Pro and Cons of Mortgage Strategic Defaults.

[Noirblack]

Well, judging from what few particulars the OP has given us -- the son hopes to save $72,000 over a couple of years by not paying the mortgage, or rent -- it looks like the nut is something on the order of three grand a month. So it's doubtful it was ever a million dollar property. Seems likelier it was a $400K property that's now worth half that. And that would be a very difficult situation for most people.

Yeah, I know, that's assuming quite a bit. But what we aren't assuming is that the fellow hopes to keep a roof over his head for upwards of two years without paying so much as a dime for it.

You're right, we don't know all the factors at play in this particular situation. But I do know that I've had dealings with people who clawed and scratched their way out of financial holes, and I've had dealings with people who repeatedly walked away from real estate contracts and filed for bankruptcy protection, and while I readily acknowledge there is such a thing as bad luck, and that some people come into the game with considerably greater advantages than others (I hold in particular disdain people born on third base telling the rest of us how to hit a ball), I have a great deal more respect for those in the former category. It seems that those in the latter category are aways running into bad luck, you know.

I think there might be more going on than meets the eye. From what I have observed, people are very reluctant to admit the depths of financial problems and often let things get pretty bad before they try to fix things or take any kind of action - such as defaulting or refinancing or whatever the action is. People get very emotional and guarded about money. I am not saying for sure this is happening, but It wouldn't surprise me if the financial issues were deeper than we know and the resulting emotional issues are playing a role too.

 

[tonyb]

I think there might be more going on than meets the eye. From what I have observed, people are very reluctant to admit the depths of financial problems and often let things get pretty bad before they try to fix things or take any kind of action - such as defaulting or refinancing or whatever the action is. People get very emotional and guarded about money. I am not saying for sure this is happening, but It wouldn't surprise me if the financial issues were deeper than we know and the resulting emotional issues are playing a role too.

So does this mean he's entitled to have a roof over his head for two years without paying for it?

If he's hopelessly in debt, then file for bankruptcy protection. Demonstrating the difference between "strategic default" and "theft" would take some serious contorting.

 

[countryclubjoe]

Hi Folks

Thanks to everyone for your replies. I gathered some more information from my Son in regard to this " stratgic default' issue.

Presently Son is current on the mortgage payments.. He is attempting to get a lower interest rate, current rate is 6.25%.
Here is an interesting Caveat to this situation. The lender Bank Of America, informed my Son, and this is backwards to me.
They(BOA) do not give modifications to folks that are current on the mortgage payments, ( Go Figure) anyway they basically instructed him to go deliquent for any chance of a modification. CRAZY OR WHAT?

I do know my Son took a 30% pay cut in Jan 2012. Also I am just gussing on the numbers but I recall he paid 610K in 2005. (Against my advise). My guess is that the home is maybe worth 340-375K. in the current market.

I mentioned the so called STRATGIC DEFAULT TERM to my Son and his reply was, don't worry Dad I know what I'm doing.

Thanks again folks.

Best regards
CCJ

 

[Noirblack]

So does this mean he's entitled to have a roof over his head for two years without paying for it?

If he's hopelessly in debt, then file for bankruptcy protection. Demonstrating the difference between "strategic default" and "theft" would take some serious contorting.

Again, if he lives in the house for a while without paying for it that is squatting, not theft. He can live there until the banks force him out after non-payment. I have heard that in the US, the land of foreclosures, the banks would rather have the defaulter in the house. An empty house, especially in a neighbourhood that is full of empty houses, can quickly be vandalized or worse, a crack house. I heard this about the Detroit area in particular.

 

[Noirblack]

Hi Folks

Thanks to everyone for your replies. I gathered some more information from my Son in regard to this " stratgic default' issue.

Presently Son is current on the mortgage payments.. He is attempting to get a lower interest rate, current rate is 6.25%.
Here is an interesting Caveat to this situation. The lender Bank Of America, informed my Son, and this is backwards to me.
They(BOA) do not give modifications to folks that are current on the mortgage payments, ( Go Figure) anyway they basically instructed him to go deliquent for any chance of a modification. CRAZY OR WHAT?

I do know my Son took a 30% pay cut in Jan 2012. Also I am just gussing on the numbers but I recall he paid 610K in 2005. (Against my advise). My guess is that the home is maybe worth 340-375K. in the current market.

I mentioned the so called STRATGIC DEFAULT TERM to my Son and his reply was, don't worry Dad I know what I'm doing.

Thanks again folks.

Best regards
CCJ

Thanks for the details CCJ.

I would expect that a 30% pay cut makes the payments difficult. 6.25% is a high interest rate these days.

If the bank itself is telling him to do this so they can give him a modification, he might as well go ahead, as long as he fully understands all the consequences (he needs to find out what could go wrong).

The numbers you have made sense. If he did 5% down on $610k, and the house is worth a maximum of $375k, that puts him $200k underwater.

It sounds like his goal is to get the loan modified rather than just to live in it free for a couple of years.

