People are walking away after 30 to 60 days, NOT waiting for foreclosure!?!
Under "Evidence of Walking Away" at Mish Economic Analysis, Michael Shedlock analyzes a Washington Mutual mortgage pool and notes a few interesting things:
1. delinquencies from 30 to 60 to 90 days are not consistent with the number of foreclosures. Therefore, he concludes that perhaps people are walking away before the 60 day period ends - hopeless - and therefore the property goes straight to foreclosure!
2. the credit score for the pool is 705, which is reasonable (certainly not extremely low). He suggests going to myFICO.com for information on what is in your credit score. Note also that some disagree with exactly WHAT is a good score - see bankrate.com.
My note: negative equity means that the sale of one's house will NET less money than the mortgage plus closing costs. Therefore, one has to PAY to sell the house. Rather than pay to sell their house, the family just walks away.
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Aside, if you haven't applied for your credit score from all 3 companies, do so! You are allowed one FREE credit report annually! YOU want to check your credit (no one else will!).
Knowing what the scores mean is also important! YOU can save with lower interest rates.
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The point Mish is trying to make is that these people walking away from their loans were not deadbeats who were risky mortgage applicants.
I know that many of you have heard this before but we need to teach personal finance in our K - 12 schools - NOW!
- YES, it is important to do so at home as well, but notice that we have a SOCIAL interest in trying to teach EVERYONE about personal finance! (Otherwise, how can we responsibly consider private Social Security accounts or keeping the government from a bail out?!? - See any newspaper for examples. I note the NY Times below.)
The potential problem is portrayed below - I hope these forecasts are wrong!
Courtesy The New York Times - the best graph I have seen yet. (The link to the article will not post, however I have linked the comments - which mostly say, let the chips fall where they may - while perhaps many real estate brokers are unscrupulous, the market is free like any other. Click on the link to the article above the comments to see the full text.) (There are interesting articles in the Wall Street Journal too but you need a subscription - one linked.)
1. delinquencies from 30 to 60 to 90 days are not consistent with the number of foreclosures. Therefore, he concludes that perhaps people are walking away before the 60 day period ends - hopeless - and therefore the property goes straight to foreclosure!
2. the credit score for the pool is 705, which is reasonable (certainly not extremely low). He suggests going to myFICO.com for information on what is in your credit score. Note also that some disagree with exactly WHAT is a good score - see bankrate.com.
My note: negative equity means that the sale of one's house will NET less money than the mortgage plus closing costs. Therefore, one has to PAY to sell the house. Rather than pay to sell their house, the family just walks away.
.......................................................................................................................................................................................
Aside, if you haven't applied for your credit score from all 3 companies, do so! You are allowed one FREE credit report annually! YOU want to check your credit (no one else will!).
Knowing what the scores mean is also important! YOU can save with lower interest rates.
.......................................................................................................................................................................................
The point Mish is trying to make is that these people walking away from their loans were not deadbeats who were risky mortgage applicants.
I know that many of you have heard this before but we need to teach personal finance in our K - 12 schools - NOW!
- YES, it is important to do so at home as well, but notice that we have a SOCIAL interest in trying to teach EVERYONE about personal finance! (Otherwise, how can we responsibly consider private Social Security accounts or keeping the government from a bail out?!? - See any newspaper for examples. I note the NY Times below.)
The potential problem is portrayed below - I hope these forecasts are wrong!
Courtesy The New York Times - the best graph I have seen yet. (The link to the article will not post, however I have linked the comments - which mostly say, let the chips fall where they may - while perhaps many real estate brokers are unscrupulous, the market is free like any other. Click on the link to the article above the comments to see the full text.) (There are interesting articles in the Wall Street Journal too but you need a subscription - one linked.)
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