BofA to slash mortgage balances by $100,000 or more

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BofA to slash mortgage balances by $100,000 or more

Danny Day
Developer · Houston, TX · Member since 2008 · 488 posts · 121 votes

Just announced today that BoA will be slashing deliquent home loans upwards of $100,000.

How does this make you feel? I personally feel like this bank should have gone under.

Does this bother anyone else that BoA took a bail out, and is now distributing $$$ to deliquent home owners?

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y

I'll feel better about all this when those of us who have been making payments, regardless of the value of our house, and who are not underwater get a nice big fat check, too.

Think about it. Two people buy a $500K house in Jan 2006. First one gets a 100%, 30 year, 6.25% loan. Second one puts down 20% and gets a 15 year, 5.75% loan. Fastforward to now, seven years later. The value has fallen to $350K. The first owner owes $458,684.43. The second owes $279,540.63. The first gets a $100K check, in the form of forgiveness (presumably tax free) of the debt. The second gets nothing. Yet the second is the own who's actually suffered the pain because they've actually put the money out. The first got off easy by being able to buy a house they couldn't really afford. Now they get a gift. While the one who bought a house they could afford gets nothing. I know life isn't fair, but this is grossly unfair.

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  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    It bothers me that they are stingy with the money to even qualified borrowers, yet they are arguably giving money away to delinquent borrowers.

    1Reply
  • Nathan Emmert
    Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
    14y

    Honestly, that's been what they should have done all along... instead of foreclosing and reselling for a fraction of what was owed, why not allow the home owner to refinance at today's rate at today's market value?

    Again, there are two problems facing our market. One is the lack of funding from banks... but the other big one is the lack of mobility of people. I get contacted weekly about jobs around the country... I can't even pursue them... why? Because I'm upside down like a LOT of other owners. Until that gets rectified (either through appreciation or wholesale write down of loan values) it will be hard for demand to kick up in the market.

    1Reply
  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    The problem is, a lot of homeowners that BofA will be helping, probably should never have had a mortgage, therefore they will lose anyway. And it will probably be hard to pick and choose who they help. Im sure they will have to be consistent. Why not loan that money to more qualified borrowers. Cut their losses with the unqualified and make money on the qualified.

    1Reply
  • Nathan Emmert
    Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
    14y
    Originally posted by Jeremy Namen:
    The problem is, a lot of homeowners that BofA will be helping, probably should never have had a mortgage, therefore they will lose anyway. And it will probably be hard to pick and choose who they help. Im sure they will have to be consistent. Why not loan that money to more qualified borrowers. Cut their losses with the unqualified and make money on the qualified.

    Every time they "cut" their losses they eliminate another potential buyer for 3, 5, 7 or even more years and therefore lower overall demand for real estate and further drive down prices. Investors are carrying the market right now with the majority being investors converting things into rentals (from what I've read). That can only be sustained so long before things crash further and this mess gets even uglier.

    The "public" has suffered enough pain on behalf of the banks. Lost equity, destroyed credits, lost homes, lost jobs, lost 401ks... call me crazy, the banks themselves simply bucking up and reducing the overall debt of the country by $100B or so seems "fair" to me at this point. Especially if I'm right in assuming that would help stimulate the market's rebound... return confidence to those who can buy but aren't for fear we aren't at the bottom, that they couldn't resell if they had to in 3 or 5 years... allow those who want to move but can't to be able to, to go where jobs are, to go from "under employed" to fully employed... to convince investors who still aren't sure about real estate to chase the market and poor more money into it... All those things "could" happen if all the banks did what BoA is proposing on a HUGE level.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    I'll feel better about all this when those of us who have been making payments, regardless of the value of our house, and who are not underwater get a nice big fat check, too.

