Comments on: Sins of Years Ago Come to Haunt the Housing Market: Foreclosure is a Slow Process in California.

By: exit

exit — Tue, 15 Apr 2008 15:56:19 +0000

@Scott – I guess the dreaded ‘consult your tax advisor’ – but not TODAY! – comes into play. Rules vary by state, and by the status of the loan. If it was owner occupied, or investor, if it was purchase money, or cash-out refi or 2nd/HELOC, was it residential, or commercial, was it “ruthless”, or unintended. How big the loss is, and whether the defaulting party has any other means to make good on the debt.

I concur, the whole ‘walk away’ issue is problematic (look at Calculated Risk for some good comments.) “Ruthless” foreclosures, when the borrower has the means to pay but chooses to default are supported by some (including Mish) because ‘the big corporations do it’. This line of reasoning goes something like, why should only individuals have to play by the rules, and corporations not?

Now we get into moral hazard….

Oh well, if Ug99 (http://www.farmandranchguide.com/articles/2008/03/13/ag_news/production_news/pro10.txt) comes to this country, we’ll have bigger problems to worry about than collapsing house prices. Collapsing food stocks – THAT’S the real worry.

By: Crazed in Glendale

Crazed in Glendale — Tue, 15 Apr 2008 07:08:51 +0000

Thanks Exit,
To tell you the truth, I like the apartment we live in. It’s in a better and convenient location, and I’m not sure if I’m ready to maintain a home yet. I actually wanted 3 to 4 bedrooms with 2 bathrooms. The house we are talking about only has 3 bedrooms and 1 bathroom. If it has an extra bathroom, then maybe I might consider buying. However, now I’ll just wait and see. I’m willing to take the risk. I’m in no hurry to buy yet. As long as the price stays the same, we’ll just have bigger down payment.

What is really cool is that because we didn’t buy the house in 2005( sorry it’s 4 years instead of 5 years ago), we ended up buying income properties with positive cash flow. : ) Maybe that is the way to go.
I’ll hold out for something better, 3 to 4 bedrooms with 2 bathrooms.

Thanks
Crazed in Glendale

By: dutchtrader

dutchtrader — Tue, 15 Apr 2008 00:35:38 +0000

When will it be back up again,

I think your answer really depends on the health of the overall economy. If things improve, people start to make more money and business continue to stay in california conceivably it is possible that in 10 years it would be at bubble prices again. However, right now I wouldn’t put my hope in it.

By: When will it be back up again?

When will it be back up again? — Mon, 14 Apr 2008 23:59:48 +0000

Hi Dr. HD,
We’re a couple in So Cal who did everything the way we ‘should’, i.e., bought in the best part of the nicest centrally located neighborhood we could afford, when the prices were still low in 1999, got a 30year loan @ 5.5%, put 20% down, never used the house as an ATM, put in a ton of sweat equity…

Last year we found our dream property in Costa Rica and were ready to cash in on our investment here and semi-retire down there. However, as soon as we came home, we didn’t even have time to clean up for sale before the market took a nose-dive and we had to cancel our offer on the house down there…

Now we’re wondering how much longer we are going to have to stay here and work… When will the prices go up again to where they were last fall?
Anyone with a crystal ball willing to make some guesses? 5years? 10? 15? Never?

Some doom sayers think we’ll have the next big depression and think we ought to sell now anyway, and get whatever equity we still have, others are very optimistic saying it will be back up again in a few years… I’m confused!

Thanks, any comment much appreciated!

By: Scott

Scott — Mon, 14 Apr 2008 23:57:52 +0000

Exit, read the links you provided and I’m still a bit confused. For one thing whether your mortgage is non recourse or not maybe totally dependant on what
state you live in if the mortgage contract is not explicit on this. I suspect most are but I don’t know that. IANAL but it also seems possible to me to argue that a walkaway is doing something beyond not making required payments on a loan. They are unilaterally abrogating the contract IF they have the means to pay and causing injury to the other party by doing so. I’m sure contract law has to be full of precedent in this type of situation but I don’t think I could get away with deliberately refusing to honor a contract I am capable of fulfilling simply because I no longer find it advantageous. In any event, Congress, should it wish to could change the tax consequences of this as quickly as it changed the tax consequences of a short sale this year. If, as the rather ominous comments by Wachovia’s CEO today indicate, the mortgage models used by WB and others are no longer operative owing to a significant change in the behavior of debtors one might expect Congress to act to prevent financially capable homeowners from escaping unscathed by walking away.