December 09, 2007

Why wouldn't the millions of negative-equity, no-down, crashing prices homedebtors just walk away? Sure makes economic sense to me.


People make economic decisions every day. Whether or not to buy that new dress, or to go on that vacation, or to order dessert with dinner, or whether to ask for a raise or look for a new job.

The millions of underwater homedebtors, especially those who put no money down and are therefore simply renters already, are slowly and surely going to make the economic decision that they're MUCH better off getting away from their debt-trap. Morally, it's wrong. But economically, it's right.

Many will try to sell for a price based on what they owe, and not what the property is worth, and they will fail.

Many will stay only as long as their teaser rate stays unchanged, and then they will bolt.

And many have already stopped making payments and will stay until foreclosure.

But the truth remains that economically speaking, these homedebtors will be better off turning in the keys. The Bush/Paulson/Banker plan isn't about helping these homedebtors. It's about helping the banks and bondholders who hold the bag.

If they were truly concerned about the homedebtors, they'd be advising them to stop making payments on the depreciating house they couldn't afford anyway. But they're not - they're concerned about the banks.

Since they won't give the correct financial advice, I will:

HOMEDEBTORS OF AMERICA - IF YOU ARE IN A HOUSE YOU CAN'T AFFORD, AND YOU HAVE NO EQUITY AND A TOXIC MORTGAGE ABOUT TO RESET, AND THE HOME'S PRICE HAS CRASHED, YOU ARE MUCH, MUCH, MUCH BETTER OFF GETTING OUT NOW.

STOP MAKING PAYMENTS, ENJOY A FEW MONTHS OF FREE HOUSING, AND GET READY TO MOVE TO A PLACE YOU CAN AFFORD.

YOU ARE NOT A "HOMEOWNER". THE HOUSE IS NOT YOURS TO LOSE. YOU WERE LIVING A LIE, LIVING BEYOND YOUR MEANS, AND NOW IT'S TIME TO FACE YOUR FINANCIAL REALITY.

59 comments:

Anonymous said...

Musrt!

The truth hurts but it is still the truth

FlyingMonkeyWarrior said...

I was listening to an Attorney's radio talk show yesterday, Sat. A caller was in a rental that was under going a foreclosure, and she asked the on air lawyer what she should do.

He said the same as Keiththing.
"It is morally wrong but a good financial decision to stop paying rent, and stay put in the home until the bank eviction takes place.

Then you will have enough money saved to recoup your looses of the surprise move.

keith said...

The funny thing is that people who put no money down call themselves (and think of themselves) as "homeowners".

They are not.

Their rent money simply goes to a bank (or CDO holder), whereas "renters" money goes to the landlord (who is likely sending money to a bank)

People need to get beyond this "homeowner" lie. Until you make your last payment, the house is NOT yours. Nobody "deserves" to live in a home. A house cannot be "lost" if is not theirs to lose.

The media and our politicians promote this "ownership" disinformation, for the benefit of their banker masters.

It's our job to make people see the truth. Even though it may disappoint them and piss them off.

Anonymous said...

It's not morally wrong to stop making payments on depreciating assets once your capital investment (equity) has been wiped out.

Corporations, investment funds, and even governments do it all the time.

It's the only thing that makes sense, and it's why bankruptcy laws exist. Use 'em people!

Anonymous said...

http://www.time.com/time/business/article/0,8599,1692310,00.html?imw=Y

Don't be fooled. The Bush Administration's deal with lenders to get them to freeze interest rates on some adjustable-rate subprime loans isn't really about rescuing lots of homeowners. It's mainly about buying some time for mortgage servicers, Wall Street firms and investors around the world who face a chaotic couple of years as foreclosures rise and a couple million subprime loans reset at higher rates.

Anonymous said...

Its not morally wrong to walk away. It's a business decision, not a moral one.

The middle class has been F*cked every which was by this government and corporate america.

It's time to F*ck'em back.

Anonymous said...

"Why wouldn't the millions of negative-equity, no-down, crashing prices homedebtors just walk away? Sure makes economic sense to me."

well you gotta remember Keefer, what makes sense to you is not what makes sense to most people. You knew in 2005 that r/e was heading for a fall. 99% of people didn't. And right now I would wager 50%+ still think real estate is a great investment.

