----- Original Message ----- From: "Erik Reuter" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Wednesday, January 01, 2003 3:40 PM Subject: Re: OT: mortgage default question
> > On Wed, Jan 01, 2003 at 03:15:08PM -0600, Dan Minette wrote: > > > That wasn't true in Houston in the mid-80s. We have friends who were > > in the position. Their dream house could be purchased for less than > > they paid for a much smaller house. So, they set it up so they rented > > out their old house, bought a new house, > > How did they buy the new house? Cash, or mortgage? The reason I ask is > because I wonder if they got a mortgage whether they had any difficulty > getting it, explaining to the bank what they were doing, etc. > Mortgage. They told the bank they would rent their old house, got renters lined up to show that they could afford the new house payments, and went from there. Even though they were losing a little money renting the old house, the loss plus the new mortage payment was close enough to their old mortagae payment so they still qualified under the 28%-35% rule. Futher, the bank didn't care if they were actually going to default on their old loan because it wasn't with them so it wasn't their problem. Their only problem was if the market continued to drop by more than 20%. It was so low then, it was hard to fathem that. There were 4 bedroom houses, about 2200 sq. feet, 1 year old that were going for $38,000. > > That is quite enterprising of them. I wonder if the bank was grateful > for the rental income when they eventually foreclosed, or whether they > kicked the renters out. Do you know if the rent was enough to cover the > mortgage payments on the old house, or did rental prices crash along > with home prices? Rental prices crashed too. The bank couldn't kick the renters out until the contract expired. Our friends didn't care what happened after that. The person who did this was a libertarian/objectivist, and thought cheating the goverment was a very good thing. AFAIK, though, the bank just banked on 'ol Uncle Sam to bail them out. > > > There were so many forclosures in Houston during that time that their > > lawyer told them that > > > 1) No one was ever prosecuted for this > > 2) Their credit rating would suffer a minimal practical hit, as long as > > they had good credit other than the forclosure. > > Do you know if it turned out to be true? If you friends applied for a > new home loan, did the next bank really not care that they intentionally > defaulted on their previous mortgage? They never seemed to have any trouble with credit after that. I know for a fact that people who were forclosed on in Houston were able to get a home loan soon after that. The comment was "Oh, Houston" and that was that. > How did that work? Did the government buy the home the homes for the > cost of the mortgage from the mortgage holders? How was that arranged > (i.e., what reason did the government give for the intervention?) It was the massive bank bailout (200+ billion) back in the '80s. I'm guessing it was before your time. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
