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sell up, rent back - 10/17/2008 5:32:30 AM   
LadyEllen


Posts: 10931
Joined: 6/30/2006
From: Stourport-England
Status: offline 		Another triumph of unregulated business!

People finding it difficult to meet their mortgage payments usually face homelessness should their homes be repossessed. This is obviously a dire situation to be in, stressful, upsetting and despairing - but never fear! All these people can be helped, by friendly companies whose charitable disposition will solve it all!

These saviours will come along and buy your house for the outstanding mortgage amount - relieving you of the liability, and then let you live in the house, paying rent instead. Brilliant!

Except. Your new rental agreement - a six month tenancy agreement, will be for a sum set by these companies to a level you cant afford. When you cant pay, or at the end of your six month agreement, you get notice to leave - and the companies sell your house at a profit on the open market - theyre in no hurry, after all, they can rent it out in the meantime at a more reasonable rent just to cover their costs.

And its all legal, unregulated. These companies make a fortune out of others' misery - paying well below market price for houses and then selling them at market prices.

"Its fair enough", some will say - "this is the nature of a free market economy", and thats true it is the nature of a free market economy. Yet, I find it objectionable in the very nature of what amounts to the trickery and deception that is employed on what are very vulnerable people - is this really the best we can come up with, that we should turn and rend one another?

"But those people should read the small print" some will say; but this too is just not good enough. People who fall prey to these companies are not at their best to make such decisions - stressed, depressed, short of sleep and anxious to get everything resolved; how many of us would be at our bright shiny best to spot problems in the documents?

This example just proves the point; unregulated, left to its own devices, business will exploit and exploit every situation and every person it finds to exploit, and sod the wider consequences, until it has drawn the very last drop. Bereft of any conscience whatever, it will destroy everything and everyone it comes across for its sole imperative to transfer money from the weak to the strong, using whatever methods are necessary, including methods from which Machiavelli might have shrunk.

E

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RE: sell up, rent back - 10/17/2008 5:34:45 AM   
kittinSol


Posts: 16926
Status: offline 		Dog easts dog  .

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RE: sell up, rent back - 10/17/2008 5:40:57 AM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		-- Im trying to talk to the bank here to see if there is a way to move.    so far no dice.

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RE: sell up, rent back - 10/17/2008 5:47:55 AM   
madamekitty


Posts: 11
Joined: 1/19/2008
From: Washington, D.C.
Status: offline 		E,

That's sad thing you described.

Here a bigger issue right now: the "outstanding" mortgage amount owed is MUCH larger than what the market will bear. There is no profit to be made.

In Detroit, where I moved from, this was the case for many people who had purchased a home even in the prior 3-5 years when the market cycle was so much higher. People literally had homes on the market to sell, knowing they would need to bring cash (well, certified check!) to the table to close.

In other words - it really sucks when you can't afford to SELL the house either. And even worse when renting wouldn't cover the monthly mortgage amount.

MK

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RE: sell up, rent back - 10/17/2008 5:52:41 AM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		having bought a forclsoure last year- these banks are tough to deal with.  nothing is turned on. so if you want it you have to put all the utilities in your name, then un-winterized it-=test it then RE_WINTERIZE it all at YOUR expense.  Then when it needs repairs to make the mortgage possible, that cost too is all on the new buyer. 

During this time the bank is stingy as heck.

And in the end- no one will buy a pig in a poke. so these houses sit.

Often the realtor cant find the owner who is some holding company out of state with no idea of local laws and customs.

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RE: sell up, rent back - 10/17/2008 6:01:49 AM   
Quivver


Posts: 1953
Joined: 11/27/2004
Status: offline 		It is sad that people are in such a position, but reading and understanding a binding contract is todays world is necessary. 
I think that old adage of "if it sounds too good to be true, it is" is the first clue that this may not be the answer. 
As a consumer we have to commit responsibly. 



