Comments on CAN I GET RICH ON A SALARY: The Lady Who Wouldn’t Pay Her Mortgage

In such situation I think the lady is taking the r...

2012-01-04T05:29:04.986-08:00

In such situation I think the lady is taking the right decision and want to give her life a new start . I hope it will give people a lesson to react in such way in such situation.
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How come in this type of situation I never hear an...

2008-08-29T10:25:00.000-07:00

How come in this type of situation I never hear anyone suggest that the person just get a roommate? The rent and help with utilities would surely provide enough extra income to save her financial situation. With a condo costing this woman a half a million dollars, I imagine it is somewhere like San Francisco or New York. I know people in both these cities who have lived with 3 or 4 roommates in apartments that are only 1 or 2 bedrooms. Extreme... yes. But more extreme than voluntary foreclosure?

Thanks for the comments! It's interesting to see t...

2008-08-19T05:57:00.000-07:00

Thanks for the comments! It's interesting to see that at least a couple of you sound like you would vote for the foreclosure path for this caller. I agree that the reality is, for some people, foreclosure or the similarly or more credit-damaging path of bankruptcy are viable or the best options. But I still think this caller should have pressed harder on several other paths and weighed options more carefully than it sounded like she did before stopping payments on her mortgage (more fight, less flight). But past what I've mentioned, it's hard for me to weigh in much further without more information about her situation.

I'm curious as to what people are finding out there in the market. Have any of you tried to sell (or know people who tried to sell) their homes at a loss (whether an actual loss or loss on paper) and found they just aren't able to sell at all? Have any of you experienced a foreclosure or bankruptcy (or know someone who did) and have information as to how hard it is to get a rental?

Good article. In a perversely logical way I think ...

2008-08-18T06:09:00.000-07:00

Good article. In a perversely logical way I think she's making the best choice given her situation. She still needs transportation, clothing, food, medicine etc. Sure a foreclosure will hurt her record but she will still be able to buy (albeit adding to already massive debt) a place to sleep, food etc.

ps- You know that inspite of her best intensions this person will NEVER pay off that credit card debt. :-(

Blogmaster,
You makes excellent points. There...

2008-08-17T21:48:00.000-07:00

Blogmaster,
You makes excellent points. There may be something I'm missing, but it seems to me this lady will need to come up with a minimum of $17k at closing, but more realistically (supposing she will owe agent commissions, seller closing costs, etc.) quite possibly $30k to $50k. Where is she going to get this money? I agree that her credit will be hurt for a long time if she allows herself to be foreclosed; once upon a time the "deed in lieu of foreclosure" would have been a better choice but is often unavailable since mortgages became securities, and is probably harder still now that the banks themselves are hurting. As a practical matter I'm not sure selling at a loss is even an option for her.
Chris

Thanks for the comments, everyone!

Chris, <...

2008-08-17T07:20:00.000-07:00

Thanks for the comments, everyone!

Chris,
There's no doubt that I started with my own frame of reference, though I tried to move on from there; and I expect there may well be situations as you describe, where "choosing" foreclosure could be the best option. But I don't believe that that was likely to be true for the caller here. From the nature of the conversation, it didn't appear to me that she had considered many options or simpler moves that could have been less extreme. And for me at least, it's absolutely the wrong call to jump ahead or quickly to the foreclosure path Maybe after careful deliberation, number crunching, and consultation...

As for selling a house at a loss, I absolutely think that's a viable option for someone who is comparing that to foreclosure and could in some cases be not just a sound financial move but the best one available in a dire situation. Unilaterally stopping payments and allowing foreclosure is, I am quite sure, going to ruin one's credit for many years. If the caller here sold at a loss, by the numbers given, she would get rid of $475-499K of her $516K mortgage (not trying to figure in closing expenses). She didn't have any equity in the house, so it's not as if she lost anything she actually had, so I don't agree that it'd be throwing money down a well. Her total debt would go down from $579K to around $80-104K. If she could manage rent payments with that debt load, she could save her credit score; and perhaps with a low-enough rent or with other financial makeovers, she might be able to start paying that down and get onto solid footing.

Also, if her credit were ruined, the caller might even have trouble getting a rental, which is a point that Suze Orman raised.

Great dialogue! I hope you'll all come back and comment some more. Thanks again.

You don't seem to be seriously considering the pos...

2008-08-16T02:42:00.000-07:00

You don't seem to be seriously considering the possibility that this woman's decision was correct. Your reference frame is of a person like yourself -- focused on long term financial security, averse to negative credit, etc. However, with significant negative equity, walking away from this mortgage might indeed be the correct decision. The possibility of redirecting her mortgage-payment cash into other debts and living essentially rent-free while the bank undertakes the foreclosure process also offers an attractive financial benefit. Your suggestion of the option to sell the house at a loss is particularly inexplicable. How is throwing tens of thousands of dollars down a well a sound financial move for anyone, particularly someone already deep in debt of all kinds?

A lot of people are finding their mounting ARMs un...

2008-08-15T17:30:00.000-07:00

A lot of people are finding their mounting ARMs unaffordable, some blame it on the mortgage brokers while others said it is the greed of the buyers.

In either case, there will be more of such cases in future. I write a post a few days ago.
http://jeflin.net/2008/08/13/more-pain-from-avalanche-of-mortgage-defaults/

Most people that call the Suze Orman Show are behi...

2008-08-13T10:40:00.000-07:00

Most people that call the Suze Orman Show are behind on something or need advice on money management. So I am not shocked that someone called saying that.

You have to realize they simply don't know, that's why they are calling the show.

Most people pay other bills before the mortage because the house note is usually the largest bill. So they opt to pay smaller bills

Is it smart? no, but it's what they know!