Truth to tell, I don't see this as horrible a thing as you do. He tried to pay off the loans, make better arrangements, and when he couldn't, he had to leave. He then chose to rent a house, which is a perfectly acceptable thing to do, and it resulted in him having more in his pocket than before, since he's not trying to make the house payments anymore. That's only fair, since he also doesn't have the house(s).

I would LOVE to own a home, but I know I couldn't afford the mortgage AND the property taxes AND the upkeep AND the larger utility bills, so I rent. I've heard all the arguments, the whole "taking money from one pocket and putting it in the other" scenarios; all I know is SO many of our friends have bought lovely homes, and will whisper to us "I had no IDEA how expensive it was gonna be". So I've never placed myself in the situation they're in, which I guess shows maturity, or at least fear of risk, on my part.

But these folks don't seem as bad as you make them out. If you realize you're in a situation you can't afford/handle, or that doesn't profit for you, you try to get out of it. He didn't leave in the night, he's settling his loan as well as he can. The banks would rather settle and get the proverbial half a loaf. Now if he walked away, his friend bought the house back from the bank for a song, and then sold it BACK to the guy, that'd be a different story.

Similarly, none of them are trying to stay in their homes forever AND not pay for it, they're just taking advantage (I think that's a good choice of words) of the fact that the bank will take some time (often QUITE some time, depending on the laws in one's state) to evict them. It's not dissimilar to not paying the rent on your apartment for the last month, and letting them keep the security deposit, albeit on a slightly grander scale.

Contrary to the implication made by a lot of politicians, not all people who lose their homes become homeless. They just move somewhere else, usually somewhere cheaper. Yes, they lose the money they've invested in the home, and their credit rating takes a massive hit (If this guy tries to rent a place as nice as he has now in a few months after his rating drops, he'll find it challenging) so there's a penelaty of sorts, but they don't go from a house to a cardboard box. I'm sure SOME do, and that's a tragedy, but I'll bet there's more of these "better off in the long run" stories than some would like to admit.

I am a bit on the fence on this one.

If you get priced out of the market, should it really matter just because the amounts we are dealing with are higher?

My knee-jerk reaction is disgust, much like you, because it's easy to key in on the excess and manipulate facts to write a sensational story that is going to piss off all the lefties. (And I am proudly one of them!)

When I was younger, I remember asking my boss for an advance on my salary telling him I was a bit "short" this month. He said "Rosie, we're all short, it's just different amounts."

And most of these idiots are just discovering that renting is SOOOOOO much smarter than buying??? Uh oh Suze Orman!

Just my .02!

:-)

People are stupid, where are these home renters going to go when theikr lanlords cash in on the same deal?

Well, the oddity in the stories is this: why are the banks letting them out of the mortgages? They should be expected to pay what they owe, unless they are totally strapped.

I can understand people who have situations that change drastically over time due to the economy, but this strikes me as running out on debt, something I have never done. I could see settling for a lesser amount if the money just isn't there, but this doesn't seem to be the case. And the fireman? They notoriously have side businesses because of their hours, but something seems off here.

I guess it's just not "cool" anymore, to live within your means.

o.O

If the government would stay out of the mortgage business we wouldn't have alot of these problems.

Let the banks require the typical 20% down. This is there insurance if someone defaults on a loan.

Slob Barney Frank is again trying to force banks to loan money to people who are not qualified.

Did this idiot not learn anything from the fimnancial crisis?

Yeah, but the rents WILL go up eventually, and bite them. I think it's the height of irresponsibility to buy what you KNOW damn good and well you can't afford, then skip out on the loan. I don't care what the bank told you you could borrow, you see your paycheck every month, and you know the mortgage payment, and if the 2 don't match, you know you can't afford the place. It's just as irresponsible as not paying your last month's rent and losing your (smaller) deposit. What about that says OK to you, "Vinnie"?

