|
Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"
|
| View previous topic :: View next topic |
| Author |
Message |
Fox
Joined: 04 Mar 2009
|
 Posted: Mon Jan 25, 2010 6:44 pm Post subject: Just Walk Away From Your Mortgage? |
 |
|
Article here.
| Quote: |
As underwater homeowners around the country despair over whether to keep paying their mortgages or just walk away, investors in the largest residential real estate deal in U.S. history have just walked away from 11,232 properties in one fell swoop.
On Monday a group led by Tishman Speyer Properties gave up the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan, turning the properties over to its creditors after defaulting on some $4.4 billion in debt. The group decided to "transfer control and operation of the property...to the lenders," it told the Wall Street Journal. The $5.4 billion acquisition in 2006 was the single biggest residential property purchase in U.S. history.
It's now worth an estimated $1.8 billion, putting the properties' owners "underwater."
Four years later, the joint venture by Tishman and BlackRock Inc. is part of what is undoubtedly the biggest walk-away in mortgage history.
On Wall Street, it's okay to walk away from your mortgage.
"We basically walked away from it," said Clark McKinley, a spokesman for the California Public Employees' Retirement System [CalPERS], the nation's biggest municipal pension fund. CalPERS, one of several investors in the venture, wrote off its $500 million investment, McKinley said.
"It's underwater, anyway, so we've lost it," he added. "We took our medicine, and we're learning from it."
The Tishman-led venture is just the latest Wall Street walk-away.
Story continues below
Last month, Morgan Stanley, the country's sixth-biggest bank by assets, walked away from five San Francisco office buildings it purchased as part of a landmark $2.43 billion deal near the height of the real estate boom. The $770 billion firm called it a "a negotiated transfer to our lenders."
So if Wall Street can do it, why can't homeowners?
About a quarter of homeowners with a mortgage -- estimates range from 11-15 million -- are currently underwater on their mortgages, meaning they owe more than the property is worth. All of the mortgages in the state of Nevada are worth more than the underlying properties, according to real estate research firm First American CoreLogic, making the whole state virtually underwater.
But struggling homeowners aren't getting the kind of mortgage relief they need, experts say. Principal cuts are rare. In fact, more than 70 percent of mortgage modifications involve an increase in the principal owed, according to a recent report by state regulators.
Meanwhile, about half of mortgages that are modified eventually re-default anyway. The kind of mortgage modifications most prevalent are simply delaying the inevitable, according to a review of mortgage modification data.
With homeowners at the mercy of their lenders, unable to get relief on their home mortgages in bankruptcy court, and unlikely to see a return in their homes' values to their boomtime highs, they don't have too many options.
Enter "strategic defaults" -- a fancy way of saying "walking away."
More than one million homeowners went that route last year, nearly double the amount in 2008 and more than four times the level in 2007, according to a recent analysis by the credit reporting company Experian and Oliver Wyman, a management consulting firm. A study by a team of university academics found that a quarter of defaults are strategic.
The trigger, researchers say, is negative equity. When the value of a house is less than what the bank is owed, borrowers have good reason to break their contracts and walk away.
As Brent T. White, a law professor at the University of Arizona, notes, "there is in fact a huge financial upside to strategic default for seriously underwater homeowners -- an upside that is routinely ignored by the media, credit counseling agencies, and other political and economic institutions in 'informing' homeowners about the consequences of default."
White argues that homeowners should act like corporations, or like Morgan Stanley and Tishman Speyer -- maximize profits and minimize losses. Walking away from an underwater mortgage makes sense, White says.
But distressed homeowners are often guilted into paying their mortgages, White argues.
Former Treasury Secretary Hank Paulson once said: "And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator - and one who is not honoring his obligations."
The head of the Mortgage Bankers Association, John Courson, played up the moral argument against walking away, telling the Wall Street Journal last month: "What about the message they will send to their family and their kids and their friends?
But corporations and businesses don't play by those rules. Like CalPERS's McKinley said, "You come to a point where you write it off or stay in the game. If you want to stay in you got to put in more capital. We reached our limit on that. It was not a prudent thing to put more money into it.