 

[ButteMT61]

Hi FolksThanks to everyone for your replies. I gathered some more information from my Son in regard to this " stratgic default' issue.Presently Son is current on the mortgage payments.. He is attempting to get a lower interest rate, current rate is 6.25%.Here is an interesting Caveat to this situation. The lender Bank Of America, informed my Son, and this is backwards to me.They(BOA) do not give modifications to folks that are current on the mortgage payments, ( Go Figure) anyway they basically instructed him to go deliquent for any chance of a modification. CRAZY OR WHAT?I do know my Son took a 30% pay cut in Jan 2012. Also I am just gussing on the numbers but I recall he paid 610K in 2005. (Against my advise). My guess is that the home is maybe worth 340-375K. in the current market.I mentioned the so called STRATGIC DEFAULT TERM to my Son and his reply was, don't worry Dad I know what I'm doing.Thanks again folks.Best regardsCCJ

Go back a few of my posts. I would have told you it was crazy a few years ago. Now, it's "business".

 

[tonyb]

Again, if he lives in the house for a while without paying for it that is squatting, not theft. ... .

Repeating that all you wish to won't make it so.

 

[Noirblack]

Repeating that all you wish to won't make it so.

By the same token, repeating that is it theft won't make is so. If it got to the worst case scenario, and the bank had to force him out of the house, and the sheriff got involved, would he be charged with theft, or trespassing? It would be trespassing.

 

[LizzieMaine]

Go back a few of my posts. I would have told you it was crazy a few years ago. Now, it's "business".

Precisely the reason this whole discussion transcends the specifics of any one case. The fact that such practices have been institutionalized is a symptom of the state of absolute moral depravity at the heart of the entire system, a system which seems to be going to every possible length to make two wrongs equal a right. Do *any* of the participants truly "know what they're doing?"

 

[tonyb]

By the same token, repeating that is it theft won't make is so. If it got to the worst case scenario, and the bank had to force him out of the house, and the sheriff got involved, would he be charged with theft, or trespassing? It would be trespassing.

Pure rationalization.

Deliberately helping oneself to something that carries a price tag, without paying for it, is stealing. It may not land him in jail, as it would be a civil matter until an eviction order is issued (at which point his remaining on the property would result in his forceful removal which, if he resisted, would be a criminal matter), but it is indeed the moral equivalent of theft. And I can't believe that an honest person would ever argue otherwise.

 

[Noirblack]

We'll agree to disagree.

 

[tonyb]

So are you saying that squatting, what the squatter can clearly afford to pay for the roof over his head, is anything but dishonest?

Is that really what you're saying? Cuz it sure smells that way to me.

 

[Noirblack]

How about we just disagree like a couple of gentlemen?

 

[vitanola]

Hi Folks

Thanks to everyone for your replies. I gathered some more information from my Son in regard to this " stratgic default' issue.

Presently Son is current on the mortgage payments.. He is attempting to get a lower interest rate, current rate is 6.25%.
Here is an interesting Caveat to this situation. The lender Bank Of America, informed my Son, and this is backwards to me.
They(BOA) do not give modifications to folks that are current on the mortgage payments, ( Go Figure) anyway they basically instructed him to go deliquent for any chance of a modification. CRAZY OR WHAT?

I do know my Son took a 30% pay cut in Jan 2012. Also I am just gussing on the numbers but I recall he paid 610K in 2005. (Against my advise). My guess is that the home is maybe worth 340-375K. in the current market.

I mentioned the so called STRATGIC DEFAULT TERM to my Son and his reply was, don't worry Dad I know what I'm doing.

Thanks again folks.

Best regards
CCJ

Be very careful! BOA is currently being sued by the government for telling their customers "They(BOA) do not give modifications to folks that are current on the mortgage payments". If your son is behind, he is no longer eligable for a modification under the Federal HAMP program.

Please tell him to keep current if he wishes to have any hope of a loan modification.

The BOA announcement of their loan midification program, pursuant to their settlement:

http://homeloanhelp.bankofamerica.com/en/principal-reduction-announcement.html

"Under the agreement, we are implementing a new modification program that offers principal reduction to qualified customers. For mortgages that are owned by Bank of America, we will be lowering interest rates to provide reduced payments for eligible homeowners who are current on their payments but who owe more than the current value of their homes. We are also continuing to help customers who are pursuing short sales and may offer additional assistance programs, such as deed in lieu of foreclosure and/or financial assistance to help those who are transitioning out of their properties."

 

[countryclubjoe]

Be very careful! BOA is currently being sued by the government for telling their customers "They(BOA) do not give modifications to folks that are current on the mortgage payments". If your son is behind, he is no longer eligable for a modification under the Federal HAMP program.

Please tell hi to keep current if he has any hope of a modification.

Hi Vitanola
From my understanding BOA informed my Son that he needs to be in default to qualify for a mod.
Thank you for your reply.
CCJ

 

[tonyb]

How about we just disagree like a couple of gentlemen?

