I have read articles that people are upsidedown on their car loans too. Given that cars wil never rebound in value but houses can and do wouldn't it make more sense to walk away from the cars? Will that be the next trend?

"wouldn't it make more sense to walk away from the cars?"

I think most people drive their cars until the repo guy picks it up at 2 am in the morning.
Can't do that with a house, just watch for the rental market to get a boost in those regions.

***The best way to become a millionaire is to borrow a million dollars and have your renters pay it off.
by Jack Miller***

there was a lot of "noise" about the rising real estate market, over the last several years, that I think made lots of people believe it was a sector that would never drop.

And so people scrambled more to get IN to the market NOW (yes, sometimes fudging their numbers, bcs they felt it was the only way to get in) , bcs they were afraid if they didn't, they'd never be able to afford to buy a home.

That belief--that the real estate market wouldn't drop--is what led them to be willing to take a mortgage that they knew they'd need to refinance. (Hey, plenty of experts in the real-estate and banking/mortgage industries told them it would work!)

But it has also led them to believe that the value of their home should never drop.

My DH and I bought our home halfway down a steep market drop. About a year later, and for several years long, we owed more on our home than we could have sold it for. Scared me to pieces, I can tell you.

But walking away was never an option.

In fact, during that time frame (the late 80s, and the 90s), the thing that stablized NYC was that all the yuppies who'd bought apartments were upside down on them, and COULDN'T move; so they stayed put, and the city stabilized.

The opposite of what's happening now in places w/ lots of foreclosures, etc. It's not just the damage to the prices; it's the damage to the community.

And no, I don't think it's OK to walk away.

Itabsolutely NOT OK to walk way if one has another choice....for any entity...be it a buyer...or a bank that that has the mortgage as the 2nd, 3rd or 4th party down...forecloses on owners who would have preferred to work out terms they could afford...forecloses nonetheless...and leaves the house to deteriorate...and pays no taxes.

Those buyers who can afford to pay but abandon...and those banks/lenders that could have worked out a plan but abandoned...should be prosecuted to the fullest extent of the law.

The banking/lending groups are now reaping what they have sown (monkey see, monkey do).......at the very high cost to us all.

Well, I'm a person who did walk away. In the 1980's -- a very bad local economy situation in which 100's of homes hit the market at the same time, my family found itself in multiple problems. My husband took a job that he really wanted, about 150 miles from the home. The whole family really needed to leave that location. We tried selling & renting, but the local situation continued to spiral downward.
The local/mortgage holder would not even discuss options with us. We hired an attorney to do the negotiating because the bank had not given straight consistent stories to us or our realtor.
The result -- the bank accepted the deed in lieu of foreclosure with a payment of $5,000. (This was a $27,000 house). And, our loan had been conventional -- we had put 20% down. So of course, we lost a great deal of money on this situation.
In hindsight, it was the right thing for my family. We needed to move from there and move on.
I think that every person in this situation will have to evaluate the right course for themselves. I don't think it's particularly helpful to hear from bankers & mortgage holders about the irresponsibility of the individuals.
Susan

"Those buyers who can afford to pay but abandon...and those banks/lenders that could have worked out a plan but abandoned...should be prosecuted to the fullest extent of the law."

What law? They might be exposing themselves to civil suit but what you describe doesn't get into any criminal law. It comes close to fraud.

I believe that California is a "no recourse" state. I believe that this means that the lender cannot go after any other assets to satisfy the house note.

It would be instructive to know the ratio of stay vs. walk - recourse vs. non-recourse.

Never thought about California and "no recourse", so if someone went zero down, and they become upside down on the loan vs home value, the banks can't go after them even if they have a significant amount of cash in the bank? wow, more food for thought

"so if someone went zero down, and they become upside down on the loan vs home value, the banks can't go after them even if they have a significant amount of cash in the bank?"

Yup. My suspicion is that pretty soon it will be impossible to get a mortgage in california without putting 20% down. That might be a good thing.

its amazing how homeowners suddenly feel they cant/shouldn't pay the mortgage just because of a loss in "paper value" of their homes. if you could afford $1500 @ month when times are good what is the difference now if you still can make the payments.

i dont believe HO who are current will suddenly walk away just because values are down. the ones who are walking away are those who cannot find sellers/renters or banks refuse to allow short sales.

if homeowners are going to stay in their homes forever why should they care. Care about the values when they try to sell not how much is it worth now.

