Condo repo in Washington State

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fishingboat
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Condo repo in Washington State

Post by fishingboat » Sun Feb 26, 2012 11:31 pm

After much debate I am considering stopping my condo payments to my lender. I paid $180K for it 4 years ago. We were approved for a $300K loan, but only bought what we could afford. It is now worth about $72K (info from two recent short sales in same association). I may need to move in less than 1 year. If I stop payment, the bank will ask for my financial records. My wife and I still work at good jobs. We have money in the bank. We also do some commercial fishing in the summer. Does anyone have experience in this path? I know the bank will want to look at all my financial info. I pay taxes on both incomes and the fishing business, but I feel trapped on the condo. Any comments or advice?

Malcolm2012
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Re: Condo repo in Washington State

Post by Malcolm2012 » Mon Feb 27, 2012 2:43 am

You made a bad decision, and a bad investment. Happens to many of us once in a while. However, it was your decision and you need to make it right. As you paid $180k I assume you put at least 20 percent down? Than would leave about $144 less what you have paid off, lets say $140K remaining.
Why not refinance to a lower rate, as you have assets to overcome your negative, move and rent it out for a couple of years if you must? When the market recovers to $100k+ consider selling and taking a loss.

Remember, it is your problem to fix. Don't listen to some that may tell you to walk away. You have good income and assets, don't take the credit hit and protracted legal issues if you try to walk away. It is not worth it. It is also not the right thing to do.

M

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bertie wooster
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Re: Condo repo in Washington State

Post by bertie wooster » Mon Feb 27, 2012 4:43 am

I disagree. You need to run the numbers, look at how comfortable you are with the credit score reprecussions, and consider if in Washington State a bank can go after your financial assets. If after you consider all of the variables it makes sense to do so then walk away.

You need to do what is in you and your family's best interest, not the banks best interest and not what people say is, "the right thing to do." You and the bank took the risk when you entered into this contract and you can walk away if you determine it is in your best interest. Your bank can try to accomodate you if they want, but they very likely won't. So do what is best for you.

l2ridehd
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Re: Condo repo in Washington State

Post by l2ridehd » Mon Feb 27, 2012 5:55 am

I agree with Malcolm 2012. There are better ways to solve this problem then walking away. Real estate always has and always will be a cyclical market. There are always peaks and valleys. However the next peak has always been higher then the last and the next valley will not be as low as this one. So you will recover your value at some point in the future. You just need to find a way to bridge the time gap. Most cycles in RE are around 10 years. We have now been in this cycle for about 4 years. So within another 4 to 8 years your value will recover and grow beyond where you bought at. Perhaps your best move would be to buy another unit for 72K and rent out both units and there by cutting your recovery time in half. Walking away should be your last option.

ginyah
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Re: Condo repo in Washington State

Post by ginyah » Mon Feb 27, 2012 9:17 am

Here is what I don't understand - you made an investment which lost equity. It happens. From what I read you are able to make the payments without problem. So for me it boils down to, you made a bad investment and you want everyone who uses the bank that provided your mortgage to pay for your mistake, rather than you. Who do you think makes up the short fall when you default? The bank is not a machine, it is the assets of lots of people just like you. Why should they lose money because you don't want to fulfill your obligation? I could understand if you had lost your job and were unable to make the payments but that doesn't appear to be the case here. If the property had increased in value would you have given the extra to the bank? Every investment is a gamble, when you play you have to pay.

sscritic
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Re: Condo repo in Washington State

Post by sscritic » Mon Feb 27, 2012 9:22 am

I would pay until I had to move. Then I would deal with a short sale or whatever else the law in Washington allows (the rights given to you to walk away and the rights given to the bank to seek recovery). I wouldn't stop paying now while I had the ability. Maybe you won't change jobs and you won't move (which I took as a key component in your decision making). Would you still consider stopping your payments if you weren't thinking that you would move?

Malcolm2012
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Re: Condo repo in Washington State

Post by Malcolm2012 » Mon Feb 27, 2012 4:57 pm

We live in a world of right and wrong, no matter what others may say. If you purchased 1000 shares of xyz company at 100 and it went to 50 would you want the brokerage house (and other investors) to pay the difference for you? What is next? Which financial obligation _should_ we honor?

Responsibility means the good AND the bad. Might be different if you are bankrupt and need to to provide for your family, but that is not the case for you. Some who may tell you it is OK no to live up to your obligations may just be trying to feel good about a similar bad decision they made. Why should the bank, banks stockholders, and perhaps taxpayers take the risk just because it is real estate? So you cannot be inconvenienced?

