I did everything right...right?

[Simon of the Playa]

Yeah....there's nothing quite like having your new rental neighbors bring the couch onto the driveway and then park on the front lawn while listening to horrible music as loud as possible.

so thats where Bob's living these days.

[VultureChow]

M&T? Mechanics and Technitions?
Murderers and Trannies?
Marigolds and Tyrannasaurs?

https://www.mtb.com/personal/Pages/Index.aspx

Manufacturers and Traders Trust Company, out of Buffalo. They've been pretty slow and steady. The result of which is that they weren't hit as badly in the downturn and at one point became the number 1 commercial lender in 2009 I think.

[VultureChow]

My two cents. Never, ever, ever feel bad about walking away from an underwater mortgage. If there is one thing in the whole downturn that has bugged me, it has been the suggestion that a homeowner has some sort of moral obligation to the lender.

Your only moral obligation is to follow the terms or your mortgage and the law. This isn't a gentleman's debt between two friends, it is a business transaction with a large corporate entity with a huge cadre of lawyers, and analysts. They are certainly better protected than you are.

Your agreement with them was to borrow money and pay them interest on that money with a physical asset as collateral. Assuming the loan is non-recourse, their sole remedy is to take the physical asset back. That was the deal, and they knew it. You didn't agree to pay them as long as you could, or to pay them before all other bills, or to blow through your savings to pay your mortgage.

And I say this as a commercial real estate developer. Hell, in our business, strategic default by non-payment is a well accepted practice. Because of CMBS loans, it may be the only way to actually get a special servicer to talk to you about a loan restructuring. It isn't something we've had to do yet, most of our loans are through banks we have good relationships with, but it's not exactly a mark of shame in this economy either.

why, with this attitude, would anyone want to "loan" money to others?
Is it so lucrative, that they can eat loans and it not matter?
Or, has the system worked, because for the most part, people took it as an obligation, that if the borrowed money, they should pay it back, no matter who loaned it to them?

How about, you buy your house, or commercial property, for cash? then, no worries.
Oh, what, you don't have the cash? And, neither do your friends?
Hmm.....what to do? Who, to ask?

Of course, if you can't pay, you can't pay. But, I don't agree, with it being inconvenient, to live up to the agreement you made, so it's ok to "walk".

but, I don't understand, the cutthroat business world, anyway.

Cut throat isn't the right word, in my opinion. Though a house, a home is tied up with a lot of emotion, this is a business contract, not a family. People don't bail on their mortgages for a lot of reasons. Remember if you have equity in the house, it's lost when the bank forecloses. So If my home that I bought for $455k only has a $225k mortgage, I lose the $230k that I already paid for in a foreclosure. Even if the value drops significantly, it's not in my best interest to walk away from the loan. Banks take all of this, your past performance, and their sophisticated models and decide what return they want for the risk of loaning to you. They are not giving you money, they are selling you money and making a profit on it.

If I buy a shirt, and decide to return it, I get my money back, the store gets to resell the product, and I don't feel guilty about it. If I borrow money from a bank, pay them some money and then give them the collateral back (and they keep the principle and interest you've already paid), I shouldn't feel guilty either. It's not my fault they can't sell it for as much as I paid for it.

[ygmir]

My two cents. Never, ever, ever feel bad about walking away from an underwater mortgage. If there is one thing in the whole downturn that has bugged me, it has been the suggestion that a homeowner has some sort of moral obligation to the lender.

Your only moral obligation is to follow the terms or your mortgage and the law. This isn't a gentleman's debt between two friends, it is a business transaction with a large corporate entity with a huge cadre of lawyers, and analysts. They are certainly better protected than you are.

Your agreement with them was to borrow money and pay them interest on that money with a physical asset as collateral. Assuming the loan is non-recourse, their sole remedy is to take the physical asset back. That was the deal, and they knew it. You didn't agree to pay them as long as you could, or to pay them before all other bills, or to blow through your savings to pay your mortgage.

And I say this as a commercial real estate developer. Hell, in our business, strategic default by non-payment is a well accepted practice. Because of CMBS loans, it may be the only way to actually get a special servicer to talk to you about a loan restructuring. It isn't something we've had to do yet, most of our loans are through banks we have good relationships with, but it's not exactly a mark of shame in this economy either.

why, with this attitude, would anyone want to "loan" money to others?
Is it so lucrative, that they can eat loans and it not matter?
Or, has the system worked, because for the most part, people took it as an obligation, that if the borrowed money, they should pay it back, no matter who loaned it to them?

How about, you buy your house, or commercial property, for cash? then, no worries.
Oh, what, you don't have the cash? And, neither do your friends?
Hmm.....what to do? Who, to ask?

Of course, if you can't pay, you can't pay. But, I don't agree, with it being inconvenient, to live up to the agreement you made, so it's ok to "walk".

but, I don't understand, the cutthroat business world, anyway.

