Pro and Cons of Mortgage Strategic Defaults.

[tonyb]

It appears that ButteMT61 and vitanola are better informed on how these things work these days.

Me, I would have difficulty faulting a person for deliberately getting behind on his payments if it was only to force the lender's hand and get him- or herself into a loan arrangement he or she could afford over the long haul. To use ButteMT61's analogy, it's something of a poker game, and all participants are aware of that. (I don't know if that's quite what's happening in the case presented by the OP, though.) Still, considering the degree to which we've let people -- borrowers and lenders, and to a lesser degree appraisers and real estate agents -- get away with their fictions, we really shouldn't be surprised that the whole business has taken on an odor.

 

[Noirblack]

Oh, I'm a gentleman. But I'm not a pushover. Nor am I a moral coward.

Tony, let's be a couple of gentlemen about this.

 

[countryclubjoe]

Yes, they have done this in thousands of instances, and then told the mortgagor that they did not qualify because they were in default.

Here is what Bankrate has to say:

http://www.bankrate.com/finance/mortgages/should-you-skip-your-mortgage-payment-1.aspx

"If you've been tempted to skip a few mortgage payments to try to convince your lender to modify your loan, you may want to resist that temptation. Whether your goal is to stave off foreclosure or just make your payments more affordable, experts say deliberate delinquency is not as smart an idea as it may seem... Missed payments disqualify borrowers
The federal government's new Making Home Affordable plan may be another reason why lenders have tweaked their policies with respect to delinquency and loan modifications. The new plan, which includes a loan modification program and a refinance program, offers lenders new incentives to participate..."

Also see: http://onthefrontlinesofamericanswa...ion-housing-program-and-why-it’s-not-working/

http://mcgrathspielberger.com/doj-settlement-results-in-boa-denying-mortgage-modifications-huh

" A few days ago, I was on the phone with a supervisor at Bank of America, discussing the unexpected mortgage loan modification denial letter we had received for one of our clients. The case at issue has a significant background, including some issues which had led to a higher level of attention from BOA. During this conversation, the supervisor made a few comments which particularly caught my attention: “Every borrower [with a modification request pending] who might qualify for the Department of Justice settlement program will be getting a modification denial letter.” (?!) I believe my eloquent response was something similar to “HUH?” as I ran his words back through my head.
When I asked for clarification, the supervisor stated “Yep, that’s how they [really meaning “we” – BOA] have decided to do it. I’ll be getting tons of these same calls. Anyone who has a HAMP request pending who may qualify for a DOJ settlement program will be getting a HAMP denial letter, because the Department of Justice program will take priority.”

http://www.smartonmoney.com/if-your...just-stop-paying-your-mortgage-and-walk-away/



IN Cleveland, OH, Judge Sikora, a freind of my parents went through this:

"
A Cuyahoga County Juvenile Court judge faces foreclosure on his eight-bedroom, lakefront Cleveland home after falling a year behind on a nearly $1 million mortgage and property taxes.
Judge Peter Sikora said he hopes a mediation session scheduled for next month will keep him in his Edgewater Drive home, which the Cuyahoga County Auditor's Office has appraised at $844,000.
Sikora, who makes $121,350 a year as a judge, said in a telephone interview Thursday that he has the money to make his mortgage payments. What got him in trouble was following the advice of officials at JP Morgan Chase & Co., he said.
With property values in decline over the past year in Cleveland, and mortgage rates the lowest in decades, Sikora sought to refinance. But the bank, he said, declined his request.
"The bank advised me that the only way they would consider a loan modification would be if I fell behind on my payments," said Sikora, 59, a judge since 1989. "I took their advice and put the money aside."
Sikora said he was surprised when, in June, during the middle of negotiations, JP Morgan Chase filed the foreclosure lawsuit against him seeking $999,000, including $6,400 in unpaid property taxes.
"It's unfortunate that it's gotten to this situation," Sikora said. "I've been talking with them for more than a year, but the bank hasn't been responsive."

http://www.avvo.com/legal-guides/ug...-paying-the-mortgage-even-if-they-tell-you-to

"Mortgage companies may not tell lenders to stop paying the mortgage. This common practice is unlawful."

http://www.bankruptcylawnetwork.com/loan-modifications-to-avoid-bankruptcy-7-tips-to-help/

"When they say to stop paying, put the money aside. Plus the late fee. Or maybe pay it anyway!

