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Foreclosures and Strategic Defaults

AIR DATE: July 20, 2010
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How different are the rich from the rest of us? Lots... at least lots more of them are likely to walk away from their homes than average people who are upside down in their mortgages. So why is that? And is it the rich who are making the right decision or is it better for everyone to stick with their mortgages. We talk with some of the experts who crunched the numbers on who exactly is walking away from their homes as well as some people who are dealing with strategic defaults on a daily basis.

GUESTS
Brent White, Prof of Law, U of AZ Law School
Michael Joe, Atty, Legal Aid Center of Southern Nevada
Sam Khater, Sr Economist, Corelogic
Rich Sharga, VP Marketing, RealtyTrac
Richard Plaster, President, Signature Homes

LINKS
Foreclosures and Strategic Defaults
LATEST COMMENTS
Hi Been checking back every day for the ...
-Misty
What's to stop every person in Nevada from ...
-Martha
Is NV a non recourse State? ...
-dee
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COMMENTS:
Hi Been checking back every day for the specific links regarding this topic you all said you would have posted on Monday - any time we can expect to see those? Not just the general links on the SON page? Thanks! And thanks for the really interesting, pertinent topic.
Misty –Jul 21, 2010 20:57:48 PM
Above I posted a link to Nevada Hope @ Home which is chock full of resources on the foreclosure crisis.

I hope that helps!
Danielle [KNPR web coordinator] –Aug 17, 2010 09:04:37 AM


What's to stop every person in Nevada from defaulting on their mortgages then? We are ALL in the same boat. We are CHOOSING to hang on until we cannot any longer. I sleep well at night.
Martha –Jul 21, 2010 15:26:25 PM


Is NV a non recourse State?
dee –Jul 21, 2010 09:25:43 AM


I bought a little 2 bedroom mobile home, and i bought a bigger three bedroom mobile home. I moved my family into the bigger one and I rent out the small one. Lenders wanted me to buy more expensive homes but I was smarter and didn't overspend. I did all the right things but find that I am still upside down in both places and after a back injury I can no longer work at the same job. Now I work for half the wages and feel that I am struggling for no fault of my own. If I lose the renter, I will just let that one go. I could also buy a much better real home for what I still owe on the old mobile home. If I had the money to do so i would and then let the mobile home go. If I let it go first then probably no credit to buy a better one so I am stuck.
Arlin Lewis –Jul 20, 2010 20:50:38 PM


We chose a buy-and-bail short-sale over a buy-and-bail foreclosure in Apr 2009, after consulting with an Attorney. This means we purchased a new home at lower rates with a good credit rating, then defaulted. We have heard differing opinions regarding what happens to the remaining deficiency after the short sale, especially when no promissory note was signed, and the bank did not agree to release the deficiency on the primary (secured) mortgage. Does anyone on your panel of experts know? This is a very valuable question for many many Nevadans... otherwise many Nevadans should likely seek a foreclosure under Nevada's deficiency laws.
Anonymous –Jul 20, 2010 20:44:14 PM


We bought our house in 2006 with a down payment and a 30-year fixed loan. Our income has dropped by half, and our house needs repairs that we can't afford. When we called about refinancing, the bank said we were ineligible because of our zip code. We are walking away. Accepting the credit score hit and loss of our down payment is a lesser evil than $140K negative equity.
Mark –Jul 20, 2010 12:24:42 PM


America Has always been a country run by and for the Wealthy classes. Now when their monumental greed has as happened in 1929 and earlier depressions brought the country to the verge of financial ruin they run out their usual stooges singing the from the same old hymnal. BE good Americans BE good Christians pay your debts stimulate the economy keep the beloved bankers solvent. I don't know about you but I think we need another Hymnal.
Ed –Jul 20, 2010 11:01:37 AM


Thanks for your program. I am 72 living on soc. sec. and income from a 401b. I bought a condo with 5 percent down in 2006. My mortgage consumes 75 percent of my income and I have stopped paying. Loan modifications only reduce the rate of interest. When principal is lowered it is by 30 percent at most and it is not waived but only postponed. I owe three times what this condo now lists for. (195000 vs 65000). The banks do not make their decisions on moral grounds, borrowers cannot afford to either but it is very difficult to get reliable advice or help. There a people out there asking 3 thousand dollars to take you through a short sale which you can do yourself.
daudi b –Jul 20, 2010 11:00:34 AM


Dear sir: I am behind my mortgage and trying negotiate w my bank to modify it. In case, I foreclose my home, can I negotiate down w my credit cards and home equity loan which is about 44k?
shawn –Jul 20, 2010 10:48:38 AM


I forclosed on a investment home in 07' because I could not afford the payments of $2400 nor could I rent the property for that much. I had a 80/20 5 year arm/interest only on both. Since the start of 2010, I have had collectors calling me and sending me letters since the bank that owned the 20% of the loan did not get paid after the house sold in a auction. I understand that if you foreclose they have 6 months to get you. Why after 3 years are they trying to collect from me? They offered me a deal to pay about $9,000 of the $80,000 outstanding balance of the loan. I obviously don't have that kind of money. Should I be worried?
Mario M. –Jul 20, 2010 10:45:58 AM


Dear sir: I am behind my mortgage and trying negotiate w my bank to modify it. In case, I foreclose my home, can I negotiate down w my credit cards and home equity loan which is about 44k?
shawn –Jul 20, 2010 10:45:54 AM


I have 2 elderly neighbors, neither of whom are monetarily savvy. I have been trying to help both of them with home loan modifications. The lenders are stalling, both for almost a year. Who can they contact to help them, aside from the lenders themselves? Dan
dan –Jul 20, 2010 10:28:36 AM


