First, visit - The Cost Of Credit.
So the slightly underwater homeowner I profiled was wrestling with the question of whether or not to go into his pocket, make his mortgage lender whole, and preserve his credit.
Here's an excerpt from an email I received from that dude today. His wife will be referenced by "Judy":
So Judy and I met up with one of her friends for lunch today. Her mortgage (on a condo) was $198k, and she knew the value dropped by 33% in the last year (they are now listing even lower, around $110k)... upside down on this one by a mile. She wasn't happy making her monthly payments (although she could easily still make them) and asked the bank what her options were... could she refinance? will the bank drop the amount owed on the mortgage (essentially a short sale), etc? As you probably already know the answer the bank gave her... she decided to foreclose. A few months went by, she moved out, and was renting month to month in a nearby apartment. Then the auction begins on her old condo with a $69k sale price. Her friend then walks in with her mom and buys the place back, under her mom's name! So now her mortgage is $69k at the same place where she 'owed' $198k just three months ago! I thought about how stupid this was... 1) on her friends part for taking a mortgage on a condo in MI for $198k AND 2) by the bank. The bank (/Judy's friend) could have renegotiated the price of the condo to $130k and Judy's friend would have taken it! Instead, they sell the place for far less and take an even larger loss!
So, based on today's approximate interest rates, that girl went from paying $1,200 to a mere $420 monthly mortgage!
I just can't wait until the market tanks some more and this sharp broad holds her *mom* up for a reduced payment!
I'll see if I can find out the name of the Moronic lending bank - though it really doesn't matter because they are all doing the same thing.
Though, in fairness to them, they can't make it too easy for borrowers to simply get outstanding debt forgiving/reduced. They want one to show *distress* by missing payments before they even consider approving a short sale or mitigating one's principal.
The problem is, with the internet and Google nowadays....scheming, and rational, homeborrowers can easily find out how to work the *system* by reading blogs and whatnot.
Hmmmmm....on that note, I wonder how much money I'VE cost the banks thus far???
Obviously, not enough to boost my decimated Ultrashort Financials ETFs!