Struggling Borrowers Decide to Quit Paying Mortgage
A recent publication at an independent site, iamfacingforeclosure.com, states that as mortgage prices increase, many borrowers are handing in their keys and calling it “quits.” A new term has been coined for the envelopes that lenders are receiving all over the country by borrowers walking away from their mortgage obligations: jingle mail. The popular “jingle mail” refers to the keys within the envelope sent by the struggling borrower. The publication further investigates if foreclosure is common and if it makes sense.
Foreclosure used to be a rare thing, typically resulting from job loss, illness, or a death in the family. But changes in the mortgage industry in recent years have altered the how and why of foreclosure.
Most of the borrowers who are walking away now are doing so because of increasing payments and depreciating assets. There is also the fact that the majority of the borrowers now have nothing to lose–they didn’t put anything down and therefore have very little invested.
Walking away can make sense for them because it can be less costly than going bankrupt in an attempt to save a single asset that is losing value by the day. Of course, this depends heavily upon where the borrower lives.
Different states have different rules for borrowers and lenders. For example, the state laws in California make it difficult for lenders to collect additional money after foreclosing and selling a property. In other states, like Michigan, lenders are allowed to go after the borrower for the difference.
This is really every lender’s worst nightmare. As homeowners decide to forego the duty to payoff mortgage loans in favor of foreclosure, banks will start to fold.
Ambac winner of Best Insurer Award for 2007
Many were surprised to hear that Ambac announced today that International Securitisation Report (ISR) has named Ambac Monoline Insurer of the Year. Some who are familiar with Ambac know that it’s not one of the best insurers to handle your business or funds, but the award was legitimately won by Ambac due to the company’s “number of ground-breaking transactions.” Businesswire.com reports:
The award is based on Ambac’s strong global presence and its role in a number of ground-breaking transactions in 2007, as well as from the results of ISR’s online poll.
“Ambac is honored to receive this award,” said Douglas Renfield-Miller, Executive Vice President of Ambac and Chairman of Ambac UK Limited. “Ambac has had an active year closing many noteworthy transactions. This award underscores the company’s ability to use our in-depth knowledge and expertise to help issuers and financial advisors structure innovative transactions across a diverse range of asset classes and jurisdictions.”
In 2007, Ambac was sole guarantor of award-winning deals Theatre Hospitals 1&2 (CMBS Deal of the Year - Europe) and Punch Taverns Finance (Corporate Deal of the Year - Europe). It also participated in Channel Link Enterprises Finance (Deal of the Year - Europe) and Airspeed (ABS Deal of the Year - Europe).
Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac’s principal operating subsidiary, Ambac Assurance Corporation, a leading guarantor of public finance and structured finance obligations, has earned triple-A ratings, the highest ratings available from Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch, Inc. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).
I’m not sure whether to congratulate Ambac for winning this award or to roll over and die. Ambac isn’t the most popular online insurer in the business but they do have an extensive list of clientèle whose net worth range from 100K to the millions. I have to give it up to Ambac though, for keeping in the business and using their services for “ground-breaking transactions.”
It certainly seems unfair that home owners must continue to slave away in order to payoff mortgage loans while insurers are able to skip out on their debts.
Hud Homes
Those considering purchasing a property may find bidding on a hud home to be wise investment. Declining home values have caused some homeowners (those without mortgage payoff plans) to find themselves with negative equity.
Buying a HUD home can enable one to modify their financial standing in such a way that they could potentially own the home free and clear in under 10 years.
Sydney Financial Group uses Mortgage Checking Accounts to help its clients get out of debt and pay off their home loans faster than traditional methods.
Blame it on U.S.
A great editorial has been written on LoanWorkout, regarding the blame game within the latest mortgage implosion.
Here’s a snippet:
Well, my hat is off to you citizens of America, you have not disappointed me once again. Just about everyone that responds to the articles in the Newspapers and Media that report on this now widening foreclosure debacle, has in their infinite wisdom, deemed that the distressed borrower is to blame.
They were greedy, stupid, ignorant, sleazy, lazy, crooks, opportunists, trailer trash, white trash, illegals……
No you have not disappointed me your overall ignorance and ability to assign blame, business as usual, the blame game, wasn’t me, we are above that, we are better than they are, we got our slice of the pie and we are not going to pay for theirs.
WELL GET THIS STRAIGHT……YOU ARE NOT PAYING FOR THEIR SLICE OF THE PIE.
