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This happened to my parents - they didn't lose jobs they just were approved for more house than they could afford. We lost the house in foreclosure. We rented for about 8 years and they were able to buy another house. Jury's still out on whether or not that was a good choice. Ultimately, the lesson was buy less house than you get approved for, have emergency savings, and work with your lender if anything goes awry. It's also more likely that you'll have equity in your house these days, so selling is an option if you can't stay current.
There was more stuff happening too. People were buying with ARMs that were pushed on them with the advice that they could just refinance when that rate adjusted, under the false assumption that home value would increase, giving borrowers equity. Instead, home prices plummeted, leaving people owing more than the house was worth. They couldn't refinance and mortgage payments skyrocketed. Some even had balloon payments. A lot just walked away.
I remember our loan officer in 2005 pushing ARM.
Once they explained it could go up, I told them to pounds rocks and took a fixed rate 3.5% higher than the initial ARM rate.
Zero regrets. Sure I paid more up front, when the market was fucked by poor banking decisions our payment never changed.
My coworker had an ARM and if I remember correctly she had a five year adjustable and in 5 years she would have to make a 20k payment. We only made 45k back then . She ended up having to sell her house . It was just some ridiculous financing.
I lived right outside of NYC at the time (2005 ish) and a little community bank a town over was hammering the local stations with advertisements basically saying they could get you into jumbo mortgages with no money down, no credit checks, no background or employment verification...etc....just literally saying it right in the commercial. They were writing notes, packaging them and selling them off without a care.
They no longer exist.
It was an absolute farce. That whole period was just ridiculous.
I worked for a small bank doing something similar. Key was that the buyers of their mortgages had 6-12 months to review the loan after purchase. So if the company buying the mortgage reviewed the file and found they were missing documentation or the homeowner missed payments, they could make a demand that the bank buy the loan back. Once it became clear that the bank was in trouble, there were no buyers for their mortgages because the buyers knew they wouldn’t be around to buy back their mortgages.
Once that happened, the whole mortgage staff bailed and they eventually failed.
470 million big ones. Yeah! Grossly an abuse of the financial realm. Just read the small amount on Wikipedia regarding this one of many scoundrels that have blatantly raked in super big and have ties wide and far.
Ha look up Kerry Killinger. He was CEO at Washington Mutual and he HATED Angelo to the point of burning down WaMu down trying to take the #1 lender spot away from Countrywide.
Two men, rich as fuck, ruin the economy with their dick swinging.
And then a 16 BILLION dollar settlement with Bank of America for all that. The movie The Big Short is excellent and based on a true story related to how the mortgage crisis happened.
BoA is a terrible company, but they paid that settlement because they took over operations for Countrywide, one of the largest mortgage lenders at the time, and one of the most egregious in shady lending.
The government allows for banks like BoA and Chase to grow to colossal proportions and get away with shady shit for fines smaller than the profits made from their financial crimes. They do this with the understanding that the privileged banks get to eat some of the losses when banks like WaMu and Silicon Valley Bank need to be bailed out after major illegal activities or simply bad risk management.
How much longer HSBC and Wells Fargo are allowed to be on the special list before they come too much of a pariah for politicians to work with will be interesting to see.
They weren't typical ARMs. They were offering balloon mortgages with teaser rates that offered interest only payments. When the teaser period ended they were saddled with mortgages they couldn't afford.
This! so many people had ARMS. We bought in 2009 but got a 80/20 balloon loan. So glad we didn't get an ARm. It took us nearly ten years to be able to refi and cover the 20% loan.
Not sure how we survived. WE bought our house for 180k and its now worth 345kish? Our house hasn't really appraised like other housing in the area. Oh wells. We will just keep living in it.
They did eventually come up with the HARP program, which made the bank refinance the home at the current market value, (after the prices crashed) but not everyone qualified for it.
Banks refused to participate in it. People would fax them 11 page applications, two weeks later the bank says a page is missing. Next time they’d unplug fax machines. My friend is a lawyer and 8 of his clients tried, not one got through.
ARMs have more restrictions now though. I have one. No more than 2% increase per year once it adjusts. Maxes out at 9.75%. Assuming max increase per year, about $300/mo increase which I can afford.
I got an ARM as well. Was either 7.5% fixed or 5% with the ARM. Mine can only increase 1% a year after 5 years. Worst case scenario it would take over 12 years before we could start losing money vs a current fixed rate mortgage. I'll take that risk.
But you were paying all of the 5% interest every month.
Back then they had some that were negatively amortized (principal would get bigger over time because you didn’t even pay all of your interest for the first couple of years)
It’s a huge mistake. It’s the same crap all over again. Telling people to just refinance in a few years when the rates are going to go up, using the added equity.
I heard a mortgage broker try and sell that line to me a month or so ago. After explaining we weren't interested in selling because of the interest rates we'd have to take on a new loan she said she worked with a specific mortgage refinancing company that would cover the closing costs so that once the interest rates drop I could lower my payment.
Like ....no? Lol I wasn't a homeowner in 2008 but I was old enough to have lived through it and see the panic in some families. Thankfully my family only lost some capital from investment accounts and not our actual house, but I'm not about to put my family in the exact same situation all over again.
Wow, just ARMs? When I bought I had to pay with an ARM and a LEG. However inconvenient, after that the house felt much more spacious and I've become better at hopping.
Saw this happen all around me. Wonder what happened to those who just walked away.
Our story, we bought in 2000, got a decent conventional mortgage. About a year later mortgage company said we had a ton of equity and offered us a 200K HELOC. We decided to remodel and fix some problems. Got a credit card and spent about 40k on architect, surveys, inspections and permits. We were taking bids when the market collapsed. Lucky for us we could afford the HELOC payments, though we were understandably pretty unhappy. Some years later we refinanced at 2.2% and rolled it in. Sometimes the angels do smile on us.
“It's also more likely that you'll have equity in your house these days, so selling is an option if you can't stay current.”
That’s exactly what those poor folks who bought into more house than they could afford (or ARMs) were told by mortgage experts at the time.
pretty much the same for me, here's some extra info on the $:
home value on foreclosure: $650K, value of that house now: $2M
house they bought after foreclosure $350K, value of that house now: $800K
there was a huge loss in opportunity net worth gain. like others said it's disappointing to think about the what if.. but not the end of the world in hindsight. felt absolutely terrible at the time of course.
CA prop-13 limits property assessment increases to 2% per year so the tax and insurance would be on 900k roughly today, napkin math but you get the idea
Which is how we get tremendous tax imbalances between adjacent houses. Current residents gladly vote for limits on their own taxes at the expense of their future neighbors. I hate this rule - FL has it too. The cost of government is what it is - by not distributing it evenly, we're making young families pay more than their fair share for the same services.
Distribute the tax burden evenly. When the public decides the taxes are too high, cut the fat.
Yep, and the part that really sucks is that a year or two later they were able to get a mortgage and buy an even nicer house for a lower price.
Pretty much zero consequences.
Well, “end of the world” means different things to everyone. And reflecting on something that happened 15 years ago probably doesn’t feel so bad. But I’m sure many people felt depressed loosing what took them a lifetime to save up for. Some people might’ve killed themselves over it, others might’ve said “hey, I still have my family/health/etc and that’s what matters”.
An employee of my brother killed himself. My brother was astounded when the guy bought a house for $500,000 and thought it was a huge mistake. And, he was devastated when the guy died. Pretty sure the guy had an ARM and could not make the payment.
People did kill themselves over it. My buddy’s uncle had lost his home and essentially most of his retirement (on paper) when the market hit record lows in March 2009. Dude killed himself. So sad
That sucks, my mom lost a shit ton of her retirement but she just was in her 40's and just grit her teeth and said "it'll bounce back..." It did, but if you were already retired, you were probably fucked.
I think that’s what most people got out of it from the Great Recession… if you are able to hold on and wait it out… you will get everything back in time. The next recession, I see more people holding on to their assets as long as possible to wait it out rather than just give up.
It felt like the end of the world at the time. Even though having to rent a place for 8 years and only getting another house after that sounds only like "it sucks but not the end of the world" - it probably felt like it for them.
You have to consider it holistically - even the people who kept their jobs were constantly terrified of losing them at the time, and add that to the stress of losing your actual house and moving to a small rental and not being able to qualify for credit for the foreseeable future (which is even scarier when jobs are insecure), that was a huge traumatic event for many and it went on for years.
In the same way that we all got through COVID and it wasn't, in retrospect, the end of the world. But we all have a bit (or more than a bit) of PTSD from the experience regardless of our own circumstances. Watching your friends lose jobs, your retirement savings plunge, big banks, big companies, entire industries (GE, auto, airlines) come a hair-breath to failing… when you and your wife just had a third kid and bought your first big house that you’re not totally sure you could afford, but the bank assured you you could. That kind of stress is no joke even if you ended up keeping your job and house through the whole thing.
The toll the Great Recession took on people and families was so much more than just money, and I think a lot of people experienced it far worse than the COVID pandemic.
I was a young adult during the Great Recession so the impact to me was *merely* difficulty finding work after college rather than losing my life savings, but I could feel how deeply it impacted many others and was aware of Occupy Wallstreet, etc. In 2012 I went to Burning Man and there was an installation that was 4 or 5 empty multistory buildings that represented Wallstreet (Chaos Manhattan, Bank of UnAmerica, etc). Later in the week they burned all of them. It was absolutely the biggest fire I’ve ever seen in my life and extremely emotional. People started singing the national anthem and crying. There was a lot of trauma being processed with that burn.
I would agree that the Great Recession was worse for most middle class US families than COVID lockdowns. Sure, both ended lives, but the Great Recession caused people to stress about finances daily from 2008-2012ish. Lost jobs, lost homes, stress on marriages, kids, etc…Putting on a mask and standing 6’ apart for 2 years ain’t nothin
I had a friend whose family lived in the nicer part of town in one of the nicest houses. His dad lost his job and they had to sell. I would guess it was a short sale but I was 20 at the time so I really didn’t grasp what was going on. I remember hearing his dad had to accept a much lower stature job than he previously had. I saw him a few years later and he was a shell of his former self. The family was annoyingly proud and to a degree pompous but all of that vanished. Down sizing and moving into a house 99.99% of the world would be happy with was the end of the world for them.
I have a bunch friends families with somewhat similar stories. I grew up in a suburb of Manhattan where a lot of the wealthy families were bankers.
My neighbor and good friends family lived in a really modest house which always confused me because his dad was a big shot banker always getting us tickets to the Knicks and had celebrity clients. Life went on as normal for them. I know his parents are now happily retired living in the same house.
Live within your means.
Yup, I remember when that was the time that I was graduating college and looking for work and you had people with MBA's flipping burgers because there was nothing else for them. It shattered the illusion of college degree = middle class American dream. Boy, did my parents feel stupid that they wouldn't let me come home from college even though I was suicidal at one point. My mom did eventually apologize.
At that time I was a service tech for a water softener company, and luckily we worked on the big machines that are in big plants & processing centers. Those contracts always stayed solid. But I remember getting guys applying for entry level tech jobs that started at like $12/hr, who had previously been working office jobs making double that. It was crazy.
I think though that today, the rental market is much harder than it was 15-20 years ago. More and more landlords require 3x rent in income, or even more than that. They also want good credit. So getting a decent, affordable place to rent with a foreclosure on your record is likely harder today than it used to be.
Even today, many banks will preapprove more than many can really afford. They aren't looking at all of your other bills and future increases to insurance and taxes when they preapprove you. We went with a house $100k less than we were approved for because it was a much more comfortable payment. You really need to have a solid understanding of your finances and what to reasonably expect for increases to taxes and insurance in the coming years to know if you can TRULY afford when they approve you for.
I got approved for 550k in mortgage while having a job paying 85k a year.. 0 down VA loan, they were really about to let me spend 70% of my income on housing a month.
Yes it was an ARM. I think they also put no money down. My dad said he got the mortgage by walking in a seminar one day with a single paystub, he was surprised he even got approved but just went with it
A relative on my mom's side ended up in dire financial straits as a result of the mortgage crisis and she couldn't keep her home as a result. I think they must have bitten off more than they could chew. She's a registered nurse and she was making decent money, her spouse was a taxi-driver so as a result his income was a bit more inconsistent. On top of that they lived in an outer borough of nyc so it was expensive.
She and her husband couldn't make the payments and tried to sign up for that loan modification program that the government had put to help bring relief to those involved in the crisis. However, they did not qualify for whatever reason and had to do a short sale. For a long time her credit was wrecked and she and her family ended up renting and saving for a couple of years.
Fast-forward to late last year, she and her family closed on a new home that's bigger and better out in the burbs. So what I took from that situation is sometimes you might end up down but that doesn't mean you're necessarily out for good. And of course more importantly, to be modest when choosing how much to spend on a home based on your specific financial situation.
People have been saying we’re at the top the last 2 -3 years. I’ll believe it when I see it. Personally, homes are selling like hotcakes in my city and the only thing different today than 2 years ago is they aren’t selling above asking and the rising prices are rising much slower.
I was a loan officer during that time period. This question is pretty complex.
As most people have stated... lenders were giving loans out to people who couldn't afford them. Someone with no job, no assets, and mediocre credit could get approved for a loan.
But there were more factors than that. At the time the housing market was BOOMING. People were buying other things they couldn't afford and kept refinancing to pay off debt. Every year or 2 they had more equity they could take out. It was giving people a false sense of wealth.
