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lasvegasmtg.com Report: Walking Away from your mortgage in Las Vegas, Nevada might make sense based on a recent article that was written by ROGER LOWENSTEIN  for the New York Times titled "Walking Away from your Mortgage".  I had previously written a blog on the  "Foreclosure now being socially acceptable" and in the article I pointed out that the large numbers of foreclosures is expected to reach 12 million by 2011 and this factor alone will change how the stigma will be lost like a grain of sand on a desolate beach. New York Times points out that more and more people are walking away from their mortgage not out of rising interest rate Arm's but because the home is just upside down! This is a new phenomenon that frankly starting to worry some bankers and was discussed by John Courson, president and C.E.O. of the Mortgage Bankers Association with Wall Street Journal that there was a moral obligation to pay your mortgage.

First American Corelogic currently shows that 65% of all home in Las Vegas, Nevada are underwater as of November 2009. The reason the remaining 35% of the homes that are not underwater were either paid off before the foreclosures started in 2006 or are the 46% of the current homes bought with cash!

The decision to walk away from a mortgage is now a economic decision and it is routinely being done by large banks. The article pointed out that Morgan Stanley stopped making payments on 5 office buildings in San Fransisco. Morgan Stanley bought these properties when the value was at its highest point. Now that the values have dropped, they made the business decision that it did not make sense to pay on a property that will take 20 to 30 years to recover the properties previous high. No one has stated that Morgan Stanley is "IMMORAL" but the consumer is "IMMORAL" if they make the same business decision.

While it assumed that there is a moral obligation for the community and their neighbors for the actions taken when you walk away from your mortgage, the reality is, this is not a "immoral" action, but is a economic decisions and the same decision that  banks do every day. In a economic model, a bond trader, stock investor, or commodity trader, are speculating on either the price is going up or down and their actions have an effect on others that had no vested interest in this speculation. Companies being closed because they are seen as insolvent because the bond ratings declined, or stocks fall due to a rumor, or gold or oil rising in price due to the speculator and not on actual market conditions.

The article points out that the borrower walking away from the mortgage has a moral obligation to the bank to pay back the loan. This was based on past relationship with the banks when they held the loan for the 30 years and did not trade it like a baseball card from one servicer to another. A borrower signs a promissory note to pay back the loan, the penalty if you did not pay back the loan is you surrender the property. Banks wants to maximize their profits, while they try to shame homeowners from walking away from mortgages in Las Vegas, Nevada. If the banks owned the the same properties they would have already  walked away!  This is a must read for everyone and has created a large debate on television and radio.

                                                                                                          

John Le Francois Senior Loan Officer All Western Mortgage Inc. 8345 W. Sunset Rd. Suite 200 Las Vegas, NV, 89113 US	Work: 702-947-0648 Mobile: 702-271-2659 Fax: 702-541-9901 jlefrancois@awmlv.com http://www.lasvegasmtg.com
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lasvegasmtg.com Report: Is foreclosures now socially acceptable in Las Vegas, Nevada and in the rest of the country? With the national average of the country reporting that 1 in 4 homes are underwater and certain areas of the country like Las Vegas, Nevada showing 1 in 2 homes are now underwater it has become more common for the borrower to walk away and be foreclosed.

Originally the housing bubble was a product of adjustable rate loan programs and lax qualifying guidelines and no money down that were being offered by lenders to purchase new homes. This was the impetus to the first wave a foreclosures when the adjustable arms started to reset and the borrower was unable to refinance due to the lower home values or debt to income was to high to qualify for a new loan.

Consumers who already owned homes were seeing home values soar then used the inflated home prices like it was a bank ATM drawing out cash to maintain a unrealistic life style or to make another home purchase as a investment.

When the housing bubble burst and values dropped the ripple effect then affected the job markets when cash stopped flowing. This created a second wave of foreclosed properties across the country with more walk aways and foreclosures.

Yesterday there was an article that showed that 12.6% of all properties with loans over a $1,000,000.00 are now 90 days or more late! This is twice the average rate of delinquencies for loans under $1 million. It has become a business decision on walking away when the cost of renting an equivalent property is half of the mortgage payment. Granted that some of these loans were in the same arm or stated income and stated asset products, but other statistics tell another story.

A major lender who only underwrote the cream of the crop borrowers with very tight qualifying guidelines with minimum 720 FICO scores, Debt to Income ratios below 45%, requiring 6 months reserves and not offering any arm products is seeing extremely high defaults rates of 26% for loans underwritten since 2006.

What has changed the landscape to make foreclosure socially acceptable you ask? It is my believe that the shear number of people that have already gone through the foreclosure process has eliminated the stigma now and has made foreclosure socially acceptable. The projected break even point is now expected to take 15 years before the value of the home will equal what is owed.

With the new guidelines on borrowers now unable to make a home purchase for 4 years after the recording date of the foreclosure the savings could be substantial. The savings could be used to purchase a home after 4 years and would still be able to ride the wave the home values that are sure to come for the remainder of the 11 years to reach the previous highs before the bubble burst.

The stigma is now gone and a foreclosure is now social acceptable.

                                                                                                          

John Le Francois Senior Loan Officer All Western Mortgage Inc. 8345 W. Sunset Rd. Suite 200 Las Vegas, NV, 89113 US	Work: 702-947-0648 Mobile: 702-271-2659 Fax: 702-541-9901 jlefrancois@awmlv.com http://www.lasvegasmtg.com
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