40k upside down. Talk to me about forclosure....

[GeoffD]

Don't you mean "when the government stopped screwing with it", aka deregulated it.
http://prospect.org/article/whats-be...prime-disaster

No. I mean precisely what I said. The Federal government intervened in the mortgage markets and completely changed lending criteria. It used to be 28%/36%, history of steady employment, employment verification, income verification, and a clean credit report.

The banks didn't care. They were just acting as mortgage brokers and all that paper was sold off as safe, government backed, mortgage backed securities to pension funds and 401-K funds investing in "safe" government backed paper. This was not deregulation. It was the government telling quasi-government organizations Fannie Mae and Freddie Mac to relax lending criteria. It's not "deregulation" when the Federal government is setting the terms and backing the securities.

If you hadn't been allowed to borrow more than 28% of your gross income in mortgage/taxes/insurance, you wouldn't have the problem you have today, would you? There wouldn't have been a housing bubble. You would have paid far less for a house you could have afforded.

[dunhamjr]

Actually, 28% has always been the number other than when the Federal government screwed with it and caused today's economic mess.

If you walk into a bank today and apply for a conventional loan, the numbers are 28/36%. FHA loans are 29%/41%.

Back in the 1980's, the debt to income ratio for first time home buyers doing 5% down and PMI was 28% housing+taxes+insurance/33% total debt. You basically had to zero out any credit card debt and you couldn't have an expensive car loan.

With those criteria, default rates have always been quite low. After a decade of total insanity, we're right back to where we started.

If you want some links to support those numbers, here are the first two on Google:
http://www.bankrate.com/finance/mort...ou-buy--1.aspx

https://www.wellsfargo.com/credit_ce...nders_consider

i am fine with those number having been what was quoted in the 80's and early 90's even. but for 20 years anyone in the RE industry i have talked to, overheard, or read about were talking 40%.

good or bad, that is the number a lot of people were working from based on info from people in the industry that we all had thought had our interests in mind when offering these suggestions.

[GeoffD]

i am fine with those number having been what was quoted in the 80's and early 90's even. but for 20 years anyone in the RE industry i have talked to, overheard, or read about were talking 40%.

good or bad, that is the number a lot of people were working from based on info from people in the industry that we all had thought had our interests in mind when offering these suggestions.

I presume you couldn't be bothered to click on the two links I provided. One is the lending guidelines at Welles Fargo. 28%. The other is the goto website for interest & mortgage rates... bankrate.com. They also say 28%.

Sub-prime lending is over. Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes.

[dunhamjr]

I presume you couldn't be bothered to click on the two links I provided. One is the lending guidelines at Welles Fargo. 28%. The other is the goto website for interest & mortgage rates... bankrate.com. They also say 28%.

Sub-prime lending is over. Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes.

no i didnt. BUT the very first thing i did was agree with you, so i assumed it wasnt needed to then go double check your numbers.

also.

the current lending practices are very different from what happened over the past 5-10 yrs, which put the RE market into the condition it is now... and therefore put the buyers in that time frame in the 'less than optimal' to 'dire straight' conditions that many found themselves in.

your statement that 'Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes' may be valid today. but 5-10 years ago that is just not the case.

so YES. sub prime is over. but that doesnt correct 10 yrs of subprime happen in the past. this thread isnt about whether or not subprime still exists.

its about what to do when you got snookered by subprime and you need to dig your way out.

[petesell]

Probably that you were gonna get rich because housing prices always go up?

you're thinking of the sophisticated computer models used by fitch and S&P to rate CDO's.

OP - whatever decision you make, don't for a second think it has anything to do with personal morality or someone else's antiquated idea of ethics.
you think the mortgage banks are ethical?

finance rigged the system, tanked the market & then got bailed out by the taxpayer when it all blew up - you don't owe the banks a goddamn thing. just make the best long term decision for you & yr family. good luck.

[mr sarcastic]

Thanks dude, that's exactly what I'm trying to do. Figure out the best thing to do to turn around my situation, which is not an uncommon situation to be in right now. Although I do enjoy a good debate from time to time, that's not what planned for this thread. I've held back cause we're only a couple steps away from it getting into politics.

