Monday, January 25, 2010

Big N.Y. Housing Complex Is Returned to Creditors! Why Are You Still Struggling to Pay Your Underwater Mortgage!

Quote from the NY Times, 1-25-10: "This month, the partnership headed by Tishman Speyer defaulted on $3 billion in debt on the properties." (Stuyvesant Town) 110 buildings, over 11,000 homes (apartments)

Did you get that? The owners defaulted on #3 Billion dollar mortgage, 110 buildings and "Returned them to creditors", sent the keys to the bank?

But didn't they have a "Moral Obligation" to pay their legally contracted debt?" Are they not "Immoral Speculators" according to former Treasury Sec Paulson? How naughty, seems the loss of money was too important to them.

And how about you? Are you are still struggling to pay off your underwater mortgage, throwing your children's college future, your retirement security, the money you need to maintain your lifestyle under the bus, driven by the craven, greedy, immoral bankers who created your living hell in the first place?

But you love your house and don't want to lose it? You lost it either when you signed the contract that you were never meant to be able to repay or when Lehman Bros went bust, kicking the lid off the rotten financial garbage that was festering under the Wall Streeters who produced it, spewing all over and contaminating the entire financial system.

Oh, your credit rating...? Well, if you want to be one of people with the highest credit scores living under the viaduct when you eventually lose your home, once your 401(k) runs out, I guess you should keep on paying your mortgage.

In reality, your credit rating will rebound, even enabling you to buy another house in a few years. Buy that new car Before you default on your mortgage!

A more serious matter is that in most states, the banks can come after you for the amount of money you owe them that they do not collect from the sale of your home. This is called a deficiency judgment.

If this amount will be great, suggest you declare bankruptcy before defaulting on the mortgage. This will prevent the banks from coming after you as well as the IRS, which, ironically can levy a income tax against you based on the amount of money you Did Not pay your lender. Seems the joke is that the IRS figures since you still have that money in your possesion, they tax it as income to you!

In some, so-called, non- deficiency states, the banks cannot come after you for any deficiency betwen what they collect at the sale of your house and the remaining balance on your mortgage. These states are:

North Carolina
North Dakota

You may still have to deal with the IRS as far as taxes on the unpaid mortgage balance goes, which requires a bankruptcy to avoid.

Think about it. How much could you rent a comparable property for? One half your mortgage payment, one third your mortgage payment?

How much money are you underwater? $50,000, $500,000? Homes will never appreciate the way they did during the boom in our lifetime. It could take decades before the values increase to cover your mortgage.

You may not be aware, but we are in the eye of the mortgage typhoon. The subprime mess was the leading edge, the massive defaults of option arm adjustable mortgage defaults, most of which are prime borrowers; the trailing edge of the storm will hit later this year and blow away another big chunk of your equity!

Another possibility, and one that we suggest all our clients explore, is the possibility of recouping a good part of your down payment, the money from your 401(k) or even amassing a grub stake to start over, by simply stopping your mortgage payments, but remaining in your house!

This will not work in states like Texas, where trust deeds are used. They can have you thrown out of your house in 90 days!

However, most states are mortgage states and the process is far more convoluted and delay prone. We have shown people how to game the system and remain in their homes for up to 3 years, while banking their mortgage payments!

There is also a good possibility, we believe that voluntary defaults will become so common that the banks will have to capitulate and reduce the balances on their mortgages to more realistic market levels. If you are still in your home when this happens, say in 2012, a Presidential reelection year, and you have some money to make a lump sum settlement, you may even be able to keep your home.

Obviously, this is a complicated issue, but the wrong answer can mean financial ruin for you and your family. It, as Tishman Speyer demonstrated to the tune of $3 Billion dollars, not a moral issue, just plain old dollars and sense!

So, you won't get a gold star in your bank book! So what?

If you would like a free consultation to discuss your specific situation, do not hesitate to give me a call.

Bill Young, Personal Financial Coach, Former Bank Loan Officer for the Dime Savings Bank of Brooklyn.

Friday, January 8, 2010

Underwater? Stop Paying Your Mortgage, Stupid!

University of Arizona law professor. Brent White agrees with my recommendation to those who owe more money than their home is worth! (Underwater)Stop Paying Your Mortgage, Stupid!

I have been arguing for more than a year as I saw people's lives being destroyed by using their retirement funds, college funds, etc to pay on a mortgage on a house that is worth less than the loan. Invariably, when the funds ran out, they lost the house anyway, leaving them totally destitute. This makes no financial sense. Corporations and businesses don't play by these rules. Case in point: Maguire Properties Inc., one of the largest commercial landlords in California, walked away from seven prime office buildings in Los Angeles and Orange counties last year, defaulting on loans worth more than $1 billion. "The deal no longer made financial sense!"

Tishman Speyer walked away from a $3 Billion mortgage on 110 buildings in NY's Stuyvesant Town after property values fell to half of the purchase price.

Sunshine Properties, a major hotel owner let a string of Hyatt's, Hiltons and other marque properties go back to the lender when their values fell.

Morality? Please! What would Ben Bernanke, or Tim Geitner do if they were in such a dire situation?

We are under no obligation to adhere to any moral standards that are different from the banks who made the immoral loans that brought down the financial system. They knew what they were doing, but only saw the dollar signs generated by the lending frenzy.

Then, when the inevitable defaults happened, will they write down the balance of your underwater mortgage so that you can pay it off? You mean the banks taking a real loss, are you kidding? They even strong armed the government, (you and me) to pay off their paper losses! They have totally forfeited any moral claims on borrowers, in my estimation.

As a former bank loan officer myself, I will show you how to stay in your home for 12-36 months without ever making an additional mortgage payment, allowing you to recoup some of your lost money so you can accumulate a nest egg for your future.

So, if you are underwater in your home, get over it. Think of the money, like a business person. The house has been lost due to the financial schenanigans of the banks. Save your money, prepare to find a cheaper rental. It is even possible that you will be able to buy another, similar or better house in the future at a much better price.

Your credit may be bad for 7 years, so buy that car or whatever before you do this but think about it, do you really want to be the one with the highest credit score among your homeless mates living in a card board box under the viaduct?

If you would like to know how you can stop paying your mortgage and remain in your home for 12-36 months, contact me.

Bill Young, Personal Financial Consultant

Sunday, January 3, 2010

What a Farce! The Making Home Affordable Program

The reality?

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)

“I cried,” she said. “I was hysterical. I bawled my eyes out.”

Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says.
Bill's Comments
The sale of her house was subsequently overturned in court, but not before Jaime had spent her last dime, and she still does not have a modification!

My to my clients is if you can no longer afford your home, especially if you are underwater, to stop throwing good money after bad. Accept the fact that the house is lost, why lose your children's college money, your retirement funds or your savings?

You will probably never see a return on that money. Your home's value will probably not return to its purchase price in your lifetime, especially if you are over 40.

If you are in a mortgage state, such as NY, Michigan, etc. I recommend that you do not move out! I can show you how to stay in your home for at least 1 year, maybe longer. In NY we have helped former homeowners remain in their homes for up to 3 years, allowing them to save thousands and thousands of dollars to use in the future.

Unfortunately, in Trust Deed States, you don't have that option.

If you want a free, private consultation with me concerning your predicament, give me a call.

Bill Young, 646-961-3818