mcs328

http://consumerist.com/348311/when-a...just-walk-away

I read this article over at Consumerist and it makes financial sense to me and I don't find it morally appalling at all. He's taking a short-medium term hit to ensure he doesn't live a lifetime of homelessness and/or without a penny to his name.

In the end you have to look out for number one.

__________________

YellowCoffee

He can walk away, but his credit won't be able to. He would've lost any money he put into the house (down payment, mortgage/tax/hoa/pmit payments) and he would have a FC on his CR for 7 years. I don't see how this is looking out for number one?

I don't see why people think of their primary residence as just investments. I don't understand decisions like this.

zippyjuan

I believe the homeowner can still be held liable for any difference between the amount of the loan and the amount that the lender gets for it in a forclosure- unless they declare bankruptsy which will be on your financial records for at least seven years.

__________________
I add new pictures to my photo gallery pretty regularly. You can see them here if you are interested: http://www.pbase.com/jeffryz

Daedalus

First mortgages are non-recourse loans. The banks can only go after the home. Other loans, including seconds, home equity loans and refinances are not, so they expose the borrower to more liability.

mcs328

That's true and that will happen regardless if he buys house #2 or stays put when his interest rate resets to a higher one on house #1 in which he'll fall behind on his payments and be foreclosed on.
In case #1 he'll have a home he can afford with bad credit and in case #2 he'll have a harder time getting a home and with bad credit.

I like one commenter's analogy about buying a car. If you buy a Hummer and realize you can only afford a Ford Festiva, then make payments on the Festiva and let them repo the Hummer when you stop making payments on that.

Cubsfan

Or not be a complete idiot and plan ahead and live within your means.

mcs328

renovation

this is very true if the lender decides to take you to court. this can even happen if you file bankrupcy as long as they can prove you filed just to get out of the home .if you drained all the cash value out before. and they can prove intent. and here in michigan they are starting to hire P.I. to do just that. fyi to P.I are being hired by loan companys now to watch home owners they think are about to declare foreclosure on there homes.

__________________
You could pick up Lindsay Lohan for less than a intel 990x, and still have money left over to bail her outta jail

YellowCoffee

I completely agree as well. At the same time, I think it's been shown that the general public will make bad financial decisions unless certain controls are put in place. This ultimately falls upon the federal/state regulators.

ShawnLee

I don't know what controls should be in place though.

Freedom means being free enough to do something stupid. Repsonsibility means facing the consequences of your actions. Bailing people out means that they have a built-in sense of "I'll be alright, that's what the gov't is for!"

Not to turn this into a political discussion... but...

__________________

YellowCoffee

It's the same controls that prevent or attempt to control predatory or unfair lending.