Стивен said...

Shiller and Rosner lay all this out on Bloomberg. Home"owners" without equity are just glorified renters with a huge debt and maintenance obligations. Without equity, as most don't have, they'll simply go bankrupt and leave the banks holding the bag.

http://tinyurl.com/262vnl

roybean said...

I hear ya, keith, re "homeowner/homedebtor". Words have been played with. Maybe one "owns" the home, but the bank has a lien on it, right? I would guess that NEVER have so many "homeowners" had this little or no equity. Millions y millions.

Anonymous said...

I'm not so sure that it's just the banks who will suffer.How about the purchasers of these loans from the banks.ie. retirees,teachers,everyday folks ect.

Anonymous said...

What's happens legally=speaking when a home-debtor mails the keys back?

GT said...

i think after you hit a certain level of equity in the home, say 50%, then you can get the 'honor' of being called a homeowner, but to say that you're a homedebtor until the last payment is kind of silly.

however, even after you finally make that last payment and are a homeowner, in 99% of the country, you still rent from the county/gov. you still have to pay that property tax and hoa dues.

Stuck in So Pa said...

Neighbor down the road "walked away" from his 5 year old sh#tbox back in Sept. The zoning officer put a "your mortgage holder will be notified that this building is abandoned" sign on the front door in Oct, right next to the sheriff's eviction notice, right next to the foreclosure company's phone number to call about a price, AND a notice that “this property
IS NOT available for rent.”
Called the reality company, called the bank, NOBODY can give me a price. Either they don't know who actually owns the note, or they are waiting for the spring when the buying market heats up (HAH!)

Driving in from church this morning, I saw that the kids finally got around to noticing that the house is empty. Some windows are smashed, and the front door is hanging open. There goes the neighborhood.

I called the zoning officer to report the vandalism since he can file against the property owner
to clean up the property, and he told me that lately it’s almost hopeless. Even with that, he, like most around here, is still in denial, and doesn’t have a clue as to how bad it's getting. We got talking about housing, and he comes up with:" I could easily sell my place for twice it's assessed value (assessed at 100% here,) TOMORROW!" He also voted for Bush twice, proudly!

Sometimes I think that I am the only conscious entity that I know!

Anonymous said...

Retirement assets are used for qualifying for home loans. Does that mean that your retirement assets are at risk if you mail back the keys?

pay your f@cking bills said...

I think I diagree with you a little on this keith.It would depend on how underwater you are.If you bought a house and it goes down 50k no big deal, wait it out.If you are under 200k that would be a different story.A person in a good financial position would be a fool to sellout over 50k.You would play right into the smart monies hands.This would be the typical buy high and sell low scenario.If you can afford your payments suck it up and pay your payments as you commited to.There are so many losers out there that have no self respect and morals who will mail the keys at the slightest home price drop.

Anonymous said...

Exactly. However, I wouldn't even say it's morally wrong. How many of these loans were sold through coercion and lies from mortgage lenders, realtors and the morally wrong actions of the Federal Reserve unnaturally inflating the money supply?

It's not morally wrong. Just walk away. Screw these lying, greedy banksters.

Another point to make is that if all these mortgage-renters would just walk away from homes they will never be able to afford the sooner home prices will return to a sane level where they may be able truly afford a home.

Anonymous said...

Its not morally wrong to walk away. It's a business decision, not a moral one.

The middle class has been F*cked every which was by this government and corporate america.

It's time to F*ck'em back.


This is so true. Americans have been f*cked every which way by the US government, corporate scum and the banksters and they don't even know how far they've been f*cked over.

Read Ron Paul's "A Foreign Policy of Freedom", it shows how he's been fighting against the military industrial complex and a corrupt Congress for the last 30 years. On almost every house resolution he's the one vote of sanity while the other scum always vote for their lobbyists and corporate interests.

Anonymous said...

http://biz.yahoo.com/t/18/6026.html

Anonymous said...

>>>>>>
I would guess that NEVER have so many "homeowners" had this little or no equity.
>>>>>>

Remember when "equity" referred to the amount of principal that had been PAID off? PAID i.e the "homeowner" actually PAID down the debt rather than relying on the house to do all the work?

