Foreclosure in 55346>Question Details

M and R, Home Seller in Eden Prairie, MN

We currently own 2 homes with solid credit and no liens/2nd mortgages, in this current political enviroment,

Asked by M and R, Eden Prairie, MN Mon Mar 2, 2009

should we stop paying our mortgages and use the money elsewhere? If it takes 6 months for foreclosures (which currently have a freeze on new foreclosures) we could conceivably make alot of sound investments at near all time lows in the stock market, then work a deal with the mortgage company to restructure our mortgages.

What's to stop us from doing this?

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Answers

15
REALTORS are required to follow our Code of Ethics, which has at its cornerstone a philosophy about treating all parties honestly and fairly. For an agent to suggest that it is acceptable to break a legally binding contract by telling you it is ok to stop paying your mortgage would violate our Code of Ethics and may also pose legal ramifications as well.

The arguement that you've suffered losses and are trying to recover them is not a justification to not honor a contract that you signed. That kind of logic could be turned around on you and the bank could decide to raise your interest rate so that they can recover their losses from other clients. Wouldn't you feel violated in that situation?

Plus, as others have said, there is no guarantee that you'll be able to renegotiate with the bank and if you can't there's a high probability that your credit will be so damaged as to prevent you from securing alternative financing, so you very well could lose the house. What if your investments in the stock market also fall? There's no "sure thing" in this economy.

A society with no morals is no society at all and there is a level of moral conformity that is required for society to function. If you're looking for suggestions that fall outside the realm of what is contractually and ethically the right thing to do then you should look to a forum that is not comprised of mostly professionals that are bound to follow those rules.
3 votes Thank Flag Link Tue Mar 3, 2009
I find the tone of most of these answers an epic failure, considering you're all real estate 'professionals' .

The fact that you condemn first and don't give anything more substantial than a 'you will be judged' points to a MAJOR issue in the financial structure of the housing market in general.

This point bears discussion, the spastic reaction here reflects poorly on those that took it, this was offered up as a discussion point but judging from the reaction, it's apparently going to be more than a discussion point in the months to come.

If the information isn't there, then that's a point that should be brought up, if this offers a viable solution for homeowners who are trying to recover their lost savings in their homes which they bought in a time of hyper housing inflation, without having to give them up, then as unpleasant as it is, it should be discussed.

I appreciate those that stand upon a moral platform and use it as a basis for their work and their life, what I find hypocritical is those that use it to push others into conforming to their rationality for the current housing situation, or that they use it to condemn others.

We have ALL contributed to this current situation, whether agent, buyer or broker, and full disclosure of all options, however distasteful, is the only way to move forward.
2 votes Thank Flag Link Tue Mar 3, 2009
Nothing is stopping you from doing that. It really depends on a couple of factors.

1. Solid credit will be gone if you quit paying the mortgage.
2. It also depends on how much equity you have in the homes. Are the homes upside down?
3. If you have two homes one must be a homestead and the other a rental?
4. Have you looked into doing a short sale on one of them?

It is like a tar pit and you need good stepping stones.

What is your GOAL and why?


I am in Rotary International and I use their 4 way test in everything I think, say and do.


The test is:

1. Is it the TRUTH?

2. Is it FAIR to all concerned?

3. Will it build GOODWILL and BETTER FRIENDSHIPS?

4. Will it be BENEFICIAL to all concerned?


Always do right. This will gratify some people and astonish the rest.
---Mark Twain

There is no pillow as soft as a clear conscience.
--French proverb

"Live a good honorable life. Then, when you get older and think back, you'll get to enjoy it a second time."
(Author unknown)


If you are having a true problem I will help you but not to take advantage of the system.
Web Reference: http://thedobbinsgroup.com
2 votes Thank Flag Link Mon Mar 2, 2009
Meg and Ryan,

You ask the question behind the question for most people who own a house right now. What stops you from doing this is your integrity. You agreed to repay these mortgages regardless of the "political environment".

You need also keep in mind that the law still allows banks to seek deficiency judgements under specific circumstances. You will also need to show financial hardship to "restructure" your mortgage. While at face value it sounds like a plausible plan - once you dig into the details you will find that it isn't as cut and dried as you think.

Cameron Piper
Web Reference: http://www.campiper.com
2 votes Thank Flag Link Mon Mar 2, 2009
I agree with Susan and I'd take it one step further. Such actions as the ones your are considering are simply disgusting to me. You signed 30+ pages promising to make payments on time and comply with the rules and that is why the bank gave you money. Some people go back on their word because they financially have no other choice... you are talking about going back on your word because it financially benefits you. Actions like that are no better in my eye than embezzling money from a company. While you may not know anyone at your bank, there is a good chance that someone you know has stock in your bank and each foreclosure hurts the bank's stock value. Also, ultimately all taxpayers are also being hurt by this... while none of these people are known to you, we are all real people. Non-payment of your mortgage will also dramatically hurt your credit rating for the next several years, making it very hard to get good financing terms.

Since you appear to be in a good financial situation I assume that you've acted prudent in the past with your money and are frustrated with those who have acted imprudent being bailed out of their bad decisions. The problem with society is that for it to function, we must rely on others. If the government "lets the chips fall where they may" we will all suffer from a much deeper recession/depression... I don't know many people that said they did well in the 1930's...