    Think about it. Two people buy a $500K house in Jan 2006. First one gets a 100%, 30 year, 6.25% loan. Second one puts down 20% and gets a 15 year, 5.75% loan. Fastforward to now, seven years later. The value has fallen to $350K. The first owner owes $458,684.43. The second owes $279,540.63. The first gets a $100K check, in the form of forgiveness (presumably tax free) of the debt. The second gets nothing. Yet the second is the own who's actually suffered the pain because they've actually put the money out. The first got off easy by being able to buy a house they couldn't really afford. Now they get a gift. While the one who bought a house they could afford gets nothing. I know life isn't fair, but this is grossly unfair.

    10Reply
  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    It was a natural event... everything is balancing itself out now, band aids will not speed up the process. it will be over when its over, and highly highly doubt it will be over before then.

    0Reply
  • Carlos Flores
    Commercial Real Estate Lender / Syndicator · Dallas, TX · Member since 2011 · 888 posts · 309 votes
    14y

    Where's my hundred grand. Should I stop making mortgage payments too?

    0Reply
  • Mark UpdegraffBusiness Member
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 698 votes
    14y

    I agree 100% with Jon!

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    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    14y

    Putting extra money into a mortgage is putting that value at risk. The person placing those dollars should understand that.

    All of this fair and right stuff is dumb. If we didn't have the government completely distorting the market we wouldn't have to worry about this mess. The market would sort it out and the weak banks would fail or get merged into healthier banks.

    1Reply
  • Bruce M.
    Real Estate Investor, CA · Member since 2012 · 93 posts · 20 votes
    14y

    Ditto on what you said Jon, I could not agree with you more.

    0Reply
  • Lance H.
    Real Estate Investor · Woodbury, MN · Member since 2008 · 133 posts · 43 votes
    14y

    Hey Everyone,

    Thought it would be worth pointing out that BofA isn't doing this by choice. This is part of the $25 billion dollar settlement that the 5 biggest banks came to with the governement for shady foreclosure practices (robo signing). JPMorgan Chase, Wells Fargo, Citibank and Ally Financial formerly known as GMAC are also part of this settlement and doing the same thing.

    Not to make this political but it is just another example of the government distorting the markets.

    1Reply
  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    There is a very good presidential candidate that would solve this sort of mess, I really hope everyone smartens up before they cast the wrong vote!

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    14y

    When a deliquent homeowner sold on a short sale, or someone settles a judgement for less than owed with a Creditor, they receive a 1099 for INCOME earned in the "short" amount. I wonder if those that receive a reduction of 100 grand ALSO receive a 1099. I'd like to see them pay something for the benefit they receive. Rich

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    14y

    Great post Jon H. Fair and just are hard to get to, but if we don't strive for that direction we are going to a very bad place.

    0Reply
  • Jeff Solberg
    Investor · Fort Worth, TX · Member since 2011 · 23 posts · 8 votes
    14y

    This is the sign of our time, reward bad behavior and do nothing for those that are responsible. Outside subsidies just delay the natural correction. But hey it makes for a good headline and looks as if they are taking actions to " help" people. Bottom line is these people will not have learned a lesson and will repeat in the future. Others learned its ok to take on more than you can handle because someone else will clean up your bad decisions at no cost to them. This mentality has become common place and will be our downfall.

    0Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    14y

    I agree with Jon. I rather see these people who made bad decisions loose their house. I know people who havent made a mortgage payment in over 2 years and are still living in their house. Now they with get a discount on what they owe?

    What if the values go back up in the future? Will they have to pay back the bank based on the new value? I have a hard time thinking we have to help out these underwater people but when there is appreciation no one complains.

    0Reply
  • Joe Delia
    Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
    14y
    Originally posted by Nathan Emmert:
    Originally posted by Jeremy Namen:
    The problem is, a lot of homeowners that BofA will be helping, probably should never have had a mortgage, therefore they will lose anyway. And it will probably be hard to pick and choose who they help. Im sure they will have to be consistent. Why not loan that money to more qualified borrowers. Cut their losses with the unqualified and make money on the qualified.