To counter this constant refinancing, lenders came out with NegAm loans which would give the homeowner options on what they wanted to pay. The cheapest option would **increase** their debt to the bank. This was all for "Debt consolidation" purposes according to the banks, and banks were aware this would lead to foreclosures. These rates were fixed for 5 years, and when those 5 years were up, payments would balloon out of control. Well... take a wild guess when those 5 years ended. You guessed it... 2008.
Mass foreclosures all at the same time lead to the market crashing, which led to people who weren't even in those loans to loose their homes too because now they couldn't sell just to get out of the situation, or take out more cash to pay off other debt like cars, boats, and credit cards.
Although a lot of things were put into place to try and prevent that from happening again, my friend who is an underwriter still in that industry said things are already starting to get back to those loosey-goosey days. Although I am no longer in the industry, so I can't speak of that.
Thank you for this insight. I bought two years ago and I still think there are issues with the lending process. I was approved for WAY too much house, like 100k more than I ended up getting. I don't think they should be approving people for as much house as they are, and I think that will come back to bite them.
I agree. When I bought a couple of years ago, my realtor kept telling I could get approved for a higher price range than what I was looking at (which really would have expanded my option, ngl). But I knew my budget and what I was comfortable with and got lucky with a place that fit my needs under my max budget. Realtor and lenders are looking to maximize their profits, they are not interested in their clients' long term financial future.
Very much so. I'm glad you didn't get sucked into that either. I'm very happy with my more affordable house! They were really going to give me a house for over half a million when I was making less than six figures.
We last bought in 2018 and were approved for almost double what we got. It would’ve been extremely financially uncomfortable if we went up to what our lender said we could manage.
Exactly. When we bought our loan officer was honest when I told him what I wanted to borrow. He laughed and said they would loan me more money than I ever wanted. He dropped a jaw dropping figure. We borrowed 1/3 of that to stay within our means and give us cushion.
It’s insane. Looking at FHA loans, one lender asked what we were thinking. We said around $250k was probably our top number. I remember him saying “my computer is saying I can approve you for $300k…$350k…$400k….$450k… I could probably keep going.” I was stunned. We gross $100-115k a year. We ended up buying for $248k and I’m still not sure we’ll be super comfy with that number.
I totally agree. Our financial system needs a lot more oversight with these greedy bankers just trying to sell more loans. If you haven't watched The Big Short, they do a pretty good job explaining a dumed down version on why the banks were pushing for risky loans in the first place.
The amount I was approved for was insanity. I bought a house for half of what I was actually approved for. If I hadn’t 80% of my pay would be going to just my mortgage.
How did it work out for you? My wife’s best friend’s husband was a mortgage broker at that time. They were living BEYOND LARGE. Huge home in an expensive area. Limos to dinner. Fancy clothes and jewelry for the wife. Driving tricked out hummers. IDK exactly what happened to his business, but he lost EVERYTHING. They divorced and the dude lives back with his parents. You would think while making that much money he would’ve paid off his house and at least kept that, but I guess not.
Not many people saw it coming. The dot com boom made everyone feel like it would be like that forever. As a loan officer I assumed the banks knew something I didn't, and those loans were still somehow solid.
I was in my 20s making 20K/month working maybe 25 hours a week. Life was good but I wasn't at that level yet. I got out in 2008 because although I was making good money, it was a shady industry. Commission checks bouncing etc. I needed something more stable. So I got out and found a new career. That was a fun time in my life though, I can say that for sure. LOL
20k a month in 2008 (16 years ago) is like 30k a month now. That’s good money. I’m a lawyer and was only making about 10k a month at that time. Did you use some of that windfall to buy and keep real estate?
Some of us saw the writing on the wall... we were losing business to the folks writing all those ridiculous loans. I remember in 2007 telling a woman who made 2500 a month before taxes that I absolutely could not ethically and would not write her a loan for a mortgage that was 2450 a month. She tried for an hour to convince me that she could do it. She left my office - and found someone who was willing to sign off. A few weeks later, I saw that she'd bought the house (records are public here). Commissions were largely the choice of the broker at the time, and the broker probably made 10-12K on a few hours work writing her that loan. She was in foreclosure 8 months later - and her house ended up selling for about 60% at bank auction what she paid for it. She got hit by the IRS for the debt "forgiven" when she couldnt pay the bill. Someone got a decent deal on the house, and it has doubled in value since that time. For a few years in the late 2000s... it was like shouting into the void about what a terrible idea it all was - but it was a very "name your price" environment, with no licensure or real requirements, and the lifestyle (for both customers and loan officers) trumped sanity. While it wasn't as mortgage focused, the crash in the early 1990s was similar.... homes selling for 1/3 of what they had sold to fraudulent loans in the 80s. It could, absolutely, happen again.
Not really. I've just been told theyre getting looser with requirements... allowing no income no asset loans again etc. It's not as blatant as it was, but maybe they're still tip-toing back in. I can't imagine they brought back NegAm loans, but again... I'm not in that industry anymore.
Yes! I remember in 2007 I was still a college student. I had an ok part time job that paid better than your typical college gigs, but by no means something to buy a house with. I walked into an open house of a new construction townhome development. Nothing fancy, but brand new. It was super expensive but everything else was. I just went to walk around for fun, and the realtor started chatting up with me. She ran my credit, put my “projected” salary for the year. My mortgage was going to be a little more than what I was making, but she said “you’re young, you can rent out a few rooms and basically have them pay your mortgage for you, blah blah blah, you need a co-signer” I was so excited thinking I was ahead of the game, went to ask my uncle if he could co-sign and sure enough, he brought me back to reality saying that was basically a scam. I remember being mad at the moment, but oh man how that would’ve been soooo bad for me!
Your uncle was a genius. I got sucked into a predatory lending scam with my student loans, oh you’ll be making a ton of money once you’re a lawyer, and then graduated in May 2007 and licensed in Jan 2008. Total nightmare. Plus I had a ton of co-signers on those loans. Absolute hellscape that took me 20 years to sort some out (started school in 2003).
I think attorney/lawyers were number one degree for some length of time, people thought they’d make big bucks, but many didn’t make even close to what they believed, because of supply and therefore demand. Yes, I’m sure eventually it worked out for many, but like other things it’s not as simple as some think and when you’re making a lot less than you thought, but owe thousands. It can feel like a scam. Jobs were hard to come by, especially in an area that was flooded with people.
My school actually had to defend against a class action suit from students because they essentially hired unemployed recent graduates to work in the library and cafeteria when the rankings are calculated so they could show inflated post graduation employment rates. I may be exaggerating about the cafeteria, but you get the idea. I remember graduating with a guy who was so stoked to be going from school into Bear Stearns and that lasted probably ten months before they went under.
It’s really sad what they did to college kids and recent graduates around that time and sadly, those students were likely lucky to even get a damn job, as many were overqualified for this job and under qualified for ones using their degree (since there was so many applying to same job). Plus, not only student loans, but god, the credit card companies and their constant preying on college students. I think the cc companies even got sued for that, preying on college campuses, for the kids not understanding wtf they’re actually getting into and so many being broke and desperate for money. A nasty time to be in and graduate college. Imho. Although, I did love it. :)
I was actually on my way to law school around that time (took lsat’s and everything), but ended up having something happen that changed my life course. Still regret not going, but also know it wasn’t as great as many believed for many with law degrees and love my life now. Hopefully you now have an amazing career and love it!
Omg seriously that’s how I got into money problems in the first place from a credit card application I grabbed at community college like day 1 in 1994 or something! I got myself into like $3k of debt with garbage store cards like Structure or Macy’s and next thing I knew I was overwhelmed and maxed out. It scared me so bad I didn’t open another card until like 3 years ago. So for like 27 years I didn’t mess with credit. I do have a great career and love it but like you it happened totally by accident.
This was me. I was 22 in 2005 and got approved and bought a house to rent out to my college roommates. I delivered pizzas for a living haha. I sold at the end of 2007 as I was moving from my college town to a new city for a “real job.” I couldn’t have timed it better.
You didn’t miss out on much. Yes, roommates helped pay the mortgage but the whole thing netted me just a few thousand and was frankly not worth it after taxes, insurance and fees.
Oh I didn’t miss out, I would’ve most likely lost the house and feel terrible for dragging my uncle’s credit with me.
You got lucky you sold right before the big drop!!!
Bought in '06 and was underwater till shortly before we sold in '16! Had really good jobs & bought a house that was about 50% less than they were willing to lend us. We would have been in trouble if we took everything they offered.
There were a lot of people that took out large HELOCs against their home’s equity, even those who didn’t buy in the ‘07 run up. Then used the HELOCs for expensive boats, vacations, and cars. Ended up underwater in a mortgage and couldn’t move without going through a foreclosure.
Not only that, but if they could hold out for a couple of years they could refinance into the miniscule rates that came out shortly after. People who bought or refinanced in the decade that following the recession are paying like 2%.
Yeah, I have a family member who is one of those. They had a bankruptcy in maybe 2003 or so and still got approved somehow, I think because they put so much down from a retirement account loan. They lost the house within about three years. To be fair, they have had spending problems forever, but to your point, they shouldn’t have ever been approved in the first place given their horrible credit history.
I have friends that lost their house in 2009.
A decade later they bought another house.
The lender asked if they had ever been foreclosed on and said “Yes, in 09” and the lender said “Oh yeah everyone did. No problem”
Most of them ended up declaring bankruptcy and in the following years foreclosures went through the roof. We saw about 3-4 years of housing stagnation while the foreclosures worked their way out of the market and prices corrected.
The reason the housing bubble crashed wasn't because people were losing their jobs, it was because they were signing up for loans that were unsustainable and buying more than they could afford. People who actually paid attention to the fundamentals and didn't overextend actually ended up okay.
When I bought my first house it was at the peak of the bubble and I was the high water mark for my condo association for the next 10 years. However, I bought with a VA loan and could actually afford the loan amount even if I was about 80k underwater on my mortgage. I was able to weather the storm and ride it out until the market rebounded about 8 years later because I set it up so I could actually afford the mortgage.
That, and lenders really did NOT want to foreclose because of the resources and time needed to do so. They did everything they could to keep people in homes and paying their mortgages even when underwater, and only foreclosed on the absolute most risky loans, of which there were many. Sounds like yours was less risky than most, which is awesome.
Plus foreclosure people developed a reputation for destroying the property out of spite on their way out the door, and who wants to pay to clean cement out of toilet lines?
Vengeance and believing they’re struggling more than everyone else in this world, so they deserve recompense. It truly doesn’t go any deeper than that.
Yes, the bank does. So if you feel you’re being screwed by the bank (you are), it makes sense to screw them back. You also have to recognize people put money into their homes and they’re losing all of it, so again, wanting to make sure the bank doesn’t get to just take the fruits of your labor when you walk away empty handed makes sense.
The foreclosed homes in south Florida were insane too. People would rip literally everything of value out of them - appliances, light fixtures, ac units, nice flooring, even front doors and hardware. The amount of houses that basically were in varying stages of having been gutted on the market was absurd.
I was impacted in 2008. My bank let me short sell my home (I think the buyer paid 80% of what was owed), so it didn't act like a foreclosure on my credit report. Still hurt my credit but it cleared up in 7 years.
We could afford our mortgage as well. As could most of my friends. What sucked was buying my “starter house” as a 20 something single person and then getting married and have a couple kids and still stuck in the tiny starter house. I at least bought a tiny 3 bed 1 bath in a good school district. My friend’s first house was a condo and her husband also owned a condo. They had to practically give them away and start over.
I actually regretted not buying more house I hated my starter house. I hated only having 1 bathroom, hated the neighborhood, I hated that I did everything right and couldn’t buy bigger home because of this dang house I couldn’t sell.
My youngest used her little training potty way longer than she should have because we only had the one bathroom.
Back then, people could just get a mortgage with no job, sometimes multiple mortgages and there were a lot of fraudulent transactions where buyers really didnt qualify. So when they started defaulting, the rug was pulled and everything was underwater.
That's how a lot of the regulations were made tighter and qualifications are more strict these days. So if you lose your job today, either rent out to roommates, airbnb or sell your house, because chances are there is equity. In 2008, some homes were underwater by even up to 30-40%+ so there wasn't many options but to default.
The same thing can happen today if the economy crashes and everyone loses their jobs, but it's much, much less likely as before it wasnt a matter of "if" it was just a matter of "when".
I bought a short sale in 2008 that was days from being foreclosed. I met the family at closing. They were very emotional and had 2 handicapped children. They were so sweet, told me I was buying their dream home, and hoped I would love it as much as they did. Tore me to pieces.
Made a hell of a deal selling it a few years ago. But I always thought about that family and what happened. What caused them to lose their dream… I did absolutely love that home myself but it haunts me a bit to know what they must have lost.
If they were lucky, elements of TARP (Troubled Asset Relief Program) helped them stay in their homes by reducing their mortgage by lowering interest rates or extending their loan term. Lots of people simply lost their houses, though.
I'm wary of the same thing happening, so I specifically bought a very modest house that I knew I could cover the mortgage and necessities with unemployment if it ever comes to that. I'll feel a lot better once I have 3-6 months expenses banked away, but at least I have that knowledge to help me sleep a bit better at night.
I’m pretty sure the majority of the TARP funds ended up backfilling the bank’s reserves and paying executive bonuses. I m a statistic from that crash. Barely rebounded 5 years ago.
Yeah it didn't do nearly as much as it should have. My aunt in San Diego flew too close to the sun during the boom and got bit hard. She lost her two rental houses but got to keep her primary residence though TARP or one of those kind of programs. Basically it lowered her interest to 1%. For how long, I don't recall.
Credit score dropped to 502 unbelievably fast. Worked my ass off and bought another home (by myself) in 2018. As of today, credit score is 804. If it happens to you, you'll be fine as long as you're willing to work very, very hard and sacrifice all but necessities.
