Strategic foreclosures and short-sells and the church's standing

[bytor2112]

They did tell me so, and exactly what their intentions were. They had a realtor fraudulently listing the house as a short sale so they'd have leverage to negotiate with the bank who held their second mortgage.

Where's the leverage? Short selling only exists if a bank accepts the petition by the seller. Two different lenders?

[Eowyn]

Their leverage was that if the second lender didn't reduce their second mortgage by several thousand dollars, they'd be forced to short sale. If they sold in short sale, the second lender would get very little, but if they would cut the loan back, the borrowers would keep the house and pay on the second mortgage at the new loan amount. It was actually the realtor's idea, and I don't know if it worked, but they still live there. They never intended to sell their house under any terms, they just wanted to reduce the amount of the second mortgage.

[yjacket]

Originally Posted by Eowyn

Their leverage was that if the second lender didn't reduce their second mortgage by several thousand dollars, they'd be forced to short sale. If they sold in short sale, the second lender would get very little, but if they would cut the loan back, the borrowers would keep the house and pay on the second mortgage at the new loan amount. It was actually the realtor's idea, and I don't know if it worked, but they still live there. They never intended to sell their house under any terms, they just wanted to reduce the amount of the second mortgage.

That part of it just sounds like negotiation to me. People negotiate, bluff, call bluffs, etc. all the time that doesn't mean it is unethical. If the bank reduced their mortgage, then hey they are good negotiators. Nothing in the contract says you can't renegotiate it. If the bank was willing to renegotiate then that is between them and the bank. You can't "list a home fraudulently" unless it's not yours to sell. A lot of people list their home with no intention of immediately selling it just to test the market.

I don't see where a family renting out a house and not making mortgage payments correlate. Now if they were renting out a house they didn't own or a house that had already been foreclosed on that is a big problem. I own my house outright, so if I rented it I'm not honest b/c I don't make mortgage payments? Making mortgage payments and renting out a house are not correlated. Renting it out while being foreclosed on, I think is okay as long as the people who are being rented to know that it is month to month. If they have a year contract and they could be foreclosed on at any moment that is a problem b/c you are defrauding the renters into thinking the contract is for a year when it may not be. Month-to-month has already laid out that the contract can be terminated at any time by any party.

[Eowyn]

Our ethical lines are clearly in different places, then.

[yjacket]

Originally Posted by Eowyn

Our ethical lines are clearly in different places, then.

Maybe, maybe not; I've given a lot of thought to these sticky situations, they are very difficult as to what is "right" and what is "wrong".

I don't know the full situation of the folks you've described so it's completely possible they are unethical. It's just really easy to judge without having the full and complete story.

Many times I've found that people judge another as unethical or immoral simply b/c it's something they wouldn't do not b/c it is right or wrong. They see someone "take advantage" or "get something for nothing" and there is a secret wish to get the same benefit and if they can't get the benefit it is labeled as unethical. Maybe it is, maybe it isn't, it just depends on the situation.

[Eowyn]

Wrong. My integrity is worth way more than $______ a month. Jealousy has nothing to do with it.

[bytor2112]

Everything is negotiable in business and he who does not ask, usually does not receive.

[yjacket]

Originally Posted by Eowyn

Wrong. My integrity is worth way more than $______ a month. Jealousy has nothing to do with it.

My integrity is priceless; and it means a heck of a lot more than being "honest".

Integrity - Wikipedia, the free encyclopedia

My integrity isn't perfect, but I try to find the truth of things and live my life according to those truths. Just b/c we have a difference of opinion on this matter doesn't mean you have more integrity than I do or more than someone else. If you wouldn't do it, great, but I wouldn't be so harsh to judge someone else as being unethical in this situation.

[some]

The title of this thread is strategic foreclosures. It's regarding people who can honor commitments but choose not to for their gain. This is not about blaming the creditors or deliberately reneging on a contract so one can better position themselves for profitability.
The responses I'm seeing are dissappointing.

[yjacket]

Originally Posted by some

The title of this thread is strategic foreclosures. It's regarding people who can honor commitments but choose not to for their gain. This is not about blaming the creditors or deliberately reneging on a contract so one can better position themselves for profitability.
The responses I'm seeing are dissappointing.

Obviously a lot of people do not understand contracts. (And I would add that a mortgage is a contract.) A contract has an exit clause. Someone who uses the exit clause is fulfilling their end of the contract. (Foreclosure is one way to exit the mortgage contract). It is immaterial why someone uses the exit clause.

If someone attempts to exit the contract in a manner that has not been renegotiated by both parties, then that person is at fault. You are right it isn't about blaming creditors, it is about a contract and fulfilling that contract. Exiting the contract is a method of fulfillment.

Those who exit without paying off the mortgage are assessed a penalty (and in many cases many penalties). They have to pay taxes on loan forgiveness, they have a severe hit to their credit, they will probably not be able to buy a house again using a loan for many years, those are the penalties for exiting the contract in that manner. In some instances taking that hit is much better in the long run than suffering by paying a mortgage on a house now worth 1/3rd the mortgage.

In the broader scheme, the major problem we have in this country is debt, too much debt at the local, state, federal, individual, corporate level. There are only 3 ways to get rid of it; 1) hard default, 2) inflate (soft default), 3) pay it off. #2 is what will happen, #3 is being attempted in Greece, #1 is what should happen. On a societal wide basis, #3 cannot possibly work as at some point you cannot squeeze blood from a turnip. The best way is to just cut your losses and move on. In fact, I would be willing to bet dollars to donuts that if more people strategically defaulted we would end up being better of in the long run. People would be able to get rid of bad investments, learn from their mistakes and move on with life. Instead we feel "obligated" to pay b/c we can pay. Once you realize it is just a contract things become a lot simpler.