Foreclosure Morality

Monday, March 09, 2009

An auction over the weekend put local foreclosed houses up for bidding. Juan Santana, director of homeowner services of the Neighborhood Housing Services of New York City, discusses the practice. What do you think? Have you been foreclosed on? Have you purchased a foreclosed house? What do you make of these auctions? Right or wrong? Comment below!


Juan Santana

Comments [24]

Bud Brooks

If it became culturally taboo to buy foreclosed homes, mortgage interest rates would go much higher.
Because the mortgage lender would be taking a much larger risk.
Because the collateral is worth much less.
Because with much less demand for foreclosed homes, the market value of foreclosed homes would be much less.

Geez, Louise, folks. Think things through just a bit!

Mar. 10 2009 01:29 AM
Ron Raphael from Flatiron district, Manhattan, NYC

I feel that it is immoral to buy into somebody's problem by taking advantage of possibly the largest mistake of their lives. The property was valued at a rate that is reflected by the mortgage that they can no longer afford, and there are questions about the morality or legality of these mortgages. If the foreclosed upon home has been auctioned for sale, the original owner should automatically be given the right to buy back his/her home at the new price that may be affordable.

Mar. 09 2009 10:49 PM
Danko Beskid Niski from Manhattan - Fort Washington

Prices for private homes began inflating with reduced personal income taxes. Easy mortgages added to the flames. Easy borrowing from inflated values inflated tuition at fancy private prep schools, colleges, and universities. Inflated tuitions raised salaries paid to teachers at all levels. When I went to college teachers taught for the love of teaching and for less money (e.g., smaller cars and houses) than their brothers and sisters. Now it's all coming down. Good. Back to normal.

Mar. 09 2009 01:56 PM
larissa from Hoboken, NJ

In order to keep as much continuity for families and children and reduce operations costs / losses for banks in the long term, banks / government should encourage homeowners and banks to enter into 'lease with option to regain equity' programs, very much like the 'lease with option to buy' programs. [This is where someone rents an apartment / house and a prenegotiated portion of the monthly rental payment is used for the evenutal purchase of the property.] So, the interest rate / equity balance for a typical loan / payment is reworked, the bank will get a lower payment for a while, and the homeowner would be paying rent for the home to the bank, expending the term of the mortgage, and preventing displacement.

Mar. 09 2009 10:46 AM
jennifer from manhattan

Home prices are still artificially high, especially in New York. People who bought their homes in the past few years still expect to sell them with some kind of return on investment. One still cannot open the pages of the NYT Real Estate section without being shocked at the prices.

I am a saver and a renter and I'm sick sick sick of hearing people complain about the falling real estate market because, frankly, I don't see it here.

PS: I think we definitely need to help people facing foreclosure because they lost their jobs. But what about people facing eviction from their apartments?

Mar. 09 2009 10:32 AM
Julia from Skillman, NJ

This appears to be just a way of lowering the housing inventory out there right now. The smaller the inventory, the more competitive this industry can be. I am not sure that the question of morality should be considered so much in the practice of purchasing homes that are on the block. What is immoral is how we got into this mess in the first place. But, it seems to me that this is just one way that we can attempt to correct a portion of this economy.

Mar. 09 2009 10:29 AM
Tom from New York City

Foreclosed homes do nothing for the expansion of the proverbial economic pie. By continuing this practice in a large scale, it reduced the value of homes, shrinks the economy, and again redistributes the money at the expense of the homeowner.

Mar. 09 2009 10:27 AM
Donna from NYC

I am in the process of purchase a "Short Sale" condo in Jersey City, in which the purchase price is less than what the buyer owes. At first I felt a bit like a vulture circling overhead the obviously sick animal but now I believe that this is a win-win-win for everyone - me, the seller & the bank as well as taxpayer. The bank is taking a loss but it's preventing another property from hitting the skids.

Mar. 09 2009 10:26 AM
Bill from Hempstead

Besides the home cost, the cost to repair, I believe there can also be other liens on the property that would have to be paid before you can get clear title ....this is my understanding.

Mar. 09 2009 10:21 AM
Hugh from Brookyn

Francisco's response to Brian Lehrer's question about flipping was essentially "yes". If so, he is an indication that the speculative atmosphere has still not disappeared. In other words, the floor of New York area real estate prices is still to come.

Mar. 09 2009 10:21 AM
Colin from Brooklyn

I think the ethical issue regarding reselling foreclosed homes lies largely with the banks. If a bank can foreclose on a mortgage of $500k only to resell for $250k, why could they not renegotiate with the original owner?