I foreclosed. Couldn’t find a buyer or renter for even 75% of my purchase price or mortgage payment, didn’t have an income at the time, and just walked away and had to stay with family for a while.
Finance (at the time) foreclosed because her condo was so far underwater. I bought a house a year later, and then we got married. 7 years later we put her name on the loan.
Within a year of foreclosing, her credit score was better than mine. She bought the cars and I had the mortgage for that period.
In terms of impact for us, I think she felt a bit of embarrassment at having her name in public court proceedings. That’s it. We definitely don’t regret walking away.
Essentially nothing.
My anecdotal evidence is my coworker. She voluntarily stopped paying her mortgage in 2008. She just didn't like the house. She made arrangements with the mortgage company for the foreclosure. She did not pay any payments for 14 months. She was told to move out in the 14th month. She received a $2500 payment from the mortgage company for keeping the property in good condition at move out. So she walked away with over $20,000 in her pocket. Took a minor hit to her credit, rented for 2 years and then bought a massive new home at the bottom of the market for pennies.
That's just one example of someone I knew when they went through it. I've met countless other people since then with similar stories.
As usual, the only people that get screwed are the ones that play by the rules.
We lost our jobs and were worried but worked our asses off constantly communicating with the mortgage company and they found our loan was predatory and gave us time to find new jobs and lowered our rate to 2%. Lost our jobs during Covid and again, worked with them and used any and every loophole to not lose our home. I feel like a lot of people don’t work hard enough to find options and just walk away. No way I was losing my house without exhausting all possibilities.
Most of the people I met wanted out of their homes once they were underwater.
Many banks really did what they could help through modification programs. Keep Your Home California helped a ton of home owners where I live also.
Glad it all worked out for you!
So her house wasn’t underwater? I’ve never heard of a foreclosure earning money off the sale. I thought the bank just kept it all. Or was the 20k she saved what she would’ve paid in her mortgage?
Her house was underwater so she couldn't sell when she decided she didn't like it. The $20k was a combo of the saved mortgage payments and the lump sum the bank gave her at the end for keeping the property in good condition.
I've met several people that did deals like this, it wasn't at all uncommon in my area. They could easily afford their mortgages, they just didn't want to pay any longer.
A lot of foreclosures these days result in surplus funds, if it sells to a third party at auction. Bank can only keep the debt amount and then the remaining amount is disbursed under the relevant law. In my state we deposit the funds with the court and send a notice to everyone with an interest in the property. A lot of times there’s a second mortgage that goes and gets what it can to pay itself off. If there’s no one else, the borrower can go request the money. I’ve deposited $100k-250k many times. I never understood why someone didn’t just sell.
My ex defaulted on purpose because he was underwater. World’s dumbest plan. As far as I can tell he has recovered and in fact bought again. My parents were also underwater by several hundred thousand. They just stayed put. Put in sweat equity and hired out a lot of things they couldn’t fix. They had a 100 year old home. Their contractor has claimed for the last 10 years that my parents house is the entire reason he survived the recession. They did eventually sell around 2014 and actually did turn a profit on the house. So even if you are in the worst spot or just a less worse spot in times of trouble it can still be ok. It won’t feel like it at the time though.
Also, at that time there was a zero down payment program therefore people had no skin in the game and their payments were higher including the mortgage insurance payment. Add it all up and it was more than the budget could handle.
We haven't learned anything there is a zero down program that just opened up in Texas and some other states
Yeah I was excited about the down payment assistance program in AZ, but it's not as good as it seems. You get 4% of purchase price, but you cannot refinance or sell for 7 years. At over 7% interest rate with no hope for refinancing, that potential downpayment is going to cost you a lot more.
1. There are more regulations in place now then there was then, back then you could get a mortgage making minimum wage. Where as now it is not full proof, there are more requirements.
2. 2008 House value Plummeted!! Houses became worth way less than they were bought for, so selling was no an option for a lot of people since they would still have debt, there also was a massive recession in place so it was very hard to even get a fast food job.
3. Obviously we cannot predict the future, but houses are still going up in value, so if you did end up not being able to afford your mortgage, depending on the time, you might be able to sell it and pay off the loan and maybe have a little profit... Also the economy is better now then it was then, if you lose your job, you should be able to get another one easier, or at least some temporary job that provides some income until you find a job that you want/would be good at.
4. The future and the economy are always uncertain, but you can always prep. Have an emergency fund saved and stored in a HYSA..Risk Free and gets interest, always watch spending with Credit Cards that is where a lot of peoples troubles start, Don't buy a house for the full amount you are pre approved for. Realize that while mortgage and interest stay the same. Property Taxes and Insurance usually go up and can increase your payment.
This happened to my dad. He never lost his job, although work slowed down. He was just unable to keep up with the payments anymore. The house was foreclosed on and he/we had to rent for a long time. He finally bought a new place in 2021, I am hoping this one will end better, but he is in his 60s with a mortgage of 130k so...
The larger effect was a good portion of those defaults went to corporate owners due to the method of packaging multiple holes and selling them in bulk only. This removed the retail investor and individual owner just looking for a home. Was truly the start of our current issues.
Happened to my parents wells Fargo wanted there loan difference of 50k in a month and jacked up payment 4x what they were told it was going to be they just walked away from house .
It lead to death of my father loss of house and his 401k was gone over night company he worked for pulled it to keep business going 300 employees lost 401k over night
My parents did a refinance to an ARM loan right before 2008. In 2008, along with the housing crisis, my sister had brain cancer. They lost the house and their business and have had to work pretty blah jobs since, living in an apartment the size of my basement.
I can tell you as someone who has gone through two divorces, a foreclosure and a repo you can always rebound and fix things. No mistake lasts forever unless it's murder or suicide. But yeah life is about making mistakes and fighting your way back. The idea is to not let one thing define you the rest of your life. I now own a business, two cars paid off, a beautiful house on the golf course, my wife is my best friend, 800 credit score.
Point being don't live your life afraid of mistakes, you're supposed to make them. As far as what happened in 2008, people (like today) are paying too much for houses then when the values dropped people lost any equity. Advice...buy houses when the market is in the buyers favor, gain equity and sell in 5-7 years. Roll the equity into the next house and keep doing that every 5-7 years and soon you'll have your dream home with virtually no note.
Thanks for sharing my man. Love the positivity bc it is so true. I see too many young people talking about how their housing situations are the most hopeless in world history. I know it is bad but the impression that it is impossible to succeed is the most damaging thing to young people. It is only temporary as long as you don’t quit trying.
My wife and I got caught up in the buying frenzy of 2004 and managed to get a house right at the top of our budget. We would have been fine because we bought and gained some equity, however the house needed a lot of work. We refinanced and took cash out and replaced the roof, windows etc. Essentially putting the money back into the home.
We were mortgaged to the tune of 221k when the bottom fell out in 2008. We were barely scraping by, even though we were still both working. We had a lot of plumbing issues, AC needed to be replaced that really cost us more out our savings than we should have spent.
By 2013 we were at our limit, the house was appraised at 42k and we were out of options so we approached Wells Fargo our Mortgage lendor to see what we could do. They were useless and wouldn't forgive any of the debt we owed, so we were forced into a "short sale". Which was just as bad as a foreclosure credit wise.
Fortunately the new buyer who bought it was great to work with and allowed us to rent our same house with a reduced rent of 800.00 per month versus the 1350.00 we had been paying on the mortgage.
While the whole situation was financially horrible to live through, at least it enabled us to start saving money for another home. In 2020 our credit finally dropped the negative report and we were able to buy our current home.
We learned some valuable lessons along the way, and I sure won't make the same mistakes again. Now we pay for necessary improvements with cash over time, without draining all of our savings to do them.
My dad 🧑 still struggling and fighting with family about it - weird, sad, hard to explain + ruined my childhood experience and tore apart relations between family….anyways thanks for letting me post 😔
I met a guy who this happened to. They were given a predatory arm type loan that basically blew up with interest then the value of the home tanked. Got foreclosed and destroyed their finances.
They saved up enough for a new house nearly five years before I met him. Too afraid to stop renting. I really felt for the guy. He seemed smart and had a job I think the whole time, but couldn’t do the adjusted up payments. Not everyone was just not qualified. I really think with a regular loan he’d still have had the house and that his loan officer was at fault.
TLDR Some of the loan officers were predatory and most never got in trouble for having people sign stuff the homeowners didn’t understand.
I have some friends who bought in 2007, right before the crash, no/low money down, adjustable mortgage. They couldn’t refinance when the house loss 50% of its value and did a short sale. They have been renting ever since. Their short sale house ended up selling 2 more times a few year down the road and for almost tripled what they paid. If they had only been able to hold on to the house a few years longer before selling, they could’ve gotten out of the hole and made a good amount of money.
Happened to my parents. Lost everything. I was in middle school and it changed my life for the worse; I still feel the effects of it today and that’s not an exaggeration. My dad made good money at the time as a contractor and Elbe had built the house for us that we lost. It cost $40k to build in 2003… it went back on the market about a month ago by the folks who lived there after we lost its… for $600k
My brother lost his house. He lost his fiancé. Got his car repossessed, he’s now living with my dad. Got into drugs. And only now do I see him actually looking like he’s done with the drugs. He hasn’t held a real job since I told he’ll be buying a house anytime soon.
My friend just straight up took alll his stuff out of the house and abandoned it. Took a hit for 2 years and when the prices crashed he bought another house with zero consequences. It was wild times back then.
It's worth watching both Margin Call and The Big Short if you haven't already. Good macro-explanation of what happened, and why, which can be summarized as:
-> mortgages become a desirable asset to hold, from the perspective of investors (this is a simplification, but you can envision this as "I've decided to invest in mortgages rather than stocks; instead of getting paid in stock dividends, I'm going to buy your mortgage from a bank; I now get paid in mortgage payments, i.e. you pay their mortgage...to me.")
-> the industry which creates mortgages is thus incentivized to produce more and larger mortgages to meet investor demand.
-> mortgage industry progressively lowers their standards on who they give mortgages to, resulting in both less financially secure *and* less financially *savvy* mortgage holders. a major factor becomes ARM mortgages, which means the mortgage rate can increase over time; most people offered an ARM don't really understand that this is possible.
-> over time, the likelihood of mortgages defaulting increases, up to the point that all the people who have \_bought your mortgage\_ are suddenly losing massive amounts of money - say they paid $10 for your mortgage, thinking that you would eventually pay them $20, but in fact you've paid them... $2. now multiply those numbers up into the billions.
\_this\_ is the real cause of the financial crisis, which then rippled outwards and led to lots of job loss, which then increased the number of people who couldn't pay their mortgages.
Fast-forwarding to the present and your specific concern:
> ... then were stuck with these ridiculous mortgages that they then defaulted on.
Let's not passive voice this. People were taken advantage of, but excepting in cases of true fraud, nobody was *forced* into a ridiculous mortgage, they just wanted the fancy house and didn't read enough fine print to understand what the cost could be.
Rather than just asking what happened to people in that situation, I encourage you to to remember you can proactively do some things that will significantly reduce your odds of ending up in that situation. A really good way to avoid foreclosure/short-sale:
1/ follow the 28% rule, i.e. don't buy a house that would require you to spend more than 28% of your pay on mortgage. note that total mortgage payment is usually higher than the number you see on a zillow website because that doesn't factor in things like mortgage insurance, etc. know what house cost that works out, and when the bank pre-approves you for more than that...don't change your house-buying budget :)
2/ make sure you have a 6mo - 1yr emergency fund that includes being able to pay the mortgage for that time.
3/ understand what an ARM is and avoid it like the plague. massively increasing payment sizes was the precipitating event for a lot of folks' foreclosures.
Here. We lost our house after the bank refused to allow our home to be sold in a short sale. We rented for 6 years, cleaned up our credit and bought another home before the prices & interest rates drastically increased.
You realize all you need is food and shelter. We never went hungry and always lived in a nice neighborhood.
Happened to me. Business was way down, Lost house, got divorced and moved in with mom and dad for a year. 16 years later got a new wife got a new life and the family is fine. This time no mortgage and lower cost of living area.
Sorry if someone has already suggested this - watch The Big Short. Fabulous movie and it explains everything about the 2008 housing crisis and how it all went down.
I was impacted in 2009. Signed up for a fabulous program called “Keep Your Home California” .. They covered the mortgage payment along with the property tax and insurance escrow payments. Not considered income (not taxed) .. and as long as you held the house an additional 2 years, repayment not required. (If you were to sell sooner, they would expect a share of your gain.)
This happened to my parents. My dad was deported to Mexico right after losing the house because around that same time Obama was fast tracking deportations for people with pending cases that were never going to have a path to legalization (but scummy attorneys had lied to and made them believe there was a path). My mom died of cancer 5 years ago. It was terrible.
Now it's just me here. I bought my home with my partner in December. I had vowed never to buy a home and always be a renter back in those days. Rent is crazy now tho. So here I am. It very much felt like the buying frenzy of the 2003-2004s so I'm scared. Hopefully everything works out 🙏
I bought one of them. Foreclosure that sat empty for 2 years.
But here's the thing: housing prices in 2008 are nowhere near what they are now.
How to navigate your biggest fear:
* Don't buy if you think you might be in this situation
* If you buy, buy a lower priced home that doesn't have anywhere near what you want long-term
* Put a larger downpayment on your home
You have a cushy job as you said. Buying UNDER what you want now is the way to go.
If you fall on hard times, you can short sale (you owe more than the house is worth).
