What the economic numbers don't say.

[GROUCHO MARX]

This is my tale.
My niece and her husband bought a home in 2006 without putting a penny down, for about $280k. They filed for bankruptcy 3 years ago and were able to keep the home.

Last week they were forced to get a new car due to an engine blow up (the Head) on a Sienna van with 190k miles on it. They were able to get 7.xx% financing on the new car due to the fact that they had paid their bills in a timely fashion after the bankruptcy.

Here's the kicker. They have not made a payment on their mortgage or taxes on their home since September of 2010. Their home is not in foreclosure, technically, it's up for short sale. The short sale asking price is above what they paid for it and about $100k less than the market. It makes one wonder how many other hidden gems are buried in the economic numbers?

 

[Burt]

Originally Posted By: GROUCHO MARX
The short sale asking price is above what they paid for it and about $100k less than the market. It makes one wonder how many other hidden gems are buried in the economic numbers?


You say they paid their bills timely after bankruptcy, but did not pay their mortgage? Didn't this show up on the credit report?

If the sales price is above what they paid for it, then the bank gets its principal back and recovers some of the unpaid mortgage payments, right? Where is this house located that it has appreciated from $280 to $380k during this downturn?

Too bad they did not sell when they could a made a profit and were not too far behind in payments.

 

[Torino]

Let no good deed go unpunished. John--Las Vegas.

 

[Cutehumor]

I bought a short sale last year. first, you can not qualify for a short sale if you pay for your mortgage. your asking the bank to take a loss on a short sale, but you can still pay your mortgage? their assets had to be basically zero to qualify.

In my case, the buyers bought the home for 294k. sold in a short sale for 382k, but they took out a home equity line for 400k when the market was hot. so, after commissions, the bank got 353k out of the 400k they were owed. pretty good I say on their part.

 

[highmilegeguy]

This doesn't make sense.

Home eq is different than a 1st mortgage. The 1st lien holder gets paid 100% before the 2nd lien holder, namely, the home eq loan bank.

So some bank with the 2nd lien home eq took the entire hit.

It is disturbing how some people are able to get away with highway robbery stiffing their creditors and still get credit while others who pay their bills get sky high rates and fees.

I've come to believe that crime pays and so does being a irresponsible deadbeat.

 

[FowVay]

I'd rather be poor and pay my way in life than to leave my debt burden on someone else's shoulder.

Shrugging one's responsibilities is hardly what I'd call a gem in the rough. We've become a deadbeat society unfortunately regardless of how it's sugar coated.

 

[Drew99GT]

Originally Posted By: FowVay
I'd rather be poor and pay my way in life than to leave my debt burden on someone else's shoulder.

Shrugging one's responsibilities is hardly what I'd call a gem in the rough. We've become a deadbeat society unfortunately regardless of how it's sugar coated.


I'm with you. These people who are still trying to keep up with the Kardashians when in reality, if they actually had to pay their way and our economy wasn't based on free money, credit, and bankruptcy, they likely wouldn't be able to afford a double wide.

I consider them thieves because they're stealing the future health of the US economy, but then again, I guess the people who make the rules and pass the laws want our system to be exactly like it is.

Sigh.

 

[Drew99GT]

Originally Posted By: Burt
If the sales price is above what they paid for it, then the bank gets its principal back and recovers some of the unpaid mortgage payments, right? Where is this house located that it has appreciated from $280 to $380k during this downturn?

Did they have a second mortgage or something, or have the unpaid taxes and mortgage payments piled up with interest to make it a short sale?

 

[dave munson]

Freaky stuff. This story is actually common in the "the government lies to you" type of blogs and web sites.

Because how the government reports statistics (unemployment, inflation, etc) changed so much the last few years, (the government makes ---- up) guys at a web site called shadowstats reports how it use to be calculated. I.E. if the gov never changed how they calculate unemployment in 1994, unemployment now would be 22%, not 9%. shadowstats.com

What would you think now, today, if the government unemployment rate was 22%. Just like unemployment during the depression. Well, it would be 22% if they calculated it the same but they don't.

You would think they would be more than able to save up enough for a car if they were not paying their mortgage. Anyway, I pity the kids. Banks are evil and when you get their ire up, they have no qualms about bringing evil to bear. If they can walk away, and get away, good for them.

Buy your niece Dave Ramsey's book on money management.

 

[Al]

I don't think its hidden at all. It comes out as a drag on the economy. Ultimately reflected in lower earnings for lending institutions.

But its still small potatoes in that we are living on borrowed money. Watch Greece I think well see the near future for us.

Also I think most people (even ones with noble intentions)..would stick it to society rather than see their families go without. But probably Groucho's relatives decided that living above ones means was a non-issue.

 

[Drew99GT]

Originally Posted By: dave munson
Anyway, I pity the kids. Banks are evil and when you get their ire up, they have no qualms about bringing evil to bear. If they can walk away, and get away, good for them.



Sure, some of the big banks are doing some questionable things in the mortgage and foreclosure debacle, but most people that got screwed in the housing collapse did so because of their own greed, materialism, and money mismanagement.

