Mortgage Forum

Mike · April 15th, 2008, 03:33 AM

The word is out and the banks and servicers need to get a clue. People are walking from their underwater homes in droves. What was once taboo has become the “smart” thing to do for many Americans. This rhetoric that 50% of homeowners do not speak with their lenders or servicers is actually true.

But it isn’t because they are too scared to pick up the phone. Oh no! They have made the sound decision to swim to the top of the water in their homes, grab their families and belongings, get in the “rental boat” and then shut the proverbial foreclosure door.

All without so much of a peep or squeak. Lenders used to use foreclosure as a scare tactic. Now, it’s nothing more than a solution for people’s misery that were once strapped by the debt, ball and chain known as their home.

Federal Reserve Governor Randall Kroszner said (http://www.reuters.com/article/gc03/idUSN0948335020080409)this past Wednesday:“The fact that many troubled borrowers have properties that are now worth less than the principal amounts … suggests that lenders and servicers should give greater consideration to the use of principal reduction as one of the loan modification options in their tool kit,” Kroszner told the U.S. House of Representatives Financial Services Committee.

Hope Now’s efforts have been getting bashed (http://money.cnn.com/2008/04/10/real...ion=2008041014) lately and more hints that many actions taken by lenders thus far, such as placing homeowners in repayment plans (all 800,000 plus of the 1.2 millions helped) are just prolonging the inevitable pain and proving that these lenders and servicers do not have a clue when it comes to loss mitigation in today’s foreclosure environment.“[Repayment plans] put more loans upside-down,” said Jim Carr, chief operating officer for the National Community Reinvestment Coalition.

He adds that these fixes make it more likely that borrowers will walk away from their mortgages (http:///2008/02/06/re...ion=2008020714) if they get behind again, since they have no equity to lose. Carr pointed out that, Hope Now’s claims not withstanding, foreclosure rates continue to soar. “We’re en route to possibly 2 million foreclosures this year alone,” he said. “It’s so important that, rather just putting out stats to look good, that something is actually accomplished.” Lenders have created an environment where the threat of foreclosure means nothing.

In actuality, bailing out on your sinking home actually makes sense to more and more people that don’t want to go down like the Titanic. Hell, just put on the rental vest and dive in, it’s not so bad and the schools are just as good as Johnny’s! Let’s face it, many borrowers (people) put little or no money down, so they don’t have much skin in the game. With little skin in the game, it only makes sense to leave while you have whatever skin you have left in tact. Why keep making payments on a home that is severely underwater and is not going up anytime soon?

The other threats of ruined credit and deficiency judgements are just hollow threats. Listen here everyone, people can’t eat or sleep because they are so worried about paying their mortgage and losing their home. Now, they are starting to realize that just letting go is the best thing to do to keep their families together and sanity in tact.

Many will choose to stick it out and fight by trying to obtain loan modifications (http://www./) from their lenders. Often these are people who have strong ties and memories in their homes. Skin in the game and a lot to lose. I hear from these people every day in my forum (http://www.zinomortgage.org/). Their stories are heart wrenching and plights commendable. However, the immediate pain of just biting the foreclosure bullet and walking away is better for some.

Better than the prolonged agony of dealing with bottle-necked lenders and employees who were a week ago at Wall Mart or better yet, in India in a sweat shop. The Mortgage Debt Relief Act of 2007 (http://www.irs.gov/individuals/artic...179414,00.html), is a consumer protection act that gives homeowners all the more reasons to walk on their homes and loans. Especially the ones who were once on the fence.Normally, debt forgiveness results in taxable income.

But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b). The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.

A couple forms and a U-Haul is all you need to walk. Wow! *FYI banks - *You better get a clue and break out the loan modification papers with big principle write downs soon or else! I think the tables have finally turned and now the consumer may have the ultimate control over these banking institutions that have straddled them with debt for years.

The only problem is that the consumer just doesn’t know it yet………. * From my blog Banks Must Write Down Loans to Prevent a Mass Homeowner Exodus (http:///2008/04/14/ba...eowner-exodus/) *What do you all think????? Should banks reduce principle balances?*

Jack carson · May 8th, 2008, 06:37 AM

Hi Mike:

"The other threats of ruined credit and deficiency judgements are just hollow threats."

What's so hollow about a deficiency judgment? Even though you may not have much "skin in the game", they have 5 years as I understand to skin you alive on a judgment.

Obviously Freddie and Fannie are fearful of the walkaway trend, thus the recent measures. Is this a tacit acknowledgement the industry is toothless re: DJ's? I keep hearing from people on the street that they haven't seen DJ's (Virginia). But will we in Phase 2 once the banks get their heads above the current foreclosure onslaught?