Another amazing finding is people would rather protect their credit cards and miss a mortgage payment.

susanna 2006, you did not "walk away"...you did your best to work things out..and paid a hefty sum to do so. That is very different from those who can well afford the payments..but walk away fromthe home simply because the house is worth less than what is currently owed.

mfbenson, I agree that "prosecuted" per se may not apply in many of these cases; however, laws vary state to state with regard to refusing to pay debt owed even though one has the financial means by which to do so...but generally, assets can be attached...inclusive of garnishing wagesto satisfy debt...except apparently in CA as mentioned above..and maybe some other states as well for all we know.

That being the caselending 100% to many whom they knew did not have the means to paywith no recourse at all..pretty much screams of fraud.

Therefore, as far as the lenders/banks are concerned.what law remains to be seen.but as they are being investigated by a number of entities, if found to be guilty of the various suspicions that the FBI, SEC etc ar einvestigating for, hopefully there is some form of legal consequence available....or else there would be little if any point.

As Ive said many times before, time will tell.

"time will tell."

True enough. And even in the non-recourse states, homeowners who walk away will still get eaten alive by gift taxes. Its not as simple as its being made out to be by some of the more sensationalistic media reports.

"And even in the non-recourse states, homeowners who walk away will still get eaten alive by gift taxes"

mfbenson---How does the gift tax apply?

Where do you walk away to? You have to live somewhere.

you walk away to a rental

NO

Too bad we can't see the conference call discussing the sensible lending practices by these lending banks.
Oh, that's right, there weren't hardly any sensible practices being discussed less being used.

It seems to me (based on talk radio) that people who "feel" that they were taken advantage of by their lender, do not "feel" the same obligation.

Therefore, when the market went through the cycle in the 80/90s, I believe most people felt a much stronger sense of obligation than today.

I think we have debated well enough the merits or lack thereof of the lending practices of late, so no comment from me as to the validity of these feelings.

Maybe I'm naive, but aren't there some real possible IRS implications in just walking way? I'm imagining that it could take a few years for the IRS to catch up to one after walking, but it just might. Capital gain or loss is the difference between the debt and your adjusted basis, which is usually the amount paid plus capital improvements (minus depreciation, if it's a rental property). If the debt exceeds the basis, there will be a capital gain even if one doen't get a dime in their pocket.

I'm all in favor of investigating every aspect of this housing debacle, but I doubt there will be much if any relief as an outcome. And what I suspect most is that any determination made will fall under the category of "white collar crime", and that companies/individuals involved in outright fraud will be deemed to "have suffered enough" being publicly humiliated. Yadda yadda, yadda. We kind of saw it before with the collapse of the saving and loans a couple of decades back.

Duluthinbloomz4, from what I have read, there are tax repercussions. Forgiven debt in a foreclosure or short sale can be taxed as income by the IRS, even though the person didn't "get" that money. However, part of the govt's bailout plan might do away with taxing forgiven debt on foreclosures, (again, just from what I've read).

No worries about the tax implications...It's a great time to walk!

"Feb. 4, 2008 The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in 2007, 2008 or 2009. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesnt apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the homes value or the taxpayers financial condition.

The amount excluded reduces the taxpayers cost basis in the home. More information on claiming this exclusion will be available soon."

FROM THE IRS WEBSITE

The IRS.Gov page continues... Are there tax consequences of losing a home through foreclosure?

Possible consequences to consider:

(1.)Taxable cancellation of debt income. If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

(2.)A reportable gain from the disposition of the home because foreclosures are treated like sales for tax purposes.

Because there are always qualifying facts, figures and circumstances, I don't get the sense that everybody who wants to is going to be able to just walk away from a property scot free with this act which - was designated to be temporary for a three year period beginning Jan. 1, 2007.

dulithinbloomz4, is the passage you quoted still applicable?

nova - to be honest, I don't really know. If not currently applicable, I imagine there'll be plenty of statistics coming out regarding the dollar amounts of lenders' debt forgiveness. But, is it a given that all lenders are going to forgive debt in all instances?

Very interesting article from CNN Money about the decision to walk away. If the Fair Isaacs spokesman is to be believed, the consequences are shockingly minimal. Although, I'd hope the interest rate would be a killer.

And while a mortgage default can savage a person's credit record, trying to pay off a loan they can't afford could be worse for borrowers if it leads to bankruptcy, said Craig Watts, a spokesman for the credit reporting firm Fair Isaac.

Credit scores are hurt much more by missing multiple payments - on credit cards, cars and so on - than by a single foreclosure.

"The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy," said Watts.

