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There’s No Equity So I Think I’ll Just Stop Making Payments

February 4, 2010

Got a call from a guy in Austin. He found one of my listings online – saw that I’ve been doing investments and exchanges for a while and called me to ask about his investment property.

He quickly summed up his situation in that he was $750/month negative and wanted to stop making payments on his income property.

“I already have a primary residence so I am set” He tells me.

So, I ask him a couple questions:

“Well was the cash flow negative when you bought it?”

“No, we only had the first.”

“Ok, so was it an adjustable?”.

“No, no. We had some equity in it then so we got a second and took cash out. But, now it’s about $50,000 underwater and it’ll probably be that way for a while.”

I am not sure why this really ticked me off but, it did.

“We’re getting tired of making that $750/mo payment if there is no equity in it”

But they weren’t too tired of the property when they took $50K out of it.  I am sure they had a lot of fun with $50,000 cash!

I told him that the bank would file a deficiency judgment against him for any balance owing. They could attach his house, his wages and anything else he does for the next ten years. Then, if they haven’t collected their monies, they could extend the judgement for another 10 years.

“But, I heard they aren’t doing that”

“Oh no, that was the old days. When this all first started the banks were overwhelmed and files slipped through the cracks. Now there are whole departments that do nothing but collect on defaulted mortgages.” It was about this time that my caller “lost the connection”.

I am sorry but, it is not the banks fault that you speculated with their money. Just like the folks that take cash advances to gamble in the stock market or at the roulette wheel, you borrow money to gamble and then lose it all – you still owe the money.

The foreclosure and judgement will be on your credit for 10 years. Every time you try to finance anything, the rate will be higher. If you sell your house, the bank gets their money. They can garnish 25% of your income. They can take your stuff. Whatever it takes to get back the money you promised to repay.

What really ticks me off is that my tax dollars, and my kids tax dollars and their kids tax dollars are bankrolling this nimrod’s gambling habit!

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