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St Louis Real Estate Search

Why We’re Walking Away

I posted yesterday on the Wall Street Journal article Report Sheds Light on Why Homeowners Walk Away. A couple of commenters on the WSJ article said why they were walking away from their mortgage, and I thought their comments were interesting enough to repeat. The first walker says that as a good borrower he is unable to have his loan modified, the second blames bank policies:

The banks (my lender is CITI) are unwilling to modify mortgages for the people able to pay. I suspect if the people underwater, but with money and good credit – you know, responsible people – were able to secure a more reasonable APR that made their monthly payments less painful, they’d more easily tolerate paying on that over-valued house.

I have no outstanding debt other than my mortgage. No credit debt, no student loan, no car note – nothing. I can afford my house. But the 6.9 APR irks me. I’ve tried for months to get a MODIFIED better rate – something in the mid 4s. But because of no hardship and being underwater, the banks refuse. After 10 months of trying for a better rate I HAVE NO QUALMS walking away in a non-recourse state. For what – keeping an 800 FICO score? Screw that!

The wife’s credit and our cash will secure the new home – a better house, larger, with a better APR – and the bank can bite me. H***, when our old house goes up for auction maybe I’ll convince my brother to buy it for half its current cost. If banks like CITI, who egregiously borrowed tax payer money, are unwilling to help those same taxpayers who are their customers they deserve to get screwed- especially by people in non-recourse states.

Here’s number two:

I’m walking away because of the absurd policy of the bank. Let me explain:

Because of the economy, my income took a hit and I now make about two thirds less than what was the norm a few years ago. After exhausting a large safety net of savings, I declared bankruptcy. I have NEVER been late on my mortgage, it was always the first thing I paid but the bank now refuses to report my payment history to the credit bureaus after my bankruptcy. They cite it is their prerogative to do so, but if I was to reaffirm the debt, they would be happy to report my timely payments to the credit bureau, which would help me, rebuild my credit.

So I call an appraiser I know to get a feel as to what my home is worth and I find out that I am $160K upside down. So I basically can keep my home but not get any credit for never being late in payments or for continuing to be an on time customer, or I can walk away since after all the bankruptcy did discharge the debt. Also, after looking at a few rental homes, I can rent the same home for half what my mortgage payment is.

So let’s see, I can put a roof over my head for half the price monthly, walk away from $160K of negative equity, and the bank thinks they are doing me a favor by offering me a deal to start reporting to the bureaus in exchange for reaffirming the debt. Yea right!

The bank can keep the house and the loan is held by Fannie so they can sustain the loss. I will restore my credit by other methods. By the way, one of my cars was financed and I was also upside down in that and they tried the same tactic. I gave them back the car.

Whatever excuses these walkers might have, I can’t help but get the feeling that the real problem is they can get a better deal elsewhere. Number one says The wife’s credit and our cash will secure the new home – a better house, larger, with a better APR… Number two says I can put a roof over my head for half the price monthly, [and] walk away from $160K of negative equity.

There was a great quote in John’s post today by Vincent Reinhart. He said:

I think the American Dream is not homeownership, it’s getting rich quick. And if you can make levered bets on an asset class, government will encourage you to do so, you’ll do it, when you think that you’ll get double digit returns.

I wonder how many people would have been willing to pay the bubble prices that they did if they hadn’t expected not just a place to live, but a healthy ROI as well. When the American Dream of easy money disappears, the American Dream of homeownership can quickly loose its appeal.

Be sure to check out Debi Averett’s other posts on her blog: Housing Doom

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