    Every time they "cut" their losses they eliminate another potential buyer for 3, 5, 7 or even more years and therefore lower overall demand for real estate and further drive down prices. Investors are carrying the market right now with the majority being investors converting things into rentals (from what I've read). That can only be sustained so long before things crash further and this mess gets even uglier.

    The "public" has suffered enough pain on behalf of the banks. Lost equity, destroyed credits, lost homes, lost jobs, lost 401ks... call me crazy, the banks themselves simply bucking up and reducing the overall debt of the country by $100B or so seems "fair" to me at this point. Especially if I'm right in assuming that would help stimulate the market's rebound... return confidence to those who can buy but aren't for fear we aren't at the bottom, that they couldn't resell if they had to in 3 or 5 years... allow those who want to move but can't to be able to, to go where jobs are, to go from "under employed" to fully employed... to convince investors who still aren't sure about real estate to chase the market and poor more money into it... All those things "could" happen if all the banks did what BoA is proposing on a HUGE level.

    What a sob story. Tons of people took loans they knew they never could afford, lets not pin it all on the banks. At some point, you have to have some type of personal accountability.

    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    14y
    Originally posted by Jeremy Namen:
    There is a very good presidential candidate that would solve this sort of mess, I really hope everyone smartens up before they cast the wrong vote!

    Unfortunately (actually it's fortunate), it's a lot more complicated than that...

    The President has a very limited ability to enact or even influence policy without the support of the House, the Senate and (to a lesser degree) state and local lawmakers. If the House/Senate and local lawmakers refuse to get behind the political ideology of the President, nothing significant can be changed. For good or bad, the last 3 years is a great example of that...

    That's why we need wholesale changes to our political candidates and not just one guy with the "right" ideas...

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    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    "When a deliquent homeowner sold on a short sale, or someone settles a judgement for less than owed with a Creditor, they receive a 1099 for INCOME earned in the "short" amount. I wonder if those that receive a reduction of 100 grand ALSO receive a 1099. I'd like to see them pay something for the benefit they receive. Rich"

    Even if they did I am sure they would find a way to show they were insolvent at the time of the gain (liabilities exceeded assets) so everyone don't hold your breathe that they would pay any money.At best the amount would be little to nothing.

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    0Reply
  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    14y

    What is most upsetting to me is that it continually feels like doing the right thing these days gets you hurt while reckless speculating or spending is forgiven and even paid back for you.

    But then I try to remember that so many people are hurting out there, and while we may not be getting bailouts or principal reductions on our loans -- or any break whatsoever -- we do get the self-respect and strength from knowing we did do it right, did save the reserves to work through hard times, and, at least so far, have lived through the worst economic crisis since the Great Depression with as little stress or hardship as possible to our families. I certainly wouldn't trade that for a loan reduction.

    2Reply
  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    @j scott, I understand what youre saying but i disagree bc one guy with the right ideas and with good results, i think, can influence other changes and will be more productive and much easier than converting the ideas of even just 2 people.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    Let's please keep the politics out of this thread. Please use the political talk group forum for political discussions.

    0Reply
  • Jeremy Namen
    Real Estate Investor · Saint Louis, MO · Member since 2012 · 113 posts · 12 votes
    14y

    it wasnt completely off topic, but thats fine. I will watch what i say...

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    Political discussions all too often turn ugly. So we don't allow them in the regular forums. There is a group, though where political discussions can go on.

    0Reply
  • Kevin C.
    Investor · McKinney, TX · Member since 2009 · 405 posts · 160 votes
    14y

    This nonsense rewards those that used their homes as an ATM, tapping out the equity every year or two as prices went up, buying cars, trucks, boats, who knows what with the equity and now that values have dropped, and they're underwater, they get a bailout.

    Never mind the fact all those shiny toys are still in their garage, toys that are now effectively being paid for by taxpayers.

    Govt rewarding bad behavior, with OUR money, it's ridiculous.

    Agree with you 100% Jon Holdman

    0Reply
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