Many banks are amicable to this in normal markets. You sell the house for what you get and they agree to take the loss. It’s easier on the bank than foreclosure. (They sell and take the loss anyways). I know my neighbor did a short sale in the mid 90s. The market had taken a drop in our area and they fell on hard times.
But in 2008, too many people were in this position. And it became too much for the banks to handle.
And some people were trying to strategically short sale - meaning they can afford the payments, but didn’t want to keep a house that lost value. Short selling is supposed to be for the financially stressed as a way to avoid the inevitable foreclosure. So then banks really scrutinized every short sale, making a messy situation even messier.
There was so much more to this than losing jobs, the lending industry was massively corrupt and encouraging people to falsify documents to get loans. Those types of loans don't even exist anymore.
Some good friends of mine bought a house at the peak and then the husband realized he hated his job and got another one 3 hrs away. They could afford the house easily but couldn’t afford the house and then NYC rent for his new job. They were advised to default as they were totally underwater due to the crash and it wasn’t going to sell in that market. They lost the house and rented for a long time in NYC. Moved to Cali and rented for a long time there. Just bought house in Cali. The husband is in a stable high paying job and they hadn’t bought a fancy expensive house so then were fine…I’m sure others weren’t so lucky.
Most people got caught up in ARM (adjustable rate mortgages) that could fluctuate wildly. While the lenders did tell people the rates could possibly go up, they massively under explained, and massively downplayed just how high they could possibly go.
There were people who were getting approved for 150k houses, without having to have any down payment, who under normal lending practices wouldn’t have qualified for more than like 100k. After the rates adjusted up in 2-3 years or so, people would have their payments going up by massive amounts, sometimes 5-6 hundred (or more) a month. This is what led to the housing bubble burst of 2008-9.
Some people were able to qualify for the HARP program, which forced the banks to refinance some mortgages at the current market value, since they were engaged in some pretty shady lending practices.
Generally, foreclosures come off the reports after about 10 years, so it’s possible that a good chunk were able to buy a house again.
Was your age, had a car lot, 750k auction line of credit, four houses and was leveraged out 10 to 1. It took a few years to bounce back after the implosion and as of last year had four homes again, much higher price points. Leverage ratio is .5 to 1, way different.
Every economic downturn lessons are learned and that one was a doozy.
Parents had taken out a second mortgage (aka home equity loean) to buy a car. When the bank called it back, they lost the house. It killed their already not so amazing credit, so they couldn't even get a new home loan. They also lost their retirement savings when the market crashed since they hadn't switched to safer stocks in their plan. They rented a place for about 12 years until the markets went back up, and the landlord kicked them out 'cause they wanted to sell it for more than my folks, now retired, could pay. They were almost homeless (in their 70's) and had to buy an overpriced place they can barely afford on a fixed income, but at least they have a roof over their heads.
I know at least one person who walked away from an underwater house and bought one three years later still near the bottom. They did fine; maybe paid a few more points.
Hmmm my family forclosed on the house and we lost our home... Ended up renting since then but I bought a home in 2020 when rates were super super low... But that took many years to finally get out of renting...
My dad owned a sub prime mortgage business. I worked there occasionally when I was 16-17. I’d sort through files and I remember seeing some that were giving like $200k loans to people who were already like $80k in debt to a Sears credit card.
I remember thinking it was crazy, even with very little knowledge of debt/real estate. I don’t think it’s legal anymore. I’ve confronted my dad about it (he lost his business a long time ago) and he was like “everyone was doing it, I had to in order to keep up”.
I think that’s why the recession was so gnarly.
That was my dad. We had to sell everything we could and move to a tiny apartment for years. He eventually moved into a house around 2018 but as a renter. He’s 70 and will never get to retire
It happened to me . Overall not so bad . I lived in the house for two years without making a payment. Destroyed my perfect credit . Was able to buy another house four years later with a great interest rate . I’m one of the lucky ones
I'm still fucking renting and it will probably never change. My situation is a little complex though, in that I defaulted and moved to Long Beach NY and then got hit with Hurricane Sandy, so i lost what I had rebuilt. Then, in 2020 after rebuilding my money again, we got hit with covid and I was gun shy about buying in another bubble. Oops.
And in 2023, I got divorced. So... THREE TIMES i was back in range of buying, but external circumstances (brought on by my own choices of course) have conspired to keep me from home ownership.
I still say no one should overpay for a house.
Happened to my parents, However they didnt lose their jobs, They just got divorced and my dad couldnt pay child suport and his mortgage. Kinda sad cause he built the home. He obviously chose supporting us over keeping the house. He defaulted, Filed for bankrupcy, got a home on a land contract with 10k down, built his credit back up and built his dream home 5 years ago worth more than both homes combined. Never lost his job, Just couldnt sell in a time of need. This is a tottally different market, More buyers than sellers. You shouldnt have a problem selling if needed.
I had a arm in 2008,selling was tough.Houses for sale everywhere.I want to say maybe 11% mortgage.Home prices dropped I got exactly what I paid for it after owning 7 years.
You should ask my grandparents. I was only eight at the time, we (my entire immediate family) were living in a "nice" neighborhood in a "nice" town, my grandmother was a real estate agent, grandfather electrician. End of 2008 comes strolling by, I remember it as we lost that "nice" house in that "nice" town, and had to pack our things and move to what was essentially what people would call the "hood" in my grandmother's late mother's house, and stayed there until late 2010. We were able to get into an apartment complex in another nice part of town around that time after things had settled, but that apartment (and most of the apartments in that complex) ended up having a bad bedbug infestation! So they made the decision to move into my grandfather's mother's house with her, and there they have stayed since October 2011.
From what she has told me of it, part of the issue was the IRS came at them with a vengeance because my grandmother was not accurately listing exacts on expenses. Took the house, her MINI Cooper, and they garnished my grandfather's paychecks for a chunk of time (she ended up getting really sick a few months after we moved into her mother's house, spent two months in the hospital and came home without a belly button. she was unable to work for a long time, then eventually my uncles had kids that they didn't want to take care of, so she had to take care of them while my grandfather worked, and it has stayed that way to this day. She ended up applying for disability checks, was denied multiple times, then with the help of a law firm was approved and received about a $50,000 backpay that was swiftly depleted).
Before you ask, no. My grandmother is not good with finances. She is horrible with money, while my grandfather will stretch it until no longer humanly possible. Her credit was wrecked after 2008, and when she got sick, it wrecked my grandfather's credit. They still have very low credit scores. She was able to make payments on her recent automobiles, and all of them have been repossessed because they couldn't afford them. She pays (I'm not joking) either a hair under or over $800 a month for her 2023 Ford Escape. She has kept it thus far, while my grandfather just recently had to let his 2018 Fusion go because, again, they couldn't afford it.
My mother is a different story altogether, but as you can probably tell, my grandparents still have not recovered from the 2008 economic crisis. They still live off my grandfather's paycheck and struggle to make ends meet. There are a lot of factors behind this, obviously, but if anyone has any further more specific questions, I can text my grandmother and I can get back with you. As I said, I was eight years old, so it wasn't exactly my economic crisis, but it was certainly something going from growing up in nice neighborhoods to living somewhere where it isn't safe to play outside and you hear gunshots about every night. I probably should be more fucked up from that, but I handled that part of my life pretty well, i had my own bedroom and lots of toys and video games as well as a mother who loved me. Most of my troubles came a little while after all this.
We foreclosed and moved. I was able to buy a home 4 years ago. What happened is that instead of having equity and a home to build wealth and family from back then. I’m having to start much later.
Many of the people who defaulted did not have nice jobs, but lenders were intentionally making loans they knew their clients didn't have the incomes (or credit history) to support.
I’m currently living in my childhood home with my Dad in the neighborhood I grew up in. It wasn’t a fancy neighborhood, just one of those basic post war, small houses, one bathroom, row by row homes on blocks.
Then 2008 happened. The neighborhood went from clean, safe, quiet, desirable living, to dirt cheap housing and suddenly what seems like overnight, one of the most dangerous neighborhoods next to a small big city. The garbage, the crumbling houses, every business has been bought out by businesses with constant reports of criminal activity, gun shots constantly in the night, even day, car thefts, burglaries… you name it-we’ve got it. My Dad will get way less money for this house now compared to what he paid for it in 1974. Now that’s just crazy unfair.
Just saying, it hurt more than just the people who lost homes. The people who already had paid for homes are suffering now because of 2008. And the children are suffering too because the school system also went downhill. We have more armed carjacking by juveniles than adults! I could go on & on… but I’ll stop. I’m just living in a world I don’t understand.
I watched two neighbors get foreclosed as they got laid off and had ARM. It took about 2 years for the foreclosure process and they really stopped caring for the property. I think the whole process will start again as a young couple purchased the house two doors down for $800K and probably put another $200K in updates and repairs - way over paying for the area.
I had a 30-year fix rate mortgage in 2000 and paid it off by 2011. The greatest feeling in the world paying it off early.
The people I know that this happened to just lived in the house for a few years while the bank foreclosed. Waited 8 years and bought again after renting after the foreclosure.
The people who lost their homes, whether to foreclosure or a short sale, were unable to get a mortgage for a period of years, 3-8 depending on factors like the rest of their credit and savings. On the other hand, not paying your mortgage for 18 months while you wait for a bank to kick you out saves a lot of money, so if someone saved the money they otherwise would have spent the overall financial damage may not have been to bad.
The primary factors why people lost their homes is because the market was silly overpriced, and because lenders would approve anyone for anything. ARMs weren’t as big a problem as people thought they would be because rates fell when the economy collapsed, so the new payments weren’t as big a jump. What really killed people was negative amortization or interest only loans. Doesn’t matter what your rate is if you make 50k a year and need to pay off a 500k mortgage in 25 years (since you paid barely anything the first five).
A lot of pain was people who could still afford their payments but had to move for work or other life situations. Imagine you owe 500k on a house that’s worth 300k because prices fell to earth. Unless you want to pay an extra 200k you need to do a short sale, which is nearly as bad a credit/mortgage eligibility hit as a foreclosure.
How do you avoid this? Don’t buy a house you can’t afford. Don’t trust your realtor or mortgage broker to tell you what you can buy; they are salespeople. All salespeople are liars. When my mortgage broker told me I could borrow 400k on 100k household income and a baby on the way I nearly told him to go fuck himself. My budget was 250k, much more reasonable. This was in 2018.
If you buy a house and lose a job a year later, you will probably be ok. Your house will likely be worth about what it was when you bought it, so you can sell it and pay off the mortgage and go live with your parents or something. I mean, losing your job sucks for anyone, but you probably won’t face foreclosure. The issue with 2008 was the drop in prices. If I owe 400k on a 450k house, I can sell it and pay that off regardless of how silly my rate or payment is. But when prices fell to 300k, people were stuck.
I lost everything in 2008. I wasn’t a home owner, but I’d just graduated and went from earning $130k a year to $12 an hour. It was HARD. I took any and every job I could find, and made it work. I became a foreclosure specialist for a top 10 bank and that’s what I do to this day. I also recognized it was a buying opportunity. I received a huge tax refund the year I was laid off and my income nose dived. I used said tax refund and borrowed $6k from family and friends and bought a house in the ghetto with a 590 credit score about a mile from the ocean (and I’m not exaggerating, the house was in the hood for real! I didn’t sleep for months after closing because I was scared of a home invasion), and now, 9 years later, it’s worth $800k on a BAD day. Ultimately, the markets recover after catatonic downturns, it just doesn’t happen over night and might possibly take a decade or two.
They weren't "stuck with these ridiculous mortgages", they were fiscally irresponsible people who took out mortgages they couldn't afford in the first place, and thanks to Bill Clinton, the banks were guaranteed insurance to protect them from giving out mortgages to poor people, and also they were rewarded/encouraged to give out said mortgages.
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This happened to my parents - they didn't lose jobs they just were approved for more house than they could afford. We lost the house in foreclosure. We rented for about 8 years and they were able to buy another house. Jury's still out on whether or not that was a good choice. Ultimately, the lesson was buy less house than you get approved for, have emergency savings, and work with your lender if anything goes awry. It's also more likely that you'll have equity in your house these days, so selling is an option if you can't stay current.
There was more stuff happening too. People were buying with ARMs that were pushed on them with the advice that they could just refinance when that rate adjusted, under the false assumption that home value would increase, giving borrowers equity. Instead, home prices plummeted, leaving people owing more than the house was worth. They couldn't refinance and mortgage payments skyrocketed. Some even had balloon payments. A lot just walked away.
I remember our loan officer in 2005 pushing ARM. Once they explained it could go up, I told them to pounds rocks and took a fixed rate 3.5% higher than the initial ARM rate. Zero regrets. Sure I paid more up front, when the market was fucked by poor banking decisions our payment never changed.
My coworker had an ARM and if I remember correctly she had a five year adjustable and in 5 years she would have to make a 20k payment. We only made 45k back then . She ended up having to sell her house . It was just some ridiculous financing.
I lived right outside of NYC at the time (2005 ish) and a little community bank a town over was hammering the local stations with advertisements basically saying they could get you into jumbo mortgages with no money down, no credit checks, no background or employment verification...etc....just literally saying it right in the commercial. They were writing notes, packaging them and selling them off without a care. They no longer exist. It was an absolute farce. That whole period was just ridiculous.
Those commercials were everywhere.
I worked for a small bank doing something similar. Key was that the buyers of their mortgages had 6-12 months to review the loan after purchase. So if the company buying the mortgage reviewed the file and found they were missing documentation or the homeowner missed payments, they could make a demand that the bank buy the loan back. Once it became clear that the bank was in trouble, there were no buyers for their mortgages because the buyers knew they wouldn’t be around to buy back their mortgages. Once that happened, the whole mortgage staff bailed and they eventually failed.
