RE: Buying a New House Before Foreclosing

Posted by Lora Burton at 3:15 PM, Mar. 27, 2008

I have thought of this way for some sellers and it makes you realize that there are people who will do this and I don't know if it is wrong .  The people I feel sorry for if they are really in need are  the lenders now taking advantage of them to give them a new loan before they walk away from the old makes me think are they reputable and is it a good loan or are they going to be in the same situation with an escalating interest rate.  Yes the value of the new home is less than the old but will that value go away with the prices still plummeting.  I know I have talked to some of my clients with mortgages in the guidelines of FHA to do a Reverse Mortgage to stay in their homes if they are over 62 then they do not have to pay the mortgage back if the house appraises for what they need..

I don't know where this is going to stop because there are so many still facing this situation.  I do know that I do not feel sorry for the people that constatnly re fied their homes whenever the equity rose and they took out the money.  They should pay for it now but a lot of those are the ones walking away because the value has diminished.  The people that scraped together a down payment and closing costs and where qualified at 0 interest or 1-3 percent interest at that teaser rate should be given a chance to redeem their homes because they are the ones that did not fully understand what would happen to them in 1 to 3 years time.

RE: Buying a New House Before Foreclosing

Posted by Ryan at 6:35 PM, Feb. 22, 2009

I think this strategy is blatantly dishonest and REALTORS who assist those in this strategy are completely unethical.

Personal responsibility has to come into play at some point.  I can rationalize the strategy in my mind, but it is completely unfair to those who decide to stay in their neighborhood and tough it out, even if their homes dropped 50% or more in value.

The cost/benefit ratio of this strategy might seem great in the short term, but if widely adopted, it will only add fuel to the fire as prices continue to plummet.

If REALTORS want to elevate their current status, which is right next to dog catcher, they need to espouse the virtues of fiscal conservatism and encourage people never to buy into a house that equals more than 25% of their take home pay.

As agents, we need to revisit our role as fiduciaries.

RE: Buying a New House Before Foreclosing

Posted by Kavat at 7:27 AM, Feb. 24, 2009

Tough it out?? All I know is I put $60,000 down on a 240,000 home, leaving ,$180,000, now my house is worth $140,000!  I actually lost a SXXt ton of CASH and then some.  It wasn't me who caused my house to depreciate.  It wasn't me who caused the housing maket to fall, I was one of the good guys, brought up with finacial morals, where did that get me? NO WHERE!  So why shouldn't I jump ship and start over, instead of just sitting toughing it out.  Can you tell me that the value of my house will go back up and I'll recoup my $60,000, with in the next 5 or even 10years?  I didn't think so....

signed, real life home owner

RE: Buying a New House Before Foreclosing

Posted by Ryan at 7:39 AM, Feb. 25, 2009

@ real life home owner (kavat)

There in lies the rub.  The moral hazard we now face because we are rewarding the failure of our lending institutions and the losers they gave loans to.

If you stay in your home, and you can afford the payment, it might be worth your while to stay (as much as that sucks!).  If you sell now, you lock in your loss.  No one can predict the future.  That includes when the supposed "bottom" will hit.  Its a shame that so many people have been affected by the foreclosure disaster when 95% of the people with mortgages are paying on time and didn't buy more than they can afford.

The moral hazard is that you and I played by the rules and now those who didnt are getting help.  We are the suckers.   Still, if you can afford your mortgage payment, you would be well advised to stay in your home.  I have taken my lumps and that is what I am doing.  The market will rebound, but who knows when and at what rate.  I would be happy to see annual appreciation around 3-4%.

Those who try and buy a new home and foreclose on the old, the "buy and bail," are commiting fraud, plain and simple.  Lenders are getting hip to the process.  REALTORS who espouse this practice should have their licenses revoked.

Everyone will pay the price for this practice.  To boot, our government decided to reward those who can't afford their current homes with the Homowner Affordability and Stability Plan, which is only making matters worse.  I can't figure out what the benefit is of keeping people in the homes they cant afford.  Meanwhile, those who pay don't get as much as a reach around. 

I'm sorry for your and everybody else's feelings of hopelessness, Kavat, but we are all in this together.  The only right thing to do is to stay put.

If lenders go back to the old way of doing business, requiring 20% down, inventory will dry up, lenders can give loans that make sense and property values will increase.

If the government trys to re-inflate the bubble, thinking everyone DESERVES a home, which is BS, then a turnaround will be a long, slow process. 

We need to have oversight of our lending institutions re-instated.  We need to get rid of Fannie and Freddie, or at least make them accountable to the SEC.  The Glass-Steagall Act needs to be re-instituted.

