I think walking away from a mortgage can be a very sound thing to do, depending on a LOT of factors. The two biggest are the debt to equity ratio and the current value of the house. I think its important for the mortgage community to take a spanking on this issue of sub prime mortgages to keep "this" from happening in the future.
Sumner,
I would have kept up on this thread had I had that time, but I've been busy. The quote of what I said is above.
I believe in honoring one's obligations as well. There are people who get in way over their heads, and right now, at this point in history, there are a ton of them because of easy lending practices in the sub prime mortgage market. It has been a fiasco.
The banks shouldn't be lending money to people that can't afford to pay it, and it is their responsibility to ensure a high level of probability of repayment. With instability in the mortgage markets you have this yo-yo effect on the ability of your average Joe to get a mortgage, much less get a mortgage at a decent interest rate. The banks 'try' to get their money back from new mortgage holders based on previous bad debts. I think that's what you take issue with and point that out when you say we 'all' pay for bad loans. Us savers also get squat for interest rates when the fed drops them and the banks squeeze us on huge spreads.
sumner4991 wrote:Grizz . . .just saw your response about the banks taking the beating . . .that NEVER happens. Everytime the banks take the loss it is passed on to the consumer. The guys that "walk away" make rates higher for the rest of us that do not walk. The banks also make up the losses by giving less of a spread on the rate they pay to savings accounts.
I try to never say never
I will kindly disagree with you on the point of the banks (investors) NEVER taking a beating. Its okay for us to not agree in our opinions, but facts are what they are.
http://finance.yahoo.com/q/bc?s=C&t=6m&l=on&z=m&q=l&c=
http://www.citigroup.com/citigroup/pres ... 71104b.htm
The banks do lose and they lose big. Had Ray gotten his settlement back in November and dumped it all into a safe investment like a bank by the name of Citigroup, he'd have a little more than half of what he started with. I consider banks a VERY risky investment right now.
I think you were referring to me when you said
sumner4991 wrote:The previous poster meant to beat the bank out of interest already earned(and potientially their principle) by not paying them according to their contractual agreement. We all lose in that case . . .not just the bank. Poor advice, in my opinion. That's why I was thrown off by your response. I have the utmost respect for you and would expect you to agree that the only reason to walk away from a home is if you lose the ability to pay . . .and even then, leave scratching and clawing.
Wow . . .that cup of coffee has an interesting flavor.
On some occasions it is excellent advice to tell people that are hanging on by the skin of their teeth to file for bankruptcy. In some cases it is wholly appropriate to hang on. There is no one size fits all solution when it comes to advice on bankruptcy proceedings.
Do you want someone hanging on by the skin of their teeth for the rest of their lives? Sounds very close to slavery to me. If someone was in that position and likely to be in that position the rest of their lives based on long term income, debt, and repayment agreements, then they may be better served with debt forgiveness through due process.
I see it as unfair for SOME people to be scratching and clawing for the rest of their lives as a result of predatory lending practices. They will effectively live to serve the interests of the bank. In some cases, it may well be better for THEM (not 'us') to walk away from a bad loan.
Make no mistake. There are downsides to bankruptcy as well as upsides.
Anyone in a position where they THINK they may be in serious trouble would be well served to get professional advice about loan restructuring and bankruptcy.
~
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Have a good one.
Pete