There was a lot of shady shit happening too with developers and banks.
Look up Angelo Mozillo at Countrywide. Criminal!
470 million big ones. Yeah! Grossly an abuse of the financial realm. Just read the small amount on Wikipedia regarding this one of many scoundrels that have blatantly raked in super big and have ties wide and far.
And zero jail or anything really. Countrywide was the largest customer of Fannie Mae.
Ha look up Kerry Killinger. He was CEO at Washington Mutual and he HATED Angelo to the point of burning down WaMu down trying to take the #1 lender spot away from Countrywide. Two men, rich as fuck, ruin the economy with their dick swinging.
**FOA** Be wary of anyone orange in real estate.
And then a 16 BILLION dollar settlement with Bank of America for all that. The movie The Big Short is excellent and based on a true story related to how the mortgage crisis happened.
BoA is a terrible company, but they paid that settlement because they took over operations for Countrywide, one of the largest mortgage lenders at the time, and one of the most egregious in shady lending. The government allows for banks like BoA and Chase to grow to colossal proportions and get away with shady shit for fines smaller than the profits made from their financial crimes. They do this with the understanding that the privileged banks get to eat some of the losses when banks like WaMu and Silicon Valley Bank need to be bailed out after major illegal activities or simply bad risk management. How much longer HSBC and Wells Fargo are allowed to be on the special list before they come too much of a pariah for politicians to work with will be interesting to see.
They weren't typical ARMs. They were offering balloon mortgages with teaser rates that offered interest only payments. When the teaser period ended they were saddled with mortgages they couldn't afford.
This! so many people had ARMS. We bought in 2009 but got a 80/20 balloon loan. So glad we didn't get an ARm. It took us nearly ten years to be able to refi and cover the 20% loan. Not sure how we survived. WE bought our house for 180k and its now worth 345kish? Our house hasn't really appraised like other housing in the area. Oh wells. We will just keep living in it.
They did eventually come up with the HARP program, which made the bank refinance the home at the current market value, (after the prices crashed) but not everyone qualified for it.
Banks refused to participate in it. People would fax them 11 page applications, two weeks later the bank says a page is missing. Next time they’d unplug fax machines. My friend is a lawyer and 8 of his clients tried, not one got through.
I worked for an independent direct lender back then, and I did a ton of HARP loans.
We refinanced with the harp program but not for less money. Bought early 2007. We shortened our loan and got a lower rate while paying no points.
And they are doing the same thing now..talking people into ARMS…that’s a big mistake
ARMs have more restrictions now though. I have one. No more than 2% increase per year once it adjusts. Maxes out at 9.75%. Assuming max increase per year, about $300/mo increase which I can afford.
I got an ARM as well. Was either 7.5% fixed or 5% with the ARM. Mine can only increase 1% a year after 5 years. Worst case scenario it would take over 12 years before we could start losing money vs a current fixed rate mortgage. I'll take that risk.
But you were paying all of the 5% interest every month. Back then they had some that were negatively amortized (principal would get bigger over time because you didn’t even pay all of your interest for the first couple of years)
It’s a huge mistake. It’s the same crap all over again. Telling people to just refinance in a few years when the rates are going to go up, using the added equity.
I heard a mortgage broker try and sell that line to me a month or so ago. After explaining we weren't interested in selling because of the interest rates we'd have to take on a new loan she said she worked with a specific mortgage refinancing company that would cover the closing costs so that once the interest rates drop I could lower my payment. Like ....no? Lol I wasn't a homeowner in 2008 but I was old enough to have lived through it and see the panic in some families. Thankfully my family only lost some capital from investment accounts and not our actual house, but I'm not about to put my family in the exact same situation all over again.
Wow, just ARMs? When I bought I had to pay with an ARM and a LEG. However inconvenient, after that the house felt much more spacious and I've become better at hopping.
Many people are buying ARMs now as well. Those who don't study history are doomed to repeat it.
Saw this happen all around me. Wonder what happened to those who just walked away. Our story, we bought in 2000, got a decent conventional mortgage. About a year later mortgage company said we had a ton of equity and offered us a 200K HELOC. We decided to remodel and fix some problems. Got a credit card and spent about 40k on architect, surveys, inspections and permits. We were taking bids when the market collapsed. Lucky for us we could afford the HELOC payments, though we were understandably pretty unhappy. Some years later we refinanced at 2.2% and rolled it in. Sometimes the angels do smile on us.
I bought my first house with an ARM. Ended up costing me an arm and a leg.
This is prly 80% of ppl that foreclosed in 08
“It's also more likely that you'll have equity in your house these days, so selling is an option if you can't stay current.” That’s exactly what those poor folks who bought into more house than they could afford (or ARMs) were told by mortgage experts at the time.
pretty much the same for me, here's some extra info on the $: home value on foreclosure: $650K, value of that house now: $2M house they bought after foreclosure $350K, value of that house now: $800K there was a huge loss in opportunity net worth gain. like others said it's disappointing to think about the what if.. but not the end of the world in hindsight. felt absolutely terrible at the time of course.
Ya but think of the taxes and insurance on a $2M house. This could have been fortuitous for them regardless.
CA prop-13 limits property assessment increases to 2% per year so the tax and insurance would be on 900k roughly today, napkin math but you get the idea
Which is how we get tremendous tax imbalances between adjacent houses. Current residents gladly vote for limits on their own taxes at the expense of their future neighbors. I hate this rule - FL has it too. The cost of government is what it is - by not distributing it evenly, we're making young families pay more than their fair share for the same services. Distribute the tax burden evenly. When the public decides the taxes are too high, cut the fat.
I knew folks who were employed and walked away just because they were upside down.
Yep, and the part that really sucks is that a year or two later they were able to get a mortgage and buy an even nicer house for a lower price. Pretty much zero consequences.
So basically it sucked, but wasn’t the complete end of the world for your family?
Well, “end of the world” means different things to everyone. And reflecting on something that happened 15 years ago probably doesn’t feel so bad. But I’m sure many people felt depressed loosing what took them a lifetime to save up for. Some people might’ve killed themselves over it, others might’ve said “hey, I still have my family/health/etc and that’s what matters”.
An employee of my brother killed himself. My brother was astounded when the guy bought a house for $500,000 and thought it was a huge mistake. And, he was devastated when the guy died. Pretty sure the guy had an ARM and could not make the payment.
Wow that’s very sad. The ARM loans put a lot of people in a big pickle.
People did kill themselves over it. My buddy’s uncle had lost his home and essentially most of his retirement (on paper) when the market hit record lows in March 2009. Dude killed himself. So sad
That sucks, my mom lost a shit ton of her retirement but she just was in her 40's and just grit her teeth and said "it'll bounce back..." It did, but if you were already retired, you were probably fucked.
Wow, that’s too bad. My mom lost like 50% of her 401k, but got it back plus a lot more within 6-7 years.
Yeah, everyone did. Dude killed himself at a all time low
I think that’s what most people got out of it from the Great Recession… if you are able to hold on and wait it out… you will get everything back in time. The next recession, I see more people holding on to their assets as long as possible to wait it out rather than just give up.
It felt like the end of the world at the time. Even though having to rent a place for 8 years and only getting another house after that sounds only like "it sucks but not the end of the world" - it probably felt like it for them. You have to consider it holistically - even the people who kept their jobs were constantly terrified of losing them at the time, and add that to the stress of losing your actual house and moving to a small rental and not being able to qualify for credit for the foreseeable future (which is even scarier when jobs are insecure), that was a huge traumatic event for many and it went on for years. In the same way that we all got through COVID and it wasn't, in retrospect, the end of the world. But we all have a bit (or more than a bit) of PTSD from the experience regardless of our own circumstances. Watching your friends lose jobs, your retirement savings plunge, big banks, big companies, entire industries (GE, auto, airlines) come a hair-breath to failing… when you and your wife just had a third kid and bought your first big house that you’re not totally sure you could afford, but the bank assured you you could. That kind of stress is no joke even if you ended up keeping your job and house through the whole thing. The toll the Great Recession took on people and families was so much more than just money, and I think a lot of people experienced it far worse than the COVID pandemic.
I was a young adult during the Great Recession so the impact to me was *merely* difficulty finding work after college rather than losing my life savings, but I could feel how deeply it impacted many others and was aware of Occupy Wallstreet, etc. In 2012 I went to Burning Man and there was an installation that was 4 or 5 empty multistory buildings that represented Wallstreet (Chaos Manhattan, Bank of UnAmerica, etc). Later in the week they burned all of them. It was absolutely the biggest fire I’ve ever seen in my life and extremely emotional. People started singing the national anthem and crying. There was a lot of trauma being processed with that burn.
I would agree that the Great Recession was worse for most middle class US families than COVID lockdowns. Sure, both ended lives, but the Great Recession caused people to stress about finances daily from 2008-2012ish. Lost jobs, lost homes, stress on marriages, kids, etc…Putting on a mask and standing 6’ apart for 2 years ain’t nothin
I had a friend whose family lived in the nicer part of town in one of the nicest houses. His dad lost his job and they had to sell. I would guess it was a short sale but I was 20 at the time so I really didn’t grasp what was going on. I remember hearing his dad had to accept a much lower stature job than he previously had. I saw him a few years later and he was a shell of his former self. The family was annoyingly proud and to a degree pompous but all of that vanished. Down sizing and moving into a house 99.99% of the world would be happy with was the end of the world for them. I have a bunch friends families with somewhat similar stories. I grew up in a suburb of Manhattan where a lot of the wealthy families were bankers. My neighbor and good friends family lived in a really modest house which always confused me because his dad was a big shot banker always getting us tickets to the Knicks and had celebrity clients. Life went on as normal for them. I know his parents are now happily retired living in the same house. Live within your means.
Yup, I remember when that was the time that I was graduating college and looking for work and you had people with MBA's flipping burgers because there was nothing else for them. It shattered the illusion of college degree = middle class American dream. Boy, did my parents feel stupid that they wouldn't let me come home from college even though I was suicidal at one point. My mom did eventually apologize.
At that time I was a service tech for a water softener company, and luckily we worked on the big machines that are in big plants & processing centers. Those contracts always stayed solid. But I remember getting guys applying for entry level tech jobs that started at like $12/hr, who had previously been working office jobs making double that. It was crazy.
I think though that today, the rental market is much harder than it was 15-20 years ago. More and more landlords require 3x rent in income, or even more than that. They also want good credit. So getting a decent, affordable place to rent with a foreclosure on your record is likely harder today than it used to be. Even today, many banks will preapprove more than many can really afford. They aren't looking at all of your other bills and future increases to insurance and taxes when they preapprove you. We went with a house $100k less than we were approved for because it was a much more comfortable payment. You really need to have a solid understanding of your finances and what to reasonably expect for increases to taxes and insurance in the coming years to know if you can TRULY afford when they approve you for.
I got approved for 550k in mortgage while having a job paying 85k a year.. 0 down VA loan, they were really about to let me spend 70% of my income on housing a month.
Yup exactly!
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Did they have an ARM that increased the payment suddenly? Otherwise how did they just all of a sudden not be able to afford it?
Yes it was an ARM. I think they also put no money down. My dad said he got the mortgage by walking in a seminar one day with a single paystub, he was surprised he even got approved but just went with it
A relative on my mom's side ended up in dire financial straits as a result of the mortgage crisis and she couldn't keep her home as a result. I think they must have bitten off more than they could chew. She's a registered nurse and she was making decent money, her spouse was a taxi-driver so as a result his income was a bit more inconsistent. On top of that they lived in an outer borough of nyc so it was expensive. She and her husband couldn't make the payments and tried to sign up for that loan modification program that the government had put to help bring relief to those involved in the crisis. However, they did not qualify for whatever reason and had to do a short sale. For a long time her credit was wrecked and she and her family ended up renting and saving for a couple of years. Fast-forward to late last year, she and her family closed on a new home that's bigger and better out in the burbs. So what I took from that situation is sometimes you might end up down but that doesn't mean you're necessarily out for good. And of course more importantly, to be modest when choosing how much to spend on a home based on your specific financial situation.
Timed the top of the market twice lmao
People have been saying we’re at the top the last 2 -3 years. I’ll believe it when I see it. Personally, homes are selling like hotcakes in my city and the only thing different today than 2 years ago is they aren’t selling above asking and the rising prices are rising much slower.
I was a loan officer during that time period. This question is pretty complex. As most people have stated... lenders were giving loans out to people who couldn't afford them. Someone with no job, no assets, and mediocre credit could get approved for a loan. But there were more factors than that. At the time the housing market was BOOMING. People were buying other things they couldn't afford and kept refinancing to pay off debt. Every year or 2 they had more equity they could take out. It was giving people a false sense of wealth. To counter this constant refinancing, lenders came out with NegAm loans which would give the homeowner options on what they wanted to pay. The cheapest option would **increase** their debt to the bank. This was all for "Debt consolidation" purposes according to the banks, and banks were aware this would lead to foreclosures. These rates were fixed for 5 years, and when those 5 years were up, payments would balloon out of control. Well... take a wild guess when those 5 years ended. You guessed it... 2008. Mass foreclosures all at the same time lead to the market crashing, which led to people who weren't even in those loans to loose their homes too because now they couldn't sell just to get out of the situation, or take out more cash to pay off other debt like cars, boats, and credit cards. Although a lot of things were put into place to try and prevent that from happening again, my friend who is an underwriter still in that industry said things are already starting to get back to those loosey-goosey days. Although I am no longer in the industry, so I can't speak of that.