You know what is right, or you would not have asked the question.

jack1719
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Re: Condo repo in Washington State

Post by jack1719 » Tue Feb 28, 2012 4:39 pm

Malcolm2012 wrote:You made a bad decision, and a bad investment. Happens to many of us once in a while. However, it was your decision and you need to make it right. As you paid $180k I assume you put at least 20 percent down? Than would leave about $144 less what you have paid off, lets say $140K remaining.
Why not refinance to a lower rate, as you have assets to overcome your negative, move and rent it out for a couple of years if you must? When the market recovers to $100k+ consider selling and taking a loss.

Remember, it is your problem to fix. Don't listen to some that may tell you to walk away. You have good income and assets, don't take the credit hit and protracted legal issues if you try to walk away. It is not worth it. It is also not the right thing to do.

M
If he made a bad decison than just about anyone(with some minor exceptions)who bought a house/condo 4 years made a bad decison..Bought at top of market..prices nationally have fallen -33% since ..it was just the absolute worst time to buy..its more about his timing than anything

DaveS
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Re: Condo repo in Washington State

Post by DaveS » Tue Feb 28, 2012 4:48 pm

We are talking about money here. It's nice, and easy to give moral advice. But we are still talking about a financial transaction. You have rights, and the bank has rights. I note your stated "I might have to move in a year." If your going to have to move, morality does not change that fact, you still have to move. You also said the bank will want to know your financial picture. One of your rights is not to talk to them. They then have to decide how to deal with you based on what is in your file. Bypassing morality, here is what is going to happen if you stop paying them. (I am a lifetime bankruptcy lawyer. You pose a common question.) You stop paying and you will get calls from the bank for about 4 months trying to get you to resume payments. They, for example, may want to push you into a program to rearrange the loan. If you go that route, or a short sale, your going to have to give them truthful financials. You never want to give a federally insured bank an untruthful financial statement. That is a crime. Don't even consider doing something criminal, just because your having financial problems. You either don't talk to them, or be candid. After the 4 months the bank is going to have to start to foreclose. It takes four months in Wash. to do the most common kind of foreclosure. So if your going to stop paying, you know the timing. Stop paying before you move based on the time it takes to foreclose. Keep up the condo dues till you move out. They can sue you. If memory serves, Washington is an anti-deficiency state. That means that after the foreclosure, they can't pursue you for a deficiency. You need to check this with a Washington lawyer. Now, even in anti-deficiency states, the bank can still decide to do an expensive and drawn out kind of foreclosure that will lead to a deficiency. They make that decision based on how rich they think you are. They make that decision when you are 4 months down. You seem to think your so rich the bank may decide to sue you for a deficiency. An experienced bankruptcy lawyer in your community can give you a good prediction. So you talk to one soon. If he says your not "too rich," you have reason to know what is going to happen if you stop paying. Note a short sale will save you about 150 points on a credit report. The same bankruptcy lawyer in your community should be able to predict if proposing a short sale is a good idea. Sometimes it's a good idea, sometimes it provokes the bank. Nuff said. Dave

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tludwig23
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Re: Condo repo in Washington State

Post by tludwig23 » Tue Feb 28, 2012 4:49 pm

Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
That's what I do: I drink, and I know things. --Tyrion Lannister

PreserveCapital
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Re: Condo repo in Washington State

Post by PreserveCapital » Tue Feb 28, 2012 5:07 pm

l2ridehd wrote:I agree with Malcolm 2012. There are better ways to solve this problem then walking away. Real estate always has and always will be a cyclical market. There are always peaks and valleys. However the next peak has always been higher then the last and the next valley will not be as low as this one. So you will recover your value at some point in the future. You just need to find a way to bridge the time gap. Most cycles in RE are around 10 years. We have now been in this cycle for about 4 years. So within another 4 to 8 years your value will recover and grow beyond where you bought at. Perhaps your best move would be to buy another unit for 72K and rent out both units and there by cutting your recovery time in half. Walking away should be your last option.
When I read this post at first I :lol: but then it occurred to me he might actually be serious and so I :shock:

PreserveCapital
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Re: Condo repo in Washington State

Post by PreserveCapital » Tue Feb 28, 2012 5:08 pm

ginyah wrote:Here is what I don't understand - you made an investment which lost equity. It happens. From what I read you are able to make the payments without problem. So for me it boils down to, you made a bad investment and you want everyone who uses the bank that provided your mortgage to pay for your mistake, rather than you. Who do you think makes up the short fall when you default? The bank is not a machine, it is the assets of lots of people just like you. Why should they lose money because you don't want to fulfill your obligation? I could understand if you had lost your job and were unable to make the payments but that doesn't appear to be the case here. If the property had increased in value would you have given the extra to the bank? Every investment is a gamble, when you play you have to pay.
Nope. The bank made an inadequately-collateralized loan. That's all on the bank.