But then again, if people hadn't taken the bait in the last decade with no down payment mortgages and the prospect of cheap and easy home ownership with the fallacy of ever increasing home prices, the economy would have tanked well before 2007.

That's what ya get when McDonalds is the leading job creator.

 

[dparm]

Originally Posted By: highmilegeguy
This doesn't make sense.

I've come to believe that crime pays and so does being a irresponsible deadbeat.



Agreed. Those of us in the middle get the shaft. I pay my bills, have a single loan (car), and carry very little credit card debt. No student loan debt either. For a 26 year old I think I'm doing well with my credit, but I don't really get cut any breaks or whatever.

And to answer your questions in advance, my credit utilization is fairly low, I do not have an insane amount of hard credit pulls, and I've never ever made a late payment or gone overbalance.

Honestly my next car purchase might just be all cash.

 

[dave munson]

I doubt it was a conscious decision at the time for them (that they really thought they would end as they are). When I purchased my house, I remember that loan officer told us (me and DW) how much we qualified for when we purchased a house. The difference is that they believed their loan officer and I told mine he was stupid.

No one told them that the prudent rule of thumb is to buy a house that costs ~2x annual income of the lowest paid spouse. (Maybe 3x if it is a career and not a job).

What the bank / loan officer told me was that we qualified for a 4x our combined annual income.

There is a big difference between those numbers. One is almost guarantied to lead to bankruptcy. There will be more sad news over time. The bank will not set them free. Odds are, financial difficulties will lead to divorce. You are more likely to get rich at the tables in Vegas than beating those odds. Over time that house will break that family. Those kids are not out of the woodwork yet and maybe by not paying the mortgage can save enough to get out of this still a whole family.

 

[dave munson]

Not true. Behind McDonalds story on that one time job creation numbers is a government scam. McDonalds cut a deal that they got a health care coverage waiver from the federal government for hiring a few fry clerks. Their hiring was part of a deal.

McDonalds saved $$millions$$, $crewed every low paid worker they had, hired a few thousands fry servers and made good publicity. By $crewed I mean their workers will have worse medical coverage than anyone else working in america, who are at least protected by obama-care.

http://www.usatoday.com/money/industries/health/2010-10-07-healthlaw07_ST_N.htm

Side calculation: average wage of these new jobs is 7.50, lets call it $8/hour, $16k per year means they could afford a house of $32k assuming that the worst paid spouse works at mcdonalds. Keep in mind they have real bad health insurance and medical things (including pregnancy) is one of the leading causes of bk.

 

[rshaw125]

Originally Posted By: Al
I don't think its hidden at all. It comes out as a drag on the economy. Ultimately reflected in lower earnings for lending institutions.

But its still small potatoes in that we are living on borrowed money. Watch Greece I think well see the near future for us.

Also I think most people (even ones with noble intentions)..would stick it to society rather than see their families go without. But probably Groucho's relatives decided that living above ones means was a non-issue.


Greece. Don't forget that the US taxpayer is part of their bailout through the IMF. Another entity that we should have cut all ties with decades ago.

 

[Mr Nice]

I have never understood why middle class folks think they make much more money than they really do and get into so much debt ?

I've read that some people in FL have not made a mortgage payment in almost 3 years due to the courts being flooded with cases.

Millions of low paying McJobs with zero benefits in today's economic times. Sad but true. Our economy is in a lot worse shape than they want us to believe, so are the unemployment numbers.

 

[dave munson]

Originally Posted By: LT4 Vette
I have never understood why middle class folks think they make much more money than they really do and get into so much debt ?


Because the rich are too greedy and stupid enough to provide the money thinking that when the middle class can't pay they can just enslave them?

No offense meant. Really. I just can't believe that you think like this.

Thinking it through, what you said, I don't believe that I am or should be considered "middle class" anymore. I think I am now poor class.

 

[rshaw125]

Originally Posted By: dave munson
Because the rich are too greedy and stupid...

On the contrary most of the people who I know that are 'rich' are pretty smart and also work long hours. If you're 'poor class' some of the blame is certainly yours.

 

[Mr Nice]

Dave,

Wealth isn't how much you spend to impress (expensive car, toys and McMansion)....

its how much you save and invest over a long period of time. My wife and I are middle class and we have almost 3 years worth of our combined gross pay in cold hard cash saved in the bank (excluding investments / retirement accounts) and I just chuckle when other folks say that they are broke because of their foolish spending habits and over inflated ego. We save 30% of our gross pay for retirement and look forward to the future.

We know people that are approximately the same age and in same income bracket and all they do is cry about how broke they are but refuse to accept the fact that they are middle class. I know a school teacher with a brand new BMW SUV and she only make about $45,000 per year.

 

[Bob Woods]

Some lenders ask to be screwed, back in the late nines I refied a rental property, the morgage broker offered me 135% financeing, told me it was a win/win for both of us. I told him no, just refi my current loan balance as my goal was to reduce the APR to increase the cash flow on that property. Now days FDIC pays the lender to service in default morgages so that to most of us it looks like they are losing when in reality they turn a profit at the expense of the taxpayer