Nowadays, people kick around the term "equity" as being almost synonomous in context with "capital gain".

People are under the influence of magical thinking as though GOD issued some commandment in stone stating that house values always go up and mortgages do not have to be repaid in order to achieve real equity.

No bailouts for gamblers.

devestment said...

I remember the Bush deal of 1991.

I was in Apple Valley, Ca. as the bubble burst and George AF Base was closed to balance the U.S. budget.

The entire town uprooted from their existing homes and moved into new ones at the new price levels.

My mortgage at the time was about $1300. It was easy to get a new place for half of that or less.

It's the equity, as soon as it’s gone people are no longer interested in the dead asset.

I don't care if you freeze my teaser mortgage, I still have a high property tax rate on a turd that’s worth a fraction of what I paid.

These so called stupid people who took sub primes were counting on the profit of an inflating asset.

As soon as the opportunity costs of home ownership are shadowed by the prospect of a deflating prices and they have the ability to move into something affordable they move.

As incomes shrink in the coming several year long consumer based recession, the idea of lower overhead will become very appealing. All this government interference draws out market adjustment and will further diminish an individual’s financial staying power.

The final insult is the implication that government cares and will fix the problem.

Go ahead, say it.

Government cares and is effective in policing society.

Don’t even worry, it’s in the bank.

Veronica Lodge said...

RE: Many will stay only as long as their teaser rate stays unchanged, and then they will bolt.

A lucky few may qualify for a frozen teaser rate.

A frozen teaser rate will take the unpaid interest and add it onto the loan. Interest will then be compounded on the deferred interest -- as well as the principle -- every month and the loan will get bigger and bigger.

Meanwhile, the value of the house will go lower and lower. After 5 years, the house will be worth substantially less than the amount of the loan.

If this living arrangement is cheaper than renting, the home debtor might as well take advantage of it and turn in the keys when the 5 year freeze has ended.

V.L.

trailer flipper said...

From the "Big Picture" blog

Looks like the Bankruptcy Courts in San Diego are challenging parties far removed from the original mortgage to provide actual proof that they own the mortgage, and have standing to engage with the homeowners.

Kenneth Andrews, a California attorney who also runs the blog San Diego Predatory Lending,explains:

"One of our lawyers was sitting in court waiting on a hearing and heard what happened. This was a relief from stay motion. Something the lender has to do to proceed on a bk. The motion was unopposed meaning the debtor did not defend it. THE JUDGE DID THIS ON HER OWN!!!!. The lawyers fell off the bench when they heard it.

We are now going to oppose every relief from stay if the names on the mortgages don’t match the parities filing in court. Same as the Boyko case in Ohio but in an NON-Judicial foreclosure state.

EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it. Meaning they lose their security and stand in line with the rest of the unsecured creditors. The debtors get a 75k homestead that stands in front of the now unsecured lender.

This is a huge problem for securitized mortgages."

FlyingMonkeyWarrior said...

More from the big picture blog;

MOVANT HAS FAILED TO PROVIDE EVIDENCE THAT IT IS ENTITLED TO BRING MOTION

ORIGINAL NOTE AND DEED OF TRUST IN NAME OF MORTGAGE LENDER USA AND NOT MOVANT

NO EVIDENCE OF ASSIGNMENT TO MOVANT


This is becoming bigger and bigger story.

lnk:
http://bigpicture.typepad.com/comments/
real_estate_/index.html

Anonymous said...

To all homeowners (homedebtors),
These indeed are difficult times for homeowners (aka homedebtors). You are in a difficult spot, specifically with the nationwide prices of homes going down rather than up.

What to do? There are two schools of thought on this matter. One is the financial piece of advice. Yes, it does make sense to just give the keys up and walk away. Stop paying your bills. But that isnt necessarilly what the doctor ordered because then you will have a foreclosure on your hands and that is just about the kiss of death from a credit worthy point of view. So, no, I dont think this is good sound financial advice.

The other aspect is the moral advice. Well, I am not going to sit here and write "We told you so!" That would not be exactly prudent or timely. The requisite time and place to have morally warned everyone was "before" you took out the teaser jumbo loan.

