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Troubled borrowers are walking away from their homes

Posted by ecoshift on February 6, 2008

Troubled borrowers are walking away from their homes – Feb. 6, 2008
By Les Christie, CNNMoney.com staff writer
February 6 2008: 5:17 AM EST

NEW YORK (CNNMoney.com) — Mortgage payments are set to jump. Home prices have plunged. “I’m outta here.”

Homeowners are abandoning their homes and, more importantly, their mortgages, rather than trying to keep up with rising payments on deteriorating assets. So many people are handing their keys back to lenders that a new term has been coined for it: jingle mail.

“I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months],” said one borrower, David, who doesn’t want his last name used. “Now, I’m just waiting for the default notice.”

…Current lending practices have created an environment where a measure as extreme as abandoning a home actually makes sense to some people.

Many buyers put little or no money down, so they don’t have much invested in them. That leaves them with little incentive to keep making payments when a home’s market value dips below the balance of the mortgage.

The most serious consequence is a tremendous hit to credit scores. For some, that’s better than throwing away money they’ll never recover by selling their home.

And while a mortgage default can savage a person’s credit record, trying to pay off a loan they can’t afford could be worse for borrowers if it leads to bankruptcy, said Craig Watts, a spokesman for the credit reporting firm Fair Isaac.

Credit scores are hurt much more by missing multiple payments – on credit cards, cars and so on – than by a single foreclosure.

“The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy,” said Watts.

It typically takes three years of a spotless payment record after a bankruptcy before credit scores recover enough for someone to think about buying a home again, he said. After abandoning a mortgage, a person may be able to buy a new house in two years or less.

And now skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007. Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income. Now the IRS will ignore it.”

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One Response to “Troubled borrowers are walking away from their homes”

  1. newdaze said

    What’s the Homeowner have to do with all this? Bailout Monies Hard at Work?
    It’s your stock – save those at the top.

    BAILOUT MONIES HARD AT WORK.
    A new twist in Mortgage Lending Practices in America Continue . . . Have the Homeowner Convert the Mortgage to a Personal Loan – put the Homeowner on the Street with now an unsecured debt and no home. It was the homeowners fault!

    Attorneys are Reaping the Bailout Monies by
    Writing Conversion Agreements
    for Mortgage Companies and Mortgage Holders
    to Convert Their Mortgages into Personal Loans to be signed by the Homeowner.

    The True New Story:

    *Wachovia and the Mortgage Insurance Company will Not Close on a Short Sale
    Unless I Sign Their Agreement to Convert my Mortgage Loss to A Personal Loan*

    In 1997, with hard-earned lifetime savings of sixty-thousand dollars down, I purchased a condominium in the San Francisco Bay Area as a sole owner with IndyMac Bank. The condominium is a 725 square-foot unit located in hundreds of units. I am a single woman and am over fifty years old who has worked in the same profession during the past two decades.

    Hey, Where did my mortgages go? During the past eleven years, the banks sold my mortgages for my condomimium to other banks and other loan service-ers, out from under me – all okay relative to my later understanding the very fine print in the mortgage, much to my dismay. For my emergency medical and dental costs, as my employers’ insurance policies are limited in benefits relative to the outrageous health care costs in this area, and for purchasing and installing a number upgrades in my condominium, I refinanced a couple of times wherein I bought into World Savings mortgages as they appeared advantageous because at first they lowered my interest rates. I kept the loan-to-value ratio in check to save on having to pay PMI. Foremost, I wanted to keep a buffer of equity in my home as well.

    Hey! What happened to honesty and customer service?
    Loan Servicing Practices – purported Computer Error –
    Made World Savings Even More Money.

    My mortgage companies have been one bad apple after the next. World Savings is now Wachovia. World Saving’s loan servicing was substandard wherein it took my personal letters to the bank executives, attorney general and other policy makers to work with someone to assist with taking care of substandard business practices on the loan servicing. Accordingly, someone in the legal department rewrote my mortgage to reflect what was transpiring from my side of the contract wherein I was performing in good faith on my mortgage – and making payments according to terms. There was one mortgage payment that Wachovia put into perpetuity as always a late billing cycle immediately upon originating the loan, and therefore wanted $50.00 a month for this error. More importantly I was harassed with computer generized letters and Notice of Default on a monthly basis, which was not true. Finally World Savings rewrote the loan history to correct what they called “a computer error”. The emotional duress I endured during the year of this battle was unexcusable. Wachovia also said it would update the credit reporting bureaus regarding this one purported late payment on my credit reports, however, they neglected to do so.

    Property Value Plummets some Forty-plus Percent in my community. Now, my two Wachovia mortgages secure my condo. The first and second both were originated by World Savings. Both the first and second are now Wachovia mortgages because of the subprime and banking problems they created by greedily making these loans by overinflated property values per their Bank Appraisers. Wachovia appraised my property for it lending purposes, only. My property has since plummeted some forty-five percent in value relative to the bank appraisals for their presenting me their financial products that I applied for and that they informed me I qualified for, as they created them for their exclusive gain.

    Job Loss Due to Outsourcing and Gross Profit Losses.
    Importantly, the law firm I was working for suffered a seventeen percent profit loss in 2007, wherein I was terminated in June 2008 – after many efforts of coercing staff off the payroll, they finally canned me on any straw they could grasp. At least EDD called their bluff as I’m collecting the unemployment benefit from the taxes I paid into. ’til the $600 million a month unemployment deficit runs here in California. In the interim, I advertised my condo for rent, however rents were some $700 lower than my condo fees and mortgage for the same unit. So no renters and I did not have income nor savings to make up the loss.

    Daily Phone and Paper Harassment from Wachovia – From Many Departments.
    Meantime, I was working with Wachovia’s Loss Mitigation Department, wherein the harassed me daily with phone calls from all different departments as purportedly records were not central.

    Good Faith In Avid Job Hunt in Stalled Economy
    And Over Fifty.
    I was earning around US$93,000 which is difficult to replace because my position was also outsourced to India earlier this year by the same firm. During my avid job hunt, I was able to keep my mortgage payments current for three months, then I ran out of monies.

    Located Buyer for My Condominium. Offer Made. I accepted.
    Bank and Mortgage Insurance Deploy New Twist.
    Because I have yet to be offered gainful employment, I recently found a a buyer and turned the sale over to a broker who wrote up the short sale and presented short sale offer to Wachovia. A short sale because the value of my property has dropped forty-five percent since its last appraisal by Wachovia refinance for both the first and second wherein it was made a requirement that I could not consolidate but had to take two loans out for medicall monies. Now I realize they were double dipping on my medical emergency and pain. Wachovia said it wasn’t possible for them to consolidate the loans at the time I requested the monies out for medical payments. Wachovia’s professional appraisal.

    Short Sale Not Accepted Unless I Sign for New Loan Terms – A Personal Loan. Today the short sale fell through because the mortgage insurance company said the sale was good if I agreed to pay – convert – my second mortgage short monies to a personal loan. They asked that I personally pay the $40,000 directly to mortgage insurance company in a contract agreeing to new terms: a personal loan for the $40,000 that is now secured by my Wachovia mortgage and they would approve the sale.

    How can the mortgage insurance company demand me to convert a mortgage to a personal loan when indeed it is secured by the property in a mortgage? Yes, the amount is the loss of value since and due to the bank’s over estimating the value of my property at the time they approved me for the loan products? Do you really think people are going to sign these conversion loans? Conversion loans.
    Walk away and live under the freeway.

    A Believer in the American Dream.
    Row, row, row your boat gently down the stream.

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