Participant[quote=sdrealtor]or because the top brass couldnt bear to work in that environment on a daily basis and they chose to work closer to where they wanted to live.[/quote]
They were there for 32 years, lol . . .
December 4, 2011 at 12:24 PM in reply to: How is Chula Vista as a place to live? Why such massive drop in price? #733991Participant[quote=ocrenter][quote=sdrealtor]To answer the OP question….it sucks[/quote]
Oh boy, look for a 3 page rebuttal complete with bolded paragraphs for emphasis from the resident Chula Vista booster upcoming.[/quote]
Nah, I don’t need to. I just consider the source and realize its coming from complete ignorance.
Don’t you reside in “4-closure Ranch,” ocrenter? I’m waiting to see a thread started by a 4-closure Ranch resident polling their “neighbor Piggs” on amounts of home equity each currently has (or “negative equity,” as the case may be), or comparing brands of sheets in their windows :=0
Oh, well, you know what they say . . . if you’re underwater and you know you’re gonna be there for awhile, take swimming lessons … or get a snorkel!!
December 4, 2011 at 12:10 PM in reply to: How is Chula Vista as a place to live? Why such massive drop in price? #733989Participant[quote=sdrealtor]. . . How much value does adding a drug smuggling tunnel under your house add? Is it worth more if its permitted? . . . [/quote]
You’ll have to ask your “lunch buddies” at the NTF and DEA. They left their longtime leased digs in National City and built new modern HQs all for themselves in Nirvana to be closer to all the action :=]
December 4, 2011 at 11:54 AM in reply to: People who can’t afford their house but get to keep it?! #733988Participant[quote=sdrealtor]It was not meant to demonstrate what a good deal he got it was to discredit your false statements. I wasnt bragging but rather was putting out a factual example in direct contrast to your statements. I didnt expect Piggs to dissect it but I guess one Pig decided to.
My comment about divorcing upper middle class couples was mocking your blanket steretypical statement about what divorcing couples do in CA. You only see one very depressed corner of the world.[/quote]
I see now. You’re apparently not used to having “a few rocks turned up” when you come in here with your “blanket statements” on how everything is peachy keen amongst all your “friends, comrades and clients” in your “perfect world.”
I learned a long time ago that there’s a backstory to everything. That’s why I carry a flashlight on my keyring.
Why am I not surprised to hear the two chief reasons you “shared” this heartwarming story with the Piggs? Hasn’t this been your usual MO around here . . . lol??
You actually have no idea which “corners of the world” I’ve seen.
December 4, 2011 at 10:01 AM in reply to: People who can’t afford their house but get to keep it?! #733981Participant[quote=sdrealtor]. . . Did I ever say he didnt live there? I said he had a tenant (i.e. roomate) so his net cost to live there was $1000 out of pocket.[/quote]
Yes.[quote]…He has a tenant and his PITI net of the rent he recieves is about $1000…[/quote]
[quote=sdrealtor]None of his equity was removed, his ex’s was and it was long before the bubble peaked or burst.[/quote]
Again, shoulda, woulda coulda sold at the peak … everyone has the same problem …
[quote=sdrealtor]I never said he had kids, he doesnt. And he’s not upper middle class for that matter. He’s also orphaned and the only family he has to hold onto the house for is his dog.[/quote]
Guess that’s a good enough reason … for HIM but not for me, tho :={ (inside joke)
[quote=sdrealtor]The mod kept him in his house and that is where he will stay as long as he wants. It was good deal for the lender and a good deal for him.
You were wrong. Please admit it so we can move on. Just say the words. Its not hard. I..WAS…WRONG!!![/quote]
sdr, in the same paragraph you used to describe your friend’s situation, you stated the following:
[quote]FWIW many of the divorcing couples I know have one spouse hold onto the house particularly when there are school age children. Thats usually what divorcing couples in upper middle class communities do in CA.[/quote]
sdr, YOU put your friend’s “story” out there (in dribs and drabs – only after I asked for more detail), ostensibly to demonstrate how great of a mod/cramdown deal he got, correct? Why did you feel a need to brag about his deal here if you didn’t expect Piggs to “dissect it?”