So therefore, we are left between a rock and a hard place. But I believe I do have some parting words of wisdom that may be of benefit to some, but not all, homedebtors who now see themselves underwater on their payments:

FU#K YOU, YOU SLIMY PIECE OF SH!T BASTARDS. THANKS FOR SCREWING UP THIS COUNTRY FINANCIALLY, MORALLY, AND PUTTING US IN THIS MESS. WE HOUSING PANIKERS SAT ON THE SIDELINES WHILE YOU ASSES GLOATED, CONDEMNED, AND POAKED FUN AT PEOPLE WHO STOOD ON THE SIDELINES! THANKS TO YOU, YOU SELF RIGHTEOUS SONS OF B%TCHES, IT IS BECAUSE OF YOU WE'RE IN THIS MESS!
BECAUSE OF YOUR GREED, ARROGANCE, STUPIDITY, A LOT OF PEOPLE SUFFERED AND WILL SUFFER FOR MANY YEARS TO COME.

GO TO HELL
AND GO FU#K YOURSELF !

shtove said...

Here's a good blog describing the tricky process of mailing in the keys - people have to be careful about how they do it, in order to avoid continuing debt and a big tax bill:

http://sandiegopredatorylending.com/

Edgar said...

The funny thing is that most of them borrowed all that money and spent it all. They didn't squirrel away any. If I had ever borrowed $2.2 million like some people we know, I guarantee you half of it would be hidden somewhere safe. They weren't very smart fraudsters, for the most part. To any who did stash the cash for a rainy day, kudos!

Anonymous said...

They want to continue to stay in low rent (with teaser rates forzen) situation as long as they can stretch it out. They already pulled out any equity (if it accrued). They want to squeeze last dollar out of it before they hand in the keys.

Anonymous said...

I realised 6 weeks ago when I first happened upon HP, HD and ML-Implode that people would walk once their equity dropped to a certain level.

If we have been handing out mortgages to folks who aren't legal residents, they already have a low stake in US society. They came here illegally, worked here illegally. There is nothing they have done to suggest that they won't walk when the deal isn't in their favor. Thay have no 'stake' in this country, state or county and will only play the game if it is to their advantage.

This will be the case in SB and R and Kern counties, and to a lesser degree LA, SD.

What is SoCal going to do when home appraisal and Property tax revenue drops 50% in one year?

When several hundred thousand houses are abandoned, f/c, and not purchased? When crime, vandalism, graffiti, prostitution and meth labs take up in those former McMansions?

When the ABCP and MBS holders are told by courts looking out for the little man that they have no standing?

You think that 26 cents on the dollar is low now? Think 2 cents if this trend of challenging f/c standing takes root - which it will once these precedents are published in next months California Law Journals.

Envision every BK court in California challenging f/c standing of the end note holders, now imagine what that will do to the world's CDO and SIV investments.

Anonymous said...

These are not stupid people. They lived with low rent (with teaser rates) for couple of years and if it appreciated they refi'd out all the equity. They know how to extract money from real estate asset. Now they want to continue living in a low rent situation. They know what they are doing. Dont feel sorry for them.

Anonymous said...

Its called 'Gaming the system". They will not hand in the keys as long as they can squeeze low rent out of these houses, they already extracted any equity that was accrued. These are not victims. They are artists. They dont care about FICO schmiCo. Or they dont care how much they owe. They are never going to pay it back. 5 yrs of low rent. They love it. Thanks to uncle paulson, uncle Bush and Aunt Hillary.

k.w. - southern ca. said...

No one is an owner until they've paid their debt in full.

When you think of the price of housing, and what most people earn in a year, along with job stability, it's not a bright picture for far too many US house debters.

Sure, if you work in healthcare or other "recession proof" professions, you be able to continue to make payments, but with the way things are going, who would really want to do (or stomach) that with a continually depreciating asset?

nfn.nln said...

It's funny how Donald Trump is looked up to, yet he's filed for bankruptcy... more than once!

http://www.legalzoom.com/legal-articles/article13737.html

Anonymous said...

If someone has equity and can afford to make fixed payments, then they are a homeowner even though they don't own the home outright. Anyone with no or negative equity is a glorified renter. Anyone only able to make teaser payments is a certified moron who deserves no pity.