It typically takes three years of a spotless payment record after a bankruptcy before credit scores recover enough for someone to think about buying a home again, he said. After abandoning a mortgage, a person may be able to buy a new house in two years or less.

Who decided that downpayments weren't required for houses anymore?

Who decided that you could put less than 20% down and still not pay mortgage insurance?

Who decided that it is acceptable to lend money to people who couldn't verify their income?

Who decided that it was acceptable to lend money out via interest only loans or even worse, negative amortization loans?

Who decided that appraisals should be contracted to the lowest bidder without auditing their process or ensuring that there were adequate checks and balances?

Who decided that pools of these loans could be securitized and rated AAA?

Let's think about the answers to these questions before we start assigning blame to people who walk away.

This is why any gov't sponsored bailout is for banks/Wall Street and NOT homeowners. Homeowners can just walk away!!!

Ok, I'll play

Who decided they don't have a downpayment,but still want a house anyway?

Who wanted a house SO bad, but couldn't afford it, decided to NOT provide any financial documents, even if it cost a bit more in interest .

Who didn't consider the ramifications of toxic loans, such as interest only,or worse negative amortization?

Who gave ZERO thought to the "What if scenarios" What if the interest rate actually does increase? What if the housing market stagnates,or worse actually starts to see prices decline?

Where does personal responsibility lie?

Any fraudulent lenders/bankers/brokers all should be prosecuted, but please lets not give those who knew better, or should have known better a free pass...

Chrisdoc,
You are so right. While I do have sympathy for many; it all depends on the situation, I have none for the lending powers that created this mess. We can not continue with bail out policies. I love the way the recent cannibalistic practices wants the taxpayer to bail them out. I also, agree that any gov't sponsored bailout is for the banks, etc., I felt the same when it was for the savings and loan, the airlines, etc.

While our government has always had problems. It seems that today we frequently see where the government, individuals, businesses, etc. placing themselves exempt from following the rule of law --- as long as you have an excuse, it's ok. We allow lax policies and judgement to create overwhelming problems. Then we start parading the unfortunate circumstances on the news and whip up the sympathies so that everything can be absolved.

When a government starts allowing this sort of lawlessness ... (and, yes, that is what it is) as a standard course of practice, it is in a decline. But, then it's only my opinion, and I hold no credentials: economist, politician, scholar, preacher, etc. I'm only one of the many who are paying for it all.

I know that I'm speaking in general terms, so not to get too off topic. But, there is a pattern here. The one's that obey the laws and rules are penalized and the one's who do not are rewarded. I feel we are on an unsustainable path.
A lot of tough love is in order ... and it not painless.

Sorry guys, reread my post. Got a little off with my generalization.
I guess my main point is just that, it is all about responsibilities, as qdogni states. Responsibility by the lending institution themselves, by government oversight, by the apprasiers, etc. etc., and yes, the borrowers too.

It seems that in the last 10-20 or so years, rules and oversight have been intentionally laxed, stretched, broken, etc. for a profit or for an individual's gain.
Then, when the problems are the result, everyone wants to point fingers at each other. While at the same time giving themselves a certain degree of excusing themselves from blame and accountability.
There is enough blame to go around.

chrisdoc, to answer almost all of your questions, it was... and still is... the regulatory authorities..aka fox guarding the henhouse. Also called "follow the money".

Wall St is akin to the average gambler...the win whets the appetite for more..and pretty soon, just like the gambler who goes from betting what he can't afford..to betting the food money..to betting the mortgage money...to losing the house..and sometimes even embezzling from their employer..the high rolling investment communities thirst for more and more ways to make billions is never slaked.
And those who win big also make sure they line enough political pockets to make sure no legislation is enacted and/or enforced that would stop their money generating schemes.

However, unlike the average gambler, Wall St can take the money of others, behave recklessly, pocket the initial millions and/or billions...leaving destruction in their wake..with minimal if any repercussions.

Its always a new scheme...S&L, dot com..this time mortgages. The victims always varybut the players and the game remains the same.

That IMO was what was behind the big push by Bush & boys to invest the SS $$$ via Wall St. Aren't we now all glad that was shot down...

Last but not least...the appraisal problem is not a lowest bidder issuemany lenders..if not allhire appraisers based upon their willingness to make sure the appraisal meets the sale price...aka, inflated. And...those appraisers who play the game get the most in fees..and referrals...while those who play it honest get few, if any.

"This is why any gov't sponsored bailout is for banks/Wall Street and NOT homeowners."

Ok, suppose there will be no government bailout. What will happen to the value of your house when dozens of your neighbors foreclose?