My last question to you, of course, would be, is “How does your friend’s credit score look today?” Of course, if you don’t wish to answer that, I’ll just use my imagination ;=]
As you might surmise, I don’t have an innate need to “sugarcoat” everything so it’s more “palatable.” I can usually be depended on to call a spade a spade when I see or hear of one.
December 4, 2011 at 9:19 AM in reply to: People who can’t afford their house but get to keep it?! #733977Participant[quote=sdrealtor]Again you were wrong on all accounts especially your bolded statement. He lost his job and was unemployed for an extended period, had to be retrained in a new industry (he was never in any of the FIRE sectors) and got a second chance. It was right for everybody involved and he will be fine now. . . . blah, blah[/quote]
Yeah, his “second chance” allowed him to essentially parlay his former “family home” into a $1000 mo net income for himself, even after defaulting on it for a year!
The fact that you elected not to address any of the points I laid out here shows, once again, that I was right on the money with this one, lol . . .
December 4, 2011 at 8:57 AM in reply to: People who can’t afford their house but get to keep it?! #733973Participant[quote=SD Realtor]Why would someone go through the hassle of selling the home when the lender went ahead and granted them instant equity and a lower rate and basically valued the home at present day prices? Seems like a pretty easy decision to stay and keep the home.[/quote]
Except he didn’t “stay,” lol . . .
SDR, sdr stated that this individual’s divorce occurred several years before he lost his job. Then he lived in the property “free” for a year after defaulting and THEN presumably worked out the mod after landing a new job. Regardless of the $80K, this particular family (like most divorcing couples) would have been better off selling at the time of divorce and splitting the proceeds, IMO. It would have saved his credit. Now, neither party has this heartwarming, special house for their “school-age kids” to live in. Why?? Because “Dad?” is now using it for a biz oppty, courtesy of his generous “loan mod.”
He’s apparently so “upper middle class” (like ALL sdr’s “friends” are, lol) that he needs the $1000 mo rental income to supplement his income.
I thought the function of “loan mods” was to keep families together in their homes … a roof over their heads while they put their financial lives back in order . . . a second chance, so to speak?
December 4, 2011 at 8:42 AM in reply to: People who can’t afford their house but get to keep it?! #733972Participant[quote=sdrealtor]Nearly all the loan mods out there start around 2% for 5 years and then go up a 1% a year until reaching todays current low interest rate whatever it is at the time of the mod.
He didnt sell the house because he weanted to keep it and could afford it. The divorce was several years ago and he was doing fine until he lost his job. FWIW many of the divorcing couples I know have one spouse hold onto the house particularly when there are school age children. Thats usually what divorcing couples in upper middle class communities do in CA.
The lender didnt subsidize his divorce settlement as it was about 5 years before he lost his job. He had plenty of equity and refied out her portion. He could easily afford the house after that in his prior career. He didnt relocate either and I never said he did….[/quote]
So, let’s just get this situation straight here. Your “friend” has $1000 positive cash flow on a voluntary rental (“biz investment”) because his lender essentially “forgave” $80K? of his mtg (the remainder of his “cash-out” refi, 2nd TD or HELOC that he used to settle his divorce). Since he had “plenty of equity” before the divorce, had he not removed any of it, he wouldn’t have been underwater, correct?
And your friend is free to live in the property himself (with his “school-age children??”) but due to his generous “mod,” it is now much more lucrative for him to rent it out and keep the change every month, correct??
So his $1000 month “net rental income” originated from the interest rate reduction along with debt forgiveness of $80K?
Where can Piggs sign up for this program??
It sounds like this friend of yours not only got $80K of his divorce settlement paid for by his mtg lender but he wasn’t “upper middle-class” enough to “hang onto” the family home for his “school-age kids.”