I understand the argument that renting is cheaper, but when you rent, you ARE paying the mortgage, taxes, insurance, and repairs. No landlord does it at a loss. At least not for long. Unless you rent a smaller place than you would buy. Now, the landlord's mortgage payment may be smaller than what yours would be now, if they have owned a while, but you're still making their payment for them. I'm not saying all people should buy, many shouldn't, I just don't think the cost argument is the best one. The headache argument, certainly. The mobility one, yeah. But not cost.

Regardless, these people should be making payments to the bank to make up the difference between what the bank got for the house and what the bank was owed. They should NOT have spare income.

I hope all the "it's ok" crowd are tuned into the fact that they are paying for the freeloaders.

It might be higher interest on your mortgage and car loan. It might be higher taxes to fund the bank bailouts and the SDLC insurance premiums. It might be that loan the company you work for didn't get - the one that would have let them be more profitable and give you a raise. You paid.

What cheeses me off most about this is the impression I get that these people are quite pleased with themselves for doing this. Now they can afford all those "toys" and "extras" they couldn't when they had a house. That's crap, IMHO. You made a deal, so sorry if you have to eat Ramen noodles for the next six years. Chalk it up to a learning experience.

It would be different if they'd lost jobs or had some unforseeable hardship occur. These people just sound like it got too haaaard and they didn't want to suck it up and act like adults.

WTF!?!?! Mortgage payments of $4,800?? For the TWO mortgages on his home!?! This guy is a twit that will just get himself into all kinds of other debts. My mortgage payment, INCLUDING property tax is $800. The idea of paying $4,800 a month makes me ill!!

I'm with you, Karen. My mortgage payment is $685 including taxes, and the condo association dues are another $135. I didn't look at home-buying as a "what is my monthly payment" type of thing. I see it the same as any other kind of debt, in that the whole point of it is to pay it off and then not have a mortgage anymore. Up until I lost my job, I was paying down on the mortgage like crazy, looking forward to the day when I only had taxes and dues to pay every month, around $300 total.

Clearly this guy just viewed his home as another line of credit.

My payment is about $1200 a month, on a really nice home. We pay more too, to pay it off early. Every dollar you use spending down your mortgage gives you (roughly, depending on your interest rate) a 100% return, because it saves you $1 in interest. And we actually bought for less than the home is currently worth. I wondered why, and we had a REALLY good home inspection. Then 2 months after closing, the cops come to the door looking for the former owners. So, now I know why :) They had to get out of town.

I don't see why this guy can't pay his mortgage. It's not like he can't afford to live with $3,300 left over every month. What a bunch of crap.

I have a different viewpoint on this.

Since my divorce in 2003 I have spent approximately $75,000 in legal fees, first to try (without success) to protect myself as my ex took me to court over and over for more child support money (5 times), and finally another $10,000 for me to win custody of my son in trial. Throw in a bankruptcy and being forced to pay for a private school for three years and my finances were totally detroyed.

I had to make a decision whether it would ever be worth it to own a house for two reasons: I did not want to be a slave to my mortgage and I wondered if I would have enough money for the next time she takes me to court.

So, I asked my child (8 years old) if he would rather have a house or go on trips every year. With no hesitation he said "lets go on lots of trips!". So, I have decided I will never be a homeowner. Instead, I will continue to pay rent, but I will still have plenty of money and will never have to pay upkeep, maintenance, property taxes, or any of the other stuff that goes with owning a home.

I am renting a condo in a very nice neighborhood that is in one of the best school districts in the state. Most of the homes in my neighborhood are upwards of $300,000, and that is the smaller ones. It is a rich area. My son goes to public school and the place we have is great.

So, to make a long story short, I don't think buying a house is the greatest thing ever, and if people can get out of mortgages and have a better life, so be it. I'm glad they got away with it. Screw the mortgage companies and the banks anyway...I don't feel sorry for them at all. These same banks are jacking everyones credit card rates because they can.

I agree this is largely the fault of the banks and mortgage brokers. Firemen make great money (at least here in FL $100,000+ is not unusual), but nobody should be paying half of their monthly income on mortgages.

