Another Perspective on Strategic Default
I get lots of good comments; here’s an interesting take on strategic default. Let’s just say “I concur.”
I’m no doubt a future “Strategic Defaulter”……..It seems to me that there is an aspect of the whole strategic default conversation that is conspicuously missing from the national discourse. It’s an analysis of how we ended up in the grossly over valued properties to begin with. In 2006 I bought my home in Florida (a modest condo) for $595,000 it’s now worth $300,000. When I bought my home I assumed the market value was legitimate and as a result was comfortable paying the price I did. Turns out the market value was not legitimate, in fact it was manufactured by the very same banks that lent me the $600,000. That’s right it was the years of phony and irresponsible lending practices of the these banks that drove up and created the false valuations to begin with. In essence my home was and has never been worth $600,000 my banks, Wells Fargo and their appraisers said it was. Said another way, by approving $500k loans for people who didnt have the financial wherewidthall or any business being approved for a second half million dollar vacation home in Florida the banks by definition controlled the market prices. My home which I love was $300,000 in 2001—–$600,000 2006—–$300,00 2011: The banks did this its like a shell game—–I trusted the valuation, I trusted the market, I trusted the appraiser
In short, I feel like I bought a diamond ring based on a trusted and certified appraisal only to find out 3yrs later that the appraiser, jeweler, and industry governing body where all in cahoots and in practice one big single entity that sold me a CZ! Strategic Default a moral issue, absolutely I agree the calculating immorality of the banking industry has brought the country to it’s knees…..damn right it’s a moral issue
Mark Stopawww.stayinmyhome.com
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i think all th monies paid toward the home in interest and principal should be add up n one column and the appraisal from 2001 b subtracted from the appraisal of 2006. The amount then already paid by the owners of the house shall be subtracted from that amount. whatever the difference between the lowest appraisal and what the costumer has already paid would bee the new balance. Thus 5995-amount already billed to the client will b the top amount. The amount having already been paid, interest and/or principal, say 255,000 over the life of the mortgage, subtract this from what the House in currently worth and mortgage the difference. they already got the 255000 before. mortgage 45,000 they wont have to pay twice. All goes to principal. No interest for the remaining 4000.
For all those interested in a fantastic movement lately, (and aren’t we all?) google “make Wall Street Pay” and you can easily input if you are in foreclosure, or if not, how much value your house has lost and how much in income you have lost due to this financial crisis. The information is then sent to the House Majority and Minority leaders.
People ARE gathering outside Wall Street and Bank of America shareholders meetings and I believe we will be heard…but we have to keep at it! Write, call, gather in protest with others, but make your voice heard somehow.
just a continuation of the earlier post…read this, from Neil Garfields’ site, posted by Neil.
Who will make them pay?
You will.
Yesterday, in six cities across Illinois, people stood together and demanded Wall Street banks like JPMorgan Chase pay their fair share to end the revenue crisis, create jobs, and stop illegal foreclosures.
In New York City, thousands marched on Wall Street demanding that Millionaires and Big Banks pay their fair share.
In North Carolina, community leaders made sure the shareholders of Bank of America faced up to the bank’s terrible record on foreclosures and devastating impact on our communities and economy.
And, that was just this week.
Next Tuesday, May 17: We Go Medieval
JPMorgan Chase is holding their annual shareholder meeting at the Polaris Center in Columbus, OH—the second largest flat office building in the world—with, get this, an actual moat around the building.
Considering that, we’ve decided to do what any normal, enraged-at-Wall-Street-and-big banks-American would do. It’s Robin Hood time. JP Morgan Chase and other big banks must pay their fair share, and at the Showdown in Ohio we will make our message clear.
Be the first to see pictures and video from the Showdown in Ohio…
Follow @streetactionNPA, RT all the action (#makewallstpay, #newbottomline), and become a fan of the Make Wall Street Pay Facebook page.
As someone who has followed this blog for a few months, I must say that I find this to be an unusually confusing post. It’s true that improper lending practices contributed to an increase in home purchases, which in turn elevated home prices. But there can’t be that much surprise and blame when a market price changes in value. A market price is simply that, a rising price when the market is growing and a falling price during times of recession. If you blame the banks for lending too much before the recession, it stands to reason that you have to credit and praise them for their lending when they “manufacture” higher prices in the future to provide homeowners with a windfall, especifially for those buying properties in today’s market. The value of the home described could continue to decrease, or it could some day again rise to $600,000 or greater, but a cubic zirconium won’t magically turn into a diamond with the passage of time.
Real estate is an investment like any other with prices that are inherently fluxuating in nature. Strategically defaulting on any investment doesn’t need to involve finger pointing and moral justification, just sound decision making.
I totally agree with your last paragraph, Mike.
However, for some people, it’s easier to accept the concept of “strategic default” once one realizes the banks created the problems we’re now facing.
The price increases during the boom were not “real” increases – they were purely a function of the banks’ own greed. Did some people benefit from that (by selling before the collapse)? Sure. But the net effect has been catastrophic for the global economy.
My husband and I have been trying to decide what to do with his home that is now worth 1/2 the mtg. amount on the house in Hernando Cty. Do we just keep paying on a house 50 miles from where we live (live in my condo that is paid for), do we keep paying for pool and lawn maintainence, water and electric, etc.?
How is this for irony on us being forced to decide. We got a letter of nonrenewal from Citizens yesterday on his homeowners policy that has never had a loss on it stating it was being non-renewed due to the age of the roof that has not been replaced. The roof does not leak and there has never been any kind of water damage or other claim on his HO policy in the 20 plus years he lived there. So unless we want to pay cash to reroof a 2500sf one story home since he cannot use his home equity loan due to the house being worth so little now, he does not have HO ins. Then the mtg. co., GMAC, will go to a surplus lines carrier and force coverage even more expensive than Citizen’s. We obviously do not want to sink another 10-12K in this house and are literally being forced to for no valid reason.
The double whammy – banks and insurance company. Yikes.
It sounds like you realize where this is headed.
Feel free to give us a call and we’ll be happy to discuss your situation further.
Thanks. I’ve actually called and left messages twice in the last two weeks with your firm. I realize you all are quite busy. I’ll try again today. We are responsible for my mother’s care in a nursing home so this additional expense on a second home is daunting, but we are also fearful of my husband’s wages being garnished at some point in time as his house becomes more and more of a burden. We may just have to deal with that, but do want to get some representation on the best way to proceed. I have authority to deal with GMAC mtg. from my husband and was actually going to call them today, although we are still current on payments. I’ll try calling your firm again before proceeding.
I cuncur — banks, agents, and appraisers were involved in inflating the market beyond all reason — much like “watering stock.” The nation is in an economic crisis and the banks need to take a bite of this crud sandwich we are all eating. I’m under water on an invetment property and keep paying for business reasons. Next week, I go to settlement on a large property I bought for cash in this depressed market. But I would like to see the underwater homeowners able to form some sort of organization with political clout and make banks feel the heat on this issue. In a just outcome, nobody should get on this — least of all the banks.
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