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RE: sell up, rent back - 10/17/2008 6:04:25 AM   
TNstepsout


Posts: 1558
Joined: 8/3/2005
Status: offline 		Sorry but I can't quite feel sorry for these people. If we were talking about tiny, just livable homes for people who otherwise wouldn't have anywhere to go, I'd have a bit more heart, but we aren't. These are really nice homes these people are buying. They are brand new, gated communities, built in sprinkler systems, yards/trees planted, fenced, vaulted ceilings etc.... This is like feeling bad that someone got their Cadillac Escalade repo'd and now they have to drive a Ford Escort.


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RE: sell up, rent back - 10/17/2008 6:06:24 AM   
NuevaVida


Posts: 6707
Joined: 8/5/2008
Status: offline 		Well....if the rent amount is set to a price I couldn't afford, I wouldn't sell the house to said company and rent it back from them. However, if I couldn't afford the mortgage in the first place, I'd be in the same boat anyway, wouldn't I?

What you describe does seem like price gouging, however. I wonder, though, is the monthly rent amount in line with the average rental price in the area? If it's higher, the companies buying and renting are not going to be so successful because nobody will rent the place.

As for buying the home at below market value and then selling it at market value...well, I did this with my house when going through my divorce. It's called a "short sale", which had to go through an approval process with my mortgage company. In addition to that, the the mortgage company lost money on the house, the "forgiveness of debt" amount will have to be reported as "income" in my next year tax return - and I get to pay taxes on it! (there were some loopholes out of this tax part but I didn't qualify for them). I don't think it's as easy as saying, "OK I'll just sell my $300,000 house for $200,000 just so I can get out of the mortgage." At least it wasn't for me. If the mortgage company isn't going to somehow benefit from the sale, the house isn't getting sold. In my case, the short sale was a benefit to them, because I was a week away from final foreclosure.

Back to the buy/rent idea, this actually can be done successfully. A friend of mine was foreclosing her house during her divorce (gotta love the results of nasty and selfish divorces), and, now a single mom with two kids, was extremely stressed over this. An investor friend of hers bought the place from her and rented it back to her at a price she could afford. He was only buying the house as an investment anyway (back when houses were worth investing in!) and didn't care what the incoming rent would be. It helped her out a great deal, and she was able to stay there for years, until her kids were grown. He sold it when the market peaked, and they both benefitted. That's an example of how it could be done, sans the greediness.

I think right now we're in a time where we'll see all sorts of creative solutions being tried - either successfully or unsuccessfully - and I think that's ok. There will be mistakes made, there will be successes, and over time things will even out. The pendulum has swung way over and now it's just returning (or trying to) and finding a happy-medium.

Having recently been in a foreclosure process and a week away from finalizing it, I will admit that it's a stressful process. I was already in an apartment by the time the house was going under, and I have enough family & friends here that I didn't risk being homeless, but the dealings with the mortgage company was almost enough to put me over the edge.

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RE: sell up, rent back - 10/17/2008 6:25:53 AM   
Termyn8or


Posts: 18681
Joined: 11/12/2005
Status: offline 		We have something similar here called a reverse mortgage. From what I understand you can stay in the house for the rest of your life, but as you would guess they only give them to old people.

T

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RE: sell up, rent back - 10/17/2008 7:09:45 AM   
NuevaVida


Posts: 6707
Joined: 8/5/2008
Status: offline 		I believe that program is set up to ensure the elderly don't become homeless elderly. Upon death, the family has the option to buy the home or give it back to the bank, if I understand it correctly.

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RE: sell up, rent back - 10/17/2008 7:15:00 AM   
PlayfulOne


Posts: 1047
Status: offline
quote:

ORIGINAL: NuevaVida
. It's called a "short sale", which had to go through an approval process with my mortgage company. In addition to that, the the mortgage company lost money on the house, the "forgiveness of debt" amount will have to be reported as "income" in my next year tax return - and I get to pay taxes on it!


