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:

Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington

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.
646-961-3818
billyoung222@gmail.com