Obviously, the guy is an idiot, who lives way beyond his means, but the banks stopped caring whether the numbers made any sense when they started repackaging the loans, piecemeal, and selling them off. They made their money and passed the problem along, just like a pyramid scheme, and they knowingly sold people mortgages and with payment plans that were completely out of their range.

So, to make a long story short, I don't think buying a house is the greatest thing ever.

I agree, not everyone should or will own a home.

and if people can get out of mortgages and have a better life, so be it.

This is part that I disagree with. The money to cover the difference between what the bank invested in that house and the amount that they received has to be created somehow. We the people will pay that debt for the firefighter and others to live a much better life while walking away from their debts.

Why can't the banks put a lien on the paychecks of those in question, leaving them with a wage that is 150% of the local poverty line for their family size and location? Take that money until they pay back the difference. That would put the penalty squarely on the shoulders of those who earned it. I can't afford a BMW, why should I pay for him to have one?

-Julie

Amen, Julie! I drive a base model dodge, but we pay our own mortgage.

Amen, Julie! I drive a base model dodge, but we pay our own mortgage.

This is the key to much of this. When people learn that they don't have to be responsible for themselves and that the rules don't apply to them, they don't take a situation and learn not to do this again, they look at this as a new blueprint to get what they want without paying for it. All people need consequences.

*SORRY FOR THE THREAD HIJACK*
That reminds me of a situation I was in last night. My husband and I ran to the grocery store (6 eggs a day between the two of us has us galloping through them) and there was a lady in the milk aisle with a crying child (the little one was maybe 3...she was still small enough to fit in the seat in the grocery buggy).

The child was 'hurt crying' (which most of us know is different than temper tantrum crying and tired crying) and I looked over. Apparently the child had done something the mom didn't like, and I turned just in time to see the mom smack the little girl's hand HARD. The crying volume increased and the mom went at it again saying, "Stop crying". The mom hadn't escalated things beyond smacking the girl's hand, so I didn't feel like I could go and make her stop, and I did make a loud comment within the mother's hearing that the poor thing won't stop crying if you keep hitting her. The mom kept it up for the entire time we were within earshot (5 minutes or more). I don't feel like I did enough, but I'm not sure what else I could have done. Any ideas?

-Julie

"You take a risk for the American dream," she says. "I don't have to worry about paying property tax, homeowners' insurance, the landscaping, cleaning the pool or any repairs."

That's included in your rent. Idiot.

My knee-jerk reaction is disgust, much like you, because it's easy to key in on the excess and manipulate facts to write a sensational story that is going to piss off all the lefties. (And I am proudly one of them!)

Who says only lefties are pissed off. I'm a conservative, and I'm pissed off, too. This woman considers jettisoning her rental properties -- IN WHICH OTHER PEOPLE LIVE -- and then purchases a fucking $1,800 dining set? The firefighter goes into hock on a BMW and a big house??? They should jettison Social Security and Medicare so that these morons will be forced to save and not become a burden on the rest of us!

I see dumb people: they're EVERYWHERE!!!

Would the guy be "stretching" to pay if he didn't have a $700 a month BMW?

Probably. The mortgage was $4,800 dollars a month, but then again, this is Kookiefornia (sorry, Amy), so they may not come any cheaper than that.

Slob Barney Frank is again trying to force banks to loan money to people who are not qualified.

Ol' Bowney Fwank may be trying to help apply the Cloward-Piven Strategy to the housing market and it's government helpers.

momof4 - unless you actually plug the numbers into a spreadsheet, you don't know what the hell you're talking about regarding buy vs rent. For equivalent house/condo, renting is MUCH cheaper. The only benefit I can see to buying IF:

* you can but it for cash
* it's your ultimate dream home
* it's relatively new and has no pending repair/remodel issues
* it's in an area guaranteed not to go depressed(i.e, Seattle, Silicon Valley)

even THEN, you should think twice about buying. Stop perpetrating the "it's great to own" propaganda.

BTW, is it the "American Dream" to be underwater, $40K in credit card debt, no savings, bankruptcy? Our politicians have been peddling this nonsense for decades now. We should become more like the Japanese, saving 20% of our income and living smaller.