I sincerely hope that you'll take the ethical and moral high road and continue to be a responsible member of society... while you may feel alone in this you are not... the vast majority of us all continue to do the right thing even though it seems like quite the opposite.
2 votes Thank Flag Link Mon Mar 2, 2009
My opinion (and I'm no investment expert) you're headed down a slippery slope with that kind of strategy. I would consider the credit and legal ramifications of such actions before doing that. It's not as though your lender is going to take you're payment stoppage in stride. That type of action is construed as a true hardship situation where a person really can't make their payments, and, even then, significantly impacts the credit worthiness of the person experiencing the hardship. Which is why I suggest there might even be behavior that would be actionable or perhaps constitute fraud. I would consult an financial planning expert and an attorney before seriously considering such a strategy.
2 votes Thank Flag Link Mon Mar 2, 2009
I think you should. I know many different real estate agents that have taken the same path with investment properties in Florida. The only consequence they have seen is bad credit. So what you would need to do is put the houses in only one of your names, so when you default it will only ruin one of your credit, then you can file for bankruptcy (hopefully) and wait 7 years. During those 7 years you will have to rely on the others credit. But by the end of the 7 years, if your investments are good, you should have made quite a bit of money by then and your reserves will be so high no one will care about the bankruptcy 7 years ago.

Not sure how the bankruptcy laws work when/if you are married, so you might have to get a "divorce" first to make things work.
1 vote Thank Flag Link Tue Mar 3, 2009
Meg and Ryan
Isn't America great? With more people like you, we can milk this situation for all it's worth.

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Just curious...is this what you would ask if your kids knew what you were doing?

What if God knew what you were thinking of doing?

By the way, may I have the address of your properties?
1 vote Thank Flag Link Mon Mar 2, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
I guess the answer to your question would depend on your morals and what you believe.

I believe the fundamental idea behind these "stimulus" packages is to help people in need and to get our economy back on track.

A couple other things for you to consider are:
If you stop paying your mortgage your credit will be affected plus you will probably incur some additional penalties or late charges. In addition, what if when you go to "restructure" your mortgage the lender isn't willing to do that or meet the terms you want? Then what could happen? Is the risk worth the reward?
1 vote Thank Flag Link Mon Mar 2, 2009
Many of the reasons behind foreclosures are health problems, loss of income and divorce. There is a certain segment of the foreclosure market are trying to game the system. That is how I took your question if that is not how you meant to frame the question then I am sorry.

In Richfield (it appears where you are from) in 2002 the median sold price was $180,500 at the end of 2008 it was $185,500 a gain of $5,000. The median peak in Richfield was 2006 $223,750. The average were a little different but similar. I have heard before that from the 1950’s through the 2007 the average increase in the price of The Metropolitan area has been 5%. Real estate number one is a place to live and is a long term investment and should be viewed as such. A home purchased should be lived in for at least five years because just to cost to buy and sell a home is around 10%.

I have said for a number of years the long term credit market is broken, cars, houses and big ticket items. It assumes that we all have consistent income and jobs like 40 years ago. It is no longer true today. I have consulted with many clients on job transition. The long term credit market should allow for a provable hardship say loss of income, medical problems, etc. It should then allow a 3, 6, 9, 12 month moratorium on payments. It would then roll the missed payments interest into the long term loan. If this had been done in the past we would have a very small problem instead of a very large problem.

I my humble opinion the underwriters that certified the mortgage pools were A rated are the most of the problem. Bad and good were in the same pool. The good ones refinanced over time and the bad ones couldn’t so what was left were the bad loans in the pool. This has been piling up for many years.

A raising housing market covers a lot of sins, fraud, and equity taken from homes that should not have been taken. Keep up with the Joneses. When the market dropped most (not all) of it was exposed.

I have never sold a home to a buyer without first doing a market analysis so it was a right price in the current market at that time. I never recommended a buyer finance with an adjustable rate unless they really wanted to. I educated them on each different mortgage they considered. With my client and ONLY DID WHAT IS IN THEIR BEST INTEREST not mine. I lost clients (income) because an inspection found a problem and we cancelled the purchase agreement. The home sold to someone else. I always used the most experienced vendors in inspection, warranties, title companies and mortgage. They had many options to choose from. I would not do anything that was in even the gray areas.

Under state law we have a Fiduciary duty to the client we represent. We are required by state law to owe these duties to the client, Loyalty, Obedience, Disclosure, Confidentiality, Reasonable Care and Accounting. If you want more information on Fiduciary duty please let me know I can send anyone a PDF.

I am not looking for any business but I am trying to change the world for the better one person at a time. I work on improving myself. Here is something I use everyday of my life.

Acceptance
And acceptance is the answer to all my problems today.
When I am disturbed, it is because I find some person,
place, thing, or situation -- some fact of my life --
unacceptable to me.
Nothing, absolutely nothing happens in God's world
by mistake.

Until I can accept life completely on life's terms, I cannot be happy.

I need to concentrate not so much on what needs to be changed in the world as on what needs to be changed in me and my attitudes.
0 votes Thank Flag Link Tue Mar 3, 2009
Thumbs up to you,too,Keith!
0 votes Thank Flag Link Mon Mar 2, 2009
Thumbs up to you,too Bill! I admire the ethical stance of everyone who responded on this page.
0 votes Thank Flag Link Mon Mar 2, 2009
Good point, Jerry and Sue. I know there are some lenders who are restructuring mortgages on second homes, but investment properties, I've not heard of any.
0 votes Thank Flag Link Mon Mar 2, 2009
Great answers below, but also consider that the proposed solutions for helping the foreclosure crisis only applies to your primary residence. The likelyhood of getting help with your second home is nil to none.
0 votes Thank Flag Link Mon Mar 2, 2009
Thumbs up to all of you for some really outstanding answers.
0 votes Thank Flag Link Mon Mar 2, 2009
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