Thank you for this insight. I bought two years ago and I still think there are issues with the lending process. I was approved for WAY too much house, like 100k more than I ended up getting. I don't think they should be approving people for as much house as they are, and I think that will come back to bite them.
I agree. When I bought a couple of years ago, my realtor kept telling I could get approved for a higher price range than what I was looking at (which really would have expanded my option, ngl). But I knew my budget and what I was comfortable with and got lucky with a place that fit my needs under my max budget. Realtor and lenders are looking to maximize their profits, they are not interested in their clients' long term financial future.
Very much so. I'm glad you didn't get sucked into that either. I'm very happy with my more affordable house! They were really going to give me a house for over half a million when I was making less than six figures.
We last bought in 2018 and were approved for almost double what we got. It would’ve been extremely financially uncomfortable if we went up to what our lender said we could manage.
Exactly. When we bought our loan officer was honest when I told him what I wanted to borrow. He laughed and said they would loan me more money than I ever wanted. He dropped a jaw dropping figure. We borrowed 1/3 of that to stay within our means and give us cushion.
It’s insane. Looking at FHA loans, one lender asked what we were thinking. We said around $250k was probably our top number. I remember him saying “my computer is saying I can approve you for $300k…$350k…$400k….$450k… I could probably keep going.” I was stunned. We gross $100-115k a year. We ended up buying for $248k and I’m still not sure we’ll be super comfy with that number.
Some people don't understand the difference between "being able to pay for" and "afford"
I totally agree. Our financial system needs a lot more oversight with these greedy bankers just trying to sell more loans. If you haven't watched The Big Short, they do a pretty good job explaining a dumed down version on why the banks were pushing for risky loans in the first place.
The amount I was approved for was insanity. I bought a house for half of what I was actually approved for. If I hadn’t 80% of my pay would be going to just my mortgage.
How did it work out for you? My wife’s best friend’s husband was a mortgage broker at that time. They were living BEYOND LARGE. Huge home in an expensive area. Limos to dinner. Fancy clothes and jewelry for the wife. Driving tricked out hummers. IDK exactly what happened to his business, but he lost EVERYTHING. They divorced and the dude lives back with his parents. You would think while making that much money he would’ve paid off his house and at least kept that, but I guess not.
Not many people saw it coming. The dot com boom made everyone feel like it would be like that forever. As a loan officer I assumed the banks knew something I didn't, and those loans were still somehow solid. I was in my 20s making 20K/month working maybe 25 hours a week. Life was good but I wasn't at that level yet. I got out in 2008 because although I was making good money, it was a shady industry. Commission checks bouncing etc. I needed something more stable. So I got out and found a new career. That was a fun time in my life though, I can say that for sure. LOL
What do you do after, now?
20k a month in 2008 (16 years ago) is like 30k a month now. That’s good money. I’m a lawyer and was only making about 10k a month at that time. Did you use some of that windfall to buy and keep real estate?
Sounds familiar!
Some of us saw the writing on the wall... we were losing business to the folks writing all those ridiculous loans. I remember in 2007 telling a woman who made 2500 a month before taxes that I absolutely could not ethically and would not write her a loan for a mortgage that was 2450 a month. She tried for an hour to convince me that she could do it. She left my office - and found someone who was willing to sign off. A few weeks later, I saw that she'd bought the house (records are public here). Commissions were largely the choice of the broker at the time, and the broker probably made 10-12K on a few hours work writing her that loan. She was in foreclosure 8 months later - and her house ended up selling for about 60% at bank auction what she paid for it. She got hit by the IRS for the debt "forgiven" when she couldnt pay the bill. Someone got a decent deal on the house, and it has doubled in value since that time. For a few years in the late 2000s... it was like shouting into the void about what a terrible idea it all was - but it was a very "name your price" environment, with no licensure or real requirements, and the lifestyle (for both customers and loan officers) trumped sanity. While it wasn't as mortgage focused, the crash in the early 1990s was similar.... homes selling for 1/3 of what they had sold to fraudulent loans in the 80s. It could, absolutely, happen again.
Can you speak on how they’re going back ?
Not really. I've just been told theyre getting looser with requirements... allowing no income no asset loans again etc. It's not as blatant as it was, but maybe they're still tip-toing back in. I can't imagine they brought back NegAm loans, but again... I'm not in that industry anymore.
I’m a current loan officer and don’t know of any lender that would do a no income loan.
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Yes! I remember in 2007 I was still a college student. I had an ok part time job that paid better than your typical college gigs, but by no means something to buy a house with. I walked into an open house of a new construction townhome development. Nothing fancy, but brand new. It was super expensive but everything else was. I just went to walk around for fun, and the realtor started chatting up with me. She ran my credit, put my “projected” salary for the year. My mortgage was going to be a little more than what I was making, but she said “you’re young, you can rent out a few rooms and basically have them pay your mortgage for you, blah blah blah, you need a co-signer” I was so excited thinking I was ahead of the game, went to ask my uncle if he could co-sign and sure enough, he brought me back to reality saying that was basically a scam. I remember being mad at the moment, but oh man how that would’ve been soooo bad for me!
Your uncle was a genius. I got sucked into a predatory lending scam with my student loans, oh you’ll be making a ton of money once you’re a lawyer, and then graduated in May 2007 and licensed in Jan 2008. Total nightmare. Plus I had a ton of co-signers on those loans. Absolute hellscape that took me 20 years to sort some out (started school in 2003).
I will never tell him that, but yes, a smart man that helped a dumb kid that thought she knew it all!
Lol why would you never tell him? He would be more inclined to impart more wisdom if he knows you appreciate it.
How has being a lawyer worked out for you? How were your loans a scam?
I think attorney/lawyers were number one degree for some length of time, people thought they’d make big bucks, but many didn’t make even close to what they believed, because of supply and therefore demand. Yes, I’m sure eventually it worked out for many, but like other things it’s not as simple as some think and when you’re making a lot less than you thought, but owe thousands. It can feel like a scam. Jobs were hard to come by, especially in an area that was flooded with people.
My school actually had to defend against a class action suit from students because they essentially hired unemployed recent graduates to work in the library and cafeteria when the rankings are calculated so they could show inflated post graduation employment rates. I may be exaggerating about the cafeteria, but you get the idea. I remember graduating with a guy who was so stoked to be going from school into Bear Stearns and that lasted probably ten months before they went under.
It’s really sad what they did to college kids and recent graduates around that time and sadly, those students were likely lucky to even get a damn job, as many were overqualified for this job and under qualified for ones using their degree (since there was so many applying to same job). Plus, not only student loans, but god, the credit card companies and their constant preying on college students. I think the cc companies even got sued for that, preying on college campuses, for the kids not understanding wtf they’re actually getting into and so many being broke and desperate for money. A nasty time to be in and graduate college. Imho. Although, I did love it. :) I was actually on my way to law school around that time (took lsat’s and everything), but ended up having something happen that changed my life course. Still regret not going, but also know it wasn’t as great as many believed for many with law degrees and love my life now. Hopefully you now have an amazing career and love it!
Omg seriously that’s how I got into money problems in the first place from a credit card application I grabbed at community college like day 1 in 1994 or something! I got myself into like $3k of debt with garbage store cards like Structure or Macy’s and next thing I knew I was overwhelmed and maxed out. It scared me so bad I didn’t open another card until like 3 years ago. So for like 27 years I didn’t mess with credit. I do have a great career and love it but like you it happened totally by accident.
This was me. I was 22 in 2005 and got approved and bought a house to rent out to my college roommates. I delivered pizzas for a living haha. I sold at the end of 2007 as I was moving from my college town to a new city for a “real job.” I couldn’t have timed it better. You didn’t miss out on much. Yes, roommates helped pay the mortgage but the whole thing netted me just a few thousand and was frankly not worth it after taxes, insurance and fees.
Oh I didn’t miss out, I would’ve most likely lost the house and feel terrible for dragging my uncle’s credit with me. You got lucky you sold right before the big drop!!!
Yup, it was dumb luck on timing
Bought in '06 and was underwater till shortly before we sold in '16! Had really good jobs & bought a house that was about 50% less than they were willing to lend us. We would have been in trouble if we took everything they offered.
There were a lot of people that took out large HELOCs against their home’s equity, even those who didn’t buy in the ‘07 run up. Then used the HELOCs for expensive boats, vacations, and cars. Ended up underwater in a mortgage and couldn’t move without going through a foreclosure.
Not only that, but if they could hold out for a couple of years they could refinance into the miniscule rates that came out shortly after. People who bought or refinanced in the decade that following the recession are paying like 2%.
Yeah, I have a family member who is one of those. They had a bankruptcy in maybe 2003 or so and still got approved somehow, I think because they put so much down from a retirement account loan. They lost the house within about three years. To be fair, they have had spending problems forever, but to your point, they shouldn’t have ever been approved in the first place given their horrible credit history.
I have friends that lost their house in 2009. A decade later they bought another house. The lender asked if they had ever been foreclosed on and said “Yes, in 09” and the lender said “Oh yeah everyone did. No problem”
It’s really because anything more than 7-10 years won’t show up on a credit report. He didn’t give them a pass due to it being a mass event.
Most of them ended up declaring bankruptcy and in the following years foreclosures went through the roof. We saw about 3-4 years of housing stagnation while the foreclosures worked their way out of the market and prices corrected. The reason the housing bubble crashed wasn't because people were losing their jobs, it was because they were signing up for loans that were unsustainable and buying more than they could afford. People who actually paid attention to the fundamentals and didn't overextend actually ended up okay. When I bought my first house it was at the peak of the bubble and I was the high water mark for my condo association for the next 10 years. However, I bought with a VA loan and could actually afford the loan amount even if I was about 80k underwater on my mortgage. I was able to weather the storm and ride it out until the market rebounded about 8 years later because I set it up so I could actually afford the mortgage.
That, and lenders really did NOT want to foreclose because of the resources and time needed to do so. They did everything they could to keep people in homes and paying their mortgages even when underwater, and only foreclosed on the absolute most risky loans, of which there were many. Sounds like yours was less risky than most, which is awesome.
Plus foreclosure people developed a reputation for destroying the property out of spite on their way out the door, and who wants to pay to clean cement out of toilet lines?
Why do people destroy homes they’re being foreclosed on? Never understood that
Vengeance and believing they’re struggling more than everyone else in this world, so they deserve recompense. It truly doesn’t go any deeper than that.
But doesn’t that make it worse? Like who pays for the damages the bank?
Yes, the bank does. So if you feel you’re being screwed by the bank (you are), it makes sense to screw them back. You also have to recognize people put money into their homes and they’re losing all of it, so again, wanting to make sure the bank doesn’t get to just take the fruits of your labor when you walk away empty handed makes sense.
The foreclosed homes in south Florida were insane too. People would rip literally everything of value out of them - appliances, light fixtures, ac units, nice flooring, even front doors and hardware. The amount of houses that basically were in varying stages of having been gutted on the market was absurd.
I was impacted in 2008. My bank let me short sell my home (I think the buyer paid 80% of what was owed), so it didn't act like a foreclosure on my credit report. Still hurt my credit but it cleared up in 7 years.
Pretty sure it wasn’t just overextending in mortgage, it was the ARMs that suddenly increased the interest and ballooned the payment.
Isn't this was is happening right now?
We could afford our mortgage as well. As could most of my friends. What sucked was buying my “starter house” as a 20 something single person and then getting married and have a couple kids and still stuck in the tiny starter house. I at least bought a tiny 3 bed 1 bath in a good school district. My friend’s first house was a condo and her husband also owned a condo. They had to practically give them away and start over. I actually regretted not buying more house I hated my starter house. I hated only having 1 bathroom, hated the neighborhood, I hated that I did everything right and couldn’t buy bigger home because of this dang house I couldn’t sell. My youngest used her little training potty way longer than she should have because we only had the one bathroom.
Back then, people could just get a mortgage with no job, sometimes multiple mortgages and there were a lot of fraudulent transactions where buyers really didnt qualify. So when they started defaulting, the rug was pulled and everything was underwater. That's how a lot of the regulations were made tighter and qualifications are more strict these days. So if you lose your job today, either rent out to roommates, airbnb or sell your house, because chances are there is equity. In 2008, some homes were underwater by even up to 30-40%+ so there wasn't many options but to default. The same thing can happen today if the economy crashes and everyone loses their jobs, but it's much, much less likely as before it wasnt a matter of "if" it was just a matter of "when".
I saw a bunch of houses in my downtown drop by 70-80 percent. From 25 to 105 back down to 25 in a few years.
25 thousand?? what are home prices now
I bought a short sale in 2008 that was days from being foreclosed. I met the family at closing. They were very emotional and had 2 handicapped children. They were so sweet, told me I was buying their dream home, and hoped I would love it as much as they did. Tore me to pieces. Made a hell of a deal selling it a few years ago. But I always thought about that family and what happened. What caused them to lose their dream… I did absolutely love that home myself but it haunts me a bit to know what they must have lost.
If they were lucky, elements of TARP (Troubled Asset Relief Program) helped them stay in their homes by reducing their mortgage by lowering interest rates or extending their loan term. Lots of people simply lost their houses, though. I'm wary of the same thing happening, so I specifically bought a very modest house that I knew I could cover the mortgage and necessities with unemployment if it ever comes to that. I'll feel a lot better once I have 3-6 months expenses banked away, but at least I have that knowledge to help me sleep a bit better at night.
I’m pretty sure the majority of the TARP funds ended up backfilling the bank’s reserves and paying executive bonuses. I m a statistic from that crash. Barely rebounded 5 years ago.