Mar. 09 2009 10:21 AM
Peter from Brooklyn

I am a teacher who purchased a HUD home in NJ as an investment (yes, I am the poster child of irrational exuberance). I put the home on sale just a few months before the market tanked and I have been sucked in. My original asking price was $430k and has been cut to $325k. I am definitely going to lose money and I am terrified that I will lose my shirt, but I understood at the time the risk that I was taking and decided to accept it. Real estate will always be a form of investment and it always SHOULD be. The problem is, just as in the case of stock market bubbles and .com bubbles, it gets too easy and everybody thinks that they too can become millionaires overnight. Buying a home should be hard. One should have to work hard and save for it. The same is true for investment properties. It is the hard work that gives a home its value. I have no problem with people buying and selling homes, but you run into trouble when assets meant for long term wealth accumulation get traded like lunch items in a school cafeteria...

Mar. 09 2009 10:21 AM
Don from Brooklyn

This seems like a no brainer. Someone bought a house that they could no afford so it was foreclosed. Someone else (the gentleman who works for national grid) diligently saved, working toward buying a home. That man is able to pay cash for that foreclosed home, BRAVO!

If you can not pay for something, DO NOT BUY IT!
There are so many people who were trying to follow the "rules" and saving and not getting in over their heads. These people should now be alowed to prosper, and if it is at a discount that is fantastic.

New Yorkers are the WORST when it comes to having a sense on entitlement.

Mar. 09 2009 10:21 AM
Jennifer Hickey from Bayside, Queens

I have mixed feelings about this topic. On the one hand, the houses are bank-owned and must be sold regardless. My husband and I have been saving for a few years and would have a solid donwpayment but we are limited to Bayside, Queens, due to family obligations, where the asking price for single-family homes in poor/fair condition still start at $500,000. Even with a downpayment of $125,000, we would still be paying a mortgage of at least $2,000 per month. That said, I don't know if I could do it knowing that we've benefited off the misfortune of others. Bottom line, the market is still overpriced for middle income people.

Mar. 09 2009 10:19 AM
Colin from Brooklyn

Hi there,
I think the largest ethical issue in reselling foreclosed homes lies with the banks... If a bank forecloses on a house with a $500,000 mortgage only to resell for $250,000, why could or would they not renegotiate for that price directly with the homeowner?

Mar. 09 2009 10:19 AM
rylee from nyc

Can you ask about Lease to own or Owner will Carry agreements. Given the banking credit mess, is this becoming more prevalent or even possible? Is this a practice that takes place?

Mar. 09 2009 10:18 AM
cam from midtown

There was a Simpsons episode on this last night!

Mar. 09 2009 10:18 AM

obviously buying a home based on the discount compared to a year ago is irrelevant.

my personal rule of thumb is and has been the 1998 cost, which ignores the various bubbles and crashes that have ensued since that year. A "great price" is one that is lower than 98 prices (in a neighborhood that is socially and economically stable).

Mar. 09 2009 10:16 AM
jennifer from manhattan

The stock market is at 27-year lows. Why shouldn't the real estate market be as well? I'm amazed that home prices are still so high.

Mar. 09 2009 10:16 AM
david from nyc

Its not the fault of the person bidding on the home, that the home went into forclosure. If the person that owned the home could not afford to pay for the home they should have never bought the home to begin with. The only ones I feel for are the one's that were able to afford the homes and lost their job's.

Mar. 09 2009 10:15 AM
Chris from NYC

The ethics are partly situational: I can see the argument against foreclosure sales of homes lost through no fault of the owner -- a systemic market crash, a layoff, and so forth. I see no problem with foreclosing on owners who simply neglect for some reason to service their mortgages.

Mar. 09 2009 10:13 AM
Michael from Long Island

If you cannot pay your mortgage you really shouldn't be living there, and clearly the bank must sell the home. I understand that foreclosures are an unfortunate reality but I don't think it's shameful.

Mar. 09 2009 10:11 AM
Cathi from Queens, NY

I think the question really isn't whether buying up cheap foreclosed houses is right or wrong. Is foreclosing is in anyone's interests or even economically efficient?

Mar. 09 2009 10:09 AM

had to laugh when i heard the guy who just plunked down $270k for a foreclosed home praying that he can now pay his bills!

a shrill wakeup call that reminds us that there may be a bottom but we sure don't know where it is yet -- sounded more like the subprime of the subprime than the market correcting itself.

Mar. 09 2009 10:08 AM

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