Many loan modification programs do not require you to be in default on your mortgage. Some deals may require you to be current. So think carefully when the lender says to stop paying the loan in order to get a modification. And if you do stop paying in order to negotiate a deal — keep the money aside, and include late fees in your savings."


SEE A LAWYER!

Bank of America is known to have told hundreds of thousands of Americans to stop paying their mortgages in direct contravention of the law.

Hi Vitanola
Many thanks for your informative post which leads me to believe more in my theory that a person should always do business in writing when dealing with a bank or insurance company.
Best regards
CCJ

 

[ButteMT61]

The whole business stinks. I agree 100% tonyb. I did however take the advice given to me to force the hands of the bank in our case. Everyone won, but there's no reason things should "work" this way. I hate that the banks were bailed out, and continue to get away with financial murder. I will pay my bills and have. I will also arm-wrestle with them if that's what it takes.
With that said, I still don't condone someone following the steps proposed at the start of the thread. I hope it's now going in a different direction.

 

[sheeplady]

Again, if he lives in the house for a while without paying for it that is squatting, not theft. He can live there until the banks force him out after non-payment. I have heard that in the US, the land of foreclosures, the banks would rather have the defaulter in the house. An empty house, especially in a neighbourhood that is full of empty houses, can quickly be vandalized or worse, a crack house. I heard this about the Detroit area in particular.

Or the defaulter him or herself strips the pipes and wires and destroys the house- if not for the backlog of defaulting mortgages and the overflow of housing stock- the bank wants you out as quick as possible. Some people get mad when they get foreclosed on and go a little crazy and damage the house. It happens. Pre-mortgage crisis, you typically had a few weeks (if lucky) after you got foreclosed on to be out (this would be after a few months of negotiation). My neighbors next door received a notice that foreclosure procedures were starting a year before, but the next day after the paperwork to foreclose was filed by the bank, they got their notice that they had to be out in 2 weeks, which the sheriff's told them was generous.

Considering that before the sub-prime legislation was put in, you couldn't get a loan no matter your finances just because of it having a certain Detroit zip code for that home, it really makes Detroit a special case.

 

[countryclubjoe]

Hi Folks

Hi Sheeplady--- Thank you for your reply... Your State NY and my Sons State NJ have what is called a judicial process.
From my limited research, the judicial process could actually take between 24-40 months.
Not sure about Michigan.
Best regards
CCJ

 

[tonyb]

Tony, let's be a couple of gentlemen about this.

Are you suggesting I'm not?

We've all seen what happens when we condone dishonesty. If we allow it to continue, corruption will be the norm.

I make no apologies for feeling this way about it. And there is nothing ungentlemanly about taking such a stand.

I said quite a few posts back that there are precious few absolutes, moral or otherwise, in the "real" world. And I wouldn't hold myself up as a paragon of virtue. But dishonesty is dishonesty, and the more we allow our imperfect brothers and sisters to get away with dishonesty, the more we'll encourage such dishonesty. And I don't want to live in a kleptocracy.

 

[Noirblack]

Are you suggesting I'm not?

We've all seen what happens when we condone dishonesty. If we allow it to continue, corruption will be the norm.

I make no apologies for feeling this way about it. And there is nothing ungentlemanly about taking such a stand.

I said quite a few posts back that there are precious few absolutes, moral or otherwise, in the "real" world. And I wouldn't hold myself up as a paragon of virtue. But dishonesty is dishonesty, and the more we allow our imperfect brothers and sisters get away with dishonesty, the more we'll encourage such dishonesty. And I don't want to live in a kleptocracy.

Tony, when a person says let's be a couple of gentlemen, that is an invitation to end the discourse.

 

[countryclubjoe]

The whole business stinks. I agree 100% tonyb. I did however take the advice given to me to force the hands of the bank in our case. Everyone won, but there's no reason things should "work" this way. I hate that the banks were bailed out, and continue to get away with financial murder. I will pay my bills and have. I will also arm-wrestle with them if that's what it takes.
With that said, I still don't condone someone following the steps proposed at the start of the thread. I hope it's now going in a different direction.

Hi ButteMT61
Thank you again for your reply. So you would arm-wrestle for two years if need be? This is simply doing whats best for you and your family.
Its called business. Now I'm starting to understand.
Best regards
CCJ

 

[countryclubjoe]

Tony, when a person says let's be a couple of gentlemen, that is an invitation to end the discourse.