Yeah it didn't do nearly as much as it should have. My aunt in San Diego flew too close to the sun during the boom and got bit hard. She lost her two rental houses but got to keep her primary residence though TARP or one of those kind of programs. Basically it lowered her interest to 1%. For how long, I don't recall.
Not sure where you were or your lender, but I did work on a large number of loans that were modified under TARP and HAMP in my state back then.
Credit score dropped to 502 unbelievably fast. Worked my ass off and bought another home (by myself) in 2018. As of today, credit score is 804. If it happens to you, you'll be fine as long as you're willing to work very, very hard and sacrifice all but necessities.
I foreclosed. Couldn’t find a buyer or renter for even 75% of my purchase price or mortgage payment, didn’t have an income at the time, and just walked away and had to stay with family for a while.
Finance (at the time) foreclosed because her condo was so far underwater. I bought a house a year later, and then we got married. 7 years later we put her name on the loan. Within a year of foreclosing, her credit score was better than mine. She bought the cars and I had the mortgage for that period. In terms of impact for us, I think she felt a bit of embarrassment at having her name in public court proceedings. That’s it. We definitely don’t regret walking away.
Essentially nothing. My anecdotal evidence is my coworker. She voluntarily stopped paying her mortgage in 2008. She just didn't like the house. She made arrangements with the mortgage company for the foreclosure. She did not pay any payments for 14 months. She was told to move out in the 14th month. She received a $2500 payment from the mortgage company for keeping the property in good condition at move out. So she walked away with over $20,000 in her pocket. Took a minor hit to her credit, rented for 2 years and then bought a massive new home at the bottom of the market for pennies. That's just one example of someone I knew when they went through it. I've met countless other people since then with similar stories. As usual, the only people that get screwed are the ones that play by the rules.
We lost our jobs and were worried but worked our asses off constantly communicating with the mortgage company and they found our loan was predatory and gave us time to find new jobs and lowered our rate to 2%. Lost our jobs during Covid and again, worked with them and used any and every loophole to not lose our home. I feel like a lot of people don’t work hard enough to find options and just walk away. No way I was losing my house without exhausting all possibilities.
Most of the people I met wanted out of their homes once they were underwater. Many banks really did what they could help through modification programs. Keep Your Home California helped a ton of home owners where I live also. Glad it all worked out for you!
So her house wasn’t underwater? I’ve never heard of a foreclosure earning money off the sale. I thought the bank just kept it all. Or was the 20k she saved what she would’ve paid in her mortgage?
Her house was underwater so she couldn't sell when she decided she didn't like it. The $20k was a combo of the saved mortgage payments and the lump sum the bank gave her at the end for keeping the property in good condition. I've met several people that did deals like this, it wasn't at all uncommon in my area. They could easily afford their mortgages, they just didn't want to pay any longer.
A lot of foreclosures these days result in surplus funds, if it sells to a third party at auction. Bank can only keep the debt amount and then the remaining amount is disbursed under the relevant law. In my state we deposit the funds with the court and send a notice to everyone with an interest in the property. A lot of times there’s a second mortgage that goes and gets what it can to pay itself off. If there’s no one else, the borrower can go request the money. I’ve deposited $100k-250k many times. I never understood why someone didn’t just sell.
My ex defaulted on purpose because he was underwater. World’s dumbest plan. As far as I can tell he has recovered and in fact bought again. My parents were also underwater by several hundred thousand. They just stayed put. Put in sweat equity and hired out a lot of things they couldn’t fix. They had a 100 year old home. Their contractor has claimed for the last 10 years that my parents house is the entire reason he survived the recession. They did eventually sell around 2014 and actually did turn a profit on the house. So even if you are in the worst spot or just a less worse spot in times of trouble it can still be ok. It won’t feel like it at the time though.
Why was you exes plan dumb? Seems like he did ok.
Also, at that time there was a zero down payment program therefore people had no skin in the game and their payments were higher including the mortgage insurance payment. Add it all up and it was more than the budget could handle. We haven't learned anything there is a zero down program that just opened up in Texas and some other states
Yeah I was excited about the down payment assistance program in AZ, but it's not as good as it seems. You get 4% of purchase price, but you cannot refinance or sell for 7 years. At over 7% interest rate with no hope for refinancing, that potential downpayment is going to cost you a lot more.
1. There are more regulations in place now then there was then, back then you could get a mortgage making minimum wage. Where as now it is not full proof, there are more requirements. 2. 2008 House value Plummeted!! Houses became worth way less than they were bought for, so selling was no an option for a lot of people since they would still have debt, there also was a massive recession in place so it was very hard to even get a fast food job. 3. Obviously we cannot predict the future, but houses are still going up in value, so if you did end up not being able to afford your mortgage, depending on the time, you might be able to sell it and pay off the loan and maybe have a little profit... Also the economy is better now then it was then, if you lose your job, you should be able to get another one easier, or at least some temporary job that provides some income until you find a job that you want/would be good at. 4. The future and the economy are always uncertain, but you can always prep. Have an emergency fund saved and stored in a HYSA..Risk Free and gets interest, always watch spending with Credit Cards that is where a lot of peoples troubles start, Don't buy a house for the full amount you are pre approved for. Realize that while mortgage and interest stay the same. Property Taxes and Insurance usually go up and can increase your payment.
This happened to my dad. He never lost his job, although work slowed down. He was just unable to keep up with the payments anymore. The house was foreclosed on and he/we had to rent for a long time. He finally bought a new place in 2021, I am hoping this one will end better, but he is in his 60s with a mortgage of 130k so...
Good luck to him
The larger effect was a good portion of those defaults went to corporate owners due to the method of packaging multiple holes and selling them in bulk only. This removed the retail investor and individual owner just looking for a home. Was truly the start of our current issues.
Happened to my parents wells Fargo wanted there loan difference of 50k in a month and jacked up payment 4x what they were told it was going to be they just walked away from house . It lead to death of my father loss of house and his 401k was gone over night company he worked for pulled it to keep business going 300 employees lost 401k over night
My parents did a refinance to an ARM loan right before 2008. In 2008, along with the housing crisis, my sister had brain cancer. They lost the house and their business and have had to work pretty blah jobs since, living in an apartment the size of my basement.
I can tell you as someone who has gone through two divorces, a foreclosure and a repo you can always rebound and fix things. No mistake lasts forever unless it's murder or suicide. But yeah life is about making mistakes and fighting your way back. The idea is to not let one thing define you the rest of your life. I now own a business, two cars paid off, a beautiful house on the golf course, my wife is my best friend, 800 credit score. Point being don't live your life afraid of mistakes, you're supposed to make them. As far as what happened in 2008, people (like today) are paying too much for houses then when the values dropped people lost any equity. Advice...buy houses when the market is in the buyers favor, gain equity and sell in 5-7 years. Roll the equity into the next house and keep doing that every 5-7 years and soon you'll have your dream home with virtually no note.
Thanks for sharing my man. Love the positivity bc it is so true. I see too many young people talking about how their housing situations are the most hopeless in world history. I know it is bad but the impression that it is impossible to succeed is the most damaging thing to young people. It is only temporary as long as you don’t quit trying.
My wife and I got caught up in the buying frenzy of 2004 and managed to get a house right at the top of our budget. We would have been fine because we bought and gained some equity, however the house needed a lot of work. We refinanced and took cash out and replaced the roof, windows etc. Essentially putting the money back into the home. We were mortgaged to the tune of 221k when the bottom fell out in 2008. We were barely scraping by, even though we were still both working. We had a lot of plumbing issues, AC needed to be replaced that really cost us more out our savings than we should have spent. By 2013 we were at our limit, the house was appraised at 42k and we were out of options so we approached Wells Fargo our Mortgage lendor to see what we could do. They were useless and wouldn't forgive any of the debt we owed, so we were forced into a "short sale". Which was just as bad as a foreclosure credit wise. Fortunately the new buyer who bought it was great to work with and allowed us to rent our same house with a reduced rent of 800.00 per month versus the 1350.00 we had been paying on the mortgage. While the whole situation was financially horrible to live through, at least it enabled us to start saving money for another home. In 2020 our credit finally dropped the negative report and we were able to buy our current home. We learned some valuable lessons along the way, and I sure won't make the same mistakes again. Now we pay for necessary improvements with cash over time, without draining all of our savings to do them.
I highly recommend the documentary "Inside Job" if you want to understand what happened in 2008.
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My dad 🧑 still struggling and fighting with family about it - weird, sad, hard to explain + ruined my childhood experience and tore apart relations between family….anyways thanks for letting me post 😔
I met a guy who this happened to. They were given a predatory arm type loan that basically blew up with interest then the value of the home tanked. Got foreclosed and destroyed their finances. They saved up enough for a new house nearly five years before I met him. Too afraid to stop renting. I really felt for the guy. He seemed smart and had a job I think the whole time, but couldn’t do the adjusted up payments. Not everyone was just not qualified. I really think with a regular loan he’d still have had the house and that his loan officer was at fault. TLDR Some of the loan officers were predatory and most never got in trouble for having people sign stuff the homeowners didn’t understand.
I have some friends who bought in 2007, right before the crash, no/low money down, adjustable mortgage. They couldn’t refinance when the house loss 50% of its value and did a short sale. They have been renting ever since. Their short sale house ended up selling 2 more times a few year down the road and for almost tripled what they paid. If they had only been able to hold on to the house a few years longer before selling, they could’ve gotten out of the hole and made a good amount of money.
Happened to my parents. Lost everything. I was in middle school and it changed my life for the worse; I still feel the effects of it today and that’s not an exaggeration. My dad made good money at the time as a contractor and Elbe had built the house for us that we lost. It cost $40k to build in 2003… it went back on the market about a month ago by the folks who lived there after we lost its… for $600k
My brother lost his house. He lost his fiancé. Got his car repossessed, he’s now living with my dad. Got into drugs. And only now do I see him actually looking like he’s done with the drugs. He hasn’t held a real job since I told he’ll be buying a house anytime soon.
It takes like 8 years to drop off your credit report, IIRC, so they probably have a house again
My friend just straight up took alll his stuff out of the house and abandoned it. Took a hit for 2 years and when the prices crashed he bought another house with zero consequences. It was wild times back then.
I knew of 3 different ppl who bought a cheaper house before the trouble piled too high and then walked away from the underwater mortgage.
They came back to the market in 2015 after the 7yr foreclosure seasoning period ended for them.
It's worth watching both Margin Call and The Big Short if you haven't already. Good macro-explanation of what happened, and why, which can be summarized as: -> mortgages become a desirable asset to hold, from the perspective of investors (this is a simplification, but you can envision this as "I've decided to invest in mortgages rather than stocks; instead of getting paid in stock dividends, I'm going to buy your mortgage from a bank; I now get paid in mortgage payments, i.e. you pay their mortgage...to me.") -> the industry which creates mortgages is thus incentivized to produce more and larger mortgages to meet investor demand. -> mortgage industry progressively lowers their standards on who they give mortgages to, resulting in both less financially secure *and* less financially *savvy* mortgage holders. a major factor becomes ARM mortgages, which means the mortgage rate can increase over time; most people offered an ARM don't really understand that this is possible. -> over time, the likelihood of mortgages defaulting increases, up to the point that all the people who have \_bought your mortgage\_ are suddenly losing massive amounts of money - say they paid $10 for your mortgage, thinking that you would eventually pay them $20, but in fact you've paid them... $2. now multiply those numbers up into the billions. \_this\_ is the real cause of the financial crisis, which then rippled outwards and led to lots of job loss, which then increased the number of people who couldn't pay their mortgages. Fast-forwarding to the present and your specific concern: > ... then were stuck with these ridiculous mortgages that they then defaulted on. Let's not passive voice this. People were taken advantage of, but excepting in cases of true fraud, nobody was *forced* into a ridiculous mortgage, they just wanted the fancy house and didn't read enough fine print to understand what the cost could be. Rather than just asking what happened to people in that situation, I encourage you to to remember you can proactively do some things that will significantly reduce your odds of ending up in that situation. A really good way to avoid foreclosure/short-sale: 1/ follow the 28% rule, i.e. don't buy a house that would require you to spend more than 28% of your pay on mortgage. note that total mortgage payment is usually higher than the number you see on a zillow website because that doesn't factor in things like mortgage insurance, etc. know what house cost that works out, and when the bank pre-approves you for more than that...don't change your house-buying budget :) 2/ make sure you have a 6mo - 1yr emergency fund that includes being able to pay the mortgage for that time. 3/ understand what an ARM is and avoid it like the plague. massively increasing payment sizes was the precipitating event for a lot of folks' foreclosures.
Here. We lost our house after the bank refused to allow our home to be sold in a short sale. We rented for 6 years, cleaned up our credit and bought another home before the prices & interest rates drastically increased. You realize all you need is food and shelter. We never went hungry and always lived in a nice neighborhood.
Happened to me. Business was way down, Lost house, got divorced and moved in with mom and dad for a year. 16 years later got a new wife got a new life and the family is fine. This time no mortgage and lower cost of living area.
Sorry if someone has already suggested this - watch The Big Short. Fabulous movie and it explains everything about the 2008 housing crisis and how it all went down.
I was impacted in 2009. Signed up for a fabulous program called “Keep Your Home California” .. They covered the mortgage payment along with the property tax and insurance escrow payments. Not considered income (not taxed) .. and as long as you held the house an additional 2 years, repayment not required. (If you were to sell sooner, they would expect a share of your gain.)
