Author Topic: Pay on a 2nd mortgage for a home I no longer own?  (Read 16487 times)

MustacianInTheMaking

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Pay on a 2nd mortgage for a home I no longer own?
« on: September 24, 2013, 12:50:55 PM »
I am so excited to be here and hope you all can help. In a nutshell, I lost a home to foreclosure in Dec. 2010 and have continued to pay the 2nd mortgage ($28k). Initially, it just felt like the "right" thing to do but in the past couple of years I have been rebuilding and making that $220 per month payment has become painful.

I will be 40 this year and have less than $20k in retirement. ( Go ahead, scream at me) Remember....rebuilding over here....working towards being as awesome as all of you!

I am in CA & have talked with: Fair Housing, Springboard Non-Profit Credit Counseling, Help For Homeowners, a BK  attorney and they all were shocked that I continued paying. The attorney actually told me that in 20 years he had never met anyone like me. (Probably meant as stupid as me...lol)

Then I talked to Suze Orman and she said to ask Chase for help one more time (i.e. lower the balance, interest...anything) and if they say no, consider BK.

Then I spoke with The Office of the Comptroller and Consumer Protection Bureau which connected me with Chases's Executive office. After a 30 day review they determined that they could not help me because I no longer own the property so I just need to pay.

So now I ask.....WWMMM do? I emailed him but I know he is crazy busy....please offer your opinions and help.

livetogive

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #1 on: September 24, 2013, 02:25:37 PM »
I'm hardly qualified to answer this,  but things to consider might be the cost of bankruptcy vs the $28k plus all the interest you will likely have to pay on it.

I'm guessing a bankruptcy lawyer isn't free and 28k seems like a reasonable enough number to overcome without bankruptcy but do you have other debt?  Is it worth saving 28k less fees to hurt your credit?  How much more would it be hurt anyway?

Frankies Girl

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #2 on: September 24, 2013, 02:33:52 PM »
I'd pay it. It was a debt you took out and benefited from, and in my book, a responsible person pays their debts.

Bankruptcy is extremely damaging for quite a few years.

If you're still able to make the payments, then do whatever you can to accelerate the payoff, and then take that momentum to funnel the same amounts into building up a stache.
« Last Edit: September 24, 2013, 02:35:46 PM by Frankies Girl »

Daleth

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #3 on: September 24, 2013, 06:05:25 PM »
I'd pay it. It was a debt you took out and benefited from, and in my book, a responsible person pays their debts.

Personally I do not think there is anything remotely unethical about not paying the remaining mortgage on a house you lost to foreclosure. The deal you make when you sign your mortgage docs is not "Hey bank, I will pay you every red cent of this no matter what." The deal is, "I will make all these monthly payments on time, and if I don't, you can take my house." If you don't make the payments, they take your house, and you're even.

The fact that in some cases the housing market has crashed in the meantime, so the bank doesn't get all its money back, does not change the equation. The bank and the buyer went through with the mortgage based on the bank's appraisal of the home's value. The bank is who hired the appraiser; the bank is who evaluated the risk; the bank is the one with vast amounts of experience in the real estate market. The bank is also the one who controls the post-foreclosure sale: it's up to them how much they ask for it and what they accept--sometimes they accept less just because they want a quick sale. So why on earth is the BORROWER the only one who gets stuck paying for the risk if the market crashes?

For those reasons, I think "recourse states" (states in which homeowners may still be on the hook for their full debt to a lender even after losing the house to foreclosure*) have the ethics of it totally wrong.


* California is non-recourse for purchase-money mortgages, but recourse for home equity loans... it's unclear to me whether the OP's second mortgage was obtained to buy the house (as in an "80-15" type loan where you borrow 95% of the price with one 80% mortgage and one 15% mortgage), or was obtained in a refi after purchase. If that second mortgage was used to buy the house, in her shoes I'd go straight to a lawyer and find out if I even still owe that money at all. Here, BTW, is a list of recourse and non-recourse states; I don't know how accurate it is but it's to give you an idea: http://www.forecloseddreams.com/recourse_states
« Last Edit: September 24, 2013, 06:06:58 PM by Daleth »

arebelspy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #4 on: September 24, 2013, 06:07:23 PM »
Who foreclosed on the house?

If it was the first, the second should have had the lien wiped, and would have had to sue you personally and get a judgement to collect on it.

Is that what happened?
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MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #5 on: September 24, 2013, 07:36:23 PM »
Thank you everyone for being so nice. I still feel terrible after all these years. I always paid my debts, carried a credit score of a 725 on average and have successfully held two stable  jobs over the past 20 years (basically 10 years on each). Unfortunately Southern Cali was hit pretty hard and on top of my income being reduced, my fiancee lost his job and a child in our home was diagnosed with an illness that accumulated quite an expense. Reading this blog has opened my eyes to many things we could have done differently to prepare for these type of events (ie. An emergency fund) but unfortunately, the time has passed so I can only look forward.

Our first mortgage was with Bank Of America, the second was with Chase Bank. We were hit at the beginning of the crash and told for a year that we would receive a loan modification. Unfortunately, that day never came so we packed up our family and moved. 2 weeks before the house went to auction we received 5 "Making Home Affordable" packets and when I called BofA to find out what was happening...they had no clue. They just apologized for not getting the packet to us sooner but also stated that it was "probably too late" since the house would inevitably sell in two weeks at auction.

I suppose its my new found determination to become a "mustacian" that is prompting this...plus the fact that I'll be 40 in a month with less than $20k in retirement. If I won $28k tomorrow, I would hand it over to Chase but the idea of paying $220 per month for the next 25 years @8% interest, for a home I can't live in, is eating at me. We are currently a family of three, living on approx. $45k per year. I have an 11 yr old car that is paid off and just under $10k in consumer debt, scheduled to be paid off by December of next year (I have 0% interest until then.)

Sorry for the lengthy response but I am hopeful that more info will help with the ability to offer advice.

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #6 on: September 24, 2013, 07:44:53 PM »
Oops! I meant to add that the 2nd mortgage was taken out about 2 years before we lost the home. A portion was used the pay Kaiser, the remainder was used more as an "emergency fund" when the market crashed and we had a job loss + reduction in my earnings.

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #7 on: September 24, 2013, 08:04:40 PM »
The first (B of A) foreclosed.  That wiped out the second from Chase.  This is not purchase money, so there is recourse.  Chase can sue.  Most times they don't.

Living on $45k in SoCal is tough.  This payment is a hardship for you.  The loan is unsecured.  In your shoes, I would try to come to a settlement with Chase.

There was also a large class action lawsuit settled over this double tracking you experienced.  You may be entitled to some compensation from B of A - you might want to look into that.

Never, ever take advice from some TV host answering questions on the fly.  They can't know all the facts of your situation or the context.  Suze Orman is not an authority on much of anything from what I have seen.

arebelspy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #8 on: September 24, 2013, 08:38:23 PM »
The first (B of A) foreclosed.  That wiped out the second from Chase.  This is not purchase money, so there is recourse.  Chase can sue.  Most times they don't.

This is what I was going for earlier, but didn't have the foreclosure info now posted. If they want to go after you (legally) for the loss they experienced, they can, but they usually don't.
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MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #9 on: September 24, 2013, 11:04:08 PM »
So, in your opinions, would taking that $220 per month to pay down debt/invest in my retirement be a smarter financial decision and hope for a settlement from Chase?

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #10 on: September 25, 2013, 01:08:44 AM »
It sounds like you've gotten several sources of professional advice to stop paying.  If you hadn't done all that research, I wouldn't know what to tell you.  :)

Some precautions come to mind, if you decide to pull the trigger.  (Or stop pulling the trigger, depending on how you look at it.)  Most retirement accounts are protected in bankruptcy.  So to whatever extent your current assets are in non-retirement accounts, you could seek to protect them by shifting them into retirement accounts.  You could do that with a 401(k) by contributing far more than you can afford while living off your non-tax-advantaged savings.  You could preserve some of the money as emergency-accessible by planning to rely on the Roth IRA principal withdrawal trick.  (And getting as much principal into your Roth IRA as you can, of course.)

I'm not sure how I'd keep enough around and accessible enough to pay the IRS for any loan forgiveness if that happens.  So you might want to leave a fraction of it for that.

This is not advice.  I've never been through bankruptcy or foreclosure, sued or been sued.  I'm also not a lawyer or financial planner.  It just seems to me that if I were playing poker with Chase, I wouldn't want them thinking there was a pot worth winning.

chasesfish

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #11 on: September 25, 2013, 05:10:39 AM »
I'd advise you to pay it off, the Bank didn't loan you the house, they loaned you money with the expectation of being paid back plus interest.

The bigger question is what can you do to get your income up and expenses down to provide yourself a secure financial future. 

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #12 on: September 25, 2013, 04:24:56 PM »
I'd pay it. It was a debt you took out and benefited from, and in my book, a responsible person pays their debts.

Personally I do not think there is anything remotely unethical about not paying the remaining mortgage on a house you lost to foreclosure. The deal you make when you sign your mortgage docs is not "Hey bank, I will pay you every red cent of this no matter what." The deal is, "I will make all these monthly payments on time, and if I don't, you can take my house." If you don't make the payments, they take your house, and you're even.

The fact that in some cases the housing market has crashed in the meantime, so the bank doesn't get all its money back, does not change the equation. The bank and the buyer went through with the mortgage based on the bank's appraisal of the home's value. The bank is who hired the appraiser; the bank is who evaluated the risk; the bank is the one with vast amounts of experience in the real estate market. The bank is also the one who controls the post-foreclosure sale: it's up to them how much they ask for it and what they accept--sometimes they accept less just because they want a quick sale. So why on earth is the BORROWER the only one who gets stuck paying for the risk if the market crashes?

