Foreclosure in today's USA?

Question

To foreclose or not to?

The economy is going to c**p, the President signed a new bill to protect the foreclosee from penaltees from the banks, no one has any idea as to when it's going to get better. People aren't buying houses for what you owe, short sales aren't working (as most banks won't work with agents now), and 150 banks are expected to go under.

So when is it time to close shop? How long do you keep suffering and struggling to keep something in fear of having a mark on your credit for 7 years (although many companies are saying they are becoming sympathetic to foreclosures)? When is time to realize your investment is no longer an investment?

How do these homeowners that foreclose accept the fail of foreclosure when it's not really their fault? What is our goverment going to do for us? When do you say when?

Answer 1

The market is soft right now.  That happens as part of the cycle.  If you can make you payment, you should sit tight.

In 1996 I ran into someone I knew who was about to mail the keys to her Marina Del Rey CA condo back to the bank because she was upside down in her mortgage and she had recently married someone who owned another house, where they both lived.  I doubt she owed more than $75K on the condo.  I often thought about that move in 2005, when that condo was probably worth about $500K.

What is real estate worth - what someone will pay for it.  If the property is in California, there always seems to be a never ending flow of people coming here willing to pay substantial prices to live here.  Sit tight.

Answer 2

if houses are too expensive, then people will not be able to buy them, and the current sellers will not be able to sell.  house prices kept going up and up until nobody could afford to buy anymore, now house prices are falling and will keep falling until they are cheap enough so people can once again afford them.  

the government can't do anything, in fact the government is the one that caused the problem.  all the "affordablily" programs such as FHA, HUD and Fannie Mae sucuritization of loans have the effect of driving up prices.  the goverment allowed banks to increase leverage though fractional reserve lending, further pushing up prices.  eventually home prices got so high, the only way people could buy there was with subprime, Neg-AM, or liar loans.  now all these programs are falling apart. and the banks that helped prop up housing prices out of the reach of the common working family by making crazy loans are failing as are the gov't agencies that sponsored them.

housing is not supposed to be an investment, it is supposed to be a home, a place to live to raise your kids and one day give to them. those that were foreclosed  (many not all) saw it as a gamble.  a quick path to riches. they either bought a house they couldn't afford, or they borrowed money they never earned and spent it. now they lost the gamble, and now they are walking away. i wouldn't count on housing being a good investment for a long time to come, nor would i trust the government to fix it.