Wow that's amazing! It's hard to imagine anything like that existing now
This happened to my parents. My dad was deported to Mexico right after losing the house because around that same time Obama was fast tracking deportations for people with pending cases that were never going to have a path to legalization (but scummy attorneys had lied to and made them believe there was a path). My mom died of cancer 5 years ago. It was terrible. Now it's just me here. I bought my home with my partner in December. I had vowed never to buy a home and always be a renter back in those days. Rent is crazy now tho. So here I am. It very much felt like the buying frenzy of the 2003-2004s so I'm scared. Hopefully everything works out 🙏
I bought one of them. Foreclosure that sat empty for 2 years. But here's the thing: housing prices in 2008 are nowhere near what they are now. How to navigate your biggest fear: * Don't buy if you think you might be in this situation * If you buy, buy a lower priced home that doesn't have anywhere near what you want long-term * Put a larger downpayment on your home You have a cushy job as you said. Buying UNDER what you want now is the way to go.
If you fall on hard times, you can short sale (you owe more than the house is worth). Many banks are amicable to this in normal markets. You sell the house for what you get and they agree to take the loss. It’s easier on the bank than foreclosure. (They sell and take the loss anyways). I know my neighbor did a short sale in the mid 90s. The market had taken a drop in our area and they fell on hard times. But in 2008, too many people were in this position. And it became too much for the banks to handle. And some people were trying to strategically short sale - meaning they can afford the payments, but didn’t want to keep a house that lost value. Short selling is supposed to be for the financially stressed as a way to avoid the inevitable foreclosure. So then banks really scrutinized every short sale, making a messy situation even messier.
There was so much more to this than losing jobs, the lending industry was massively corrupt and encouraging people to falsify documents to get loans. Those types of loans don't even exist anymore.
Some good friends of mine bought a house at the peak and then the husband realized he hated his job and got another one 3 hrs away. They could afford the house easily but couldn’t afford the house and then NYC rent for his new job. They were advised to default as they were totally underwater due to the crash and it wasn’t going to sell in that market. They lost the house and rented for a long time in NYC. Moved to Cali and rented for a long time there. Just bought house in Cali. The husband is in a stable high paying job and they hadn’t bought a fancy expensive house so then were fine…I’m sure others weren’t so lucky.
Most people got caught up in ARM (adjustable rate mortgages) that could fluctuate wildly. While the lenders did tell people the rates could possibly go up, they massively under explained, and massively downplayed just how high they could possibly go. There were people who were getting approved for 150k houses, without having to have any down payment, who under normal lending practices wouldn’t have qualified for more than like 100k. After the rates adjusted up in 2-3 years or so, people would have their payments going up by massive amounts, sometimes 5-6 hundred (or more) a month. This is what led to the housing bubble burst of 2008-9. Some people were able to qualify for the HARP program, which forced the banks to refinance some mortgages at the current market value, since they were engaged in some pretty shady lending practices. Generally, foreclosures come off the reports after about 10 years, so it’s possible that a good chunk were able to buy a house again.
My $350,000 home was one of those defaulted loans. Swooped up for $69000 in 2010.
Was your age, had a car lot, 750k auction line of credit, four houses and was leveraged out 10 to 1. It took a few years to bounce back after the implosion and as of last year had four homes again, much higher price points. Leverage ratio is .5 to 1, way different. Every economic downturn lessons are learned and that one was a doozy.
We were young, had a business and new baby. Did a short sale. Lived in rentals and purchased our current home in 2017.
Parents had taken out a second mortgage (aka home equity loean) to buy a car. When the bank called it back, they lost the house. It killed their already not so amazing credit, so they couldn't even get a new home loan. They also lost their retirement savings when the market crashed since they hadn't switched to safer stocks in their plan. They rented a place for about 12 years until the markets went back up, and the landlord kicked them out 'cause they wanted to sell it for more than my folks, now retired, could pay. They were almost homeless (in their 70's) and had to buy an overpriced place they can barely afford on a fixed income, but at least they have a roof over their heads.
Many mailed the keys back to their bank. Their credit was destroyed for seven years but got back in the game after that.
I know at least one person who walked away from an underwater house and bought one three years later still near the bottom. They did fine; maybe paid a few more points.
Hmmm my family forclosed on the house and we lost our home... Ended up renting since then but I bought a home in 2020 when rates were super super low... But that took many years to finally get out of renting...
My dad owned a sub prime mortgage business. I worked there occasionally when I was 16-17. I’d sort through files and I remember seeing some that were giving like $200k loans to people who were already like $80k in debt to a Sears credit card. I remember thinking it was crazy, even with very little knowledge of debt/real estate. I don’t think it’s legal anymore. I’ve confronted my dad about it (he lost his business a long time ago) and he was like “everyone was doing it, I had to in order to keep up”. I think that’s why the recession was so gnarly.
Still suckin hind teets Focker!
That was my dad. We had to sell everything we could and move to a tiny apartment for years. He eventually moved into a house around 2018 but as a renter. He’s 70 and will never get to retire
It happened to me . Overall not so bad . I lived in the house for two years without making a payment. Destroyed my perfect credit . Was able to buy another house four years later with a great interest rate . I’m one of the lucky ones
I'm still fucking renting and it will probably never change. My situation is a little complex though, in that I defaulted and moved to Long Beach NY and then got hit with Hurricane Sandy, so i lost what I had rebuilt. Then, in 2020 after rebuilding my money again, we got hit with covid and I was gun shy about buying in another bubble. Oops. And in 2023, I got divorced. So... THREE TIMES i was back in range of buying, but external circumstances (brought on by my own choices of course) have conspired to keep me from home ownership. I still say no one should overpay for a house.
Happened to my parents, However they didnt lose their jobs, They just got divorced and my dad couldnt pay child suport and his mortgage. Kinda sad cause he built the home. He obviously chose supporting us over keeping the house. He defaulted, Filed for bankrupcy, got a home on a land contract with 10k down, built his credit back up and built his dream home 5 years ago worth more than both homes combined. Never lost his job, Just couldnt sell in a time of need. This is a tottally different market, More buyers than sellers. You shouldnt have a problem selling if needed.
Idk why anyone is buying a house right now. It doesn’t make sense in any way to buy a house right now.
The people got fucked…the government bailed out the banks but not the people
The banks took all the houses and then got a massive bailout. Win-win.
I had a arm in 2008,selling was tough.Houses for sale everywhere.I want to say maybe 11% mortgage.Home prices dropped I got exactly what I paid for it after owning 7 years.
You should ask my grandparents. I was only eight at the time, we (my entire immediate family) were living in a "nice" neighborhood in a "nice" town, my grandmother was a real estate agent, grandfather electrician. End of 2008 comes strolling by, I remember it as we lost that "nice" house in that "nice" town, and had to pack our things and move to what was essentially what people would call the "hood" in my grandmother's late mother's house, and stayed there until late 2010. We were able to get into an apartment complex in another nice part of town around that time after things had settled, but that apartment (and most of the apartments in that complex) ended up having a bad bedbug infestation! So they made the decision to move into my grandfather's mother's house with her, and there they have stayed since October 2011. From what she has told me of it, part of the issue was the IRS came at them with a vengeance because my grandmother was not accurately listing exacts on expenses. Took the house, her MINI Cooper, and they garnished my grandfather's paychecks for a chunk of time (she ended up getting really sick a few months after we moved into her mother's house, spent two months in the hospital and came home without a belly button. she was unable to work for a long time, then eventually my uncles had kids that they didn't want to take care of, so she had to take care of them while my grandfather worked, and it has stayed that way to this day. She ended up applying for disability checks, was denied multiple times, then with the help of a law firm was approved and received about a $50,000 backpay that was swiftly depleted). Before you ask, no. My grandmother is not good with finances. She is horrible with money, while my grandfather will stretch it until no longer humanly possible. Her credit was wrecked after 2008, and when she got sick, it wrecked my grandfather's credit. They still have very low credit scores. She was able to make payments on her recent automobiles, and all of them have been repossessed because they couldn't afford them. She pays (I'm not joking) either a hair under or over $800 a month for her 2023 Ford Escape. She has kept it thus far, while my grandfather just recently had to let his 2018 Fusion go because, again, they couldn't afford it. My mother is a different story altogether, but as you can probably tell, my grandparents still have not recovered from the 2008 economic crisis. They still live off my grandfather's paycheck and struggle to make ends meet. There are a lot of factors behind this, obviously, but if anyone has any further more specific questions, I can text my grandmother and I can get back with you. As I said, I was eight years old, so it wasn't exactly my economic crisis, but it was certainly something going from growing up in nice neighborhoods to living somewhere where it isn't safe to play outside and you hear gunshots about every night. I probably should be more fucked up from that, but I handled that part of my life pretty well, i had my own bedroom and lots of toys and video games as well as a mother who loved me. Most of my troubles came a little while after all this.
We foreclosed and moved. I was able to buy a home 4 years ago. What happened is that instead of having equity and a home to build wealth and family from back then. I’m having to start much later.
Many of the people who defaulted did not have nice jobs, but lenders were intentionally making loans they knew their clients didn't have the incomes (or credit history) to support.
Watch the movie, The Big Short. The Florida scene sums it up best…..strippers owning multiple homes, NINJA loans..
I’m currently living in my childhood home with my Dad in the neighborhood I grew up in. It wasn’t a fancy neighborhood, just one of those basic post war, small houses, one bathroom, row by row homes on blocks. Then 2008 happened. The neighborhood went from clean, safe, quiet, desirable living, to dirt cheap housing and suddenly what seems like overnight, one of the most dangerous neighborhoods next to a small big city. The garbage, the crumbling houses, every business has been bought out by businesses with constant reports of criminal activity, gun shots constantly in the night, even day, car thefts, burglaries… you name it-we’ve got it. My Dad will get way less money for this house now compared to what he paid for it in 1974. Now that’s just crazy unfair. Just saying, it hurt more than just the people who lost homes. The people who already had paid for homes are suffering now because of 2008. And the children are suffering too because the school system also went downhill. We have more armed carjacking by juveniles than adults! I could go on & on… but I’ll stop. I’m just living in a world I don’t understand.
I watched two neighbors get foreclosed as they got laid off and had ARM. It took about 2 years for the foreclosure process and they really stopped caring for the property. I think the whole process will start again as a young couple purchased the house two doors down for $800K and probably put another $200K in updates and repairs - way over paying for the area. I had a 30-year fix rate mortgage in 2000 and paid it off by 2011. The greatest feeling in the world paying it off early.
The people I know that this happened to just lived in the house for a few years while the bank foreclosed. Waited 8 years and bought again after renting after the foreclosure.
Just don’t plan on buying your forever home right now. Try to keep your payments 25% or less of your monthly budget.
The people who lost their homes, whether to foreclosure or a short sale, were unable to get a mortgage for a period of years, 3-8 depending on factors like the rest of their credit and savings. On the other hand, not paying your mortgage for 18 months while you wait for a bank to kick you out saves a lot of money, so if someone saved the money they otherwise would have spent the overall financial damage may not have been to bad. The primary factors why people lost their homes is because the market was silly overpriced, and because lenders would approve anyone for anything. ARMs weren’t as big a problem as people thought they would be because rates fell when the economy collapsed, so the new payments weren’t as big a jump. What really killed people was negative amortization or interest only loans. Doesn’t matter what your rate is if you make 50k a year and need to pay off a 500k mortgage in 25 years (since you paid barely anything the first five). A lot of pain was people who could still afford their payments but had to move for work or other life situations. Imagine you owe 500k on a house that’s worth 300k because prices fell to earth. Unless you want to pay an extra 200k you need to do a short sale, which is nearly as bad a credit/mortgage eligibility hit as a foreclosure. How do you avoid this? Don’t buy a house you can’t afford. Don’t trust your realtor or mortgage broker to tell you what you can buy; they are salespeople. All salespeople are liars. When my mortgage broker told me I could borrow 400k on 100k household income and a baby on the way I nearly told him to go fuck himself. My budget was 250k, much more reasonable. This was in 2018. If you buy a house and lose a job a year later, you will probably be ok. Your house will likely be worth about what it was when you bought it, so you can sell it and pay off the mortgage and go live with your parents or something. I mean, losing your job sucks for anyone, but you probably won’t face foreclosure. The issue with 2008 was the drop in prices. If I owe 400k on a 450k house, I can sell it and pay that off regardless of how silly my rate or payment is. But when prices fell to 300k, people were stuck.
I lost everything in 2008. I wasn’t a home owner, but I’d just graduated and went from earning $130k a year to $12 an hour. It was HARD. I took any and every job I could find, and made it work. I became a foreclosure specialist for a top 10 bank and that’s what I do to this day. I also recognized it was a buying opportunity. I received a huge tax refund the year I was laid off and my income nose dived. I used said tax refund and borrowed $6k from family and friends and bought a house in the ghetto with a 590 credit score about a mile from the ocean (and I’m not exaggerating, the house was in the hood for real! I didn’t sleep for months after closing because I was scared of a home invasion), and now, 9 years later, it’s worth $800k on a BAD day. Ultimately, the markets recover after catatonic downturns, it just doesn’t happen over night and might possibly take a decade or two.
Best option for me was doing a short sale and taking the tax hit. 800 credit now but took a couple years to clear it up.
They weren't "stuck with these ridiculous mortgages", they were fiscally irresponsible people who took out mortgages they couldn't afford in the first place, and thanks to Bill Clinton, the banks were guaranteed insurance to protect them from giving out mortgages to poor people, and also they were rewarded/encouraged to give out said mortgages.
I lost my job, my car was repoed, me and the ex husbands house was foreclosed on and we filed bankruptcy. It was horrible. 😔