Question on forclosures

borg
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borg
Edited Date/Time 1/25/2012 6:15pm
I was just reading an AP about fannie mae requesting another 8 billion or so to cover more losses. According to fannie mae this is because home prices are still falling and people who's home value falls below their mortgage are walking away. I have heard that many other times of course but i don't understand it. If it's normal to walk away from something simply because it's value is less that what is owed on it, the streets would be littered with abandoned vehicles. Something's missing here.
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Febuary
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Febuary 5/8/2011 9:53am
5/8/2011 9:53am
In AZ, people are still walking away from their homes. The value has dropped so much that they figure fuck it and let the bank take the loss. They will have a foreclosure on their credit or some will file bankruptcy. They rent or live with family until a few years passes then they buy a similiar house for 40-50% of what they used to owe on the old house. It's also a domino effect. The neighbor forecloses, then the house prices drop further. After a while, people lose hope that they will ever get from under their mortgage.

Some people are just working the system. I had a riding friend that was foreclosing on purpose and right before he foreclosed, he bought a house 5 houses down for nearly 50% of what he owed on his current house. It's fucked up and it will get a little worse before it gets better IMO.
72kiteboarder
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72kiteboarder 5/8/2011 10:19am
5/8/2011 10:19am
Two ass clowns in my neighborhood went into forclosure and caused my hous to drop 35-40 thousand in value. Now I am screwed because I have to move for the Navy on orders and the home prices in my neighborhood are low specificaly because of the two forclosures.
UpTiTe 5/8/2011 3:59pm
5/8/2011 3:59pm
Wht most people don't get is that when you walk away from a house, the bank 75% of the time will sue to make up for the loss. If they walk from a 300k house and it goes for 100k at auction the bank will go after them for the other 200k. Big banks don't do it as much because its a hassle, but little banks and savings and loans will.

So in a few years all these people will be getting notices to appear and if they don't they will get everything garnished.
FreshTopEnd
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FreshTopEnd 5/8/2011 4:19pm
5/8/2011 4:19pm Edited Date/Time 5/8/2011 4:21pm
Residential real estate lending is a little different from most other areas. For a variety of reasons, in most if not all states, generally the debt on a loan secured by a mortgage (judicial foreclosure states) or deed of trust (non-judicial foreclosure states) on a residence is non-recourse. In other words, the lender has to look to the proceeds of a foreclosure sale to satisfy the debt and cannot pursue recovery of any deficiency between the amount owed on the note and the proceeds of the sale.

So, if someone borrowed $500k to buy the house and it's now worth $250k, the reasoning is that the homeowner is now paying more than the property is worth. Because the bank can't recover the other $250K deficiency from the homeowner, the homeowner can walk away to start over again by renting at less than the defaulted payment or buying a different property at market value and making lower payments that relate to values in the current, depressed market. Whether the person can afford to make the original payments s/he promised to make is irrelevant.

The foreclosure process takes a long time, especially now with the extraordinary volume of distressed properties and government requirements on any number of things, including modifications. The playing field here is very complex at the moment, which is making the foreclosure process take even longer. And, in turn, delaying the market correction with so many distressed properties in limbo.

The process for "foreclosing" on other collateralized loans, like car loan, is a lot more streamlined.

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FreshTopEnd
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FreshTopEnd 5/8/2011 4:20pm
5/8/2011 4:20pm
UpTiTe wrote:
Wht most people don't get is that when you walk away from a house, the bank 75% of the time will sue to make up for...
Wht most people don't get is that when you walk away from a house, the bank 75% of the time will sue to make up for the loss. If they walk from a 300k house and it goes for 100k at auction the bank will go after them for the other 200k. Big banks don't do it as much because its a hassle, but little banks and savings and loans will.

So in a few years all these people will be getting notices to appear and if they don't they will get everything garnished.
You're wrong. See above.
newmann
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newmann 5/8/2011 4:28pm
5/8/2011 4:28pm
I've bought a couple of foreclosures here lately and all I can say is.....WOW. It's amazing what filth some people will live in. Going to try and streamline my search more towards distressed sellers than distressed properties.Sick
borg
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borg 5/8/2011 6:49pm
5/8/2011 6:49pm
FreshTopEnd wrote:
Residential real estate lending is a little different from most other areas. For a variety of reasons, in most if not all states, generally the debt...
Residential real estate lending is a little different from most other areas. For a variety of reasons, in most if not all states, generally the debt on a loan secured by a mortgage (judicial foreclosure states) or deed of trust (non-judicial foreclosure states) on a residence is non-recourse. In other words, the lender has to look to the proceeds of a foreclosure sale to satisfy the debt and cannot pursue recovery of any deficiency between the amount owed on the note and the proceeds of the sale.

