so how exactly does foreclosure (house) work?

[BlahBlahYouToo]

hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

 

[maddogchen]

people are foreclosing because the value of the house has fallen and the interest on their adjustable mortgages have risen. Now they can't afford the monthly payments and they owe more than the house is currently worth. They have no way of lowering the interest rate because no one wants to take the loss so they are forced to foreclose.

 

[Slew Foot]

Recently, lots of people didnt have a down payment, so when values go down combined with their payments going up, theyre screwed.

 

[Jumpem]

Originally posted by: Slew Foot
Recently, lots of people didnt have a down payment, so when values go down combined with their payments going up, theyre screwed.

Pretty much. We financed 106%, but don't have issues making the payments.

 

[Ns1]

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

so lets say you pay $500k for a house.
you are a fucking retard and think "hey, this housing boom is going to continue FOREVER", you get in some teaser ARM mortgage and pay interest only for a few years, knowing that you will have to repay that principal. sometime. BUT you plan to sell it when it appreciates 200k in 12 months!!!
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
all of a sudden the economy goes to SHIT. rates increase, ZOMG. soon your rates will adjust and you'll have to start repaying principle, ZOMG, 4k a month in mortage?!?!
then you try to sell your house only to find that you can't sell it for more than what you owe and repay the loan

= fucked

 

[bctbct]

Most likely people dont have the funds to carry the ARMS. If their payment doubled and they had no way to get the money for the payment, after 30 days they would have a hard time borrowing money from anyone. 3 months later you are out.

I dont know what to think of the whole mess. On one hand I feel people should take responsibilty

On the other hand if you have lots of homes in foreclosure that reduces the value of all homes.

The banking industry did set this whole failure in motion by relaxing their loan qualifications.

 

[flunky nassau]

so is foreclosing the housing equivalent to declaring bankrupcy?

 

[BlahBlahYouToo]

ok, but is my concept correct?

 

[BlahBlahYouToo]

Originally posted by: maddogchen
people are foreclosing because the value of the house has fallen and the interest on their adjustable mortgages have risen. Now they can't afford the monthly payments and they owe more than the house is currently worth.

basically what i said with "1. you owe a lot more on the house than you can get by selling"

 

[Slew Foot]

Originally posted by: BlahBlahYouToo

1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

Not entirely.


If you can afford the monthly payment you dont need to foreclose.

If you find a buyer, but they wont buy at a price that covers the loan balance, you may be hosed.

Foreclosure usually occurs when, you cant afford the monthly payment, and you cant find a buyer to pay the balance of the loan.

There are other nuances, but really, there are like 50 different housing threads on ATOT and P&N look them over.

 

[bctbct]

Originally posted by: BlahBlahYouToo
ok, but is my concept correct?

Not really, your description is more like a person who buys a house and realizes he wants to sell it to reduce his monthly expenses.

If someone goes to foreclosure they have most likely tried to borrow from banks, family, friends. Been denied by all of them.

They have probably exhausted all means to keep the house. Exception would be investors who decide it better to take the credit score hit than throw money into a bad investment.

 

[child of wonder]

My wife and I made sure we did our homework when we got our home over a year ago and didn't bite on the ARM bullshit. Our lending agent was really straight forward and helpful.

What it all boils down to is people living beyond their means and the banking industry happily making that possible -- only this time the banks have let so many people do it that it created an artificial period of prosperity which will be followed be a period of lube free ass pounding as consumers and banks take it hard up the rear.

However, what's upsetting is that this bubble was created only because the American people were doing what the media and government tells them to do: be good little consumers!

 

[Caecus Veritas]

ok... i think most people have the concept down pretty good. but one thing - it is the lender that is foreclosing the property when they declare your mortgage to be in default. once the loan is declared to be in default (usually after 60+ days of delinquency), the bank will file a notice of default against the property title. once that shit happens, you can pretty much forget about the selling the house cuz the value will drop even further as vultures hang about waiting for the foreclosure auction. after the notice is file, the bank will then proceed with its liquidation process.