Crusader, one more for your list:

*if you enjoy gardening or DIY home improvement.

I got really sick of having everything in pots that I could move every other year when the rent inevitably went up. Some people are born to put down roots.

The question is whether you consider a contract a moral obligation or a pragmatic agreement. If you agree to a mortgage or a lease, is it OK to stiff the bank or landlord and suffer the contractual consequences. Or does your word mean something?

BTW, any landlord who accepts these people as renters are idiots. In two months, the BMW and vacations will be more imporant than the rent. The landlord will spend months evicting the deadbeats.

"And with this guy's apparent $100K income, if that's true, why couldn't he pay?"
"I don't see why this guy can't pay his mortgage. It's not like he can't afford to live with $3,300 left over every month."

You guys are asking the wrong questions. People respond to incentives. Don't want people walking away from their mortgages? Throw some of those stimulus billions at the problem and align the borrower's incentives to your benefit. Oh but you don't have this particular problem, why should your tax dollars...get real, you're not going to solve this problem with smug stories about how you aggressively paid down some small loan.

In the corporate world they call it dumping toxic debt, or restructuring debt. So let's see some ideas, how do you want individuals with a couple of hundred grand in toxic debt to restructure their liabilities? And then, what policy solutions would you propose to incentiveize lenders and borrowers?

"Not my problem" wont get you a seat at the table.

Julie get five or six chickens - fresh eggs have moreprotien soyou wont eat as many.

Feed them lay mash, table scraps, and mix in their old shells after they have been boiled.

place the coop away from the home as the feed mix will attract your yards insects whic the chiens will also eat

With any luck you'll never have to go to the store for eggs again

Here's how I'd like to see the process go:

Streamline the short sale process for the new buyers. I think it is in the taxpayer's best interest to have these homes turn over and get into the hands of solvent, serious, shame-ridden buyers. The more quickly the better.

Once the sale is inked you take the loan value, subtract the sale price, subtract a portion of the interest paid on the original loan* and the balance is what the original borrower owes, in personal debt, to the original lender.

*Remember that many of these homes are financed at higher interest rates than we see today so there has been some money made by the bank that should be counted as an offset on the bank's loss.

So let's see some ideas, how do you want individuals with a couple of hundred grand in toxic debt to restructure their liabilities?

Does declaring bankruptcy ring a bell?

And then, what policy solutions would you propose to incentivize lenders and borrowers?

I would prefer to disincentivize both sides by repealing the Community Reinvestment Act. Banks would then be disincentivized from making bad loans, and people who couldn't put 20 percent down on a house would be disincentivized from borrowing. Whichever lenders and borrowers continue bad behavior afterward get what they deserve.

Our local paper just had an article on a guy who is getting his backyard chicken farm shut down by the county.

I'd like to see zoning laws changed to at least allow hens on a reasonable size lot. But I don't really like eggs so I can't muster much energy for the cause.

My husband and I rent a home. We outgrew apartment living but weren't and aren't ready to assume the responsibility of home ownership. Having lived there for three years, I don't know if we'll ever buy a house. Taxes, HOA fees and repairs, even pest control are non-issues. Sure, for what we're paying in rent we could buy a house, but then we'd have to deal with all the bullshit. We're both from the east coast, where there's not such stigma attached to renting. My parents' neighbors are almost all doing what the folks in this article are doing. It pisses my dad off something fierce - they bought a brand new home in 2005, so it's worth maybe half what they paid. But he pays his mortgage every month while watching his expected retirement date slip further and further into the future, because he signed a contract and that's what you're supposed to do.

They're in PALMDALE! It's a slum, albeit one with McMansions. These places aren't luxurious as you and I know luxury.

It's the high desert. You couldn't pay me to live there.

The writer must not have gone there--it's not exactly the Hamptons!

http://www.superiorrealtyhomes.com/main.asp?id=20

With any luck you'll never have to go to the store for eggs again

Lujlp, you often bug the fuck out of me (Please understand that isn't a unique reaction nor meant as an insult), but just as often you write something that has be laughing out loud in the cube farm. Thank you for brightening my day and helping me to perpetuate the idea at work that I am more than a little nuts. It reduces the number of meetings I'm required to attend.