The bailout IS for homeowners, once you start using a definition of homeowners that includes those not directly affected.

"Its always a new scheme...S&L, dot com..this time mortgages."

I'd look for something in the energy sector - either oil (which may already be in a bubble) or some sort of alternative fuel.

mfbenson: "..or some sort of alternative fuel."

Good point..ethnanol...way to expensive to make..uses way to much energy to make..and barely increases gas mileage.
Go figure.

"Ok, suppose there will be no government bailout. What will happen to the value of your house when dozens of your neighbors foreclose?"

I don't own a house because I can't afford to buy a house. Will the government buy me (and the millions of people like me) a house as part of the bailout? If not will they use my tax $ to bailout people who couldn't afford houses but got them anyway?

Maybe it would just make more sense to let the prices of houses fall to affordable levels so people could buy them w/ conventional financing and 20% downpayments.

The bottom line is Banks/Wall Steet lent money to people who can't afford to pay it back. I believe Banks/Wall Street deserve the brunt of the blaim but I can see the point where qdog says home owners should bear the most blame. But I can't see how the tax $ of people who can't afford to buy houses should be used to bail out people who signed up to buy more house than they paid for.

chrisdoc you make some good points, and I agree that people who were behaving responsibly shouldn't have to pick up the tab for this. Also, housing is still artificially high, and needs to come down. I am sure people who have an interest in seeing it stay high would disagree, but really, it's been out of line with incomes for some time. Appraiser fraud/coercion was part of the bubble. Returning to normal will be painful for some, but mostly for those who were irresponsible or foolish in the first place. I also agree that the industry should bear the brunt of the blame as you said. One book I read on mortgage fraud summed it up nicely in saying this type of fraud cannot exist without industry involvement. Certainly the industry had the knowledge more than home buyers, to know what they were doing, too. Many buyers did get in over their heads but they didn't invent Interest Only loans, etc, nor did they approve them and then sell them as investments. That was all the indusry's doing.

Although this article is about the economy in general, the AP poll also asked people their opinions on the housing /mortgage mess:

Excerpt:
"With Wall Street in turmoil, the top economic worry for poll respondents was seeing their nest eggs shrink. Fifty-nine percent said they were worried "a lot" or "some" about seeing the value of stocks and retirement investments drop. Those approaching retirement fretted the most.

Nearly half 46 percent said they were worried about being able to pay their bills. This is especially a concern for people whose household incomes are under $50,000, and for minorities. Twenty-eight percent most feared losing their jobs; minorities and those with a high school education or less were especially concerned.

Also, 48 percent of homeowners polled worried that the value of their homes would drop. The housing bust has led to record-high foreclosures, and weaker home values have made people feel less wealthy.

Who deserves most of the blame for the economys troubles?

More than half 56 percent pointed the finger at mortgage lenders. Forty-four percent said Bush deserves a lot of the blame. After that come Congress, Wall Street, consumers themselves and in last place the Federal Reserve."

chrisdoc, while I also agree that you make good points, the sad fact is that the shrinking middle class continues to be the piggy bank for the wealthy, and the financiers for the poor.

And...when the big financial players lose the pot, in the end, the rest of us are forced into picking up the pieces...as was the case with the S&L's...

This is a problem that goes far beyond the current debacle..it is apparently a hidden amendment to the constitution (known only to those of a certain level of extreme wealth)...that the finance folk have a inalienable right to speculate with our money as they see fit...and leave us holding the bag when the scheme du jour implodes.

Interesting factoid that may or may not be relevant...but who was President during the S&L scandal? Who's son was chief player in that mess? Who's other son is President now?

For answers, visit here:

http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

Coincidenceor not?

As the primary's grind on...and the "parties" invent new ways to manipulate the process... super delegatesthen maybe super-sized delegates (with a side of fries)...and who knows what else...it is important for people to remember that as much as things seem to change..they basically stay the same.

Who decided that downpayments weren't required for houses anymore?
Who decided that you could put less than 20% down and still not pay mortgage insurance?

Who decided that it is acceptable to lend money to people who couldn't verify their income?

Why, the ACLU, for one.

Some years ago, banks were accused of discriminatory lending practices, so they were pressured to make sure that loans approved went to borrowers in pretty exact propotions, depending on the demographics of the area.

Here is the problem with that: discrimination could have been more acurately shown on default rates, NOT loan rates.

If families named "Jones" are defaulting like crazy, and "Smiths" aren't, then obviously the lending institutions are requiring a higher standard of the Smiths, thus discriminating against them.

