Irvine Housing Blog

I think this post confirms what I have long suspected: FICO scores are largely BS.

Long time reader first time poster! (Sounds like i’m on the radio) Just wanted to relate my personal experience.  Bought a 1br for $270k in Santa Ana in 2006 thats been worth $110k the past couple years. (conventional loan and i put 20% down, what was i thinking)  Got married and needed to move on.  Had a 800 fico when I stopped making payments with plans to let it default. Squatted for about 4 months before got a bigger/better/cheaper place in Irvine. BofA canceled my credit cards (they had my countrywide loan) but no problem renting a new place and I kept current with any other payments.  Score dropped to about 660 but is back up to 710 and climbing. Ended up doing a short sale which took the bank about 8 months to process while the place sat empty.  It finally went through about a year ago and its the best decision I’ve ever made it my life. (although buying was far worse) I’m hoping to be able to buy a sfr in the next couple years that I can start a family in.  I’ve been told though that I’ll need to wait another 2 years before I’d be able to help us get a loan.

There’s another negative that could potentially be removed.  A bill passed the California Assembly and is in the Senate now that would preclude employers from checking your credit score. 

I know a couple people who are underwater, whose only reservation to walking is their concern about its effect on any potential employment opportunity over the next seven years.

I wouldn’t be too scared about pre-employment background checks.  Most HR types (I am one) usually discount home loan defaults when reviewing credit.  I would definitely, however, keep all other payments up to date and tell the HR representative about the house default after the job offer and before she sends out the reference check.

Here’s another one…remember the Real Housewife who did the short sale?  Seems they’ve already found another dream home…

http://www.radaronline.com/exclusives/2011/05/alexis-bellino-real-housewives-orange-county

If the banks run out of money, Ben will just print more, taxpayers can finance another bailout.  Maybe HELOC’s will make a comeback, Mama might need to upgrade the “twins”, it’s bikini season!  Yay!

I ran accross this blog at http://finance.yahoo.com/news/New-home-sales-rebound-but-rb-2165792017.html?x=0#mwpphu-container and thought of Irvine Renter: The “number of new houses on the market was the lowest since the 1960’s”. Funny there is no mention of the following: According to the Commerce Department, 2009 & 2010 new homes were the lowest number built since records began in 1959. The Commerce Department further states that the annualized new build rate for 2011 is 10% even lower than last year. I guess the positive spin about the number of available new homes being down is supposed to make us feel better…...until we realize it is because far fewer new homes are being built versus more homes being purchased.

Wow. I knew this would happen, but I was still a poor prophet: I figured it would be a matter of 3-5 years after default before the prodigal children would be re-admitted to the debt family.

I am kicking myself for selling my house before it dropped to less than the balance on the mortgage.

I don’t wish these folks well…. just another case of greed and delusional thinking. I wish the the next buyers of their properties will get a good deal on them… which the featured property surely is not.

Maybe I’m unrealistic, but for $729K, could I get a kitchen with high-end custom cabinets and built-in appliances, instead of cheesy HD-grade white cabinets with a cheap gas range shoved into a niche? This is LUXURY? Every cheap Rogers Park, Chicago rehab is better appointed than this.. and much, much better built. And the house itself looks like it’s built out of plastic and chip-board.

2 words: debtor prisons.  Let them work it off.

Absent that, all the missed payments + HELOC default should really have a bigger effect than this, unless some of these cited are unusually special cases.  I’d expect an initial 804 to rebound a bit more quickly than someone who had say, a 725 starting out.  But one would think a double hit would have a pretty good effect regardless, absent of any “special tricks” attempted by web companies like these, or lawyers touting they can get your score back up there again in no time.

Downside if things are truly going to be like this (for most defaulters), then nothing’s going to significantly improve on the lending side of things for a while. In which case, I hope the banks enjoy their new default rates they’ve brought upon themselves until at least 2013.

Although, in 2012 the CRAs could decide to revise to handle walkaways completely differently, which would make this article somewhat invalid.  And the whole IRS situation post ‘12 should take care of the rest.  I suspect bankruptcy would be no remedy there either, though offer & compromise deals always seem to exist at least the first time around.

“Strategic default” is just a euphemism to make something very unethical sound palatable.  Foreclosure is a safety net set up to protect those who truly can’t pay.  It was never meant as a payment option for those who simply don’t want to pay what they agreed to.  You are abusing a public safety net and you are breaking your promise to pay.  As distasteful as the banks are in other areas, they upheld their portion of the deal with you when they paid for the house originally.  Also, given that your mortgage has likely been repackaged and resold, your “strategic default” is probably also stealing from somebody’s retirement, not to mention from taxpayers who are also left to clean up your mess.  Shame on you all.

Am I correct that a debt written off will be taxed as income received? So walking off a 750K loan, say the bank releases obligation? Sounds pretty BRUTAL of a tax bill to me. Sure, these California suckers who fell into such a trap are now broke but in that type scenario then where do they run? It just sounds like a vicious cycle of abuse and distaster to me.

Irvine Renter,

You start this post with the astute observation that punishment for SD is “likely to lessen as lenders need customers in the future.”

In addition, there is a growing amount of evidence that strategic defaulters are in fact some of the very best borrowers.  They have higher credit scores (before onset of default).  They have higher incomes.  They qualified for larger mortgages.  They manage their debt better.  And, they are more informed.  There are a number of articles and research papers, but here are two recent ones.[1][2]

In fact, I started my company to specifically extend credit to families with severe negative equity but who have decided strategic default is in their family’s financial best interest.  This is not because we need to find customers, but simply because they are good borrowers.

Just don’t put them in a contract that is against their best interest.

Mark Moore, CEO
HomeLiberty, Inc.

How pathetic has this country become?  Promoting a strategic default as the new American way of life shows just how close to the bottom we are.

Sure, let’s get everyone who didn’t have enough common sense when they made their purchase but can still afford their mortgage payments to just stick it to the investors that provided the loan.

While we are at it, let’s also do this to the banks who issue credit cards along with anyone else stupid enough to grant someone credit. 

Face it, the entire USA is nothing more than a nation of bankrupt, incompetent, corrupt individuals and entities and it gets worse every single day.

So let’s just keep this pile of crap rolling until this deadbeat country finally comes to an abrupt stop and the riots and total chaos that are coming, can take over.

Most of you idiots can’t see the handwriting on the wall and what it says is your days are numbered.  In the end you usually get what you deserve and that will surely be the case when this fiasco finally ends.