-Julie

"people who couldn't put 20 percent down on a house would be disincentivized from borrowing"

My house lost 20% of it's value back in late 2007. I'm over crying about losing the down payment. People are looking at 50% now.

Also, the rest of us do benefit when houses sell, tightening lending standards competes against our need to find some interested buyers.

Bankruptcy? I'd rather people actually met their debt obligations and remained solvent. I'd like to see some better ways to split the empty bag.

get real, you're not going to solve this problem with smug stories about how you aggressively paid down some small loan.

I personally paid down well over 100,000 of credit card debt (I can share the story of my stupidity in getting it another time) and am working on the 100,000 in student loans. I understand what it is like to be under 200k of toxic debt.

My suggestions are as follows:

1) Ensure the continuation of the tax code practice that all forgiven debt must be reported as income (There is a movement afoot to absolve the indebted of this).
2) Create a structure that will allow for the garnishment of wages (down to 150% of poverty line) of people walking away from debt.
3) Enforce rules restricting a company's ability to write off bad debt. Make sure that the owners of the debt must attempt all methods to collect the debt.
4) Restrict the number of calls per day that a debt collector can make in an attempt to collect a debt, and what hours during they day they may make those calls (Maximum twice per day, from 10:00 AM - 4:30 PM and 7:30-8:30PM).
5) Allow people in cities to keep small farm animals (chickens, ducks, rabbits, goats) for personal food use.
6) Reverse the idea that 'A company is too large to fail'. Let companies fail and they will make better credit decisions.

Those are my current ideas, I'm sure I will come up with more later.

-Julie

Bankruptcy? I'd rather people actually met their debt obligations and remained solvent. I'd like to see some better ways to split the empty bag.

I assumed by "toxic debt," you meant debt that was very difficult or impossible to pay off, whether through simple bad luck or sheer moral decadence. So I suggested bankruptcy. I would rather people paid off their debts, too, but sometimes, it's not always possible.

My mom bought a house in 1996, and she did all the right things (making the payments, saving a little for retirement, refinancing when the time was right, improving the property). But then she got fired by her company, to be replaced by somebody YOUNGER and CHEAPER. She couldn't keep any job she found, due in part to various physical problems, so I ended up buying the house from her (she gifted my her equity so I could afford a mortgage), and I financially support her, along with her disability (which is a program that I can actually support, due to disability usually being due to bad luck). Said equity gifting was necessary, because housing values, in early 2007, had only begun to decline from their exorbitant heights.

Had I declined to buy, she may have indeed needed to declare bankruptcy.

Had I declined to buy, she may have indeed needed to declare bankruptcy..

And bankruptcy rarely absolves a person completely of their debt, they are required to allow the government to sell all but a few of their family possessions and turn the management of their paychecks and assets over to the government for distribution, often over a period of years. These banks likely would have made out better under bankruptcy.

http://research.lawyers.com/Texas/Bankruptcy-In-Texas.html

I picked Texas because it appears we have more than a few Texans in the crowd.

-Julie

mpetrie98 said>"This woman considers jettisoning her rental properties -- IN WHICH OTHER PEOPLE LIVE -- and then purchases a fucking $1,800 dining set?"

This is where I got a liiiittle stuck; show owns two other properties? Which she rents out? And now just wants to ditch those and thus dump the renters out into an uncomfortable situation? That's... that's a little dishonest and a little unthoughtful, isn't it?

This is why I'd like to own a home. Hubby & I have outgrown our apartment (we're collectors by nature), but everyone I've known who has rented a house has gotten screwed. In pretty much this exact way - the owner decides to ditch the house and then all of a sudden you're up a creek. And then, quite frankly, as smurfy said, I'd like to put down roots. I'm tired of being told what decorations I can have on my porch, putting up with upstairs neighbors (which is torture!), and being told that strangers will be coming into MY home whenever they feel the need to "inspect" or paint or carve holes in my walls.