"You get to a point where you can't keep throwing good money after bad," he said. "These are illiquid investments. You gotta fish or cut bait."
As for homeowners walking away en masse -- perhaps lenders' biggest housing-related fear -- McKinley added: "We're hopeful that won't happen." |
This has been talked about a lot lately. Why shouldn't consumers simply act exactly like corporate investors and simply walk away from an underwater mortgage? It'll hurt your credit rating, but let's get real: credit ratings are a scam, and preserving your credit rating isn't worth throwing away hundreds of thousands of dollars on a bad mortage. One might appeal to personal responsibility, but personal responsibility doesn't exist in the business world, so why should it exist for citizens interacting with the business world? You and your bank have a contract, and that contract spells out what will happen in various eventualities. Why should someone feel bad about using that contract to their advantage?
Can anyone think of a good reason one should stay with an excessively priced mortgage instead of just cutting their losses and dumping it? |
|
| Back to top |
|
 |
conrad2
Joined: 05 Nov 2009
|
| Posted: Mon Jan 25, 2010 7:09 pm Post subject: |
|
|
| Since corporations are now considered people in the realm of free speech and campaign finance, I hope every person with an underwater mortgage acts like corporations and just walks away. |
|
| Back to top |
|
|
richardlang
Joined: 21 Jan 2007
Location: Gangnam
|
| Posted: Mon Jan 25, 2010 7:14 pm Post subject: |
|
|
| I wouldn't do this because it would damage my credit history (nevermind my credit score by any of the scoring companies). That's good enough reason for me and most people who realize credit history follows them for a substantial amount of time, if not for life. Sure I could walk away contractually or otherwise, but defaulting on a mortgage is much easier and less hurtful for a big corporation than it is for an individual. Big corporations get back up and running in no time after big losses, as we've seen. People don't. Individuals have to live up to their financial responsibilities and histories in a way that corporations don't. Just because individuals would like to receive the same treatment corporations are blessed with won't make it so. The woman or man at the bank might see a person's argument regarding this, but still deny him/her outright or offer terrible contract terms. |
|
| Back to top |
|
|
Fox
Joined: 04 Mar 2009
|
| Posted: Mon Jan 25, 2010 7:29 pm Post subject: |
|
|
| richardlang wrote: |
| I wouldn't do this because it would damage my credit history (nevermind my credit score by any of the scoring companies). That's good enough reason for me and most people who realize credit history follows them for a substantial amount of time, if not for life. Sure I could walk away contractually or otherwise, but defaulting on a mortgage is much easier and less hurtful for a big corporation than it is for an individual. Big corporations get back up and running in no time after big losses, as we've seen. People don't. Individuals have to live up to their financial responsibilities and histories in a way that corporations don't. Just because individuals would like to receive the same treatment corporations are blessed with won't make it so. The woman or man at the bank might see a person's argument regarding this, but still deny him/her outright or offer terrible contract terms. |
Do you feel your credit history is worth $100,000 or more? Because that's the position some of these people are in. Certainly, it might make it difficult to get another mortgage in the future, but most people are better off renting anyway from a financial point of view. What else would it seriously obstruct you regarding? You'll still be able to get a credit card if you really want one. You'll probably even be able to get a car loan if you really want one, though used cars are sufficiently cheap that car loans are hardly requirements of life.
People in our society have been tricked into over-valuing their credit history in order to keep them playing the credit con game. You can live perfectly well with bad credit. One shouldn't damage their credit needlessly, but saving hundreds of thousands of dollars isn't what I'd call a needless rationale either. |
|
| Back to top |
|
|
ELGORDO
Joined: 12 Jul 2009
|
| Posted: Mon Jan 25, 2010 8:33 pm Post subject: |
|
|
People are simply walking away from mortgages in CA and AZ. I haven't been back in 7 months, but apparently my condo complex is like a ghost town now. I keep it because I need someplace to to stay when in the states even though its probably only worth half of the 150K I paid.