Ruprecht said...

Excellent piece Keith. Well said.

All the fraudsters, flippers, liars and cheaters have already walked away from their shitboxes.

It's the folks who were actually buying a house to live in that I pity. They got sucked in to the whole feel-good-always-rising-value granite-countertop-bigger-house-no-money down-instant-qualify sales pitch.
These are the same kind of suckers who buy timeshare on impulse when they go on vacation.

Eventually they will realize that their house value WENT DOWN $100,000, and the family down the street is renting the same house for a fraction of their mortgage payment. Then they have to make a decision given the choice of $2300 mortgage or $1000 rent. $2300 mortgage or $1000 rent? $2300 mortgage or $1000 rent? Hmmmmmm.

Anonymous said...

Retirement assets are used for qualifying for home loans. Does that mean that your retirement assets are at risk if you mail back the keys?
-------------------------------

I am not an expert but I seem to recall reading that they can't come after your retirement funds that are in legally recognized retirement accounts.

tabasco said...

Nice post, Keith. Good to see someone telling the truth. If the mortgage rate freeze applies to you, that means you should NOT try to attempt to freeze your mortgage rate but instead mail in the keys, because you are one of the debtors the bank knows would be better of foreclosing so is trying to fool into keep making the payments.

Ed said...

When I owned I paid money to Countrywide every month. I also paid money to the county every 3 months. Now I rent and pay money to a guy who then takes my money and sends it to Countrywide. He also pays money to the county every 3 months and when something breaks, he pays for it instead of me paying for it.

I have the same furniture. I have the same art on the walls. Today my wife and I put up our Christmas tree, same tree we had when we owned. I had a pool when I owned. I have a pool now. Although my landlord pays for poor maintenance and a recent leak was paid by him at a cost of $900. In "MY" home I would have paid $900. I own the same clothes now as then. I eat he same food now as then. I had a dog when I owned, I have the same dog now in the rental. And I have a bigger yard so the dog is probably happier.

Aside from the "PAY TO" part of the check I fill out every month, nothing in my life is any different. Nothing changed when I bought a house, nothing changed when I sold it either.

This whole idea of "SAVING" owners' homes is ridiculous. All you are saving is who they make the monthly check out to.

And the notion of somehow being grown up or more mature by owning property is also foolish. Anyone who judges their place in life by whether or not they own a mortgage has some serious personal issues.

Frank@Scottsdale-Sucks.com said...

If they're gonna walk away they'd better get a lease signed soon, before the foreclosure appears on their credit. The handful of people I know who own rental properties have gotten VERY strict on credit over the past year. Even a few late credit card payments here and there is enough to get declined for a rental from any of them.

corvinus said...

But that isnt necessarilly what the doctor ordered because then you will have a foreclosure on your hands and that is just about the kiss of death from a credit worthy point of view.

BUT... if millions of other people are in the same boat as far as "credit worthiness" goes, than that would probably bring the average down a little bit. Finding so-called "credit-worthy" clients (suckers) will be far more difficult for the lenders and they'll have to lower their standards if they want any business at all.

Anonymous said...

omg omg omg that's soooo funny. Did you guys watch Suze Orman show about real estate yesterday, in which a mortgage broker was crying that business was dead and he was under in a McMansion that cost him $800k? This "experienced professional", who was previously telling others what to do btw, was now asking Suze for advice on a freaking TV show. His monthly cancer mortgage payment: $10,000. The current value of his McMansion: $600k...and going down fast. Suze pretty much told him to walk away because he was f*cked...bwahahahaha

Anonymous said...

BUT... if millions of other people are in the same boat as far as "credit worthiness" goes, than that would probably bring the average down a little bit. Finding so-called "credit-worthy" clients (suckers) will be far more difficult for the lenders and they'll have to lower their standards if they want any business at all.

If your credit stinks, you pay more for insurance and will be denied good job positions. My wife's credit was checked for the last previous jobs she got. Bad credit means that you're pretty much a moron who shouldn't be trusted.
That extra risk premium, which people with crappy credit pays for insurance, could be put to pay other bills or invested to earn interest. What a waste! Pay up, suckers.

Anonymous said...

