The thread that plots a perilous course around the shoals of politics, piloted by a dead horse. I gotta say this mortgage thing is a red herring. The thing that killed us was a financial crisis. You can blame deadbeat borrowers but thats like blaming the horse for losing the race and causing you to lose your kids college fund. Mind you I'm totally p.o.ed at my idiot neighbors and their borrowing. The worst are people in no recourse states that bought a slew of 'investment' property and played the game until it ran out and then walked away. But frankly these are just the little scummy leaches and they are always with us. I think its just a distraction. The amount of debt directly at risk of default was not the problem, the big numbers were the derivatives that were based on the debt, and the big problem was that you couldn't really know who was in trouble. Credit Default Swaps are the most famous and easiest to understand of these trades. The structural problems are still substantially there and I predict we will have another disaster within the next 20 years. You can take that to the bank, its up to you if you want to deposit it.
Well, they can't walk away from it on their income taxes. The deficiency will show as income.
I have a friend that was talked into buying a second home as an investment property. He paid $350K for something that ended up being worth less than half of that. However, value aside, he couldn't afford to hold the property in the first place. His other 'friend' was telling him how easy it was to flip houses, and talked him into buying it.
So, my friend has to let it go to foreclosure, since he can't afford his current home and this investment property on his $50K/year salary. He couldn't get renters into the house to cover the mortgage, so he was always losing money. What he didn't think of was that he now has an approximate $180K figure (value of loan - what the bank received at a foreclosure auction) that is income to him.
He's been ignoring it, like it would go away, but the IRS never goes away. It makes me wonder how many other people are just excluding this part of 'walking away' from their properties, and subsequently getting into a bad tax situation.
An other problem is that people have stopped paying their mortgages yet stay in the properties for over 2 years. Once again, this in South Florida. People can afford to pay the mortgage, but because they value of their property is so upside down, they just stop, pocketing the cash. Their plan is to save enough money to take a credit hit with a short sale or foreclosure, then buy another place (usually a condo, since they're cheap down here) for cash. We know several people doing this. I find it immoral.