[mr sarcastic]

so i guess i have to say this, cause its been burning a hole in my brain ever since i researched it. the entire "deficiency judgment" thing is ridiculous. it puts pretty much proves that banks have everything to gain by selling mortgages to people that cant afford them. here's how i see it: the bank gets you into a load you cant afford. you pay for 5 years, pretty average for people treading water in that situation. then something happens and you fall behind on your payment. well, then bank has already gotten a **** load of their interest on the load cause of how they structure the payments. your first quarter or third of payments go mostly to interest and after that they go mostly to your balance..... so they foreclose, auction off the property and get back say 2/3's of what you owed. then they wait, wait till you get back onto your feet and then get you for the rest. so in say 10-15 years they've made there money back, plus all the interest you paid in the beginning. why wouldnt they want to get people in over there heads then foreclose, its more profitable then telling you that you cant afford your 200k house, your limit is 130k.

[rich!]

deficiency judgements can be waived during proceedings
short sale income reporting is in the last year for being waived as well

i wouldn't burn a hole too much, not all banks hold mortgages and may just service them for a fee.

[mr sarcastic]

So only banks can come after you using deficiency judgement? My loan was through the FHA first time buyer program, gmac (before they became a bank) first owned it then sold it to some company out of utah that I can never remember the name of....

[GeoffD]

no i didnt. BUT the very first thing i did was agree with you, so i assumed it wasnt needed to then go double check your numbers.

also.

the current lending practices are very different from what happened over the past 5-10 yrs, which put the RE market into the condition it is now... and therefore put the buyers in that time frame in the 'less than optimal' to 'dire straight' conditions that many found themselves in.

your statement that 'Nobody is going to write a loan where it puts 40% of your gross income into mortgage + interest + taxes' may be valid today. but 5-10 years ago that is just not the case.

so YES. sub prime is over. but that doesnt correct 10 yrs of subprime happen in the past. this thread isnt about whether or not subprime still exists.

its about what to do when you got snookered by subprime and you need to dig your way out.

No. This thread morphed into you saying you'd never heard 28%. It's hurt your delicate feelings that the facts are that today, you can't easily get a mortgage where the mortgage + taxes + insurance are more than 28% of your gross. The exception is FHA loans where the government is still screwing with it.

Sub-prime mortgages were a sucker play. Little better than responding to that SPAM email from the colonel from Nigeria who is going to make you rich. I'm baffled that anyone would put themselves in the financial situation where they are committing 40 or 50% of their gross income to housing debt. A friend of mine used to have the largest Chapter 13 bankruptcy firm in Connecticut before the bankruptcy reform law put him out of business. He always said that he was amazed at how stupid people could be. The people making these life-ending financial decisions can't add a row of numbers or do a basic budget.

[GeoffD]

i wouldn't burn a hole too much, not all banks hold mortgages and may just service them for a fee.

In general, no banks held any of that sub-prime mortgage paper. They lobbed it over the wall to Fannie Mae and Freddie Mac as quickly as they could. The banks and mortgage companies got burned at the very end because the music stopped and they had a pile of sub-prime paper they'd just written that they couldn't dump.

The banks are just a middle man in all of this. They make money writing the mortgage. They make money servicing the mortgage. The actual loan is grouped with a bunch of other loans into a mortgage backed security.

[titleist1976]

$40k under water is nothing. Wait until HARP 3 gets passed and drop your rate. That should clear up some cash flow on a monthly basis.

[Diamond Dave]

The people making these life-ending financial decisions can't add a row of numbers or do a basic budget.

It was this and those same people "listening to advice" from friends about how it's stupid to pay someone else's mortgage (aka- rent) when you could own your own home.

The larger issue is that even though people are idiots, they really did take a greater beating than they had to take. It wasn't just foreclosure, it was the bankruptcy that followed. Meanwhile, banks were covered by the government.

[GeoffD]

Meanwhile, banks were covered by the government.