For those reasons, I think "recourse states" (states in which homeowners may still be on the hook for their full debt to a lender even after losing the house to foreclosure*) have the ethics of it totally wrong.


* California is non-recourse for purchase-money mortgages, but recourse for home equity loans... it's unclear to me whether the OP's second mortgage was obtained to buy the house (as in an "80-15" type loan where you borrow 95% of the price with one 80% mortgage and one 15% mortgage), or was obtained in a refi after purchase. If that second mortgage was used to buy the house, in her shoes I'd go straight to a lawyer and find out if I even still owe that money at all. Here, BTW, is a list of recourse and non-recourse states; I don't know how accurate it is but it's to give you an idea: http://www.forecloseddreams.com/recourse_states

From an ethical standpoint, I think this has a lot to do with the intent of those borrowing the money. In all reality you entered into an agreement that the bank would give you X and you would in turn pay them X for the next X years. The house only enters the equation as a form of thumbscrews because the majority of people can rationalize themselves out of doing the right thing. If everyone could be trusted to pay their debts then collateral wouldn't be needed. There are obviously extenuating circumstances that crop up from time to time (of which I think the OP found themselves in, partially of their own making, but hindsight is 20/20) but these circumstances should not be treated as the norm. The largest risk as of late in the market hasn't been people who had a string of problems occur that left them unable to pay the debt but those who just decided they didn't feel like fulfilling their end of the agreement anymore and walked away(Or lived there for years free until forced out). If the only risk was that the the debtor could die or that the bank would have to wait longer to get its money, then the borrowing market would be a different world, sadly this is not the case.

I would personally advocate the OP to figure out a way to come to an agreement with CHASE to pay the debt, because I know my word is worth a heck of a lot more to me than 28k. I however am not in your shoes, so you need to take a look at your circumstances and decided what your best course of action is, and not just from a financial standpoint. Whatever you end up at, I glad to see you are working hard to get yourself, your family, and your finances on track :-)

Daleth

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #13 on: September 25, 2013, 04:45:49 PM »
I'd advise you to pay it off, the Bank didn't loan you the house, they loaned you money with the expectation of being paid back plus interest.

They loaned her money with the knowledge that they would probably get paid back either by her or by the proceeds of any eventual foreclosure--while knowing that although that was probable, it wasn't certain and they might NOT get paid back because she might stop paying and the house might get sold at a foreclosure sale for less money than was needed to pay back their loan. They priced the loan based on their determination of the risk that she would stop paying and the house would be foreclosed upon. They priced it based on knowing that they held a second (junior) lien and that if the house went into foreclosure, they would not get their money back unless it sold for enough to pay B of A back and then some. In other words, they planned for this; they took the risk very, very knowingly (that's what their whole business is).

Not to mention, she lost the home to foreclosure in December 2010, and that second mortgage was taken out about two years earlier... in other words, at a time when property values were already falling and everyone was foreseeing a recession. Chase had every reason to know that the house might drop in value, and Chase also had the power to have an appraisal done and to make the loan OR NOT. They walked into that risk with their eyes wide open, and it is not her job to save them from it.

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #14 on: September 25, 2013, 04:59:21 PM »
If paying the $200 plus dollars is a hardship and you're barely making it then declare bankruptcy and be done with this beast and wipe out the debt. Chase doesn't want to play ball and negotiate. I'm assuming you don't have any other assets besides the $20k in the retirement account.

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #15 on: September 25, 2013, 08:55:57 PM »
If paying the $200 plus dollars is a hardship and you're barely making it then declare bankruptcy and be done with this beast and wipe out the debt. Chase doesn't want to play ball and negotiate. I'm assuming you don't have any other assets besides the $20k in the retirement account.

I don't have any other assets and the retirement is less than $20k ( approx. $13k). I have had to add my son to my employers insurance plan for $279 per more (since he has a pre-existing condition all companies denied him). It has come down to healthcare vs. the 2nd mortgage payment so a slight hardship.

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #16 on: September 25, 2013, 09:03:12 PM »
I'd pay it. It was a debt you took out and benefited from, and in my book, a responsible person pays their debts.

Personally I do not think there is anything remotely unethical about not paying the remaining mortgage on a house you lost to foreclosure. The deal you make when you sign your mortgage docs is not "Hey bank, I will pay you every red cent of this no matter what." The deal is, "I will make all these monthly payments on time, and if I don't, you can take my house." If you don't make the payments, they take your house, and you're even.

The fact that in some cases the housing market has crashed in the meantime, so the bank doesn't get all its money back, does not change the equation. The bank and the buyer went through with the mortgage based on the bank's appraisal of the home's value. The bank is who hired the appraiser; the bank is who evaluated the risk; the bank is the one with vast amounts of experience in the real estate market. The bank is also the one who controls the post-foreclosure sale: it's up to them how much they ask for it and what they accept--sometimes they accept less just because they want a quick sale. So why on earth is the BORROWER the only one who gets stuck paying for the risk if the market crashes?

For those reasons, I think "recourse states" (states in which homeowners may still be on the hook for their full debt to a lender even after losing the house to foreclosure*) have the ethics of it totally wrong.


* California is non-recourse for purchase-money mortgages, but recourse for home equity loans... it's unclear to me whether the OP's second mortgage was obtained to buy the house (as in an "80-15" type loan where you borrow 95% of the price with one 80% mortgage and one 15% mortgage), or was obtained in a refi after purchase. If that second mortgage was used to buy the house, in her shoes I'd go straight to a lawyer and find out if I even still owe that money at all. Here, BTW, is a list of recourse and non-recourse states; I don't know how accurate it is but it's to give you an idea: http://www.forecloseddreams.com/recourse_states

From an ethical standpoint, I think this has a lot to do with the intent of those borrowing the money. In all reality you entered into an agreement that the bank would give you X and you would in turn pay them X for the next X years. The house only enters the equation as a form of thumbscrews because the majority of people can rationalize themselves out of doing the right thing. If everyone could be trusted to pay their debts then collateral wouldn't be needed. There are obviously extenuating circumstances that crop up from time to time (of which I think the OP found themselves in, partially of their own making, but hindsight is 20/20) but these circumstances should not be treated as the norm. The largest risk as of late in the market hasn't been people who had a string of problems occur that left them unable to pay the debt but those who just decided they didn't feel like fulfilling their end of the agreement anymore and walked away(Or lived there for years free until forced out). If the only risk was that the the debtor could die or that the bank would have to wait longer to get its money, then the borrowing market would be a different world, sadly this is not the case.

I would personally advocate the OP to figure out a way to come to an agreement with CHASE to pay the debt, because I know my word is worth a heck of a lot more to me than 28k. I however am not in your shoes, so you need to take a look at your circumstances and decided what your best course of action is, and not just from a financial standpoint. Whatever you end up at, I glad to see you are working hard to get yourself, your family, and your finances on track :-)

Thank you for the kind words. I think that is why this is so difficult....I have continued making the payment for three years because I have been able to (literally by the skin of my teeth) but will be 40 in a month, basically no retirement and a healthcare challenge. (See comment above for explanation)

Chase sent me a letter stating that while they would not encourage someone to stop paying, they want me to know they don't offer settlements on current accounts.

It was as if they were saying "stop paying and we will make you a deal."

If only I had a crystal ball or $28k to hand over. :-)
« Last Edit: September 25, 2013, 09:05:06 PM by MustacianInTheMaking »

arebelspy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #17 on: September 25, 2013, 09:34:43 PM »
Sorry, but it sounds like you need some punches in the face.  When a $200 payment is a hardship, you're choosing between that and healthcare, you have no assets other than <20k in retirement funds...

You're one of those people we read about who has nothing saved and hits a bump and declares BK.  I've heard of it, but it's such an odd concept to me.

All this 2nd mortgage stuff aside, you need to go read MMM's first post from about 2 1/2 years ago.  Then read the second, third, and so on.

Cause you really need to get your financial house in order.

...yikes.
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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #18 on: September 25, 2013, 10:08:12 PM »
The OP is trying to fix things, having just stumbled across this site.  It takes time to turn a mess around.  Some people don't have the benefit of financial awareness at an early age.  No point in thinking about the past.  In this case, some gentle encouragement might be more effective than a full blown face punch.  If the OP starts now at 40, he or she could be in much better shape at 50.

arebelspy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #19 on: September 25, 2013, 10:38:31 PM »
The OP is trying to fix things, having just stumbled across this site.  It takes time to turn a mess around.  Some people don't have the benefit of financial awareness at an early age.  No point in thinking about the past.  In this case, some gentle encouragement might be more effective than a full blown face punch.  If the OP starts now at 40, he or she could be in much better shape at 50.

No doubt.

But, as stated in the OP:
I will be 40 this year and have less than $20k in retirement. ( Go ahead, scream at me)

Screaming may not be needed, but a face punch, with the kindest intentions, might be.

Regardless of just finding this site or not, a facepunch for past mistakes isn't unwarranted and is part of the purposes of these forums, IMO.  Then comes the moving forward.

OP has certainly had some hardships (with illness and job loss), but also has made some mistakes.  Part of trying to learn from those may be a tough assessment of them, rather than just sympathy.