I'd love to rent a home; it'd be a perfect solution for me. But I don't want to be in that situation of having the owner default on the mortgage, and then I'm having to hunt for a new place to live on someone else's timetable.

Cornerdemon, I don't like having upstairs neighbors either. The couple living above me is very nice - I know their names and say hello to them when I see them. They aren't even too bad, but I can always hear them clomp-clomping across the floor, and their little dog yips sometimes. However, buying a house or townhouse would have cost me an extra $100K. So I put up with it, and honestly, living in a condo is cheap, even with the dues. I pay $135 a month in dues, but it covers snow removal and grounds maintenance, so I don't have to buy a lawnmower, snowblower, or spend any time taking care of those things. (This is also awesome if I have to travel for work.) Since the association policy covers the building from walls out, my homeowners insurance is only $15 a month. The utilities are also dirt cheap. By collectivizing some of these expenses, I think it saves money for everyone. And yes, someday in the hopefully-not-too-distant future, my mortgage will be paid off, which will mean $525 a month I no longer have to write a check for, and I'll always have a place to live. There's no way I could rent anywhere for $300 a month. The only way I could live cheaper would be to cash in on the place for whatever I could get and move into a trailer.

Julie, jut curious as to what about me pisses you off.

I'm not offended, and in all likleyhod I wont change whatever it is - I'm just curious

cd - I rented the bottom half of a house for 6 years through three owners, never had a problem. The third owner even let me keep the dog the second owner let me get.

I bought a house because the neighborhood I was in was going to shit, and an opportunity presented itself.

The house is worth slightly less than what I paid for it three years ago, but since I'm not planning to sell any time soon, I'm not going to bail. If interest rates fall far enough, I might go for a re-fi, but I doubt I'd get a 100% LTV loan in this climate, even with my credit rating.

As far as cars, I drive an 8 year old VW that's free and clear. Know what I'll be driving next year (Gods willing?). A 9 year old VW.

"unless you actually plug the numbers into a spreadsheet, you don't know what the hell you're talking about regarding buy vs rent"

Once again, for the slower kids-LANDLORDS DO NOT OPERATE AT A LOSS. That means YOU are paying ALL the home's expenses. Might be worth it to you, for the mobility and lack of responsibility and other items, but the owner is not paying for repairs and taxes and insurance. You are. Every month.

JUlie, that's a really tough situation, because most of the time anything you say will get taken out on the kid. Think about it, if it was a mom who could realize her actions were wrong, she wouldn't have done them in the first place. About all you can do is call 311 if it's bad enough.

That's included in your rent. Idiot.

Depends upon where you live. I think the general rule in high-demand urban areas is that rent is substantially less than the cost of ownership. My wife and I rent in a nice 2BR place in an appealing San Francisco neighborhood. From public records, it looks like it was purchased in 2006 for 660k and would sell for about 700k today. I'm guessing the owner pays upwards of 5k. Our rent is 3k. We went out looking, and even with a good down payment, we'd be paying a bunch more than this for places that are not as nice.

Landlords will operate at a loss sometimes, usually due to preferential tax treatment - here in Australia, we have relatively generous rules for negative gearing on capital assets, i.e. the amount you're losing on the property can be deducted from your regular income for tax purposes. Obviously you are still losing money but the expectation is that the capital gain will eventually cover those losses. Lately that's looking a bit less certain so I expect we'll see a bit less of it.

But in general the point that a renter is paying the mortgage, taxes, repairs, etc is true of course, and this attitude that "someone else pays all that" annoys the shit out of me. If they're taking a loss it's either because of the above, in which case they are hoping to realise a handsome profit down the track which you won't see any of despite having paid a lot of the cost of the investment, or it's because of rent control or similar restrictions on rent adjustments ('Whatever' posting above - I don't know but that's probably what you're seeing in San Fran), in which case landlords will either give up providing rental stock or jack up the rents in the future to cover their losses now. Over time it has to correct, you can't have a landlord losing 2k per month without something giving. What happens to you when he mails the keys to the bank and walks away from the debt?