I know a couple of people here who had to short sell their homes to get out of them.  They both lost about $100,000.  But they also got no forgiveness of debt from the mortgage company.  They both have the mortgage company holding them for the difference.
K

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RE: sell up, rent back - 10/17/2008 7:22:16 AM   
NuevaVida


Posts: 6707
Joined: 8/5/2008
Status: offline 		That seems very strange, but I don't understand all the laws about it. I learned if I went ahead and foreclosed, whatever amount the mortgage company lost when they eventually DID sell the home, I'd have to report as income due to forgiveness of debt. So it made sense to lose $20,000 now, rather than watch the mortgage industry keep declining and lose $100,000 later.

I can't see how the mortgage company would have the ability to try to collect. I think bankruptcy would help in a case such as that.

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RE: sell up, rent back - 10/17/2008 7:38:04 AM   
PlayfulOne


Posts: 1047
Status: offline 		In your case the mortgage company let you slide for 20 grand.  The mortgage company didn't decide to let them slide on a 100 grand.  You can't just sell something and walk away without the mortgage company agreeing.  The house my brother bought several years ago, the couple he bought it from had to get out of the house.  The best they could do at the moment was about 30,000 less than what they could get.  He bought the house and they still owed the bank 30,000 dollars.  They had to make a deal to pay the bank that $30,000 for the bank to ok the sale. 

You don't get to just say oops, sell it for a loss and walk away, unless the mortgage holder lets you.

K

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RE: sell up, rent back - 10/17/2008 7:48:14 AM   
NuevaVida


Posts: 6707
Joined: 8/5/2008
Status: offline
quote:

ORIGINAL: PlayfulOne

In your case the mortgage company let you slide for 20 grand.  The mortgage company didn't decide to let them slide on a 100 grand.  You can't just sell something and walk away without the mortgage company agreeing.  The house my brother bought several years ago, the couple he bought it from had to get out of the house.  The best they could do at the moment was about 30,000 less than what they could get.  He bought the house and they still owed the bank 30,000 dollars.  They had to make a deal to pay the bank that $30,000 for the bank to ok the sale. 

You don't get to just say oops, sell it for a loss and walk away, unless the mortgage holder lets you.

K



True, that's what foreclosures are. The bank could have agreed to that $20,000 loss, or I would have foreclosed and they would have lost about $100,000 instantly. In either case, I wasn't paying them back, but having to report their loss on my taxes.

Your "oops" comment seemed kind of insulting, unless I read it wrong. In my case I could very well have afforded the mortgage, had I not also been paying rent and had my ex not attached my wages for spousal support while refusing to contribute to the mortgage payments. It wasn't a situation of buying bigger than I could afford. It was a small 3 bedroom house without much hurrah to it. But it was my home.

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RE: sell up, rent back - 10/17/2008 8:38:22 AM   
Termyn8or


Posts: 18681
Joined: 11/12/2005
Status: offline 		Interesting points, I hadn't really considered this.

So now if the bank let's you out from under and just writes part of it off as a bad debt, YOU have to pay income tax on it ?

The ONLY way this makes any sense at all is if the borrower gets to save their otherwise (if so) good credit rating. Even with that, the asset did not go to you, how can you be taxed ?

And then the bank gets a tax deduction for writing off a bad loan ? (or a part thereof).

I would also think it likely that their tax savings would be more than you have to pay.

Wow, in my best day I could not think up a better scam than that. There are some people who have gotten very rich and we all have to pay now. There will be no prosecution, there will be no jail. With the tool known as the fed, this was a cakewalk.

I stand in awe of the scammers. And that is exactly what they are. Never done a day's work in their life and sit on top of the world. You don't get results like that without an ingenius scam.

Follow the money.

T

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RE: sell up, rent back - 10/17/2008 8:56:42 AM   
PlayfulOne


Posts: 1047
Status: offline 		NuevaVida,

The oops comment was not meant as anything personal towards you.  I apologize if you took it that way.  I meant that as a general statement that it is not that easy to just walk out of the mortgage.  If it were that easy a lot of people would just sell their home and tell the mortgage holder, "sorry".