Hi Noirblack
Thank you for your reply's. I appreciate your points of view from both the business and legal perspective.
You have been the voice of reason on the topic.
Best regards
CCJ

 

[tonyb]

Tony, when a person says let's be a couple of gentlemen, that is an invitation to end the discourse.

Fine. But I suspect you wish to "end the discourse" because you've put yourself in an indefensible position.

Am I wrong about that? If you honestly (that's the operative word) think so, I'd love to hear your reasoning.

 

[Noirblack]

Hi Noirblack
Thank you for your reply's. I appreciate your points of view from both the business and legal perspective.
You have been the voice of reason on the topic.
Best regardsCCJ

You're welcome CCJ. I hope that things work out the best for your son. I think understanding all the plusses and minuses of a strategic default and then deciding is the best thing for him. You are a good father trying to give your son guidance.

 

[Noirblack]

Fine. But I suspect you wish to "end the discourse" because you've put yourself in an indefensible position.

Am I wrong about that? If you honestly (that's the operative word) think so, I'd love to hear your reasoning.

Tony, the odds that any further discussion will be fecund are very low.

 

[sheeplady]

Hi Folks

Hi Sheeplady--- Thank you for your reply... Your State NY and my Sons State NJ have what is called a judicial process.
From my limited research, the judicial process could actually take between 24-40 months.
Not sure about Michigan.
Best regards
CCJ

My neighbors filed for bankruptency and I think that starts the process when they filed- but it was a rapid turnaround to possession. They were kind of stunned at how fast it happened. Their's was a special case and they should have never lost their home (they were current on their payments and should have been able to keep their home). Unfortunately they don't have any resources left to do anything about it as far as legal proceedings.

 

[tonyb]

Tony, the odds that any further discussion will be fecund are very low.

Don't blame me for that, dude. I've asked to hear your reasoning. I'm all ears.

You are defending plain, unadorned dishonesty. Perhaps there are conditions under which such dishonesty is defensible, but I have a hard time seeing it in this case, based on what we know of it. Living rent-free for two years while piling up something like $72,000 may indeed be a solid financial move, but that in and of itself doesn't forgive it.

 

[countryclubjoe]

Tonyb

I suggest that you read the lastest post on the topic. Then, GO GET YOUR SHINE BOX.

 

[ButteMT61]

Hi ButteMT61Thank you again for your reply. So you would arm-wrestle for two years if need be? This is simply doing whats best for you and your family.Its called business. Now I'm starting to understand.Best regardsCCJ

Two years? Not sure. Took us almost one. Surely worth it, but stressful and p*ssed us both off, as one could imagine. We have (and had) great , solid, consistent income, no late payments, yet they would not even discuss a refi with us due to the market. We called BS and went for it. I think it was worth it, but like I said, not without penalty. It's on your credit for some time. Not sure exactly how long as I've put the details out of my mind. But that's ok because I have no plans to need credit beyond what I have and need. The system is a scam and they can shove it, if you know what I mean. But I will pay what's owed always to the best of my ability. Again. Good luck. I know I come off as an a$$, but that's a genetic and environmental outcome

 

[countryclubjoe]

Hi Sheeplady,
Thank you again for your reply. It would appear your neighbors had horrible legal representation.
There are so many horror story's in this foreclosure mess. Also I believe the banks tend to foreclosure much quicker on folks that have some equity in there property.
Best regards
CCJ

 

[tonyb]

Tonyb

I suggest that you read the lastest post on the topic. Then, GO GET YOUR SHINE BOX.

What does that mean, Sir? And to what "lastest" post are you referring?

Perhaps you take exception with my finding significant fault with a person who can afford to keep a roof over his head seriously considering living rent-free for a couple of years so he can pile up a significant amount of dough. Judging from your initial posts, it seems you had your reservations about it, too. I'm not saying that a person who would do such a thing is without his own qualities, but I refuse to accept that it's the honorable thing to do, no matter who does it.

 

[tonyb]

Hi Folks

What are your views/opinions on homeowners doing strategic foreclosures?

I am old school therefore I feel a contract is a contract. Now my dilemma is that my son is actually considering doing this strategic default business. His theory is live rent free for 20-24 months depending on your state laws and building cash flow.
Since he is upside down on the property, he feels this is a good business plan.

Is there an ethical obligation to consider? Or am I just to old school?

My son is financially able to make the payments however he feels that purchasing the property six years ago was a mistake and he now wants to stop paying on that mistake.

Thoughts and opinions are most welcome.

TIA

Best regards
CCJ

Just to refresh your memory.