The act of foreclosure, is a punitive measure...not a restorative financial venture

[SoCalDem]

If it was a restorative measure, the banks/mortgage holders would EAGERLY be approaching homebuyers , to restructure their loans..

A house that sold near us (in 2005), for over $300,000, was recently sold after foreclosure, for $74K.. This house sat empty for MONTHS, was vandalized, and was snapped up as a rental by someone from another county.

The people who rented it, after the renovations were thrilled to have found such a nice place to rent, for $1200 a month.

My friends (their neighbors) are paying more than that, for the same house and were close friends of the people who had to leave.

They tried for MONTHS to work something out.. They fell behind because the husband had lost his job, and the payments for that $280K loan (they put down $20K) were killing them.. The bank (Wamu) would not work with them, but were OK with selling that house 6 months later, for $74K... He did find another job, but unless they hand-delivered a cashier's check or cash for the TOTAL amount they were behind, the bank would not even accept a payment from them.

So the bank just "ate" a $206K "loss", but were unwilling to renegotiate with the people who were already in the house, and had a vested interest in staying there..

This is what's "wrong" with the mortgage "problem"..

Another angle to the problem, is that as more and more "bargain" houses get bought up, in neighborhoods, the people who have struggled along, paying more for their upside-down houses than their "new neighbors", there's a lot of hand-wringing to come, and more and more people feel like chumps for paying so much for houses that are now worth so much less..

Those of us who have stayed put, in houses we "bought" years ago, understand that during a 30-year timespan, houses often go through upside-down periods, but in a volatile market, it spooks the newbies/flippers/first-timers, and once the panic gets going, it feeds on itself..

[drmeow]

1. Yes - and it is also a power and control issue. eom

[JuniperLea]

3. Don't forget "fear"

You know how that one works.

[drmeow]

4. Looks like banks are the latest perpetrators

of domestic violence!

[earthboundmisfit]

10. In the time leading up to my foreclosure, the CitiFinancial rep would call me while she was DRUNK

VERY abusive, obviously either drunk or painpilled-up (or both). She would call me, knowing my situation had not changed from the day or two before when she called - and ask things like "Does it make you nervous to talk to me? It should..." - and lots of other crazy shit. I tried to complain to her supervisor, to no avail, of course. I hope that she eventually lost her job and got the karma of finding herself in my position...

[JuniperLea]

2. My house is currently worth $150k less than my mortgage...

And the number is still declining. My neighbors, with an identical townhouse, walked away from their place and mortgage. I'm betting it will sell for even less than the last one.

I did nothing wrong. I bought a suitable and honest mortgage, yet now if I tried to re-negotiate, I'm betting I would have to pay mortgage insurance because my equity is now less than 30% of the principal amount... so on top of it all, I've lost the $30k I put down.

[drmeow]

5. Man - that SUCKS! eom

[SoCalDem]

6. Our house was "worth" $383K in 2006...now we "might" be able to get $165K

:grr:..We are praying that in 5 years IF my husband even gets to retire, we can get a little something out of it, so we can get us a small place to live out our final days :(

Our son wanted us to sell back when prices were high, but we were too lazy :)..and now we are stuck:(

[stopbush]

13. We bought our place for $383,000 in 2005. I lost my job in 2006.

Finally found work in Feb. 2008, but had to relo 375 miles to take the new gig.

We sold our home on a short sell last August for $265,000. The bank lost $118,000 on the short sell. But I can't feel bad for them - we had a couple of buyers lined up to buy the house last March for $315,000, but the bank refused to even discuss a short sell with us. I guess they thought the market was going to miraculously turn around.

Their refusal to allow the short sell last March cost them $50,000 more than it needed to.

Of course, they're the financial geniuses, not me.

[Taverner]

8. Beware - the banks might do anything they can to foreclose on you

Even if you make all the payments...

[JuniperLea]

11. That's another of my fears!!

It could at some point be more advantageous to them to have a higher dollar figure in this category, who knows. They don't care if they trash my credit rating! I did nothing wrong, but crying "victim" is the least of their concerns. I keep hearing talk about what to do with the upside-down mortgages such as mine, and all these decisions will be made with not one word from me.

[Belial]

7. Is it Australia?? or somewhere that has a program in place

that if your house gets foreclosed on the bank sales it.. you are still responsible for difference between your loan and selling price.

[stopbush]

14. There's currently an amnesty program in place for this in the USA.

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

[Still Sensible]

9. Well they are beginning to find themselves in a Catch-22

The fact is foreclosures aren't so much punitive as they are the essence of greed. They take back property that they have created a loan on and received some payment toward that loan. So, gee, they basically get to sell it twice! And if they do it right, they'll hold the paper on it and continue making money.

To me it is especially egregious because some significant percentage of the ARM loans that caused a lot of this mess were granted with the knowledge that a certain percentage would end up in foreclosure. It was just like all the ridiculous easy credit card offers--they just built it into the business plan that actuarially speaking they would expect "X" percentage to go bad.

Of course now, the banks and mortgage holders (including those with derivative bundles of bad debt) are stumbling around with balance sheets laden with foreclosures and toxic assets they can't do a damn thing with in this economy.

What they should be doing is renegotiating mortgages instead of adding to the likelihood of more toxic debt on their balance sheets... but, being the greedy fucks they are, they are hoping to get very close to whole on Uncle Sam (and our) funds so they can hold on and go back to screwing the public once the economy recovers a little bit.

[stopbush]

12. How does the bank get to "sell it twice?"

You put down $30k on a $300,000 house. The bank loans you $270,000. You turn that $270,000 plus your $30,000 over to the guy that owns the house. Now, you own it, and the bank is out $270,000. If you walk away, the bank has a debit of $270,000 in real money on their books. If they sell the debt to a third party for $70,000, they're still in the hole for $200,000 and they no longer own the property.