You do understand whether it is a vehicle, home, whatever, if it is foreclosed on the lien holder can still come after you for the difference.  If you owe $250,000, they foreclose on you and then sell the property for $150,000 they can still in most cases come after you for the difference.  The auto companies have never been shy about doing that.

K 


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RE: sell up, rent back - 10/17/2008 11:24:09 AM   
DMFParadox


Posts: 1405
Joined: 9/11/2007
Status: offline 		Termin8or, this is a scam that's over 100 years in the making. In other words, not a scam; just a whole lot of stupid.

As for 'triumph of unregulated business', it's the regulations--specifically, the Fair Housing Act, updated in 1995 under the Clinton Administration, though there are others--that caused this mess in the first place.  During the last decade or so, refusing to loan to applicants that couldn't afford it under predatory terms was a crime, one prosecuted by law firms such as the one Obama worked for a while back. Institutions such as WaMu didn't choose this, they were forced into it.



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RE: sell up, rent back - 10/17/2008 11:51:35 AM   
susie


Posts: 1699
Joined: 11/21/2004
Status: offline 		When I was diagnosed with my tumour I went to the local jobcentre and signed on for sickness benefit. I asked about my mortgage payments and was told that I could not any help for 39 weeks. They also told me that if I had been renting somewhere instead of owning my own house they benefit office would have picked up the rental payment on my house.

There was a story in the paper last week about an Afghan woman with 7  children who has come to the UK to live. She has been given a £1.2m house to live in and the local council are picking up the £11k a month rent.

So here am I borrowing money from friends and family to try and keep my house even though I have worked all my life and paid taxes all that time. Yet someone who has never paid a thing to the government here getting £11k a month rent paid on top of the other benefits she is getting because she has brought all her kids with her.

Makes me soooo mad.

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RE: sell up, rent back - 10/17/2008 1:10:36 PM   
LadyEllen


Posts: 10931
Joined: 6/30/2006
From: Stourport-England
Status: offline
quote:

ORIGINAL: susie

When I was diagnosed with my tumour I went to the local jobcentre and signed on for sickness benefit. I asked about my mortgage payments and was told that I could not any help for 39 weeks. They also told me that if I had been renting somewhere instead of owning my own house they benefit office would have picked up the rental payment on my house.

There was a story in the paper last week about an Afghan woman with 7  children who has come to the UK to live. She has been given a £1.2m house to live in and the local council are picking up the £11k a month rent.

So here am I borrowing money from friends and family to try and keep my house even though I have worked all my life and paid taxes all that time. Yet someone who has never paid a thing to the government here getting £11k a month rent paid on top of the other benefits she is getting because she has brought all her kids with her.

Makes me soooo mad.


Without wishing to single you out here on this - it makes me wonder too, just how long our tolerance for this sort of thing is going to hold, as people who have contributed through the taxes they paid by working hard, find themselves losing everything through no fault of their own - and then being told en masse to forget any assistance whatever because all the available rental housing - including the scabbiest of bed and breakfast places and dosshouse hostels, are full up with people who have never contributed a damned thing.

Its easy to be tolerant when one has a home, a reasonable income and reasonable standard of living. Less so, when one finds that all one's efforts to do the right thing have got one nowhere, whilst others' lack of effort has got them far further - and at your expense, both through the taxes you paid when you had what you had, and now when you have no longer, by way of them holding the very resources to which you thought your efforts and taxes might entitle you should you fall on hard times, but which are now found unavailable by way of their holding them.

I foresee huge rises in suicide rates. I foresee a good year for the manufacturers of depression medicines, but less so for the NHS budget. And I foresee a dangerous rise in the sort of extremist politics - to be accounted in no small part to a New Labour party which has abandoned the ordinary worker - that might rend our society even further than it is already.

E

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RE: sell up, rent back - 10/17/2008 3:38:53 PM   
tweedydaddy


Posts: 673
Joined: 9/1/2008
Status: offline 		I do believe that the word market would appear to have substituted in common parlance for the word Jungle

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