I don't think you quite understand how this all worked. The banks were middle men in all of this. They brokered the mortgage for a pretty big fee. They then turned around and sold it to Fannie Mae or Freddie Mac. They got monthly residuals for collecting the mortgage payments and forwarding the money to Fannie Mae or Freddie Mac. In this arrangement, the bank has zero risk since it's not their capital. They got F'ed at the end because they had an inventory of sub-prime mortgages that hadn't been bundled up and sold to Fannie Mae/Freddie Mac when lending guidelines were tightened. There's about a 60 day lag between the day you close and the day your mortgage gets transferred. Just the amount of mortgages written at the very end was enough to get banks into trouble and it put just about all the mortgage brokers out of business.

The banks were just doing what the Federal government told them to do. This was misguided policy to make home ownership available to people who would have otherwise been locked out of the housing market. The Republicans turned the other way because the housing bubble was propping up the economy and making the Bush presidency look good. You can't blame the banks. The blame spreads pretty much equally across both political parties.

[NZTIGUAN]

here's how i see it: the bank gets you into a load you cant afford.

Here's how I see it .............

YOU signed the loan documents, presumably YOU asked the bank for the money, they didn't come hammering on your door and say "here take this money and buy an overpriced house" YOU did that entirely on your own.

[a_riot]

Here's how I see it .............

YOU signed the loan documents, presumably YOU asked the bank for the money, they didn't come hammering on your door and say "here take this money and buy an overpriced house" YOU did that entirely on your own.

Yes, you see in NZTIGUAN's world, there is no such thing as integrity, ethics, honest representation, or even common law. In NZTIGUAN's world, when you want to buy a good or service, there is no legal obligation not to commit fraud. If you aren't feeling well and go to the doctor and he misdiagnoses you with cancer when you are perfectly healthy and then gives you radiation treatments that then give you terminal cancer, its all your fault. After all, YOU went to the doctor, YOU asked and paid for their expert opinion, YOU showed up at the radiation treatment center, YOU submitted to the treatment. The doctor didn't come hammering on your door and say "here, take this unnecessary and dangerous radiation treatment that will kill you". YOU did that entirely on your own.

Its a wacky world NZTIGUAN lives in but hopefully you are getting the picture of what its like to live there.

[mr sarcastic]

[Cooper]

... here's how i see it: the bank gets you into a load you cant afford ...

Hanen't read the whole thread. Why agree to something you can't afford?

[dunhamjr]

Hanen't read the whole thread. Why agree to something you can't afford?

you need to read the thread.

think back before the bubble, when brokers and banks were pushing adjustable rate option arm no doc loans.

think back to when the banks would tell you anything to get you to sign the dotted line.

think back to when uneducated people would actually listen to the financial advice they were paying to receive, with the assumption that they were not being lied to.

[YEAHTOM]

you need to read the thread.

think back before the bubble, when brokers and banks were pushing adjustable rate option arm no doc loans.

think back to when the banks would tell you anything to get you to sign the dotted line.

think back to when uneducated people would actually listen to the financial advice they were paying to receive, with the assumption that they were not being lied to.

Just to add to that I was approved in 2007 bringing in 53k a year for 300k with 100% financing. I wasn't even trying to be approved for that much but I always wondered what happened to the people in the same situation as me that went out and purchased a $300,000 house. The people that approved that loan should be in jail that is criminal IMO.

[mr sarcastic]

my wife and i were making 80k combined, they approved us for way more then the 200k we spent. even being naive first time buyers we knew better then to spend more then that. the maintenance and upkeep has been the part that pushing us to our limits.

[dunhamjr]

my wife and i were making 80k combined, they approved us for way more then the 200k we spent. even being naive first time buyers we knew better then to spend more then that. the maintenance and upkeep has been the part that pushing us to our limits.

funny thing about that.
when i bought my first house, i made about half that and bought my house for $256k...

thank you no doc loans. they worked for me at least.

HOWEVER.

i did have two guaranteed "till I kick you out" roommates. so the mortgage payment and maintenance has never been an issue.