Either way, I wish the OP the best of luck in resolving the problems and starting on a new path.
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MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #20 on: September 25, 2013, 10:46:44 PM »
The OP is trying to fix things, having just stumbled across this site.  It takes time to turn a mess around.  Some people don't have the benefit of financial awareness at an early age.  No point in thinking about the past.  In this case, some gentle encouragement might be more effective than a full blown face punch.  If the OP starts now at 40, he or she could be in much better shape at 50.

Thank you. That is my hope and I appreciate the kind words.

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #21 on: September 25, 2013, 11:31:35 PM »
Sorry, but it sounds like you need some punches in the face.  When a $200 payment is a hardship, you're choosing between that and healthcare, you have no assets other than <20k in retirement funds...

You're one of those people we read about who has nothing saved and hits a bump and declares BK.  I've heard of it, but it's such an odd concept to me.

All this 2nd mortgage stuff aside, you need to go read MMM's first post from about 2 1/2 years ago.  Then read the second, third, and so on.

Cause you really need to get your financial house in order.

...yikes.

That hurt a bit but I suppose after inhaling the MMM blog in a week and scrambling to the forum for advice, I opened myself up to criticism. Unfortunately, I am the oldest of 8, was raised by a single mother most of my life who lived on the welfare system...my earliest money memories are of food stamps vs. balancing a checkbook. I wish this blog existed or that I had been exposed to money management at an early age...I basically fumbled my way through it and you are right,  I was unprepared when life slapped us silly.

For the past three years, I felt pretty good about doing all I could to stay afloat & pay the 2nd mortgage. I walked away from a BK attorney who told me that it was my best bet because I just couldn't do it. For that I am proud.

I guess if I wanted sympathy I could have signed up for another less abrasive (or ballsy) forum, but honestly I poked around before posting so I think I knew what was coming.

Thank you for taking the time to offer your opinion. I won't take your words lightly. I plan on sticking around to learn from all of you. With the MMM site & this forum, I hope to learn what I should have long ago, not become a burden to my son and be able to take care of myself throughout my retirement phase. Retiring on time is my new goal.

Thanks again, I sorta feel like I just got "jumped in" to the MMM gang & will take this as my "initiation".

MITM

One last thought: I may be "one of those people" who hit bumps (like almost losing a child, a job loss and income reduction) BUT....I have not filed BK and am doing crazy things like throwing myself into the lions den in an attempt to educate myself/ take action and THAT is super bada$$.

I'll report back.

:-)
« Last Edit: September 25, 2013, 11:59:27 PM by MustacianInTheMaking »

arebelspy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #22 on: September 26, 2013, 12:27:41 AM »
I plan on sticking around to learn from all of you. With the MMM site & this forum, I hope to learn what I should have long ago, not become a burden to my son and be able to take care of myself throughout my retirement phase.

Excellent.  Your new attitude and mindset will get you far!
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sherr

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #23 on: September 26, 2013, 09:16:03 AM »
I'd pay it. It was a debt you took out and benefited from, and in my book, a responsible person pays their debts.

Personally I do not think there is anything remotely unethical about not paying the remaining mortgage on a house you lost to foreclosure. The deal you make when you sign your mortgage docs is not "Hey bank, I will pay you every red cent of this no matter what." The deal is, "I will make all these monthly payments on time, and if I don't, you can take my house." If you don't make the payments, they take your house, and you're even.

I'm going to throw my hat in as disagreeing with you. The above means that failing to repay is not *illegal*, it does not necessarily mean that it's not unethical. I think that borrowing money (with the expectation that you have to pay it back) and then not paying it back is pretty generally always unethical. There may be cases where it is the least unethical of the available options, but that does not mean it is not still unethical.

I'd advise you to pay it off, the Bank didn't loan you the house, they loaned you money with the expectation of being paid back plus interest.

They loaned her money with the knowledge that they would probably get paid back either by her or by the proceeds of any eventual foreclosure--while knowing that although that was probable, it wasn't certain and they might NOT get paid back because she might stop paying and the house might get sold at a foreclosure sale for less money than was needed to pay back their loan. They priced the loan based on their determination of the risk that she would stop paying and the house would be foreclosed upon. They priced it based on knowing that they held a second (junior) lien and that if the house went into foreclosure, they would not get their money back unless it sold for enough to pay B of A back and then some. In other words, they planned for this; they took the risk very, very knowingly (that's what their whole business is).

So what? If I loan you $20 I know that you might not pay me back. If my business is loaning people $20 then of course I'll be charging interest, part of which will go to pay for the loans that people default on. I will have determined the interest rate based on chances of repayment, current market rates for loans, and other investment opportunities. I have walked into this loan with my eyes wide open, very knowingly as it were. Does that mean that it's suddenly completely ethical for you to walk away and never repay my $20?

Where is the line you are drawing where it becomes ethical to not replay a loan?
Is it because you took the loan from a business instead of a real person?
Is it because they charged you interest?
Is it because they aren't incompetent (aka the "they knew what they were doing" bits)?
Is it because there was some form of collateral (the house)?

I don't consider any of those as legitimately turning an unethical behavior (borrowing money from someone and not repaying, a protracted form of stealing) into an ethical one.

Now, all that being said clearly there is a huge difference between stealing and defaulting on a loan, and the specifics of the situation matter a lot. I'm not even sure I would tell the OP to repay the loan, bankruptcy might be the best option available. But I don't think you can wave a magic wand and say "because it's a second mortgage it's completely ethical to not repay it."
« Last Edit: September 26, 2013, 09:17:57 AM by sherr »

TrulyStashin

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #24 on: September 26, 2013, 09:34:10 AM »
Most likely you will not have to declare bankruptcy.  You already have the foreclosure on your credit record so a default to Chase is not going to be tragic in that your credit score is already in bad shape.

Stop paying Chase. 

When they come after you, find a bankruptcy lawyer who will write a letter to Chase and say that if they pursue the loan you will simply declare bankruptcy.  This will cost you very little (less than one payment to Chase).   It is very likely that Chase will leave you alone after that.  I doubt they will pursue it as $28k, in their world, is simply not worth the effort.  If they do pursue it, declare bankruptcy.  The legal fees are typically only a few hundred dollars.

All the energy and worry you've been spending on this issue, should be diverted to reading this blog and others like it.  Put your time & money to work on rebuilding, learning good money habits and turning the ship around.  Don't look back and don't indulge in victimhood of any kind.  Who will you be, today?

livetogive

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #25 on: September 26, 2013, 10:57:52 AM »
I thought about this in the shower this morning and realized most people probably stop paying their second mortgage before stopping their first which is why this is a little odd.

At the end of the day is it worth declaring bankruptcy to wipe out what is effectively unsecured consumer debt of slightly more than half your gross income?  Might be.

Is it worth consulting a BK lawyer before making that call?  Definitely.

msilenus

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #26 on: September 26, 2013, 11:51:12 AM »
Stop paying Chase. 

She's heard this from Fair Housing, Springboard, Help for Homewoners, a bankruptcy attorney, and Suzy Orman.

She's made up her mind.

MsSindy

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #27 on: September 26, 2013, 03:07:49 PM »
So, I'll weigh in from the point of view of someone who is in the Note business.  I buy non-performing 2nd mortgages at a discount, then work with the Homeowner to try to get them performing again.  My business model is to pass some of that discount on to the HO and get them into a payment plan that they can afford (this means that I may discount the balance, extend the life of the loan, or lower the interest rate).  If they truly can't afford to stay in the house (or don't want to), we start working with them to do a short sale or exit through some other strategy.  In a small percentage of cases, our 2nd loan may get wiped if the 1st forecloses before we do.  If that happens, we lick our wounds and move on - we never pursue a judgement against the individual - we just don't feel it's good business practice (financially or morally).  And, Chase won't either.

Anyway, basically you have a couple of choices:
1) File BK and clear the loan
2) Use your savings to pay the loan
3) Stop paying Chase
      a) They may send a couple of demand letters and then never bother you again
      b) They may send you to a collections agency, who will bother you
      c) Once they communicate that they will send you to Collections, then start to negotiate a discounted payoff - be prepared to show all your financials and that you truly are in a hardship
4) Figure out how to increase your income and continue to pay Chase
5) Did I leave out any??

I won't comment on what is ethical/moral vs what is a business decision - that is only something that you can determine, as you need to live with that decision and the impact it has on your family, your conscience, etc.

Be decisive, make a decision, and then get on with it.  Don't spend any more energy on this.  Instead, figure out how you can increase your income.

Another Reader

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #28 on: September 26, 2013, 03:26:39 PM »
Accurate and concise, MsSindy.  I think "decisive" is the best advice.  It's time for the OP to make a decision and move on.

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #29 on: September 26, 2013, 05:34:50 PM »
Accurate and concise, MsSindy.  I think "decisive" is the best advice.  It's time for the OP to make a decision and move on.

I second the motion, The motion carries!

Good luck MustacianInTheMaking!

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #30 on: September 26, 2013, 08:16:28 PM »
Thank you again everyone....I really appreciate you taking the time.

:-)

Daleth

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #31 on: September 27, 2013, 10:45:51 AM »
Why is it ethical to stop paying (in addition to also being legal)? Because whenever someone borrows money to buy a house, there is a risk—both the bank and the borrower know it--that the house is overpriced or is priced correctly but will go down in value, and it is not fair for only ONE party to bear ALL the consequences of that risk by themselves.
 
Especially since it was the bank who selected and hired the appraiser, had the expertise of thousands of employees and many years in the market, and chose to accept the appraisal.
 
And ESPECIALLY in this case, where the bank made this loan during the financial crisis/recession, and had every reason to think values might continue dropping!
 