What you're really buying with renting is certainty - you know exactly what you're paying for the year, if there are sudden unexpected maintenance expenses etc the landlord covers them and recoups them over time. So it can be a good decision for people who don't have the ability to absorb unexpected shocks to their finances.

What I don't understand is how anyone ever expected that a system based on fixed interest for the life of the loan and non-recourse was ever going to work? Here almost all mortgages are variable rate (you can get fixed rate loans but they are generally for short terms, 3 to 5 years, after which you have to roll them over into whatever is available at the time) and I've never heard of anyone walking away from negative equity without going into bankruptcy. And lo and behold, no bank failures at all, very low default rate, property market holding up, loans are available. There are always stupid people but in general the insanity of buying and flipping properties you can't really afford just didn't happen here, it's too obvious what the consequences are if you screw up.

To those saying "I'd rather people actually met their debt obligations and remained solvent" or words to that effect as preferential to bankruptcy, isn't the whole point that they're not meeting their debt obligations? They've stiffed the bank for $200k and can still keep up the payments on a BMW? I've kept my 13 year old car (which I love and wouldn't sell in any case, it's a Subaru and they run forever) so I can maintain my mortgage payments. Fine, I agree you should avoid bankruptcy if possible, but the point of it is to protect you from creditors while ensuring that those who have lent you money in good faith get the maximum possible return without squeezing blood from a stone. Debts get written down but it's based on your ability to pay them back. You should not be able to walk away and have heaps of spare cash, or why would anyone lend. Oh that's right, credit crunch. Wonder where that came from.

And Curtis, I agree with you - the landlords taking these freeloaders on are going to have a fun six months evicting people who have decided their new TV is more important than rent.

Sorry, I just can't stop on this one (don't ban me Amy!). I mixed up my deadbeats above, the firefighter with the BMW is only trying to write down his debt by $120k odd - I note though this is based on what he "expects" the house to fetch, I hope he completes the sale before he signs binding agreements with his creditors - he might just find his sudden windfalls cut into if the house only goes for $250k, I doubt they would write down the debt again.

How the hell did he get the loans in the first place? Who decided that payments at over 60% of his gross income (I assume that's pre-tax?) were ok? The limit here is usually 33% of gross income, the house I live in I originally bought with a friend who subsequently lost his job and I had to take over the loan. For complicated reasons this involved a nominal sale (you think you have to sign your name a lot to buy a house, try being both the joint vendor and the purchaser) and a new loan. I was at approx 40% of gross income on the payments and they had to refer it to the bank's head office for approval - of course, they had a problem, I was actually making all the payments on the original loan so they couldn't repossess either, plus the property was positive for equity so they didn't have much to lose, in the end sanity prevailed thank goodness. But that was pretty tough to cover for a few years, I don't see how anyone could have approved this.

I'm feeling a bit less sorry for the lenders now, but not too much - they deserve to take a bit of a haircut but he really shouldn't be driving round in a Beemer.

If they're taking a loss it's either because of the above, in which case they are hoping to realise a handsome profit down the track which you won't see any of despite having paid a lot of the cost of the investment, or it's because of rent control or similar restrictions on rent adjustments ('Whatever' posting above - I don't know but that's probably what you're seeing in San Fran

There's no real rent control in most of the U.S.- some places within Manhattan and some other urban areas excepted. It's definitely the case here in SF that not much restricts what people can rent their places for other than what the market will bear. We have rent stabilization, which limits per annum increases to current tenants for some types of properties, but when they leave, the place rents at market price. Because there is a big enough rental market and enough turnover, rents here are not artificially depressed.