Cut throat isn't the right word, in my opinion. Though a house, a home is tied up with a lot of emotion, this is a business contract, not a family. People don't bail on their mortgages for a lot of reasons. Remember if you have equity in the house, it's lost when the bank forecloses. So If my home that I bought for $455k only has a $225k mortgage, I lose the $230k that I already paid for in a foreclosure. Even if the value drops significantly, it's not in my best interest to walk away from the loan. Banks take all of this, your past performance, and their sophisticated models and decide what return they want for the risk of loaning to you. They are not giving you money, they are selling you money and making a profit on it.

If I buy a shirt, and decide to return it, I get my money back, the store gets to resell the product, and I don't feel guilty about it. If I borrow money from a bank, pay them some money and then give them the collateral back (and they keep the principle and interest you've already paid), I shouldn't feel guilty either. It's not my fault they can't sell it for as much as I paid for it.

I totally understand all that. All I'm saying, is, why then would anyone want to be in the mortgage business? unless, it's so profitable.

I'd say, your "t-shirt analogy" is somewhat flawed, in that, you'll only get your money back, if it's in new conditions.
if you stained it, and then said you want your money back.........seems it'd not work.
I see lots of foreclosed houses, getting trashed, before vacating.
and, lots in worse shape, older, etc, than when purchased.

again, I'm not saying people, under duress, should not be able to "walk". What I lament, is those who do it simply for convenience, or to minimize the loss from thier bad luck or poor decision making.

NOT, folks who just can't make it.

[VultureChow]

I totally understand all that. All I'm saying, is, why then would anyone want to be in the mortgage business? unless, it's so profitable.

I'd say, your "t-shirt analogy" is somewhat flawed, in that, you'll only get your money back, if it's in new conditions.
if you stained it, and then said you want your money back.........seems it'd not work.
I see lots of foreclosed houses, getting trashed, before vacating.
and, lots in worse shape, older, etc, than when purchased.

again, I'm not saying people, under duress, should not be able to "walk". What I lament, is those who do it simply for convenience, or to minimize the loss from thier bad luck or poor decision making.

NOT, folks who just can't make it.

I guess I look at it this way. In an underwater mortgage, there are two parties who made a bad decision. The homeowner who bought a house with a mortgage they couldn't afford (adjustable rate or whatever) for a price that was unsustainable, and the lender who loaned money to a person unable or unwilling to make the payments with a house as collateral with an over inflated value. One of those parties has hundreds of employees and sophisticated models that help them make business decisions, and billions of dollars to help cushion a loss in one investment. The other just bought a home. Both parties suffer when you walk away. You lose any principal you have paid back into the house and take a huge cut to your credit rating and ability to buy a home in the future. The lender is left with a property whose value on their books is less than the market value of the property.

No one gets out unscathed, but the lender had the decks stacked in their favor from day one.

[theCryptofishist]

again, I'm not saying people, under duress, should not be able to "walk". What I lament, is those who do it simply for convenience, or to minimize the loss from thier bad luck or poor decision making.

NOT, folks who just can't make it.

This is a pretty steady part of your character, ygmir. This is what you believe in. Unfortunately, no matter where you draw the line there are going to be people who successfully cheat the system.

Perhaps to drag this someplace it really shouldn't go, I get to the place where if there are going to be people who manage to cheat, then at somepoint you have to draw that line and say, okay, people are going to cheat, but our strategy is to stand here and keep to this standard and do our best to find and stop cheaters.

(ooh nicely put, VultureChow.)

[ygmir]

again, I'm not saying people, under duress, should not be able to "walk". What I lament, is those who do it simply for convenience, or to minimize the loss from thier bad luck or poor decision making.

NOT, folks who just can't make it.

This is a pretty steady part of your character, ygmir. This is what you believe in. Unfortunately, no matter where you draw the line there are going to be people who successfully cheat the system.

Perhaps to drag this someplace it really shouldn't go, I get to the place where if there are going to be people who manage to cheat, then at somepoint you have to draw that line and say, okay, people are going to cheat, but our strategy is to stand here and keep to this standard and do our best to find and stop cheaters.

(ooh nicely put, VultureChow.)

yeah, I guess I hate "good people" suffering, due to "cheaters".
On both sides.
you know, there were, and are, reputable banks, and bankers (all inclusive, for credit unions etc.).
And, there were, and are, good people, who did all their homework.

and, both, got crushed, by the "bid dogs" on wall st. and Washington.
I just hate lumping them together, by making blanket statements like "all bankers are bad" and, " you knew you couldn't afford it, so, why did you buy it?", and, "sure, I'll speculate on this house, make minimum if any payments, and, if I don't 'flip' it, I'll just walk, and let the bank deal with it".

I lament, the loss of honor and integrity, in our society.


and Vulturechow:
very well put, and thank you, for that above.

[VultureChow]

again, I'm not saying people, under duress, should not be able to "walk". What I lament, is those who do it simply for convenience, or to minimize the loss from thier bad luck or poor decision making.

NOT, folks who just can't make it.

This is a pretty steady part of your character, ygmir. This is what you believe in. Unfortunately, no matter where you draw the line there are going to be people who successfully cheat the system.