I hope when I get back it's not occupied by squatters. |
|
| Back to top |
|
|
Reggie
Joined: 21 Sep 2009
|
| Posted: Mon Jan 25, 2010 9:11 pm Post subject: |
|
|
| I don't know how common it is, but I've read a lot of people saying they know people who have continued to live in their house for months, like 18 months or longer in some cases, without making a payment because the banks are so far behind on foreclosures. Perhaps it's a symbiotic relationship where the banks also benefit by having regular people living there instead of stinky squatters or copper thieves ravaging the place -- free guards in a sense. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Mon Jan 25, 2010 9:57 pm Post subject: |
|
|
| Reggie wrote: |
| I don't know how common it is, but I've read a lot of people saying they know people who have continued to live in their house for months, like 18 months or longer in some cases, without making a payment because the banks are so far behind on foreclosures. Perhaps it's a symbiotic relationship where the banks also benefit by having regular people living there instead of stinky squatters or copper thieves ravaging the place -- free guards in a sense. |
18-24 months in Miami, Vegas and Phx. You could get a 100% loan on a house and not make a single payment and then live rent free for around two years. |
|
| Back to top |
|
|
Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
|
| Posted: Tue Jan 26, 2010 2:43 am Post subject: |
|
|
| They should just walk away and start a movement for 'credit amnesty' in a couple of years. |
|
| Back to top |
|
|
mises
Joined: 05 Nov 2007
Location: retired
|
| Posted: Tue Jan 26, 2010 5:32 am Post subject: |
|
|
A mortgage is a business transaction. If it does not make business sense, you reevaluate the transaction.
Like firms do:
| Quote: |
| Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market. |
http://www.bloomberg.com/apps/news?pid=20601110&sid=aLYZhnfoXOSk
| Quote: |
A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.
The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006�the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments. |
http://online.wsj.com/article/SB10001424052748703415804575023483097973538.html?mod=WSJ_hps_LEFTWhatsNews#articleTabs%3Darticle
There is no moral imperative to keep paying. It is a contract that can be broken. That's all. In the USA, as prices continue to fall (whatever your house was worth in 1996, that's going to be the value again, either sooner or later) and if walking away becomes a mass movement, it will speed up the process of liquidating malinvestment and creating recovery.
When you see a discussion of the moral element of a mortgage, just think "banker propaganda". The banks don't have morals. They are just profit seeking firms. Be sensible. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Wed Jan 27, 2010 10:53 am Post subject: Re: Just Walk Away From Your Mortgage? |
|
|
| Fox wrote: |
Article here.
| Quote: |
As underwater homeowners around the country despair over whether to keep paying their mortgages or just walk away, investors in the largest residential real estate deal in U.S. history have just walked away from 11,232 properties in one fell swoop.
On Monday a group led by Tishman Speyer Properties gave up the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan, turning the properties over to its creditors after defaulting on some $4.4 billion in debt. The group decided to "transfer control and operation of the property...to the lenders," it told the Wall Street Journal. The $5.4 billion acquisition in 2006 was the single biggest residential property purchase in U.S. history.
It's now worth an estimated $1.8 billion, putting the properties' owners "underwater."
Four years later, the joint venture by Tishman and BlackRock Inc. is part of what is undoubtedly the biggest walk-away in mortgage history.
On Wall Street, it's okay to walk away from your mortgage.
"We basically walked away from it," said Clark McKinley, a spokesman for the California Public Employees' Retirement System [CalPERS], the nation's biggest municipal pension fund. CalPERS, one of several investors in the venture, wrote off its $500 million investment, McKinley said.
"It's underwater, anyway, so we've lost it," he added. "We took our medicine, and we're learning from it."
The Tishman-led venture is just the latest Wall Street walk-away.
Story continues below
Last month, Morgan Stanley, the country's sixth-biggest bank by assets, walked away from five San Francisco office buildings it purchased as part of a landmark $2.43 billion deal near the height of the real estate boom. The $770 billion firm called it a "a negotiated transfer to our lenders."
So if Wall Street can do it, why can't homeowners?
About a quarter of homeowners with a mortgage -- estimates range from 11-15 million -- are currently underwater on their mortgages, meaning they owe more than the property is worth. All of the mortgages in the state of Nevada are worth more than the underlying properties, according to real estate research firm First American CoreLogic, making the whole state virtually underwater.
