A Conversation I Had Recently With A Few Other 20-Something Home Owners
The conversation started with me complaining about how people have stopped paying their mortgages and are still living in their homes. For more background, read the recent post on strategic default.
Bill: Had a friend of the family who did that. Bought for about 500 with like 95% finance. House worth like 250 now. He just stopped paying. He is older so won’t need credit that much anymore. Will just rent a house the same size for much less once he is forclosed on. Who knows how long that will take.
Me: Yep…. the American Dream is now living in a house without paying for it!
Joe: Part of the problem is these mortgage companies. I have been dealing with my bank for 15 months on my re-fi!! They sent me a “trial package” that was to last 3 months then be finalized, that was 9 months ago. I sent them a letter saying that I will not pay another dime until they give me a final refinance in writing. The sad thing is, I have called them every week or two and checking in on things. More than what most do. I called Thursday to speak to the guy who is handling my re-finance and I was told that despite him giving me his extension, they are not allowed to transfer me to him. Sweet system.
Me: From what i see, there are 3 waves of foreclosures…
1. The people who simply can’t pay their payments and are forced into it… we are well into this wave, although it does continue somewhat.
2. The people who are struggling financially to pay the mortgage. They have realized that they can stop struggling so much and still stay in their house (at least for a year or more). They have chosen to stop paying their mortgage. We are well into this wave, but not as far.
3. The people who are pissed off about wave #2 and are saying screw this; despite having the means to continue paying the mortgage, they choose not to. Why pay my mortgage when nobody else has to? We are just starting this wave. I can send you multiple resources on the internet discussing this growing trend.
If and when banks actually start to recognize these losses (mark to market), look out below! What a mess.
Joe: Here’s another thing, and this is what will happen with mine. I won’t pay for 6-8 months, and put that money in a safe in my house. The bank will call and want to finalize my loan, I will resubmit paperwork and in 8-12 months I will have it finalized. So to recap, by not paying my mortgage, I have “saved” 15-20k in my safe, refinanced my house, and the only bad part is my credit goes down?? Easiest decision of my life. Is your credit score worth that much? Mine sure as hell isn’t.
Hank: I think its pretty complex issue with a lot of moving parts. It def specific to someone’s situation. Throwing your loss on the Bank is not necessarily ethical but at the same time, they were the ones that received TARP money! The thing is my house has declined dramatically in value, its obviously way off from where I bought it, but I still need semewhere to live. Renting wouldnt be much less and I’d have no tax benefits.
For people who own a house that worth $300k and they have a $600k, that would be hard to continue paying that, horrible to be in that situation.
Just a glimpse of the financial decisions that the young people of this country are working through today.