The OP took the risk and got hit with consequences: she lost all the money she’d put into the house, she went into foreclosure (taking a big hit on her credit), she lost her home… AND she’s spent years afterwards paying Chase’s loan back, even though it might mean she has no health coverage for a kid who needs it!
 
Chase also took a risk, and lost—or should have lost—because the home plummeted in value. But what consequences has Chase borne so far, for freely entering into that very real risk in the middle of a recession, and for accepting an appraisal at face value? None, nada, zip. Even the first-mortgage bank (the one that foreclosed) seems to have suffered some consequences—there wasn’t even a dollar left over to pay Chase (the 2nd mortgage) with after the foreclosure, so my best guess is that the house sold for less than the OP owed on the first mortgage. Meaning, the bank holding the first mortgage suffered some consequences. So Chase is the ONLY party to this whole mess to have gotten out scot-free, even though they, as the bank providing the SECOND mortgage, were supposed to be taking a higher risk than the bank providing the first mortgage!
 
Both parties (OP and Chase) went into this risk (i.e., loan) with their eyes open and so far only one of them has borne any consequences whatsoever. They should share the consequences; it’s Chase’s turn now. And what’s more, Chase is INVITING her to come to a settlement (i.e. get rid of the loan for less than the outstanding amount) by sending her the letter it just sent. They are ASKING her to STOP paying the loan so that they can start a settlement process.
 
What more does anyone need to know this is the right thing to do?

MustacianInTheMaking

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #32 on: September 27, 2013, 07:14:38 PM »
Why is it ethical to stop paying (in addition to also being legal)? Because whenever someone borrows money to buy a house, there is a risk—both the bank and the borrower know it--that the house is overpriced or is priced correctly but will go down in value, and it is not fair for only ONE party to bear ALL the consequences of that risk by themselves.
 
Especially since it was the bank who selected and hired the appraiser, had the expertise of thousands of employees and many years in the market, and chose to accept the appraisal.
 
And ESPECIALLY in this case, where the bank made this loan during the financial crisis/recession, and had every reason to think values might continue dropping!
 
The OP took the risk and got hit with consequences: she lost all the money she’d put into the house, she went into foreclosure (taking a big hit on her credit), she lost her home… AND she’s spent years afterwards paying Chase’s loan back, even though it might mean she has no health coverage for a kid who needs it!
 
Chase also took a risk, and lost—or should have lost—because the home plummeted in value. But what consequences has Chase borne so far, for freely entering into that very real risk in the middle of a recession, and for accepting an appraisal at face value? None, nada, zip. Even the first-mortgage bank (the one that foreclosed) seems to have suffered some consequences—there wasn’t even a dollar left over to pay Chase (the 2nd mortgage) with after the foreclosure, so my best guess is that the house sold for less than the OP owed on the first mortgage. Meaning, the bank holding the first mortgage suffered some consequences. So Chase is the ONLY party to this whole mess to have gotten out scot-free, even though they, as the bank providing the SECOND mortgage, were supposed to be taking a higher risk than the bank providing the first mortgage!
 
Both parties (OP and Chase) went into this risk (i.e., loan) with their eyes open and so far only one of them has borne any consequences whatsoever. They should share the consequences; it’s Chase’s turn now. And what’s more, Chase is INVITING her to come to a settlement (i.e. get rid of the loan for less than the outstanding amount) by sending her the letter it just sent. They are ASKING her to STOP paying the loan so that they can start a settlement process.
 
What more does anyone need to know this is the right thing to do?

Daleth,
I really appreciate your analysis of my situation and thoughts on this...I am determined to find a way to work through it so that I can start building on my retirement. So glad I found you all!

On a brighter note, my boss made a great suggestion. I am skilled in marketing and social media and volunteer quite a bit in the nonprofit sector. She suggested I start marketing my services to local companies as a way to earn extra income since the market is pretty slow in our area and the potential for me to earn more right now in my full time career is not possible. She is closely connected to a nonprofit that is seeking someone with my skill set and is working to connect us. If the stars line up I could have a nice little side-hustle that draws from my two passions...marketing and non-profits!

***fingers crossed***

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #33 on: September 27, 2013, 09:15:22 PM »
Who here has ever paid an ETF to get out of a mobile/cable/satellite/etc. contract? Or perhaps started a job with a sign-on bonus that required you to be there for X years, but quit early and had to pay some/all of it back?

You failed to honor the contract. Your word now means nothing.

Wait, what's that? The contract had a clear "you're expected to do X (pay your mobile bill for 24 months), if not then we will do Y (charge you $300, pay or we'll send collectors after you)"? Ok...how is that different from a mortgage that has a clear "you're expected to do X (pay your mortgage for 360 months), if not then we will do Y (foreclose on your house, evict you if necessary, sell it and if legal in your state we may charge you for the shortfall)"?

In both cases, you're agreeing to do something; and you're also agreeing to the repercussions if you don't follow through. The terms are clearly (to a lawyer) laid out, both parties understand what they're agreeing to (and if you don't, get a lawyer).

So...why is it morally ok to renege on some contracts but not others?

Daleth

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #34 on: September 28, 2013, 06:41:46 PM »
Who here has ever paid an ETF to get out of a mobile/cable/satellite/etc. contract? Or perhaps started a job with a sign-on bonus that required you to be there for X years, but quit early and had to pay some/all of it back?

You failed to honor the contract. Your word now means nothing.

Wait, what's that? The contract had a clear "you're expected to do X (pay your mobile bill for 24 months), if not then we will do Y (charge you $300, pay or we'll send collectors after you)"? Ok...how is that different from a mortgage that has a clear "you're expected to do X (pay your mortgage for 360 months), if not then we will do Y (foreclose on your house, evict you if necessary, sell it and if legal in your state we may charge you for the shortfall)"?

In both cases, you're agreeing to do something; and you're also agreeing to the repercussions if you don't follow through. The terms are clearly (to a lawyer) laid out, both parties understand what they're agreeing to (and if you don't, get a lawyer).

So...why is it morally ok to renege on some contracts but not others?

Since you and some others here are making distinctions between what's legal and what's moral, I want to point out that just because it is LEGAL for the bank to say (in its contract) "if you don't pay and you go into foreclosure, we'll charge you for the shortfall," that doesn't mean it's MORAL or ETHICAL for the bank to do that. As I pointed out above, letting a bank charge the buyer for a shortfall means you're putting 100% of the risk that the recession will deepen or the housing market will plummet on the buyer.

Why should only one party be stuck with 100% of the risk? Why should the buyer alone bear the entire risk? Especially since the shortfall is in no way the buyer's fault, and the bank is who hired the appraiser (in other words to the extent the appraiser was over-optimistic, the consequences of that should fall on the bank who chose him), and the bank has decades of expertise in finance and the real estate market--far, far more expertise than the buyer?

So here's why it's morally okay to renege on some contracts and not others: because some contracts contain terms that are themselves immoral. If you signed a contract that said "if your house goes into foreclosure, you have to let the bank manager sodomize you," reneging on that would clearly be okay and would in no way reflect poorly on your own moral character. The contract that the OP signed basically says, translated from legalese into plain English, "if your house goes into foreclosure, you have to let the bank financially sodomize you." So my advice to the OP is, go ahead and renege!

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #35 on: September 28, 2013, 07:12:14 PM »
So here's why it's morally okay to renege on some contracts and not others: because some contracts contain terms that are themselves immoral. If you signed a contract that said "if your house goes into foreclosure, you have to let the bank manager sodomize you," reneging on that would clearly be okay and would in no way reflect poorly on your own moral character. The contract that the OP signed basically says, translated from legalese into plain English, "if your house goes into foreclosure, you have to let the bank financially sodomize you." So my advice to the OP is, go ahead and renege!

I agree with your conclusion, but disagree with how you got there.

If a contract literally said "if your house goes into foreclosure, you have to let the bank manager sodomize you," not only would that not be legally enforceable, but if it were, I would argue that it would NOT be ok to renege on that contract (because reneging would invoke the sodomy clause).

BTW, in case it wasn't clear in my post, I was being sarcastic :) .  I just find it hypocritical to say "no, that's immoral, you can't renege on the contract, you gave your WORD" and then turn around and suggest someone pay to get out of their mobile contract because it's a wise financial move. A contract is a contract, whether the stakes are small (pay $100/mo to AT&T for 24 months, or pay $325 to get out of your commitment) or large (pay $1,500/mo to Big Bad Bank for the next 30 years, or lose "your" house).

As for morals, here's how I'd tackle it. Figure out the best thing to do financially, THEN let morals into the picture. So off the bat, you feel that it's not moral to renege on the contract. Ok...but first figure out how it'd affect your finances, perhaps you'll be better able to take care of your kids, less stress in the family, etc...so perhaps it'd be more immoral to sacrifice your kids' happiness and well-being. Or perhaps not. That's how I'd approach it.

Frankies Girl

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #36 on: September 28, 2013, 07:36:10 PM »
First off,  I do feel great sympathy for the OP being in that situation. It sucks all the way round. OP, please don't think I'm judging you or don't understand what a horrible situation you've going through.

But  I stand by my original statement. I would pay the loan off if it was me.

If the wording or contract terms were not something that they were in agreement with, all they had to do was walk away from it. No one is forced to enter into taking a loan or entering into a legal contract (and if they are forced, then it isn't legal). They could have the most bizarre penalties in there that are legally enforceable, but if you sign the contract, you are agreeing to them in my book. Don't agree, then don't sign and don't take the loan. I really think it is just that simple.