If our banks want people to invest in them, they need to raise interest rates, not lower them.  This would be a great start to getting value back into the market.

Sorry, I guess if you are a janitor and want the "dream" of homeownership, you might have to go back to school or start pinching your pennies. 

RE: Buying a New House Before Foreclosing

Posted by Apes at 6:45 AM, Apr. 15, 2009

What about people who are upside down on their mortgage and can't sell it but need to move to a new city because their spouses job is transferring? We are not behind on our mortgage but we can't afford two mortgage payments. I know it may seem dishonest but I think there is an exception to every rule......

RE: Buying a New House Before Foreclosing

Posted by Mom of 2 at 8:43 PM, Jun. 10, 2009

I'd be interested in hearing someone's take on this situation:

We purchased our townhome 3 years ago on an 80/20% INTEREST ONLY PAYMENT mortgages- both on a 5 yr ARM @ 100% financing. We did this intending to get out and sell it for at least the same amount we purchased it for within 2 yrs. Our realtor told us it was a safe bet if we were wanting to get out so soon and "upgrade" our home. It was our first home and we had no idea what we were doing, nor could we have seen this housing crash coming. We bought this house at the height of it's value, and find that we are now about $35K under on the value of the home vs. what we owe!

We've always paid everything on time, we have excellent credit, we are not struggling to make our mortgage or any payments, but we cannot refinance right now, as we would need to put down the difference. We do not have that kind of $ lying around, on top of another $5K in closing costs! In 2 years are we going to be screwed by rising interest rates? Probably!

On top of that, we now have 2 children in our 2 bedroom home... things are getting a little cramped here and we would like to get a new home to fit our expanding family.

I usually pride myself in having good financial morals and paying for the $ I borrowed- I have never considered doing ANYTHING like this before- but this situation is not looking good here in the next 2 years when that ARM comes due! I'd rather save that extra $35K now, put it towards a new larger house that will actually fit my family, get a better deal on a home that was out of my reach financially 3 years ago, and let the old one go.

We are going to at least try to rent it out so hopefully we have some luck there, so we never hopefully HAVE to foreclosure on our first home, but if it does, so be it. I'd rather do it now before the Obama Administration decides to find a way to place a lien on both the old and new home when in foreclosure, so you could possibly lose that one too. They are going to figure out a way to close this loop hole at some point and I'd like to have gotten out of this situation before that happens!

I might be way off here, but this option is looking better and better...

RE: Buying a New House Before Foreclosing

Posted by Lilly at 12:02 PM, Sep. 17, 2009

I have a home in the bay area that I bought in 2006. The bastards at wamu/chase have been dragging me along on a string for 1.5 full years while I've been trying to modify. I've resent my package 6 full times myself and through Hope now AND NACA.

Guess what? They could all go to hell. They lack compassion, an efficient process, and force you into default for their attention.

No. I've decided not to get mad (although it still burns me to think about it), I've decided to get even. Here's what gets me: The bank will run you into the ground trying to get your loan modified, then when you finally give and foreclose, they sell it for thousands, if not hundred thousands less. Where the hell is the ethics in that!

I searched for months for a bank owned home. I finally found a sweet deal on a bank owned home literally (and I mean literally) around the corner for $415K less than what I bought my place for. Same lot size and everything!!! I pulled a Hard money loan together, borrowed from friends and family (bless them) and am working on the rehab as we speak. I will  balance both loans and wait 6 months til I'm seasoned, get some tenant because of course this place will generate income at what I bought it for, then do a cash out refi.

Then I will stick it to wamu/chase and let them call me every freaking week for a year while I live rent free.

The catch is to balance both mortgages on the new and old home, never default until you are ready. If you are as blessed as I was with friends and family who have faith in your drive...trust me...you can do it.

The good thing is I don't have children. For all of you who say this is wrong, guess what... screw you too. You know what I get to do. I get to move in to a place I could afford. I could pay for my mom's medical bills and for my cousin's after-school programs so they don't turn out like half these kids running around here, I could afford to have some kids for crying out loud, I could pay back my school loans without defaulting (because I went to college and got a decent job this is what I get right?.. not), I could go to school for my mba instead of pulling a night job to pay those bastards back.

So if you "ethical" realtors/business folk want to talk about sticking in this together, then call me so you can pay for these expenses I have and I'll stay in the house. But oh yeah, you guys have bills and family's too, right? I'm not going to be your charity case and I rather not be the martyr for the american economy. If I go down, I'm going to go down in style and if that means the rest of you are going to be hurt because of it...well... brace yourselves to share the pain...then you could get back on this site and really sympathize.