If your credit stinks, you pay more for insurance and will be denied good job positions. My wife's credit was checked for the last previous jobs she got. Bad credit means that you're pretty much a moron who shouldn't be trusted.

--

You are missing the point. If millions and millions of FBs have bad credit, then bad credit becomes average credit. It's like grading on a curve. If everyone in a class gets an F, then F becomes a C.

As for insurance, it is marginal at best. My fico is 780 and I pay just a little less on car insurance than my brother whose fico can't be above 600 given his financial stupidity. We both have spotless driving records.

Lady Di said...

I cringe everytime I hear "just turn in the keys and walk from you house", because there are ginormous consequences to that decision, including taxes owed on the "cancelled debt" (not always but in many cases), a possible money judgment against you depending on what state you live in and/or how you financed the house; and destroyed credit.

What does bad credit mean now a days? A lot! Employers routinely check it for job applicants; Landlords check it for renters; and of course creditors check it for future credit.

Bad credit = irresponsible person = Buh Bye.

"Just walk away" is not that easy.

In sum, get some good professional advice before you decide to walk off that cliff.

Anonymous said...

I realised 6 weeks ago when I first happened upon HP, HD and ML-Implode that people would walk once their equity dropped to a certain level.

If we have been handing out mortgages to folks who aren't legal residents, they already have a low stake in US society. They came here illegally, worked here illegally. There is nothing they have done to suggest that they won't walk when the deal isn't in their favor. Thay have no 'stake' in this country, state or county and will only play the game if it is to their advantage.


...... washington post had an article saying when the RE market started to tank, a cab driver from Ghana took out a big HELOC on his house, then scooted off to Africa. he'll be big man in the village, fo sho! smart guy.

Frank@Scottsdale-Sucks.com said...

My wife's credit was checked for the last previous jobs she got.

That's only legal now if the salary is over $75,000 so I hope she's suing if it wasn't. The statutory damages for an unauthorized credit check can be substantial.

livingininterestingtimes said...

anon said "That extra risk premium, which people with crappy credit pays for insurance, could be put to pay other bills or invested to earn interest. What a waste! Pay up, suckers."

So, your logic is to continue making a high payment on a depreciating asset in order to save a few bucks on insurance??

And you call other people suckers? Hmmm ...

Anonymous said...

Who needs good credit scores when you can just rip off some gringos ID and use theirs like so many illegal aliens do!

Anonymous said...

SAN FRANCISCO (MarketWatch) - A day after the White House unveiled a program to salvage the mortgage market, people are already talking about how borrowers might game the system.

The program will freeze low, introductory rates on some subprime mortgages before they reset to higher levels. Roughly 1.8 million subprime home loans are due to reset in 2008 and 2009. By delaying those resets for five years, more foreclosures may be avoided, possibly stabilizing the housing market.

One of the main criteria for qualifying for a reset freeze is the FICO score, which measures how well a borrower has repaid debts in the past (the higher the better). Borrowers' income does not have to be checked. See analysis of program.

To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can't have increased by more than 10% since they took out their original subprime mortgage.

Because income isn't checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.

"The message here is to get your FICO score down," Mark Adelson, a structured finance expert, said. "Don't pay some bills, but keep up with mortgage payments."

Anonymous said...

Bad credit = irresponsible person = Buh Bye

I have a low FICO score because I don't borrow, have closed credit cards from college days that charged annual fees that I don't need and paid off years ago, etc.

The highest FICO scores come from debtors who have massive mortgage debt, lots of open credit cards, and no solvency.

Idiots who go on and on about "bad credit costs you a job since it says you aren't responsible" are just as responsible for all the fraud as the fraudsters themselves.

Most of the FICO system was designed to sustain borrowing. Any employer idiotic enough to look at FICO as an indicator of "responsibility" deserves the $1 million debtor who flips his debts between credit cards that he gets.

And all the dummies sustaining the debt bubble fraud by buying into "credit reports" laced with incorrect entries, and "scores" that improve only after piling up huge amounts of debt, deserve what they're gonna get in this economy.

Hey -- you've gotta pay to know your score! Which is based on... a secret formula that only we know! But don't worry, get this $50K credit card and your score will go way up and prove you're responsible! BTW, need a new car or house? Easy credit is available thanks to your high credit score -- no payment history or debt load analysis needed! You're responsible!