In our case, the landlord is a guy whose job now has him working out of the country most of the year; he didn't buy with the plan of renting it out. But our market has gone so crazy in the last 12-15 years or so due to a combination of the web and real estate booms, the Greenspan and Bernanke feds turning on the floodgates, and the fact that we're San Francisco, that the rent/buy differential (which pretty much always exists - it's the risk premium on the capital) is really high here. Coastal LA is the same way; I know Venice and Santa Monica still haven't seen big declines like much of the U.S. real estate market (maybe Silver Lake or Highland or Echo Park have gotten cheaper, but probably not much). Back to the point - if you bought in 2006, but most of the other landlords bought in 1996 or 1986, you can't rent at near what the place costs to own. In the long run, this sort of huge discrepancy is untenable - renting and home ownership should not be so far apart. But in the meanwhile, our money is better invested elsewhere than in home ownership.

Fair enough Whatever - I should have pointed out that the time scales involved mean it can take a long time for these discrepancies to work their way through the system and this sort of arbitrage opportunity can affect the decision. He seems to be recovering what value he can from the property which is reasonable. You're making an informed decision then to rent rather than buy, I can understand that. My real beef is with people who expect that to last forever or think it's always cheaper to rent.

Ltw -

Your beef is wrong for one reason -

The bulk of houses in the rental arena are older houses. Which means that they are already cheaper unless someone was dumb enough to pay a premium for them during the bubble.

And they tend to be multi-family (at least here in Connecticut). A 2-family house is actually cheaper than most of the McMansions that are being barfed up all around me, and when you can put two families in it, then rent is certainly cheaper than own.

Of course, we're not talking about equivalent properties here, but we almost never are. There aren't many single-family homes on the rental market around here. And the ones that are are not the 3,000 sq. ft. behemoths that the people in TFA bought.

There aren't many single-family homes on the rental market around here.

Brian's right, at least here in CT. Where I am on the shore (I believe he's more inland. Cheshire?) in Milford, there are some one-family houses around here that are smaller than mine (4 bedrooms, 2 baths) that rent for at least half again as much as I am paying. (One reason is that my parents own the house I'm renting, but they haven't given me much of a break on the mortgage, either, but at least it includes heat and water). But most of the 2-family homes around here (and some 3- and 4-family homes) are on very small pieces of land; the owner of the house more often than not, lives there, too, and these houses are situated very close together. Some are kept up well, others are not. Most of the houses in my neighborhood are one-family and have had work done to expand on the 1 and 1/2 story capes that most of them are. A lot of people remortgaged to get the equity loans for expansions. In cities like New Haven, Bridgeport, and Hartford, especially inner-city, most houses are multi-family dwellings. Then there are the projects (although I hear it's not "politcally correct" to call them that anymore) that are beyond belief. Huge ugly apartment buildings right alongside the tenement houses that still make up more than 3/4 of Section 8 housing. There was a big push at one time in Bridgeport to get some of these impoverished families into houses of their own, that, guess what? got defaulted on. Big surprise? I think not.

"Once again, for the slower kids-LANDLORDS DO NOT OPERATE AT A LOSS. That means YOU are paying ALL the home's expenses. "

There are a couple of other factors that come into play. The landlord may be willing to rent for less than the cost of ownership because of the tax advantages, especially if he's holding on to the house as an investment property, or just needs to keep it occupied to avoid damage/loss. Some years ago, I owned a house whose value declined due to a school rezoning. Although the mortgage wasn't upside down, I didn't relish the idea of giving all of my equity to the bank to get out of it. So I rented it out for a while; I charged rent that was about equal to the mortgage. That still left me out of pocket for taxes and maintenance, but that was preferable to the alternative. Furthermore, renting it for a while changed the tax treatment of the property, so when the day came that I got tired of waiting for the market to get better, I was able to write off my loss, which I could not have done if it was still classed as a personal residence.

Julie, jut curious as to what about me pisses you off.

Actually I didn't say that you piss me off, but that you bug the fuck out of me sometimes. In typical nomenclature that might not have a very different meaning, but for me it is the difference between someone I dislike (pissing me off) and someone I like but don't always get along with.

Hopefully this isn't too vague a definition, and if it is, let me know. But you bug the fuck out of me sometimes when we disagree (I'm sure I do the same), but I don't dislike you, and therefore you don't piss me off.

-Julie