 

[JEDI]

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

 

[BlahBlahYouToo]

Originally posted by: Slew Foot

Originally posted by: BlahBlahYouToo

1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

Not entirely.


If you can afford the monthly payment you dont need to foreclose.

my situation states that you lost your job. therefore you cannot continue the monthly payments after your reserve runs dry.

If you find a buyer, but they wont buy at a price that covers the loan balance, you may be hosed.

that's obvious isn't it? i did state you owe more than you can sell for.

Foreclosure usually occurs when, you cant afford the monthly payment, and you cant find a buyer to pay the balance of the loan.

There are other nuances, but really, there are like 50 different housing threads on ATOT and P&N look them over.

 

[BlahBlahYouToo]

Originally posted by: JEDI

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

what does that accomplish?
screwing your credit for the next 15 years?

 

[Ns1]

Originally posted by: BlahBlahYouToo

Originally posted by: JEDI

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

what does that accomplish?
screwing your credit for the next 15 years?

not paying 6k/month on a mortgage

 

[child of wonder]

Originally posted by: JEDI

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

Unless this imaginary person only plans to live in their house for 3-4 years max, then this isn't a very sensible approach if they can afford the payments.

The market will rebound eventually. Everything has it's ups and downs, this is no different.

 

[z0mb13]

Originally posted by: JEDI

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

you forgot to mention the part where your credit gets shot for years

 

[waggy]

Originally posted by: JEDI

Originally posted by: BlahBlahYouToo
hypothetical situation:

so lets say you pay $500k for a house.
you put a down payment of $100k leaving you with a $400k balance.
lets say you lose your job, but you have a couple months of payments in the bank that will keep you going until you sell the house.
you sell the house 1 month later for $500k and you pay the bank what you owe, which is $400k and you have back in your pocket your initial $100k investment.

of course nothing is ever so simple, so you lose some money for closing costs, lawyer fees, agent fees, etc.
so maybe you would be out $25k (not including interest on the principal, RE taxes, etc).

the only time i see a problem is:
1. you owe a lot more on the house than you can get by selling
2. you cannot find a buyer

do i have this correct?

$500k house, $500k loan

house depreciates to $400k. even tho you can still make payments, it's nuts to do this financially.

walk to bank, drop off keys to loan officer. you're done.

simple as that

personally i think thats a silly idea. if you thought the house was worth 500k and you can afford it then pay for it (i guess thats if you plan on staying in the area for more then 3 years).

though i don't see why anyone would buy a house when they are only planning on staying in it 2-3 years.

 

[BriGy86]

I think a lot of this can be avoided if you simply stay away from ARM loans. at least that's what my dad told me never to get.

 

[waggy]

Originally posted by: BriGy86
I think a lot of this can be avoided if you simply stay away from ARM loans. at least that's what my dad told me never to get.

yeap. i would NEVER get a ARM loan. just seems a bad idea.

 

[amdforever2]

Drop the keys off at the bank and you're done?



Right.


You: ZOMG Here's the keys I don't want the house anymore.
Banker: Aww I understand no problem I'll take the house worth $400k even though we gave you $500k to buy it. Merry Christmas!



BULLSHIT


You don't just walk away and take a credit score hit.

The bank can collect the $100K deficiency from YOU!

 

[BarneyFife]

They "can" collect but rarely do.

 

[Caecus Veritas]

Originally posted by: amdforever2
Drop the keys off at the bank and you're done?

Right.

You: ZOMG Here's the keys I don't want the house anymore.
Banker: Aww I understand no problem I'll take the house worth $400k even though we gave you $500k to buy it. Merry Christmas!

BULLSHIT

You don't just walk away and take a credit score hit.

The bank can collect the $100K deficiency from YOU!

generally you can, or at least it has been. you just walk away and banks will eat the loss and recover as much as they can from the foreclosure... but with the tougher new bankcruptcy laws, it may be more difficult now.