My bank (chase Manhattan) is telling me, before they will even talk to me about any type of restructure of my loan I must file for bankruptcy. I am current on my payments, but all my other bill are behind because of it. Currently I owe 110% of the value, although I put down 45%.
Thom –Jul 20, 2010 10:26:35 AM


I wanted to respond that my husband & I did not 'drink the kool aid'. We saved for years for a down payment, and then purchased an older home in 2006 for the avg price at the time ($280k) on a 30 yr fixed. Our house is now worth $75k. We have outgrown the house (we now have two kids, but not enough bedrooms). We can afford the mortgage, but it seems crazy to keep paying it. It even seems irresponsible to throw money into basic repairs, like throwing good money after bad. Are there any programs that would help us? Any suggestions?
Sherri –Jul 20, 2010 10:24:51 AM


In some loan modifications, homeowners are enjoying an actual reduction of loan principal. Those of us who are dutifully (and with great difficulty) never missing a mortgage payment are, essentially, suckers to hang on to our loans in the face of this kind of unfair policy. Two years ago, I would have never considered walking away from my mortgage. With this kind of negative incentive, if it becomes necessary, I will walk away from my mortgage without any qualms whatsoever.
Ginger Swartz –Jul 20, 2010 10:22:06 AM


Will the banks bring deficiency judgments against high net worth strategic defaulters (as opposed to owners whose homes are their only tangible assets) who, according to the participants, have much of their net worth in investments other than their expensive houses?
Jack Brebbia –Jul 20, 2010 10:13:57 AM


I have been in a loan modification with Wells Fargo since Jan. 2010 with no resolution. The loan bal is negative amortizing every month in the mod increasing the balance which is approx. $240K and the current Mrkt val is $130. Loan is 30yr fixed 5.625%. We have put everything we have into this home. We are current, however in the past 3-4 days I have come to realize the only thing to do is let this go or short sale. A mortgage bal reduction which will never happen is the only way keeping this home makes sense.
John –Jul 20, 2010 10:10:56 AM


Please comment on the concept of the credit rating of those who default recovering before their equity recovers.
Dan –Jul 20, 2010 10:08:13 AM


Please explain how the TARP bailouts are related to this problem. I've heard that if I default on my home, my lender (Wells Fargo) will receive 80% of the value via TARP from the federal government. If this is the case, are there any programs in the works to work directly with borrowers rather than continuing to transfer our tax dollars directly to the big banks balance sheets?
Justin –Jul 20, 2010 09:56:28 AM


We have made the "financially strategic" move of short-selling our home in lieu of foreclosure. But, we've stopped making payments and leaving it to the bank(s) to "make the deal". I think it'll protect us from the banks coming after us for the difference. We are making sure that the bank agrees however.
Coby –Jul 20, 2010 09:55:38 AM


I've just come in from looking at the property diagonally from me on an intersection--I've lived here since 1963. It has been the "spifiest" property on our street. Just prior to the market plunge, a real estate investor acquired it and asked a preposterous price. For the past year, he hired a house sitter to care for the yard. That task is not being filled and mature trees are dying--fruit trees and even huge palms. That is the saddest part of the site because our 50-year old tract is proud of the various mature trees around us.
G1963..enie –Jul 20, 2010 09:50:29 AM


It's refreshing to hear the blame placed on the people who crashed the economy. It's not the fault of people who bought homes, thinking that that was the smart thing to do. Obviously, no one should borrow more than they can afford, but folks who did are not to blame for this economy and mortgage crisis.
Misty –Jul 20, 2010 09:43:20 AM


If you decide to walk away from your home. Should you seek the guidance of an attorney? If so, can any be recommended that specialize in this field. Also it appears the mortgage holders, regardless if what company line they give, do want your home. If they refuse to rework mortgages to fair market value to keep clients in their home what else should a homeowner believe. I am able to pay my mortgage. I would like to have my rate adjusted but my bank is not willing to do anything, what's a guy to do.
Troy Young –Jul 20, 2010 09:39:22 AM


Our mortgage is about 60% under water and we have approached our lender for loan modification but no help so far. The lender says we have no hardship so we don't qualify. What do we have to do to get the 'difference in principle' reduced from our mortgage? Or should we just walk away? Thanks, Deb
deb –Jul 20, 2010 09:32:42 AM


Your recent speaker was I belive wrong in suggesting that homebuyers didn't bear that much responsibility for getting themselves underwater with their mortgage payments - it was all someone elses's fault. Let's be honest here - people were often just stupid and sometimes a little greedy. I have had several mortgages - both here and back in the UK. For each of them I worked out what I could afford to pay (on an ongoing basis) and worked backwards from there as to how much I ended up borrowing. I was offered MUCH MORE by brokers of all types - but always refused this. As a result (and I am grateful for this each and every day), my finances are in reasonably good shape
Chris –Jul 20, 2010 09:31:16 AM


How often are deficiency judgments pursued? If there is a limit of a year in Nevada for lenders to pursue deficiency judgments, does the IRS look at that as a profit for the mortgage holder (with all debt being forgiven)? What protections does filing for bankruptcy offer? Would a person have to file for bankruptcy in Nevada if there was no possibility of a deficiency judgment being pursued? How can having a foreclosure hurt future job searches?
Frank –Jul 20, 2010 09:18:02 AM


My husband and I have considered walking away, but unlike the rich, we don't know how to protect our assets and credit rating. We've heard many compelling arguments for walking away, but we would want to do so sanely. Please advise.
Misty –Jul 20, 2010 09:02:56 AM


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07/20/10 RUNDOWN
Foreclosures and Strategic Defaults
College With a Checkered Past


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