It isn't about the bank and whether what was in the contract was/wasn't immoral; it is about my personal code of ethics and doing what I agreed to do and benefited from.

If it is possible according to a lawyer to stop the payments and get a settlement, then that is a path that the OP could take and still feel like they were doing what was best for their family. But in my case, I'd still pay it as best as I could.

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #37 on: September 28, 2013, 10:15:56 PM »
If the wording or contract terms were not something that they were in agreement with, all they had to do was walk away from it. No one is forced to enter into taking a loan or entering into a legal contract (and if they are forced, then it isn't legal). They could have the most bizarre penalties in there that are legally enforceable, but if you sign the contract, you are agreeing to them in my book. Don't agree, then don't sign and don't take the loan. I really think it is just that simple.

This is the part I just can't get my head around. They (I assume) read the loan and agreed to it. So did the bank. They agreed that they'd either pay, or the bank would have the option of foreclosing. The bank knew they were the second lien holder, and I'd assume they charged a higher interest rate to reflect this risk (and if not, why is that the other side's problem?).

Every contract (that I've seen) has an out. Do X, and if you don't, then Y will (may) happen.

What I'd like, is for someone to explain why it's morally ok to break some contracts and face the penalty (i.e. paying an ETF on your mobile phone contract), but it's not morally ok to break other contracts and face the penalty (i.e. letting the bank take "your" house back). In both situations you're expected to pay X amount every month for a set period of time; you can get out of that requirement but there'll be a penalty.

It is an honest to goodness question. I don't see a difference, but that doesn't mean I'm right. What determines that it's moral or not? Size of the company? Dollar amount at stake? Whether or not it affects your credit report? Heck, I would assume (perhaps incorrectly) that a short-sale wouldn't be too frowned on here...but that has a negative effect on your credit report. Maybe it's a combination of things?

I suspect it's viewed as morally wrong "just because." As in, we're told it's wrong, so that's that. But we're a group that doesn't accept "just because," else we'd still be living paycheck to paycheck and fully buying into the consumerist culture.

But again, I could be wrong. Any assistance would be appreciated.
« Last Edit: September 28, 2013, 10:18:06 PM by josetann »

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #38 on: September 29, 2013, 09:38:10 PM »
It is an honest to goodness question. I don't see a difference, but that doesn't mean I'm right. What determines that it's moral or not?

Let me start off by saying that I am thoroughly enjoying this discussion. It has actually opened my eyes a lot to understanding how someone could look at a situation like this and feel Morally ok with walking away. So my hat is off to the people who so eloquently expressed that.

With that being said, let me just throw in a few comments in an attempt to perhaps help you better understand why one could look at this decision and not think it is such an easy moral question to just renege on the contract and walk away. The first thing from my perspective is that I would look at this FIRST from a Moral perspective, and then from a Financial one. That is the way I choose to look at all of my decisions and this would be no exception. Flipping those priorities, especially for the reason of money, would make it morally all the worse in my book.

Now this doesn't mean that the OP or anyone else couldn't look at this situation and decide that the impact that it would have on the family and their life compared to walking away from the house, makes walking away "The lesser of two evils". Those situations happen from time to time as unfortunate as they are. The point is that you need to consider all of those perspectives from the beginning.

In the hypothetical situations you gave a few comments up regarding backing out of various contracts I would have to say that some of them I wouldn't be ok with backing out of. For example, if I promised my boss that I would be at my job for the next 2 years in return for taking a new position, I would feel it morally wrong to walk away from it in 1 for a job I liked better. The key being that I promised I would stay. This is different however, for example, from my companies tuition policy. They are willing to give you money for tuition up to X a year. If you choose to leave in the next year after they give it to you though they will likely ask for the money back in full. They are not asking you to promise to stay for the year in order to take it, just letting you know that if you choose to use it and then choose to leave in that time they are probably going to ask for it back. Then it's up to you to decide if leaving the job during that period is worth having to pay the money back. Your call. If I were to leave, the company wouldn't be mad. They wouldn't bar me from working there again or make it harder for me to get a job in the future. They would just ask for the money back. Simple as that. In the cell phone example, the company is fine with me leaving if I want. That is why they give you the option to walk away built right in. Just pay them X and they will let you out of your obligation. Easy Peasy, both parties agree.

This differs from buying a house because you promised them that in return for them giving you X thousands of dollars you would pay them X each month for the next X years. The only way they have built in the contract to get out of that is to instead pay them the entire sum back at one time. The contract doesn't say, "If at any time you decide you don't feel like paying us any more you can just sign over the house and it's all good". Could you go to your bank today and say, "Hey, I don't think this house is worth paying for anymore. Where is the paper that says you guys can just keep it?" I'm doubting it. You could however do that if you showed up with the cash to pay off the loan. The bank wouldn't even allow you to do that if your house was worth MORE than you have the loan for because it isn't what you originally agreed to. My point in that example is just to show that it isn't a simple option built in the contract like the ability to pay off the debt early. It is a separate section of the contract that deals with the contingency that you show up and say, "Screw you guys, I'm not paying another dime." You only built it into the contract so that they have 1st claim on that piece of the pie, that is why in some states they are able to come after the rest of the loan if the house doesn't sell for enough. Again, all of this is only to show that it's not a simple matter of, "We will loan you X for that house there. If in the event you don't want to pay us X, just give us the house".

To me the main difference between various forms of contracts and agreements comes down to the disposition of both parties. If both parties are ok with ending the contract, either through approvals external to the contract or through built in allowances in the contract, then it is more likely to be morally ok. If one of the parties has to end up suing the other to settle the affair, ending the contract probably wasn't on the moral up-n-up. This of course, like almost everything in life, isn't cut and dry. Regardless, I hope it helped to convey some of the thoughts behind looking at this type of decision as morally questionable. (Even if the post isn't immaculately worded :-) )

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #39 on: September 29, 2013, 11:15:48 PM »
The first thing from my perspective is that I would look at this FIRST from a Moral perspective, and then from a Financial one. That is the way I choose to look at all of my decisions and this would be no exception. Flipping those priorities, especially for the reason of money, would make it morally all the worse in my book.

I'd disagree with the last sentence. Perhaps we could agree that one should thoroughly review all financial and emotional ramifications of all possible options. Or, being technical...you only state that flipping the priorities would make it worse...that's fine with me. I was only talking about the order in which you approach the decision making, not what should take priority.

I find that emotions are often a roadblock to sound financial decisions. Mention to someone that maybe they could sell their huge SUV and trade it in for a station wagon and they'll get heart palpitations. Suggest cutting back on the Christmas gift-giving and they'll go on about how Christmas would be ruined for their little darlings. And don't even think about telling them that maybe, just maybe they should let the bank take "their" house from them. Emotions are the first thing that pop up in their decision making, and they go no further. Perhaps this is simply a hack to get around "normal" human behavior, but it just seems that if you look at it from a cold analytical point of view (i.e. what's the best for us in a pure financial sense) and THEN let emotion in, you're more likely to get the whole picture (i.e., fully analyze the financial and emotional ramifications of all available options).

That is why they give you the option to walk away built right in. Just pay them X and they will let you out of your obligation. Easy Peasy, both parties agree.

So, the ease of breaking the contract is part of what determines how moral or not it is?

This differs from buying a house because you promised them that in return for them giving you X thousands of dollars you would pay them X each month for the next X years. The only way they have built in the contract to get out of that is to instead pay them the entire sum back at one time.

I don't have our old mortgage papers with us (they're all back in the US), but for some reason I thought there was wording to the effect of "if you stop paying us, we have the right to take possession of the house and kick you out."

Perhaps that's the (subtle to me) difference. A mobile contract says if you don't fulfill the terms of the contract they'll charge a fee; a mortgage contract says if you don't fulfill the terms of the contract they'll have to repossess it. Even then, I still see similarities. With the mobile contract you can simply pay them the cancellation fee upfront, even before they bill you. In the case of a mortgage, you can simply inform the bank you'll no longer be paying, move out without requiring eviction, and be cooperative with any foreclosure proceedings.

Ok...now I'm thinking that it might not be so much the contract, or how it's worded...but in how MOST people handle the process of breaking the contract. It's fairly common to call up AT&T, tell them you'll no longer pay for their services, pay the ETF and the final bill when it comes, and that's that. It's also fairly common to stop paying the mortgage, ignore the bank's calls asking "dude, why aren't you paying for your mortgage...hello?", fight the foreclosure proceedings every step of the way, and after a year or two of rent-free living, finally be evicted (after fighting that as much as possible). In that case, it's not the breaking of the contract that's morally bad, but the actions afterward. If we hear of someone breaking one of the aforementioned contracts, our judgement of that person is automatically clouded by the manner in which most people act in a similar situation.

To me the main difference between various forms of contracts and agreements comes down to the disposition of both parties. If both parties are ok with ending the contract, either through approvals external to the contract or through built in allowances in the contract, then it is more likely to be morally ok. If one of the parties has to end up suing the other to settle the affair, ending the contract probably wasn't on the moral up-n-up.

If I was dealing with a smaller, more personal company...maybe. But not because I'm against big bad corporations; rather, any feelings of goodwill I have toward a smaller company are more likely to be reciprocated. Once a company grows past a certain point, and has more than a few dozen lawyers just to handle the wording in their contracts; they don't have warm fuzzy feelings about you anymore. You're just a number, statistic, what-have-you, and I don't think it's exactly fair that we should let our decisions be overly influenced by emotions. If AT&T were truly concerned about my emotional well-being and what's best for me, then I would likely extend the same to them.