Idiots.

Anonymous said...

As for insurance, it is marginal at best. My fico is 780 and I pay just a little less on car insurance than my brother whose fico can't be above 600 given his financial stupidity. We both have spotless driving records.

Sure buddy, that's why there's an investigation going on re: the credit card companies that have been increasing rates like crazy on people with decreasing Fico scores because of extra cards or balance, but never late and good credit otherwise. If you give a reason to insurance and credit card companies to f*ck you, they will. Fico score is a major factor to calculate insurance rates. Very simple, crappy credit = life becomes much more expensive. Oh, have I told you that I studied Risk Management and Insurance at major B School? And I seriously doubt that your Fico is 780.

Anonymous said...

So, your logic is to continue making a high payment on a depreciating asset in order to save a few bucks on insurance??

Au contraire mon frere, what I'm saying is that homedebtors are screwed no matter what they do. Again, crappy Fico score = more expensive life and lost job opportunities.

It's a simple case of data mining used by Insurance which found out, through multiple regression analysis, that drivers with low Fico scores have more accidents or commit more insurance fraud. They are higher risks. Same logic is applied by recruiters. Simple.

One more thing, if you own a business, even if it's a corporation, many vendors check your credit report in order to establish credit. Happened to me a zillion times. Even Office Depot does that when you're applying for its card.

Some people with crappy credit don't mind paying an extra $300 to $1,000 per year in premiums for 10 years, or losing job and business opportunities. After all, they're stupid already for having bad credit...no big surprise here.

Anonymous said...

That's only legal now if the salary is over $75,000 so I hope she's suing if it wasn't. The statutory damages for an unauthorized credit check can be substantial.

Let's put the speculations to rest. Follow the link bellow to an informative and detailed article regarding credit check by recruiters. Here's a small part:

MSN -- Government workers aren't the only ones whose credit histories are being scrutinized. Anyone who has had trouble paying bills could find his or her finances endangered again as employers use credit information to help decide who to hire, fire or promote.

There are some indications such credit checks are on the rise. About 35% of the companies surveyed by the Society for Human Resource Management pulled the credit reports of current or potential employees last year, up from 19% in 1996.


I say it again, crappy credit = lost job opportunities + more expensive life. If you want be in denial or be ignorant about it, fine by me.

Anonymous said...

Ooops, forgot to post the link to MSN article:

http://tinyurl.com/bmknl

Anonymous said...

Some people with crappy credit don't mind paying an extra $300 to $1,000 per year in premiums for 10 years, or losing job and business opportunities. After all, they're stupid already for having bad credit...no big surprise here.
)))))))))))))))))))((((((((((((((((((
Eff the credit score, one could always just buy stuff they can afford.

Anonymous said...

Mr. Risk Analyst ANON @9:40AM:

Many states explicitly forbid insurance to be determined based on credit. For the ones that don't, it is a small component of the premium. And you are confusing credit card rates with insurance rates dumbass.

Just because you study something in a classroom at some Tier 4 B-school doesn't mean shit pal. Next time you boast about your MBA, just remember George Bush is a Harvard MBA.

You sir are today's douche bag du jour.

Anonymous said...

Concerning credit scores and renting...

As the economy becomes more bifurcated, those who've made it (cash in banks, jobs, etc) vs those who're teetering on the edge, a high credit score will determine the relative safety of your place of residence. A good apartment in a good neighborhood will mainly accept credit worthy applicants (with provable incomes) since by law, it's not possible to discriminate on other factors like gender and nationality. So we'll essentially see apartment blocks of all successful peoples and then dilapidated units of former homedebtors turned slumlord where those w/o credit will be forced to live in relative squalor. That's the future.

Anonymous said...

I don't think anyone will be too strict on credit terms. Look at craigslist rentals, they are desperate.

Anonymous said...

"I don't think anyone will be too strict on credit terms. Look at craigslist rentals, they are desperate."

*Hint: Soon to be slums.

Anonymous said...

Post is right on the money. As I've pointed out here before, bankruptcy is just not an option for most people in this situation. Mail your keys to the bank that owns the house and move to an apartment, folks. It's not your problem, it's theirs.