[mr sarcastic]

we've had a couple roommates, all have been relatives that havnt paid us any money.

[dunhamjr]

we've had a couple roommates, all have been relatives that havnt paid us any money.

no rent $ = not a roommate

[mr sarcastic]

I agree.... I used to refer to them as "leaches", but my wife wasn't impressed with me talking like that about her family.

[NZTIGUAN]

Yes, you see in NZTIGUAN's world, there is no such thing as integrity, ethics, honest representation, or even common law. In NZTIGUAN's world, when you want to buy a good or service, there is no legal obligation not to commit fraud. If you aren't feeling well and go to the doctor and he misdiagnoses you with cancer when you are perfectly healthy and then gives you radiation treatments that then give you terminal cancer, its all your fault. After all, YOU went to the doctor, YOU asked and paid for their expert opinion, YOU showed up at the radiation treatment center, YOU submitted to the treatment. The doctor didn't come hammering on your door and say "here, take this unnecessary and dangerous radiation treatment that will kill you". YOU did that entirely on your own.

Its a wacky world NZTIGUAN lives in but hopefully you are getting the picture of what its like to live there.

Here we go again i-idiot spouting bollocks.

So, the BANKS are supposed to be the EXPERTS on house prices are they ???

[mr sarcastic]

They're supposed to be EXPERTS on lending money, who can qualify and who can't. They're supposed to be EXPERTS about helping you decide what you can afford and can't. You shouldn't be going into a bank thinking they're gonna try and put you into a mortgage thats too much for you, they're supposed to help you make good financial decisions cause there're the EXPERTS with that.

[Diamond Dave]

they're supposed to help you make good financial decisions cause there're the EXPERTS with that.

Wrong. That's not what they're supposed to do. They're supposed to charge you as much money as possible so you can borrow their money.

You're thinking of a financial advisor, whom you pay to give you good advice for your situation. Banks are for profit entities.

[mr sarcastic]

I understand that banks are for profit, and I guess I'm thinking back to when it was profitable for banks to put people into loans that they could afford to pay to completion. Something changed along the way and predatory lending became more profitable.

[blue70beetle]

That was probably brought about by perpetually declining interest rates, combined with the fact that the population of the US is, as a whole, more transient than in the past. We buy and sell our homes more often than we used to, and we refinance our homes as soon as the interest rate drops to a point where it becomes cost-effective. As a result, nobody keeps a 30-year mortgage for anything close to 30 years, and 15-year mortgages are handled about the same way by most borrowers.

[a_riot]

Banks are for profit entities.

But financial advising isn't?

In case you aren't aware, financial advising is also a for profit business, same as lending is. Very large profit in fact. Therefore, using your argument, you can expect your financial adviser will charge you as much as possible for advice that will be ultimately be designed so that you do the most foolhardy thing with your money, so you will continually need more financial advice as you get in worse and worse financial straits. Ain't capitalism grand?

[a_riot]

I understand that banks are for profit, and I guess I'm thinking back to when it was profitable for banks to put people into loans that they could afford to pay to completion. Something changed along the way and predatory lending became more profitable.

Yeah, they figured out it was easier to lose money on purpose while simultaneously betting big on that engineered outcome, than to actually make money the old fashioned way, by earning it. Ain't financial engineering grand?

[Cooper]

Our financial person at Merrill Lynch started his own business. He met with us earlier this year and wanted us to move everything over to him. I gave him a top-line analysis of how much money he made us, as opposed to his shell game and smoke-and mirrors.

He was shocked and said he would get back to us. Never heard from him again.

[titleist1976]

Our financial person at Merrill Lynch started his own business. He met with us earlier this year and wanted us to move everything over to him. I gave him a top-line analysis of how much money he made us, as opposed to his shell game and smoke-and mirrors.

He was shocked and said he would get back to us. Never heard from him again.

You had me at Merrill.

[NZTIGUAN]

Something changed along the way and predatory lending became more profitable.

Predatory lending ???? "You take this money or we'll beat you up and maybe eat you"

DUH