It's also why I can understand the need to pay back family/friends before big corporations; the corporation loaned to you because they took a calculated risk, and are expecting to make a profit on you; family/friends are helping you because they care, thus you could (should) feel a moral obligation to repay them first.

Many thanks for the reply.

bacchi

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #40 on: September 29, 2013, 11:47:27 PM »
What I'd like, is for someone to explain why it's morally ok to break some contracts and face the penalty (i.e. paying an ETF on your mobile phone contract), but it's not morally ok to break other contracts and face the penalty (i.e. letting the bank take "your" house back). In both situations you're expected to pay X amount every month for a set period of time; you can get out of that requirement but there'll be a penalty.

Houses, and subsequently mortgages for most of us, are part-and-parcel of the American Dream. What is ultimately a business contract becomes entangled with the cultural meme of Adult Life (get a real job, get married, get a house, have a kid). When someone goes against that cultural meme, they get labelled. In this case, they're "immoral." If it was a business defaulting on a real property loan, the business would pay the contractual penalty and the "immoral" tag would never be used.


Another Reader

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #41 on: September 29, 2013, 11:55:53 PM »
And the business would likely reorganize and get financing for the next project from the same lender, because borrowing and lending are business decisions in this context.  Each party takes a risk, the hand is played, and if someone fails, the mess is cleaned up and everyone shrugs and moves on.

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #42 on: September 30, 2013, 12:25:22 PM »
being technical...you only state that flipping the priorities would make it worse...that's fine with me. I was only talking about the order in which you approach the decision making, not what should take priority.

I can appreciate that you would approach them in a different order. However I find that I approach things in order of what is most important to me first. To me, my morally standing comes before my financial well being. That is not to say I completely ignore my financial well being, but that I choose not to sacrifice my moral obligations to achieve my financial goals.

I find that emotions are often a roadblock to sound financial decisions.

I agree that emotions CAN be a roadblock to sound financial decisions. However removing them from all decision making processes is fool hardy. We are emotional creatures to greater and lesser extents by nature. Anyone who believes they are removing emotions from all decisions is fooling themselves.

That is why they give you the option to walk away built right in. Just pay them X and they will let you out of your obligation. Easy Peasy, both parties agree.

So, the ease of breaking the contract is part of what determines how moral or not it is?

This was taken very much out of context. "Easy Peasy" is a turn of phrase, not a defining statement. Please look closer at the contextual clues in the rest of that paragraph.

I don't have our old mortgage papers with us (they're all back in the US), but for some reason I thought there was wording to the effect of "if you stop paying us, we have the right to take possession of the house and kick you out."

Your likely right, that is probably how that was worded. That however is not the same thing as. "If you decide you don't feel like paying us any more. Just let us know and we will take the house. No out side proceedings needed." Forclosure is not built into the loan documents, it is merely planned for.

Perhaps that's the (subtle to me) difference. A mobile contract says if you don't fulfill the terms of the contract they'll charge a fee; a mortgage contract says if you don't fulfill the terms of the contract they'll have to repossess it. Even then, I still see similarities. With the mobile contract you can simply pay them the cancellation fee upfront, even before they bill you. In the case of a mortgage, you can simply inform the bank you'll no longer be paying, move out without requiring eviction, and be cooperative with any foreclosure proceedings.

There are obviously similarities, that's why the differences are not blatant. In the cell phone agreement they tell you: if you don't want to finish out the contract, just pay us this fee up front. If you choose to just stop paying, we are going to come after you for X fee's (which would likely include that cancellation fee). There is no "or" like contingency similar to that in the mortgage paperwork. The only "or" you have in there is to pay every month for the entire length of the loan or pay it off early.

Ok...now I'm thinking that it might not be so much the contract, or how it's worded...but in how MOST people handle the process of breaking the contract.

The way in which people choose to break a contract can be a part of the problem, that is for sure. However it isn't the only thing as explained above.

If AT&T were truly concerned about my emotional well-being and what's best for me, then I would likely extend the same to them.

I think this statement cuts closer to the heart of the disparity of opinions. I choose not to treat those banks any differently on my obligations to them than I would if I borrowed money from my best friend. I made them both the same promise of repayment. I am going to treat them the same, regardless of how they choose to treat me. If I fell behind on the payments I would ask them to forgive the fee's or help me negotiate a way to repay them in a different manner. If they chose not to allow that then that is their prerogative, I am the one borrowing their money. The way they treat me shapes how I will interact with them in the future. If I wasn't comfortable with the rules of repayment in the first place, I shouldn't have taken the loan.

This discussion as a whole appears to be grinding to a standstill but I'm grateful for the discussion thus far.

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #43 on: September 30, 2013, 05:06:05 PM »
I agree that emotions CAN be a roadblock to sound financial decisions. However removing them from all decision making processes is fool hardy. We are emotional creatures to greater and lesser extents by nature. Anyone who believes they are removing emotions from all decisions is fooling themselves.

I never said to remove emotions from your decision making. Just the order. I agree that you'd only be deceiving yourself if you thought you could remove all emotions from the equation.

This was taken very much out of context. "Easy Peasy" is a turn of phrase, not a defining statement. Please look closer at the contextual clues in the rest of that paragraph.

Wasn't poking fun at the terminology. Trying to figure if there's a semi-reliable way to determine when it's socially acceptable to break a contract. As we all know, society as a whole doesn't always make rational choices, doesn't mean we can't try to understand the thought process though. For all I know, the ease of breaking a contract could be a defining factor.

Your likely right, that is probably how that was worded. That however is not the same thing as. "If you decide you don't feel like paying us any more. Just let us know and we will take the house. No out side proceedings needed." Forclosure is not built into the loan documents, it is merely planned for.

Ok, I checked the wording for AT&T's contract, relevant part can be found at http://www.att.com/shop/en/legalterms.html?toskey=wirelessCustomerAgreement#whatIsTheTermOfMyService . Here's a snippet:

Quote
There are two alternative ways to fulfill your Service Commitment. You can pay for the Services described in your Customer Service Summary for the term of your Service Commitment, or you can terminate your Agreement prior to the end of your Service Commitment and pay an Early Termination Fee (“ETF”). The Early Termination Fee is not a penalty, but rather is an alternative means for you to perform your obligations under the Agreement that partially compensates us for the fact that the Service Commitment on which your rate plan is based was not completed.

I am curious as to whether "Your Termination Rights" is based on law (and they're simply informing you of such) or not (I suspect not). That could be another big reason; if the contract states you have a choice, then it's socially acceptable to choose either option. If it looks like the contract is only giving you a single choice, then breaking/terminating that contract is not socially acceptable.

I think this statement cuts closer to the heart of the disparity of opinions. I choose not to treat those banks any differently on my obligations to them than I would if I borrowed money from my best friend. I made them both the same promise of repayment. I am going to treat them the same, regardless of how they choose to treat me. If I fell behind on the payments I would ask them to forgive the fee's or help me negotiate a way to repay them in a different manner. If they chose not to allow that then that is their prerogative, I am the one borrowing their money. The way they treat me shapes how I will interact with them in the future. If I wasn't comfortable with the rules of repayment in the first place, I shouldn't have taken the loan.

I don't think I can agree on having an unbalanced relationship. Doesn't seem fair that one side should be expected to be driven by emotions, but the other side is in it simply to make money (note, there's nothing inherently wrong with them wanting to make money). And as for "the rules of repayment"; one of the rules is to either pay or face the consequences.

If the bank was driven by emotions just as much as we are...wouldn't a lot of banks be saying "sorry you can't keep up with your mortgage payments...that really sucks...tell you what, keep the house, we're good." But they don't care about us as people...it's just a business transaction to them. Why should we care about them as a person? Why can't it be a simple business transaction to us?

I searched for the past hour, trying to find a commercial I know I've seen in the past 2-3 years. Thought it'd be well suited for this thread. In the (bank?) sponsored ad, it acknowledges that people are struggling, but they're good moral people, and good moral people don't default on their mortgage (it didn't come out and say that directly, but that was the gist). I remember part of the ad being outdoors, some kind of barbecue/potluck. Anyone know what I'm talking about?

This discussion as a whole appears to be grinding to a standstill but I'm grateful for the discussion thus far.

I thought we were just getting started! :)

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #44 on: September 30, 2013, 06:25:16 PM »
Wasn't poking fun at the terminology. Trying to figure if there's a semi-reliable way to determine when it's socially acceptable to break a contract. As we all know, society as a whole doesn't always make rational choices, doesn't mean we can't try to understand the thought process though. For all I know, the ease of breaking a contract could be a defining factor.

Fair enough. Then to answer the inquiry, for me the ease of breaking the contract isn't a factor.

I am curious as to whether "Your Termination Rights" is based on law (and they're simply informing you of such) or not (I suspect not).

A good question about whether or not it is a law compelling them to do so. What ever the reason they are doing it, it is something they chose to build into the contract.

That could be another big reason; if the contract states you have a choice, then it's socially acceptable to choose either option. If it looks like the contract is only giving you a single choice, then breaking/terminating that contract is not socially acceptable.

You (should) read the contract before you sign it. You (should) know the terms you are agreeing to if you are promising someone you are going to pay them. For me the difference in there being a choice, and there not being a choice, is key. If you both agreed to a contract that gives you an option to get out of it in exchange for X then I don't see a problem with excising that option. However if the contract doesn't offer such options then I don't believe trying to force one is ok. If you didn't like the terms you shouldn't have signed up. Just because you can legally get away with forcing it doesn't necessarily make it morally ok.