Oh for god's sake let's not start dragging the aclu into this.

I can't find it now, but just a couple hours ago I read where prime forclosures are starting to creep upward. One of the people profiled in the story was in Vegas--true, a declining mkt, but she had a good job as technology head of a casino and a fairly reasonably priced house. Nevertheless, in '06 or '07 she was bait-and-switched into an interest-only loan w/ a $40,000 prepay penalty that doesn't go away until 2009. (Countrywide) That $40k is more than 10% the amount of the mortgage. I thought to myself 'how the heck did she get into such a loan??' Then I noticed the picture. She's black.

And yes, that does make a difference. Conservative pundits may protest till they're blue in the face that it's not color, it's poverty, or lack of education, or whathaveyou. But that's bull. It's color. Minorities are many times more likely than whites to get overcharged or offered only inappropriate products. It happens over and over again. Just a year or two ago, most of the big life insurers settled a class action case where they essentially were forced to admit that they'd charged blacks more for life insurance products over decades. They'd also churned these accounts and done all sorts of other fraudulent things.

I used to date a guy who worked in a mortgage office located in a black neighborhood in Bklyn. This place was scam-central. I read years later that the company had been shut down by the atty general. It's a disgrace that it took so long. Even as a college kid I could tell they were in the business of ripping people off.

So, bottom line, the fact that the aclu and others have fought to force lenders and other financial companies to a) do business with minorities at all, and b) do so fairly without adding a 'color surcharge,' has absolutely nothing to do with the fact that we're now in a mortgage meltdown caused by lax lending and fraud.

What does have to do with it? Well, whoever invented the idea that people should convert unsecured loans to secured loans by taking out home-equity loans to pay off the CCs, for one. They're still running those ads in my area. What gets me is not only that shady 'credit counseling' companies would push it (why not, there's a buck to be made) but that it actually makes it into 'financial advice' given by so-called experts on tv and in magazines. Also, the Fed, by keeping the money supply so cheap and plentiful for so many years. Check out Jim Jubak on msnmoney.com for multiple well-thought-out discussions of why and how the Fed caused the last several asset bubbles, and why the current rate-lowering is setting us up for the next one. And of course the loan machines--I mean banks--that keep inventing ways of lending money to people under terms that are meant to look like they're good for consumers, but are actually just a way of dragging out the repayment and therefore increasing their profit (I/O, 40-year, exploding ARMs, etc).

Finally: I was watching 'My First Place' on HGTV last night. A young couple was looking for a house somewhere in the mountains out west. They were completely unreaslistic about what they were going to get for ~$200k, I thought, but then lo and behold they found a place. Paid $225k. At the end, when they're showing the closing, I almost jumped out of bed--they took out a 100% interest-only ARM mortgage! They were shown signing the 'adjustable rate disclosure' without even reading it! I almost shouted--they still do those?!? I don't know when this was filmed, but it's a pretty new show. I wonder if they're foreclosed yet.

housenewbie..VERY well said. There is apparently no limit to the number of ways scams can be perpetrated when there is huge money to be had...and with the supposed regulatory authorites looking the other way even with regard to the limited regs that do exist, those less fortunate where like sitting ducks for the predators. And yes indeed the minority communities have been the target of predatory lending for years...

That said, what is up lately with HGTV????

I was watching an episode of House Hunters (staged, yes I know) the other evening...a couple in Orange Park FL were looking to move up to a bigger home. The REA went on to say how it is currently a sellers market, and the couple will have to make an immediate offer if they find what they like..or else someone will beat them to the punch.

Overhearing this, DH said, wow..this must be an an old one...checked the listing..2008!!!! In FLORIDA no less! Hello??

Another one that makes me nuts is "My House Is Worth What?" where the REA (NOT an appraiser) tells the owner how much they would list the house for right then and there...then telling the owners that since the house could be LISTED for x price, they can spend up to that amount to upgrade because they will get it back at the sale..AND, that they will be able to sell for even a higher price due to the upgrades..so they will have money to spare. Yeah...right.

I keep waiting for the owner to say.."and if not, will you cut me a check for the difference?"

Thanks, logic.

"My House Is Worth What?", OMG. I love it when they say 'you'll get 100% back on that renovation.' Yeah right. Or when they're planning to 'pull equity' to buy a car or something. Grrr.

I pine for the days when HGTV was more balanced between H and G. As far as I can tell there's only the one garden show on anymore, not counting stuff like 'landscapers challenge' where people who live in Minnesota are putting in 40-ft pools. Not heated, afaik. So usable maybe 6 weeks of the year.

found it. NY Times.

