Timbo

How to Default on Your Mortgage and Stay in Your House

This may turn into a valuable lesson for the future. I live in Sacramento. I know over a dozen people who bought homes in the last few years. None put any of their money down. If that was a requirement, none would have been able to buy. Without buyers with ample "cash" the prices could not have gone up so high. In my area, they more than doubled in 4 years. Think about that. Now the reset is starting. Most of the homes have gone down far more then the piggyback loan. It is just a matter of time before these people have to sell. Now, if they couldn't come up with any down payment money when they wanted a house how will they bring money to the table if they sell at a loss? Do you think these buyers will never divorce, lose a job, get sick, etc.? Even if they don't want to sell it will be forced upon them when they can't come up with the payment. The banks need to lose big so they don't ever recreate the cycle. Think of the people who stay and pay regularly at the expense of funding their 401k. We will be taking care of their health costs in 30 years since they spent all their money on housing.
I am renter and have plenty saved for retirement. However, I don't see how the math will work out for all the people who put too much into housing. Later, years later, they will cry poor and expect a subsidy from somewhere else. We need to end this cycle and return to rational house prices.