I don't think I can agree on having an unbalanced relationship. Doesn't seem fair that one side should be expected to be driven by emotions, but the other side is in it simply to make money (note, there's nothing inherently wrong with them wanting to make money). And as for "the rules of repayment"; one of the rules is to either pay or face the consequences.

I guess I'm failing to see how this relationship is unbalanced. Why does someone choosing to view a transaction first from a moral perspective and then from a financial perspective, make it unbalanced if the other is doing it from the other way around? And I totally agree, nothing inherently wrong with wanting to making money.

If the bank was driven by emotions just as much as we are...wouldn't a lot of banks be saying "sorry you can't keep up with your mortgage payments...that really sucks...tell you what, keep the house, we're good." But they don't care about us as people...it's just a business transaction to them. Why should we care about them as a person? Why can't it be a simple business transaction to us?

I think you are confusing my desire to repay their loan in full and according to our agreement with caring about them as a person. My wanting to repay them is about me wanting to be a person who keeps their word. I promised that bank (or who ever loaned me the money) that I would pay them back in full abiding by a specific set of rules. That is exactly what I intend to do. How they look at the transaction is essentially irrelevant to me.

I searched for the past hour, trying to find a commercial I know I've seen in the past 2-3 years. Thought it'd be well suited for this thread. In the (bank?) sponsored ad, it acknowledges that people are struggling, but they're good moral people, and good moral people don't default on their mortgage (it didn't come out and say that directly, but that was the gist). I remember part of the ad being outdoors, some kind of barbecue/potluck. Anyone know what I'm talking about?

It sounds like an interesting commercial. Be sure to link it if you find it!

I thought we were just getting started! :)

Haha, If you say so! Maybe its just me but Working in this little box to draft up these responses is taking forever >.<

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #45 on: September 30, 2013, 10:12:17 PM »
A good question about whether or not it is a law compelling them to do so. What ever the reason they are doing it, it is something they chose to build into the contract.

You (should) read the contract before you sign it. You (should) know the terms you are agreeing to if you are promising someone you are going to pay them. For me the difference in there being a choice, and there not being a choice, is key. If you both agreed to a contract that gives you an option to get out of it in exchange for X then I don't see a problem with excising that option. However if the contract doesn't offer such options then I don't believe trying to force one is ok. If you didn't like the terms you shouldn't have signed up. Just because you can legally get away with forcing it doesn't necessarily make it morally ok.

(Note, I can't think of a better way to word this, sorry if it's convoluted) Here's a way to think of it; the entire agreement is not solely what's in the contract. The contract could say "Either pay us, or give us your first born", but that's not legal. Many times, portions of contracts/EULAs/etc. have been found to not be legally binding. On the same note, the entire agreement often includes portions that are not written specifically in the contract. Two corporations agreeing on a contract will (likely) know their legal rights, and will take that into consideration when agreeing to the contract. They know that bankruptcy, defaulting, etc. are simple business maneuvers that are available to them, even if it's not specifically written into the contract.

I.e., whether or not a contract specifically gives you a choice to terminate it, does not mean that the choice does not exist. And it does not mean that they had no idea that it exists (I think you'd be hard-pressed to find a mortgage lender who does not know that defaulting on a mortgage is a choice their customers have).

I guess I'm failing to see how this relationship is unbalanced. Why does someone choosing to view a transaction first from a moral perspective and then from a financial perspective, make it unbalanced if the other is doing it from the other way around? And I totally agree, nothing inherently wrong with wanting to making money.

Because you're being held to a different standard. A corporation can decide to file bankruptcy, do a strategic default, etc. and it's just smart business. If an individual does it, then it's morally wrong. That just...doesn't make sense to me. I can make sense of it if we're talking person-to-person agreements though.

I think you are confusing my desire to repay their loan in full and according to our agreement with caring about them as a person. My wanting to repay them is about me wanting to be a person who keeps their word. I promised that bank (or who ever loaned me the money) that I would pay them back in full abiding by a specific set of rules. That is exactly what I intend to do. How they look at the transaction is essentially irrelevant to me.

My point is, by signing the contract you didn't solely promise the bank to give them money. You promise to give them money in exchange for being able to live in that house, and that the house will be fully yours at the end of the contract period (this is a gross simplification of course). You also promise that if you stop paying, that the bank gets to take the house back and try to recoup their costs (and, depending on the state's laws, try to recoup the rest directly from you). To me neither option is, by itself, more moral than the other.

It sounds like an interesting commercial. Be sure to link it if you find it!

Argh, another hour wasted. I think I'm getting closer, found this link: http://www.newyorker.com/talk/financial/2011/12/19/111219ta_talk_surowiecki . It describes the general hypocrisy I'm talking about. Some snippets (though I'd highly recommend reading the entire article):

Quote
But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills.
....
American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different.
....
So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages....
....
According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse.... So strategic default was portrayed as the act of dishonorable deadbeats. ...John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”
....
Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.

And while it's not the video I spoke of, this is pretty amusing as well: http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default

Haha, If you say so! Maybe its just me but Working in this little box to draft up these responses is taking forever >.<

I'm spending hours looking for a commercial that must have never existed. Or maybe it's a conspiracy, they've wiped all evidence of it ever existing. I'm going to look into this further; if you don't hear back from me, it means I got too close to the truth.
« Last Edit: September 30, 2013, 10:14:28 PM by josetann »

Dicey

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #46 on: September 30, 2013, 10:44:31 PM »
Oops! I meant to add that the 2nd mortgage was taken out about 2 years before we lost the home. A portion was used the pay Kaiser, the remainder was used more as an "emergency fund" when the market crashed and we had a job loss + reduction in my earnings.

You also mentioned elsewhere that the loan is at 8%.

You basically borrowed this money to get through a rough patch in your life. There is nowhere else you could have gotten money this cheaply. You used your house as collateral and you no longer have that collateral. You still owe the money for these debts, and you are darn lucky that you are still only paying 8%. You gave your word, you got a fair price for the money that you borowed. The fact that you let go of your house seems virtually irrelevant. You got the money to pay your debts and tide you over, why shouldn't you want to pay it back? The fact that you have little saved for retirement is also not all that relevant. It's simply not the bank's fault. In my view, they helped you when you needed it.

Read this blog, learn to manage your money better, pay off your debt, start saving for retirement and be proud of yourself, because you are doing the right thing. You have demonstrated this by continuing to make the Chase payment this long. The fact that you're turning 40 is just a red herring. Use the power of turning 40 to do what's right, not to give yourself a lame excuse for previous less-than-perfect choices. You can do it. Please continue to keep us posted.

suntailedshadow

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #47 on: October 01, 2013, 09:55:12 PM »
*Stretches Fingers for exorbitant amount of typing*

(Note, I can't think of a better way to word this, sorry if it's convoluted) Here's a way to think of it; the entire agreement is not solely what's in the contract. The contract could say "Either pay us, or give us your first born", but that's not legal. Many times, portions of contracts/EULAs/etc. have been found to not be legally binding. On the same note, the entire agreement often includes portions that are not written specifically in the contract. Two corporations agreeing on a contract will (likely) know their legal rights, and will take that into consideration when agreeing to the contract. They know that bankruptcy, defaulting, etc. are simple business maneuvers that are available to them, even if it's not specifically written into the contract.

IF you sign a contract in which you agree to give up your first born in exchange for some straw turned to gold... You lead a very amusing life my friend :-P

Seriously though. I understand that its important to know all of your right and the legal maneuvers available to you in the event something fishy happens. However, let me spin this a different way. How would you feel if the bank decided that the money it loaned you was being loaned at such a cheap rate that if it could get the money back and loan it out to someone else it could be making three times as much! So it found some legal maneuver to force you to either pay the loan in full or give up the house (which happens to now be worth enough to pay back your loan in full). That is just a good business decision on their part right? Sounds fair to you? Totally moral? Based on the logic you have given me this would be ok because they are only using the legal means they have available to them.

Because you're being held to a different standard. A corporation can decide to file bankruptcy, do a strategic default, etc. and it's just smart business. If an individual does it, then it's morally wrong. That just...doesn't make sense to me. I can make sense of it if we're talking person-to-person agreements though.

As I said before, to me it doesn't matter who the agreement is with or how THEY are going to treat the agreement. I don't find it moral to back out on a loan unless we have agreed upon the option to up front or they choose to extend it to me after the fact.

My point is, by signing the contract you didn't solely promise the bank to give them money.

Actually, I did. When I signed those documents I promised them I would do everything in my power to repay that loan.

You promise to give them money in exchange for being able to live in that house, and that the house will be fully yours at the end of the contract period (this is a gross simplification of course). You also promise that if you stop paying, that the bank gets to take the house back and try to recoup their costs (and, depending on the state's laws, try to recoup the rest directly from you). To me neither option is, by itself, more moral than the other.

I disagree. They told you they would give you X thousands of dollars, You told them you would pay them back according to X schedule. The only difference between a mortgage loan and a home equity loan is that you are promising to use the cash they give you to purchase the collateral you are providing them (since you can't provide something else up front) instead of getting a nice stack of cash to do with as you please. Would you feel different if it was a home equity loan they had to pay back? From the perspective of borrowing and repayment, aren't they essentially the same thing?

Argh, another hour wasted. I think I'm getting closer, found this link: http://www.newyorker.com/talk/financial/2011/12/19/111219ta_talk_surowiecki . It describes the general hypocrisy I'm talking about. Some snippets (though I'd highly recommend reading the entire article):

Quote
But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills.
....
American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different.
....
So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages....
....
According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse.... So strategic default was portrayed as the act of dishonorable deadbeats. ...John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”
....
Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.