December 3, 2011 at 4:09 PM in reply to: People who can’t afford their house but get to keep it?! #733953Participant[quote=sdrealtor]I saw the loan mod papers as he asked my opinion before signing them. he absolutely can make it and will stay there forever. He has a tenant and his PITI net of the rent he recieves is about $1000. He is divorced and took out equity to buy the house. He was unemployed for a while. He went back and retrained in another industry and now has a very good job in stable field. He has been promoted twice in the last year since he started.
He had about 80K loan balance plus a year of missed payments forgiven and now owes about 450K which is about what its worth now. He absolutely will acquire equity and no repayment of the forgiven amounts will ever be required. I know this because I saw the loan mod papers. The 4.5% cap is for the duration of the loan also…[/quote]
I think it is wonderful your friend received a 4.5% (fixed?) interest rate for the remainder of his mtg. Even though I don’t personally believe interest rates will skyrocket in the next few years, I, too, have seen a few “proposed-mod agreements” and your friend’s arrangement is unusual since the consensus of “economist-types” seems to be that mtg rates will rise.
However a question looms in my mind on your friends situation: Why didn’t your friend and his ex SELL their property (at the time of dissolution) and split the proceeds amongst themselves so your friend would not be left holding the bag on a property that perhaps TWO INCOMES were helping to pay the bills while he was married? That’s usually what divorcing couples do in CA.
It appears the lender in question here “subsidized” your friend’s divorce settlement. Out of curiosity, one wonders why they would do that. If he was a year behind in payments, they could just foreclose on the property.
I understand the part about your friend needing to relocate (and rent the place out) in order to accept a position in his “new” field.
December 2, 2011 at 9:30 PM in reply to: People who can’t afford their house but get to keep it?! #733930Participant[quote=sdrealtor]Except when they get some principal and past payments forgiven accompanied by a below market interest rate (2% for the next 5 years, then 3% in year 6, 4% in year 7 and capped at 4.5% in year 8) that makes staying in their house significantly cheaper than renting like a friend of mine got up in OC. Please stop speaking in absolutes that are patently wrong.[/quote]
sdr, why don’t you tell us how much your “friend in OC” currently owes on their mortgage? How much of their mortgage was “forgiven” and how much is his/her property currently worth?? Is their mortgage capped at 4.5% for ALL years after year 8 (assuming they stay with the program that long)??
What is their current PITI (+ HOA dues, if applic) and what will their property rent for in the condition it is currently in??
Your borrower has to LAST on the “plan” you describe here. Underwater FB’s have typically been living off the “equity” in their homes. In addition, they have been squatting and not making any payments since the “serial cash-out” refi/HELOC party abruptly ended.
What makes you believe that your “friend in OC” can last 8 years on his “mod program??” And do you think he/she will EVER acquire any equity in “their” property??
December 2, 2011 at 9:07 PM in reply to: People who can’t afford their house but get to keep it?! #733928Participant[quote=dd123]I’d love to live in a million dollar house provided someone else pay mortgage part although I can only afford a $600K
who would not want this kind of deal ?[/quote]dd123, in a mod, no one is paying part of the borrower’s mortgage. They simply get their interest rate reduced, more years added to their mortgage, or both. The entire amount (incl any deferred interest) will become due and payable when the fat lady finally sings (when they finally sell and a lender demand is sent for by escrow) :=]
A borrower can get a deal comparable to this by renting. When they give a deed in lieu of foreclosure early on, an underwater borrower begins healing their credit from that day forward. There is no guarantee that an underwater borrower (who is currently eligible for a loan mod and agree to its terms) will be able to sell in the foreseeable future and still cover their closing costs with the proceeds. Therefore they are prolonging the pain (of waiting out the damage to their credit) by agreeing to a mod today in order to continue living in a property in the future that they can’t afford (and likely have never been able to afford).
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