I'm glad I'm not the only HGTV viewer who laughs out loud at "My House Is Worth What?", "Buy Me", "House Hunters", "Property Virgins",...

Listing Agent to Seller: "It's a buyer's market, there are a gazillion homes listed in your neighborhood for less money with more features. We need to lower the price."

Buying Agent to Buyer on the same house: "It's a seller's market, so if you find something you like, make an offer immediately and make it close to list."

It's like watching a presidential debate.

Back on topic:
Most folks don't understand ARMs, negative amortization, or any of the other "new" loans out there. Truth is that these were all developed to help a small niche of homeowners in odd situations. Most as short term solutions for quick relocations. Never as a mass marketed home buying solution. Notice how most of these stories are first time buyers who didn't think they could afford a home... well they were right.

But EVERYONE from the buyer, to agent, to mortgage broker, to bank, to Wall Street is to blame for some piece of this.

The buyers should be stuck with their credit ruined for not understanding the loan they signed or buying more house than they could afford.

Agents and Brokers are going to have lean sales for a while. And remember that some of them were out there speculating on real estate and are getting burned too.

Banks and Wall Street are going to own lots of over valued houses and write off lots of losses for years to come.

If the Lenders and Borrowers want to figure out a solution that doesn't involve foreclosure, then fine, do it. Just don't use tax dollars for it.

No surprise that this maelstrom has now encompassed prime...it would have been a big surprise if it had not...

This is IMO a major reason as to why a number of lenders are finally offering to restructure etc.......otherwise the entire market and economy would implodeas has happened with a number of hedge funds recently.

In addition, apparenlty the lending community finally got a clue in terms of the value of thousands of homes sitting empty and deterioratingdue to weather, vandals, etc generating zero income...and, fast becoming worthless(talk about being stupid?? THAT is STUPID) verses working out a deal with the owners in order that they can stay in the homes...and, drum roll please...continue making payments.

Another concept! ;-)

As this was hardly rocket science, I am still amazed that it took them this long to face reality.IMOthe difficulties that many have had proving that they are in the proper legal position to forecloseand the courage of some judges to actually call them on it probably helped to facilitate at least some of the major players to face the music.
And of course, the fact that we are in an election yearwith the Republicans worried about losing the White House definitely provided a LOT of incentive for Bush & Co to at least appear to care

"I am still amazed that it took them this long to face reality."

Umm. We're still 12 to 24 months away from reality. Even now, if prices were to stabilize, it would take 10 years of rising incomes for the long-term average of average income to median home value to return to normal.

Prices need to fall by a third, tommorrow.

The part of reality that has been, er, realized, is probably just the beginning.

I don't particularly care for the people who have been suckered into buying a house at the highest ever price point.

However, while they are at fault for buying things they could not afford, the entire system is also at fault for manipulating gullible people into believing crazy things like "real estate never loses value" (just look at historical charts), "now is the best time to buy" (when it was the worst), etc.

These people are the victims of predatory lenders and mortgage brokers. Banks made huge profits on them with this insane system. However, it backfired rather badly. Is it justice ? I don't know, since everyone will suffer.

So basically, people who really couldn't afford those homes, or people who will lose their jobs, will default, and this is normal, except the risks have not been priced right.

Moreover, if you bought a home for $400K and it is now valued at $200K, even if you can afford the payments, what should you do ? Keep paying and become a debt slave forever ? Walk away and rent ? Or walk away and buy your neighbour's repo house at $200K, and therefore save $200K ?

The answer will come easily. I don't think people have much pity for banks. After all, banks are mostly responsible for this mess. Walking away will become an epidemic.

There is a major diffrence from those people who did some really stupid things taking a mortage that they could not afford in the first place and those who loose their jobs or get sick and are unable to pay their mortages and have no choice but to loose their homes.

I think that there should be higher penalties for those people who just walk away from a mortage. There are no penalties right now that scares people enough to keep them from doing this.

I think that in these cases the bank should be able to haunt these type of people F O R E V E R because what they are doing is just wrong and hurts a lot more people then they could ever imagine.

mfbenson: "The part of reality that has been, er, realized, is probably just the beginning"

To clarify, the specifc reality to which I was referring is the the bigger loss would be to let the foreclosed homes sit and rot..and thereby lose most if not all of their value...as opposed to working out deal whereas payments would continue to be made...and the properties could then continue to be financially viable.