Investors in the bank should lose money because they invested in a mismanaged bank.

The Op as the borrower has no contractual obligation other than what's in the promissory note and mortgage docs. If he breaches the agreement they are entitled to pursue whatever remedies they have. Most likely of course the loan was re-sold to Fannie or Freddie so actually it would be the taxpayer, you and me, on the hook. But it was our collective decision through elected representation to bail out Fannie and Freddie.

That would be your fault, and mine too, of course.
Last edited by PreserveCapital on Tue Feb 28, 2012 5:11 pm, edited 1 time in total.

bberris
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Re: Condo repo in Washington State

Post by bberris » Tue Feb 28, 2012 5:08 pm

tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
Large companies default when they are unable to pay. They are not entitled to pay one creditor and stiff another if they are equal priority, lets say both unsecured. The OP seems to be able to pay but may choose not to pay. So he is thinking about paying his other debts, apparently, and stiffing the mortgagee.

PreserveCapital
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Re: Condo repo in Washington State

Post by PreserveCapital » Tue Feb 28, 2012 5:14 pm

bberris wrote:
tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
Large companies default when they are unable to pay. They are not entitled to pay one creditor and stiff another if they are equal priority, lets say both unsecured. The OP seems to be able to pay but may choose not to pay. So he is thinking about paying his other debts, apparently, and stiffing the mortgagee.
Sure they are, unless bankruptcy is filed, in which case they are subject to the priorities of bankruptcy law.

But if they don't file for bankruptcy, or are not forced into it, they can play favorites.

As far as I can tell OP didn't say he filed bankruptcy nor was thinking of doing so.

PreserveCapital
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Re: Condo repo in Washington State

Post by PreserveCapital » Tue Feb 28, 2012 5:16 pm

tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
It's not "wrong" in an ethical or moral sense for a debtor to default in OP's situation. Default may or may not be financially optimal, but it isn't "wrong."

PreserveCapital
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Re: Condo repo in Washington State

Post by PreserveCapital » Tue Feb 28, 2012 5:28 pm

DaveS wrote:We are talking about money here. It's nice, and easy to give moral advice. But we are still talking about a financial transaction. You have rights, and the bank has rights. I note your stated "I might have to move in a year." If your going to have to move, morality does not change that fact, you still have to move. You also said the bank will want to know your financial picture. One of your rights is not to talk to them. They then have to decide how to deal with you based on what is in your file. Bypassing morality, here is what is going to happen if you stop paying them. (I am a lifetime bankruptcy lawyer. You pose a common question.) You stop paying and you will get calls from the bank for about 4 months trying to get you to resume payments. They, for example, may want to push you into a program to rearrange the loan. If you go that route, or a short sale, your going to have to give them truthful financials. You never want to give a federally insured bank an untruthful financial statement. That is a crime. Don't even consider doing something criminal, just because your having financial problems. You either don't talk to them, or be candid. After the 4 months the bank is going to have to start to foreclose. It takes four months in Wash. to do the most common kind of foreclosure. So if your going to stop paying, you know the timing. Stop paying before you move based on the time it takes to foreclose. Keep up the condo dues till you move out. They can sue you. If memory serves, Washington is an anti-deficiency state. That means that after the foreclosure, they can't pursue you for a deficiency. You need to check this with a Washington lawyer. Now, even in anti-deficiency states, the bank can still decide to do an expensive and drawn out kind of foreclosure that will lead to a deficiency. They make that decision based on how rich they think you are. They make that decision when you are 4 months down. You seem to think your so rich the bank may decide to sue you for a deficiency. An experienced bankruptcy lawyer in your community can give you a good prediction. So you talk to one soon. If he says your not "too rich," you have reason to know what is going to happen if you stop paying. Note a short sale will save you about 150 points on a credit report. The same bankruptcy lawyer in your community should be able to predict if proposing a short sale is a good idea. Sometimes it's a good idea, sometimes it provokes the bank. Nuff said. Dave

C'mon man you can do better than that.....