Well said. Government bailout plans are not going to do the average American any good as far as helping to payoff mortgage debts.
Rather, almost everything that has been done lately has had the focus of assisting lenders, and bad banks rather than those that truly need assistance.
I love this piece best from the above article:
“You are paying for the greedy, sleazy, ignorant, dare I say criminal opportunists that proliferated Wall Street that created the markets for these toxic loan products and the Major Lending Institutions that actually made these toxic loans to borrowers to be delivered to those markets.”
Australia Sues US Underwriter
As US borrowers continue to default and not payoff mortgage loans, many international markets are taking a beating as a result of US held securities. Bloomberg is reporting on the latest bad news:
Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, faces legal action by Australian municipal governments after the value of their subprime-related investments dropped as much as 86 percent.
Wingecarribee Shire Council, in the Southern Highlands in New South Wales state, is suing Lehman for “deceptive and misleading conduct” in selling A$3 million ($2.6 million) of subprime-linked collateralized debt obligations, the council’s managing director Mike Hyde said in a media statement today.
Given the array of errors made by lenders in the past few years, it should come as no surprise that many investors are upset at the nonsensical and illicit actions taken in the US.
What Is Going On With Gold?
Many are surprised at the jump gold has made in recent years, increasing in value so fast that $1000 an ounce now seems likely.
Mish is offering an explanation for this:
The message behind gold is simple: Gold is acting like money because gold is money. In deflation, the value of money rises. Money is hoarded. Furthermore, in economic turmoil in general, gold is sought as a safe haven. Gold has both of those things going for it.
With leverage everywhere under attack however, there is a possibility of a sharp pullback. From what level such a pullback might occur is anyone’s guess.
Good news for those that have owned gold for sometime. Those that do not may find it a better and easier investment to simply payoff mortgage debt.
Get out of a high rate ARM with mortgage payoff
Properly managing the payoff of debt can be difficult to successfully accomplish, so getting a good method to payoff and control large amounts of debt can become a great habit or a new year’s resolution. Those looking to payoff their mortgage debt may be pleasantly surprised at the options offered them. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.
Reducing the amount of debt, whether during the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be necessary if you find yourself with a high rate adjustable mortgage loan (ARM) about to adjust upwards. In addition this can make retirement far more affordable. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, almost 50% of one’s gross income ends up being spent on a mortgage.
Mortgage payoff with less debt
To pay off Christmas debt can be difficult to manage, so finding a simple method to payoff and controllarge amounts of debt can become a great habit or a new year’s resolution. Those looking to payoff there mortgage debt may be pleasantly surprised at the options offered them. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.
Reducing the use of debt, whether over the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be particularly necessary if you find yourself with a high rate adjustable mortgage loan. In addition this can make retirement far more affordable due. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, 1/2 of one’s income ends up being spent on a mortgage.
Mortgage reduction by payoff
To payoff Christmas debt can be difficult to successfully accomplish, so getting a good method to payoff and control large amounts of debt can become a great habit or a new year’s resolution. Those looking to payoff their mortgage debt may be pleasantly surprised at the options offered them. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.
Reducing the amount of debt, whether during the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be necessary if you find yourself with a high rate adjustable mortgage loan (ARM). In addition this can make retirement far more affordable due. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, almost 1/2 of one’s income ends up being spent on a mortgage.
The Fallacy Within Housing
OptionArmageddon is seeking to open consumers eyes to lender’s questionable actions. They write:
Remember: negative amortization is the amount of interest due on a mortgage that the borrower defers to future periods. Accounting rules allow banks to count these “deferred payments” as current income. But if borrowers default on their loans, if they never make payments in cash, then “income” previously recognized has to be reversed.
Say I’m carrying a balance on my credit card; I owe interest on that balance. If I’m not paying my bill on time–if I’m making the minimum payment each month, for instance–then I’m “deferring” interest payments to the future. Wouldn’t it seem foolish for the credit card company to treat my “deferred” payments as income today? Banks that sold option ARMs are doing exactly this: watching the unpaid balance on their mortgage loans rise while counting nonpayments as income today.
If home values are increasing and borrowers can refinance, then there’s little risk to the bank that the loan amount won’t be paid back. But home prices are now falling across the nation. And defaults are rising…….
The concept behind reporting invisible (read:nonexistent) payments from homes about to be foreclosed as income seems idiotic. No wonder investors are shying away from large lenders. The borrowers will not payoff mortgage debts, and these companies are simply delaying the inevitable.