But struggling homeowners aren't getting the kind of mortgage relief they need, experts say. Principal cuts are rare. In fact, more than 70 percent of mortgage modifications involve an increase in the principal owed, according to a recent report by state regulators.
Meanwhile, about half of mortgages that are modified eventually re-default anyway. The kind of mortgage modifications most prevalent are simply delaying the inevitable, according to a review of mortgage modification data.
With homeowners at the mercy of their lenders, unable to get relief on their home mortgages in bankruptcy court, and unlikely to see a return in their homes' values to their boomtime highs, they don't have too many options.
Enter "strategic defaults" -- a fancy way of saying "walking away."
More than one million homeowners went that route last year, nearly double the amount in 2008 and more than four times the level in 2007, according to a recent analysis by the credit reporting company Experian and Oliver Wyman, a management consulting firm. A study by a team of university academics found that a quarter of defaults are strategic.
The trigger, researchers say, is negative equity. When the value of a house is less than what the bank is owed, borrowers have good reason to break their contracts and walk away.
As Brent T. White, a law professor at the University of Arizona, notes, "there is in fact a huge financial upside to strategic default for seriously underwater homeowners -- an upside that is routinely ignored by the media, credit counseling agencies, and other political and economic institutions in 'informing' homeowners about the consequences of default."
White argues that homeowners should act like corporations, or like Morgan Stanley and Tishman Speyer -- maximize profits and minimize losses. Walking away from an underwater mortgage makes sense, White says.
But distressed homeowners are often guilted into paying their mortgages, White argues.
Former Treasury Secretary Hank Paulson once said: "And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator - and one who is not honoring his obligations."
The head of the Mortgage Bankers Association, John Courson, played up the moral argument against walking away, telling the Wall Street Journal last month: "What about the message they will send to their family and their kids and their friends?
But corporations and businesses don't play by those rules. Like CalPERS's McKinley said, "You come to a point where you write it off or stay in the game. If you want to stay in you got to put in more capital. We reached our limit on that. It was not a prudent thing to put more money into it.
"You get to a point where you can't keep throwing good money after bad," he said. "These are illiquid investments. You gotta fish or cut bait."
As for homeowners walking away en masse -- perhaps lenders' biggest housing-related fear -- McKinley added: "We're hopeful that won't happen." |
This has been talked about a lot lately. Why shouldn't consumers simply act exactly like corporate investors and simply walk away from an underwater mortgage? It'll hurt your credit rating, but let's get real: credit ratings are a scam, and preserving your credit rating isn't worth throwing away hundreds of thousands of dollars on a bad mortage. One might appeal to personal responsibility, but personal responsibility doesn't exist in the business world, so why should it exist for citizens interacting with the business world? You and your bank have a contract, and that contract spells out what will happen in various eventualities. Why should someone feel bad about using that contract to their advantage?
Can anyone think of a good reason one should stay with an excessively priced mortgage instead of just cutting their losses and dumping it? |
Yes, the underwater homeowners should walk away. This will drive down prices further, creating another tier of underwater homeowners who can walk away.
Taxpayers should walk away from the Government debt and entitlement debt at all levels: Federal, State and Local.
Then, the dollar and the US government collapse.
We can start over with a gold backed dollar, no income tax, no property tax, no entitlement programs, no drug laws or victimless crime laws and no foreign military adventures - all tax free and debt free.
We can empty the prisons by pardoning all the victims of drug/prostitution/gambling and similar victimless crime laws. Politicians who created the debt and deficits should replace them in prison.
Then, if we can keep the socialists at bay, we can usher in a permanent growth economy, with peace, prosperity and liberty for every American.
Yes, lets hope the floodgates open and the walk-away movement and the taxpayer and teaparty movements wash America clean, just as the floodgates opened to wash over Communist Eastern Europe and the USSR.
Home sales down again in Dec. The market has started to tank again. The depression is deepening and extending. The denoument of the fascist-socialist system continues. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