April 15th, 2008, 03:33 AM	#1
Mike Senior Member Join Date: Apr 2008 Posts: 714	Banks Must Write Down Loans to Prevent a Mass Homeowner Exodus The word is out and the banks and servicers need to get a clue. People are walking from their underwater homes in droves. What was once taboo has become the “smart” thing to do for many Americans. This rhetoric that 50% of homeowners do not speak with their lenders or servicers is actually true. But it isn’t because they are too scared to pick up the phone. Oh no! They have made the sound decision to swim to the top of the water in their homes, grab their families and belongings, get in the “rental boat” and then shut the proverbial foreclosure door. All without so much of a peep or squeak. Lenders used to use foreclosure as a scare tactic. Now, it’s nothing more than a solution for people’s misery that were once strapped by the debt, ball and chain known as their home. Federal Reserve Governor Randall Kroszner said (http://www.reuters.com/article/gc03/idUSN0948335020080409)this past Wednesday:“The fact that many troubled borrowers have properties that are now worth less than the principal amounts … suggests that lenders and servicers should give greater consideration to the use of principal reduction as one of the loan modification options in their tool kit,” Kroszner told the U.S. House of Representatives Financial Services Committee. Hope Now’s efforts have been getting bashed (http://money.cnn.com/2008/04/10/real...ion=2008041014) lately and more hints that many actions taken by lenders thus far, such as placing homeowners in repayment plans (all 800,000 plus of the 1.2 millions helped) are just prolonging the inevitable pain and proving that these lenders and servicers do not have a clue when it comes to loss mitigation in today’s foreclosure environment.“[Repayment plans] put more loans upside-down,” said Jim Carr, chief operating officer for the National Community Reinvestment Coalition. He adds that these fixes make it more likely that borrowers will walk away from their mortgages (http:///2008/02/06/re...ion=2008020714) if they get behind again, since they have no equity to lose. Carr pointed out that, Hope Now’s claims not withstanding, foreclosure rates continue to soar. “We’re en route to possibly 2 million foreclosures this year alone,” he said. “It’s so important that, rather just putting out stats to look good, that something is actually accomplished.” Lenders have created an environment where the threat of foreclosure means nothing. In actuality, bailing out on your sinking home actually makes sense to more and more people that don’t want to go down like the Titanic. Hell, just put on the rental vest and dive in, it’s not so bad and the schools are just as good as Johnny’s! Let’s face it, many borrowers (people) put little or no money down, so they don’t have much skin in the game. With little skin in the game, it only makes sense to leave while you have whatever skin you have left in tact. Why keep making payments on a home that is severely underwater and is not going up anytime soon? The other threats of ruined credit and deficiency judgements are just hollow threats. Listen here everyone, people can’t eat or sleep because they are so worried about paying their mortgage and losing their home. Now, they are starting to realize that just letting go is the best thing to do to keep their families together and sanity in tact. Many will choose to stick it out and fight by trying to obtain loan modifications (http://www./) from their lenders. Often these are people who have strong ties and memories in their homes. Skin in the game and a lot to lose. I hear from these people every day in my forum (http://www.zinomortgage.org/). Their stories are heart wrenching and plights commendable. However, the immediate pain of just biting the foreclosure bullet and walking away is better for some. Better than the prolonged agony of dealing with bottle-necked lenders and employees who were a week ago at Wall Mart or better yet, in India in a sweat shop. The Mortgage Debt Relief Act of 2007 (http://www.irs.gov/individuals/artic...179414,00.html), is a consumer protection act that gives homeowners all the more reasons to walk on their homes and loans. Especially the ones who were once on the fence.Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b). The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. A couple forms and a U-Haul is all you need to walk. Wow! FYI banks - You better get a clue and break out the loan modification papers with big principle write downs soon or else! I think the tables have finally turned and now the consumer may have the ultimate control over these banking institutions that have straddled them with debt for years. The only problem is that the consumer just doesn’t know it yet………. * From my blog Banks Must Write Down Loans to Prevent a Mass Homeowner Exodus (http:///2008/04/14/ba...eowner-exodus/) What do you all think????? Should banks reduce principle balances?

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May 8th, 2008, 06:37 AM	#2
Jack carson Junior Member Join Date: May 2008 Posts: 1	Hi Mike: "The other threats of ruined credit and deficiency judgements are just hollow threats." What's so hollow about a deficiency judgment? Even though you may not have much "skin in the game", they have 5 years as I understand to skin you alive on a judgment. Obviously Freddie and Fannie are fearful of the walkaway trend, thus the recent measures. Is this a tacit acknowledgement the industry is toothless re: DJ's? I keep hearing from people on the street that they haven't seen DJ's (Virginia). But will we in Phase 2 once the banks get their heads above the current foreclosure onslaught?