....OP should simply send them the jingle mail and offer the deed in lieu of foreclosure. If they threaten him or actually sue he can counter-sue on a theory of predatory lending. Surely the bank must have known the appraisal was vastly over-inflated..... :sharebeer

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tludwig23
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Re: Condo repo in Washington State

Post by tludwig23 » Tue Feb 28, 2012 5:33 pm

bberris wrote:
tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
Large companies default when they are unable to pay. They are not entitled to pay one creditor and stiff another if they are equal priority, lets say both unsecured. The OP seems to be able to pay but may choose not to pay. So he is thinking about paying his other debts, apparently, and stiffing the mortgagee.
Really? Consider the quote below regarding American Airlines

"On November 29, 2011 AMR Corporation filed for Chapter 11 bankruptcy protection with $4 billion of cash. The decision comes as the airline tries to "achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers," the company said in a statement. American Airlines stated that despite the filing it was continuing normal operations." (wikipedia)

I believe the OP would like to "achieve a cost and debt structure" that is "competitive" to assure his "long-term viability" while "continuing (his) normal operations." Moreover, he can achieve this even without Chapter 11 protections.
That's what I do: I drink, and I know things. --Tyrion Lannister

bberris
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Re: Condo repo in Washington State

Post by bberris » Tue Feb 28, 2012 5:58 pm

tludwig23 wrote:
bberris wrote:
tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
Large companies default when they are unable to pay. They are not entitled to pay one creditor and stiff another if they are equal priority, lets say both unsecured. The OP seems to be able to pay but may choose not to pay. So he is thinking about paying his other debts, apparently, and stiffing the mortgagee.
Really? Consider the quote below regarding American Airlines

"On November 29, 2011 AMR Corporation filed for Chapter 11 bankruptcy protection with $4 billion of cash. The decision comes as the airline tries to "achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability and ability to continue delivering a world-class travel experience for its customers," the company said in a statement. American Airlines stated that despite the filing it was continuing normal operations." (wikipedia)

I believe the OP would like to "achieve a cost and debt structure" that is "competitive" to assure his "long-term viability" while "continuing (his) normal operations." Moreover, he can achieve this even without Chapter 11 protections.
You left out the part where they have billions in unfunded pension liability. The 4 billion in cash is irrelevant without knowing their obligations. They need cash to be able to run the airline. So the way things were, AA was unable to pay.

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Dale_G
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Re: Condo repo in Washington State

Post by Dale_G » Tue Feb 28, 2012 6:09 pm

Gee, I paid cash for my home in 2003 - and it is now worth less than I paid for it.

Is there any way to get a retroactive loan?

Dale
Volatility is my friend

Malcolm2012
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Re: Condo repo in Washington State

Post by Malcolm2012 » Wed Feb 29, 2012 2:32 am

PreserveCapital wrote:
tludwig23 wrote:
Malcolm2012 wrote:We live in a world of right and wrong, no matter what others may say...
Why is it "wrong" for an individual to default when large companies do it all the time? Why can the OP not be "restructuring debt"? Why should corporations have the rights of individuals, but not the same "right and wrong" moral responsibilities?
It's not "wrong" in an ethical or moral sense for a debtor to default in OP's situation. Default may or may not be financially optimal, but it isn't "wrong."
It is not a bankruptcy he is talking about. He has money, a business, income and cash in the bank. He is just looking for validation not to live up to ONE financial transaction that was a bad investment. That is a world of difference. Unfortunately, many bankruptcies are 'strategic' as well. Who do you think will pay for him pushing his bad decision/luck off on the bank? Why is that OK?

Under certain people's theories, it is OK, as it is 'just a financial transaction with a big bank'. So is a guy who walks into your local branch wearing a ski mask. Just a financial transaction - right?

Sometimes you win, sometimes you lose. He just doesn't want to lose any money, his lifestyle and family are not in jeopardy. Man up, do the right thing, and learn from it.

itypefast
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Re: Condo repo in Washington State

Post by itypefast » Wed Feb 29, 2012 7:23 am

Thanks to those that are giving financial advice. I'm nowhere near the op's situation... In fact I work at a bank. But this moralizing is sickening.

So three parties made a mistake here... The buyer, the bank and society in general that kept loose money flowing for so long that houses got bid up to crazy levels. According to Malcolm it's morally wrong for the bank to share in the loss. It's a ridiculous position. Beyond that, nobody asked for your subjective moral opinion. He was asking for financial advice.

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