And while it's not the video I spoke of, this is pretty amusing as well: http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default

That was a pretty funny video and definitely some interesting information in the article. As I have already stated, I personally find it morally corrupt to walk away from one's debts just because you don't fee like paying them. This is irrespective if it is a business or an individual because really, isn't a business just a group of individuals? At the end of the day someone had to make the call.  I totally agree that that kind of hypocrisy is staggering but once again, I'm not interested in allowing someones elses actions to dictate my own.

I'm spending hours looking for a commercial that must have never existed. Or maybe it's a conspiracy, they've wiped all evidence of it ever existing. I'm going to look into this further; if you don't hear back from me, it means I got too close to the truth.

X-D

X-)

:-)

:-|

:-/

:-(

D-:
...Herrrro?!?

NumberJohnny5

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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #48 on: October 01, 2013, 11:57:52 PM »
Seriously though. I understand that its important to know all of your right and the legal maneuvers available to you in the event something fishy happens. However, let me spin this a different way. How would you feel if the bank decided that the money it loaned you was being loaned at such a cheap rate that if it could get the money back and loan it out to someone else it could be making three times as much! So it found some legal maneuver to force you to either pay the loan in full or give up the house (which happens to now be worth enough to pay back your loan in full). That is just a good business decision on their part right? Sounds fair to you? Totally moral? Based on the logic you have given me this would be ok because they are only using the legal means they have available to them.

Sounds...familiar somehow. Leg...elbow...knee...arm...that's it, ARM! Adjustable Rate Mortgage, or a balloon mortgage. I think those two very common mortgages can have that effect, especially the balloon mortgage. Completely legal, and I'm sure many banks foreclosed on homes because the homeowner had a balloon mortgage even though the homeowner had never been late or had any change in circumstances (lots of people couldn't qualify for mortgages when the housing bubble burst, even if they had no problem getting one just five years prior).

As I said before, to me it doesn't matter who the agreement is with or how THEY are going to treat the agreement. I don't find it moral to back out on a loan unless we have agreed upon the option to up front or they choose to extend it to me after the fact.

But...but...it IS an option. And they were well aware of it. And it's fine with me if you want to hold yourself to a different standard than the bank/corporation holds themselves to.

Here's another way to think of it. Is it fair to judge one party differently than the other? Would it be fair if a basketball referee applied one set of rules to the home team, and a much more restrictive set of rules on the other? So, the visiting team is allowed to walk with the ball and punch the other guys in the face; but the home team can't hold the ball for more than one second (even if standing still) and if they so much as touch someone on the visiting team, automatic foul. And for some reason, this is ok.

To be fair, I don't think you've said you judge others the same way you judge yourself.

Actually, I did. When I signed those documents I promised them I would do everything in my power to repay that loan.

You may have pinky-sworn; but by signing the documents you agreed to pay and if you don't pay, you agree that the bank gets the house back. I don't remember any fine print of our mortgage that said "you agree to do everything in your power to repay the loan;" it basically said to pay and what'd happen if we didn't.

Of course, it's completely possible that you verbally agreed to do everything in your power to repay the loan. From a legal standpoint I don't think that'd make any difference, though on a moral one I suppose it would.

I disagree. They told you they would give you X thousands of dollars, You told them you would pay them back according to X schedule. The only difference between a mortgage loan and a home equity loan is that you are promising to use the cash they give you to purchase the collateral you are providing them (since you can't provide something else up front) instead of getting a nice stack of cash to do with as you please. Would you feel different if it was a home equity loan they had to pay back? From the perspective of borrowing and repayment, aren't they essentially the same thing?

I wouldn't feel differently; plus it later turned out to be just that (op said the second mortgage was taken out two years before the house was lost).

That was a pretty funny video and definitely some interesting information in the article. As I have already stated, I personally find it morally corrupt to walk away from one's debts just because you don't fee like paying them. This is irrespective if it is a business or an individual because really, isn't a business just a group of individuals? At the end of the day someone had to make the call.  I totally agree that that kind of hypocrisy is staggering but once again, I'm not interested in allowing someones elses actions to dictate my own.

What exactly dictates if it is moral or immoral? Why can't it simply be a business decision? The bank approaches it as a pure business decision. If the individual on the other end also approaches it as a pure business decision...what's the problem? The bank can exercise their option to foreclose if you're late more than X months...it's nothing personal, just business.

Which brings up another point. While I think it's wrong (wrong not being the best word, but foolhardy and misinformed don't fit either) for a person to keep paying solely based on emotions; I also think it's wrong to get overly emotional when a bank is taking "their" home away. This isn't a moral decision by the bank; it's simply a business decision dictated by the contract and the law (well, it's supposed to be).

...Herrrro?!?

It's ok, I'm safe. A black helicopter flew over our house, few black SUVs are parked right outside the front door; but I'm several thousand miles away. I should be safe for now. Ooh, that must be the postman at the door, better wrap this up.

suntailedshadow

  • 5 O'Clock Shadow
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Re: Pay on a 2nd mortgage for a home I no longer own?
« Reply #49 on: October 03, 2013, 06:29:55 PM »
Sounds...familiar somehow. Leg...elbow...knee...arm...that's it, ARM! Adjustable Rate Mortgage, or a balloon mortgage. I think those two very common mortgages can have that effect, especially the balloon mortgage. Completely legal, and I'm sure many banks foreclosed on homes because the homeowner had a balloon mortgage even though the homeowner had never been late or had any change in circumstances (lots of people couldn't qualify for mortgages when the housing bubble burst, even if they had no problem getting one just five years prior).

I don't think that is exactly a square comparison. People went into those mortgages knowing that they would have to pay at the end of those periods... and then they couldn't. It was all agreed to up front. I was asking about a different scenario where the Homeowner was accosted by legal means that existed outside of the contract. Thoughts on that?

But...but...it IS an option. And they were well aware of it. And it's fine with me if you want to hold yourself to a different standard than the bank/corporation holds themselves to.

Here's another way to think of it. Is it fair to judge one party differently than the other? Would it be fair if a basketball referee applied one set of rules to the home team, and a much more restrictive set of rules on the other? So, the visiting team is allowed to walk with the ball and punch the other guys in the face; but the home team can't hold the ball for more than one second (even if standing still) and if they so much as touch someone on the visiting team, automatic foul. And for some reason, this is ok.

To be fair, I don't think you've said you judge others the same way you judge yourself.

Where are the judgement discrepancies here? I clearly stated that I would judge the Individual by the same standard as the Company and visa-versa. I can't control how other people judge things, that is their call. Society as a whole as never been able to 100% agree on things like this and that isn't going to change any time soon. As long as you accept that then its only a matter of whether the individuals doing the judge are judging everyone by the same standard.

You may have pinky-sworn; but by signing the documents you agreed to pay and if you don't pay, you agree that the bank gets the house back. I don't remember any fine print of our mortgage that said "you agree to do everything in your power to repay the loan;" it basically said to pay and what'd happen if we didn't.

Of course, it's completely possible that you verbally agreed to do everything in your power to repay the loan. From a legal standpoint I don't think that'd make any difference, though on a moral one I suppose it would.

You keep saying "by signing the documents you agreed to pay and if you don't pay, you agree that the bank gets the house back" but I'm fairly certain that is not how it works. If it was that simple then it would be an option built in the loan. You could just choose to give the house back, but you can't. You can only choose to stop paying and then they can choose to do something about it. If the contract was written that way they also wouldn't be able to come after you for the remainder of the debt or require you to claim it on your taxes, etc.

And those Pinky Swears are No-Joke...

I wouldn't feel differently; plus it later turned out to be just that (op said the second mortgage was taken out two years before the house was lost).

(I'm trying to explore the nuances in your thought processes at this point)
Would you still feel the same way if it was an unsecured personal loan?

What exactly dictates if it is moral or immoral? Why can't it simply be a business decision? The bank approaches it as a pure business decision. If the individual on the other end also approaches it as a pure business decision...what's the problem? The bank can exercise their option to foreclose if you're late more than X months...it's nothing personal, just business.

Which brings up another point. While I think it's wrong (wrong not being the best word, but foolhardy and misinformed don't fit either) for a person to keep paying solely based on emotions; I also think it's wrong to get overly emotional when a bank is taking "their" home away. This isn't a moral decision by the bank; it's simply a business decision dictated by the contract and the law (well, it's supposed to be).

There is nothing wrong with it being approached as a "business decision", people will make decisions based on whatever priorities they feel most prevailed upon by. However this brings me to the definition of "Business Decision". If by "Business Decision" you mean "Make a decision based on nothing but numbers" then I think that is wrong way to go about it no matter what the decision is. However if by "Business Decision" you mean, "Make a smart decision based on informed priorities" then ya, every decision should be a "Business Decision"!

I agree that getting "Overly Emotional" either way is not the right call. Approaching the situation with Calm Logic will (almost) always lead you to a better outcome. Calm Logic would require that you look at the situation and then look at your priorities and make an informed decision. I see nothing wrong with looking at a decision like this and deciding that based on your priorities it is more important to you to pay off the debt, even if it isn't going to get you every last penny from a financial perspective.

It's ok, I'm safe. A black helicopter flew over our house, few black SUVs are parked right outside the front door; but I'm several thousand miles away. I should be safe for now. Ooh, that must be the postman at the door, better wrap this up.

Lolz, Makes you want to Yell "DON'T OPEN THE DOOR!" Horror Movie Style.