Oh, I'm a gentleman. But I'm not a pushover. Nor am I a moral coward.

 

[ButteMT61]

Hi VitanolaFrom my understanding BOA informed my Son that he needs to be in default to qualify for a mod.Thank you for your reply.CCJ

Have your son contact naca.
https://www.naca.com/nacaWeb/index_main.aspx

 

[vitanola]

Hi Vitanola
From my understanding BOA informed my Son that he needs to be in default to qualify for a mod.
Thank you for your reply.
CCJ

Yes, they have done this in thousands of instances, and then told the mortgagor that they did not qualify because they were in default.

Here is what Bankrate has to say:

http://www.bankrate.com/finance/mortgages/should-you-skip-your-mortgage-payment-1.aspx

"If you've been tempted to skip a few mortgage payments to try to convince your lender to modify your loan, you may want to resist that temptation. Whether your goal is to stave off foreclosure or just make your payments more affordable, experts say deliberate delinquency is not as smart an idea as it may seem... Missed payments disqualify borrowers
The federal government's new Making Home Affordable plan may be another reason why lenders have tweaked their policies with respect to delinquency and loan modifications. The new plan, which includes a loan modification program and a refinance program, offers lenders new incentives to participate..."

Also see: http://onthefrontlinesofamericanswa...ion-housing-program-and-why-it’s-not-working/

http://mcgrathspielberger.com/doj-settlement-results-in-boa-denying-mortgage-modifications-huh

" A few days ago, I was on the phone with a supervisor at Bank of America, discussing the unexpected mortgage loan modification denial letter we had received for one of our clients. The case at issue has a significant background, including some issues which had led to a higher level of attention from BOA. During this conversation, the supervisor made a few comments which particularly caught my attention: “Every borrower [with a modification request pending] who might qualify for the Department of Justice settlement program will be getting a modification denial letter.” (?!) I believe my eloquent response was something similar to “HUH?” as I ran his words back through my head.
When I asked for clarification, the supervisor stated “Yep, that’s how they [really meaning “we” – BOA] have decided to do it. I’ll be getting tons of these same calls. Anyone who has a HAMP request pending who may qualify for a DOJ settlement program will be getting a HAMP denial letter, because the Department of Justice program will take priority.”

http://www.smartonmoney.com/if-your...just-stop-paying-your-mortgage-and-walk-away/



IN Cleveland, OH, Judge Sikora, a freind of my parents went through this:

"
A Cuyahoga County Juvenile Court judge faces foreclosure on his eight-bedroom, lakefront Cleveland home after falling a year behind on a nearly $1 million mortgage and property taxes.
Judge Peter Sikora said he hopes a mediation session scheduled for next month will keep him in his Edgewater Drive home, which the Cuyahoga County Auditor's Office has appraised at $844,000.
Sikora, who makes $121,350 a year as a judge, said in a telephone interview Thursday that he has the money to make his mortgage payments. What got him in trouble was following the advice of officials at JP Morgan Chase & Co., he said.
With property values in decline over the past year in Cleveland, and mortgage rates the lowest in decades, Sikora sought to refinance. But the bank, he said, declined his request.
"The bank advised me that the only way they would consider a loan modification would be if I fell behind on my payments," said Sikora, 59, a judge since 1989. "I took their advice and put the money aside."
Sikora said he was surprised when, in June, during the middle of negotiations, JP Morgan Chase filed the foreclosure lawsuit against him seeking $999,000, including $6,400 in unpaid property taxes.
"It's unfortunate that it's gotten to this situation," Sikora said. "I've been talking with them for more than a year, but the bank hasn't been responsive."

http://www.avvo.com/legal-guides/ug...-paying-the-mortgage-even-if-they-tell-you-to

"Mortgage companies may not tell lenders to stop paying the mortgage. This common practice is unlawful."

http://www.bankruptcylawnetwork.com/loan-modifications-to-avoid-bankruptcy-7-tips-to-help/

"When they say to stop paying, put the money aside. Plus the late fee. Or maybe pay it anyway!

Many loan modification programs do not require you to be in default on your mortgage. Some deals may require you to be current. So think carefully when the lender says to stop paying the loan in order to get a modification. And if you do stop paying in order to negotiate a deal — keep the money aside, and include late fees in your savings."


SEE A LAWYER!

Bank of America is known to have told hundreds of thousands of Americans to stop paying their mortgages in direct contravention of the law.

 

[countryclubjoe]

Have your son contact naca.
https://www.naca.com/nacaWeb/index_main.aspx

Hi ButteMT61-
Thank you for your reply's. I will pass the info on to my Son.
Best regards
CCJ

 

[ButteMT61]

Hi ButteMT61- Thank you for your reply's. I will pass the info on to my Son. Best regardsCCJ

They are a good organization. They don't charge and get results. You have to participate and go to their seminars, but I know,of many folks that they helped. My wife was a commissioner and learned of them while working with some neighborhood groups helping residents. Good luck.