So, if someone borrowed $500k to buy the house and it's now worth $250k, the reasoning is that the homeowner is now paying more than the property is worth. Because the bank can't recover the other $250K deficiency from the homeowner, the homeowner can walk away to start over again by renting at less than the defaulted payment or buying a different property at market value and making lower payments that relate to values in the current, depressed market. Whether the person can afford to make the original payments s/he promised to make is irrelevant.

The foreclosure process takes a long time, especially now with the extraordinary volume of distressed properties and government requirements on any number of things, including modifications. The playing field here is very complex at the moment, which is making the foreclosure process take even longer. And, in turn, delaying the market correction with so many distressed properties in limbo.

The process for "foreclosing" on other collateralized loans, like car loan, is a lot more streamlined.
The reference to car loans was tongue in cheek but I do understand what you're saying. My problem with fannie mae's reasons for why they are still experiencing defaults is what I am questioning. The drop in home prices was dramatic in '08 and 09'. It then began to slow down and in many places around the country only dropped slightly. The recent declines are very small and only in a few areas. It just seems that they are passing off the blame for their losses on something like an unforeseen drop in property values when the real culprit is the fact that they purchased crap loans. Loans that would probably not be repaid even if property values didn't go down at all. I understand why someone would walk away from a home that they bought at the top of the market with little or no money down that lost half it's value. They have nothing to lose and everything to gain. That's the problem. I went through the housing slump in the 90's when my own property lost 20% in value but I never considered walking away from it. I had too much invested. And that's the crux of the current problem. Fannie mae bought loans that were made to people who had no skin in the game. Blaming it on property values dropping 1 to 2 percent for the quarter is bullshit.

AP story
oldschoolmxr203 5/8/2011 7:39pm
5/8/2011 7:39pm
newmann wrote:
I've bought a couple of foreclosures here lately and all I can say is.....WOW. It's amazing what filth some people will live in. Going to try...
I've bought a couple of foreclosures here lately and all I can say is.....WOW. It's amazing what filth some people will live in. Going to try and streamline my search more towards distressed sellers than distressed properties.Sick
Theres real money to be made from foreclosures,

But also you have to be willing to work, and have a vision of what it could be,
Most of any profit from flipping houses is ate up in labor costs, so the more of the work you do your self or with cheap labor, the better your profit could be, but depending on the area of the country where you live, it might not work, has to be a demand, in the area where i live is a big army base, and rental housing is getting scarce, the more us army guys that come, more and more housing will be needed, all it takes is some money, good credit, and be willing to take a chance.
jtomasik
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jtomasik 5/9/2011 7:25am
5/9/2011 7:25am
The buys here in Colorado's front range aren't that fantastic. Banks are holding inventory in fear that if they release too much, they'd be shooting themselves in the foot by overwhelming the supply side and prices would drop out. Add to that our market isn't nearly as volatile as some (like California, where homes that sold for $350K back in 2006 are now half that price). I'm shopping for a duplex, and the deals are so-so. Heck, the biggest problem has been finding a realtor that wasn't just lazy and greedy. I just about shot the last one I had.
dirthead1
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dirthead1 5/9/2011 8:03am
5/9/2011 8:03am Edited Date/Time 5/9/2011 8:08am
I just bought a foreclosure last month after having been out of the market since late 2004. Like newmann said, I had to put a ton of work into myself both structurally and cosmetically. Now I have a home with an ocean view for less than 50% I planned to spend. Construction workers are really willing to work for peanuts right now. I had some people bid really low just to stay in work without having to even pressure them. Too bad inflation is so high...
UpTiTe 5/9/2011 5:08pm
5/9/2011 5:08pm
newmann wrote:
I've bought a couple of foreclosures here lately and all I can say is.....WOW. It's amazing what filth some people will live in. Going to try...
I've bought a couple of foreclosures here lately and all I can say is.....WOW. It's amazing what filth some people will live in. Going to try and streamline my search more towards distressed sellers than distressed properties.Sick
If this is what you want to do, start talking to banks. If you're a proven buyer with serious intrest they will put you in contact with people in trouble. I got one from an old couple that wanted out, they owed 81, I gave them 15k and tookit over. I put 5k into it and sold it for 155. While that was good, I financed the house for 145 and put 40k into a savings account before it even sold.

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