Perhaps to drag this someplace it really shouldn't go, I get to the place where if there are going to be people who manage to cheat, then at somepoint you have to draw that line and say, okay, people are going to cheat, but our strategy is to stand here and keep to this standard and do our best to find and stop cheaters.

(ooh nicely put, VultureChow.)

yeah, I guess I hate "good people" suffering, due to "cheaters".
On both sides.
you know, there were, and are, reputable banks, and bankers (all inclusive, for credit unions etc.).
And, there were, and are, good people, who did all their homework.

and, both, got crushed, by the "bid dogs" on wall st. and Washington.
I just hate lumping them together, by making blanket statements like "all bankers are bad" and, " you knew you couldn't afford it, so, why did you buy it?", and, "sure, I'll speculate on this house, make minimum if any payments, and, if I don't 'flip' it, I'll just walk, and let the bank deal with it".

I lament, the loss of honor and integrity, in our society.


and Vulturechow:
very well put, and thank you, for that above.

Thanks. I get where you are coming from. There was a time when loans were originated and held locally. Where you saw your banker when you walked your dog and a local business/bank was hurt when you couldn't fulfill your obligations. That's no longer the case in the absolute vast majority of the US.

In our business, we're dealing with a guy who is about to just hand the keys back to the special servicer. He outbid us for an adjacent property a few years ago because he was young, his father had loads of money, and he liked the "asset class." He never did any real research on the property and he speculated he could build a bunch of restaurants on it. Existing restrictions with four other parties prohibit this. His sole tenant that was paying just enough rent to cover his mortgage just vacated. Now he's sitting with a property that has no income. A $3 million dollar mortgage with $1 million of equity on something we wouldn't pay more than $2 million for. This guy has loads of family money. He could easily afford to continue to fund the mortgage. But without a likely replacement tenant, he's going to cut his losses and hand the keys over.

Here's the funny thing. When we talk about him, we make fun of him for overpaying for the property and being a cocky young kid. Not for defaulting. It's the absolutely right business decision to make. Even the servicer understands this. Every day well respected developers are handing the keys over. On even larger loans. Some of the time an extension or adjustment is negotiated while the servicer looks around to find someone to buy the note. And no one sees this as a moral failing.

I find it upsetting that an average American is made to feel some sort of shame for a much smaller failure.

[theCryptofishist]

I find it upsetting that an average American is made to feel some sort of shame for a much smaller failure.

I suspect that it's to keep us from going after the people who manipulated the market and created the problem(s).

But here we go down a rabbit hole with at least two other threads before us...

[ygmir]

*snipped*
I find it upsetting that an average American is made to feel some sort of shame for a much smaller failure.

well, except I'd say, he's not "failing", he "abdicating responsibility". But, that's just me.

again, I think it's different, if you (an individual, in their home) can't afford it, and, well you gotta "walk".
I'd not so much call that "failure", because, it's brought on by circumstances beyond their control. and, it's not like they don't want to stay, but, at a point, they can't.
It's horrid, folks losing their dreams.
and, it's wrong, to lump them, with business people/players, who just screw up.

This guy is just giving up, and letting someone else clean up the mess.
It seems, the loan holder, may be able to break even, selling the place? Good thing, they required a large down, or something.

Folks piss about banks wanting large down payments and such....well, that seems a good example of why?
I'm sure it's different, for commercial loans.

[Lord Of Ruin]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

Short answer - no, there aren't any, at least not among the big regional and national players.
Once upon a time I practiced bankruptcy law. All of us in the business knew who the villains were among the lenders - banks like Fleet, Standard Federal, Countrywide - you could count on them to make shaky loans on terrible terms to shaky borrowers who were misled by all sorts of sales pitches. The "good" banks, like Wells Fargo and Bank of America got envious of the villains' bigger profits, so they bought the villains and became villains. Can't tell the good guys from the bad guys any more. Today's paper - B of A shelling out millions in restitution for Countrywide's illicit practices. You could look it up.

This is just factually and historically wrong, so it calls into question all your observations despite your "practice of bankruptcy law."

LoR

[Mojojita]

Are there no good banks? Were they all driven out of business by the bad actors? I know about credit unions, but I'm just curious about banks. (I'm assuming that any such would be small and local.)

Short answer - no, there aren't any, at least not among the big regional and national players.
Once upon a time I practiced bankruptcy law. All of us in the business knew who the villains were among the lenders - banks like Fleet, Standard Federal, Countrywide - you could count on them to make shaky loans on terrible terms to shaky borrowers who were misled by all sorts of sales pitches. The "good" banks, like Wells Fargo and Bank of America got envious of the villains' bigger profits, so they bought the villains and became villains. Can't tell the good guys from the bad guys any more. Today's paper - B of A shelling out millions in restitution for Countrywide's illicit practices. You could look it up.

I was afraid of that.

*sigh*

I found one that I think has a better report card than most, good enough that local Occupy protestors singled it out as one of the few they would not stage protests in front of. It is Rabobank, and was a local bank until purchased by a group originating from one of the Nordic countries.