GolfHos

Masoud Bokaie, co-founder of engineering firm BORM Associates Inc. in Irvine, California, owes $2.6 million on a 3,664-square-foot house with marble floors and granite counters about 10 miles (16 kilometers) away in Newport Beach. He’s waiting to hear whether lenders Luther Burbank Savings and Wells Fargo & Co. will approve a short sale.

He received an offer last month “close to” the loan balances, said Shirley Cameron, his agent at Coldwell Banker Platinum Properties in Irvine, who declined to specify how much. Bokaie said he doesn’t want to pay $7,000 a month in net costs including the property’s mortgages and taxes when real estate values in the area continue to tumble.

“What’s the point when the market is going in the other direction?” Bokaie said in an interview.

Here's the part that I have a real problem with. People who can afford the house they bought but don't want to pay for it now that the investment turned out to be bad. I know several people who have walked away from their house because the value dropped 30%, not because they couldn't pay for it. They just went out and bought another house.  [sm_thumbsdown]

I've heard about people doing this, but know nothing about how it works.  I thought if you walk away from your house, your credit takes a big hit.  But I guess not if people can just buy another house.  Is there no penalty for walking away from an underwater house?

The way it was explained to me is the bank doesn't pursue these people knowing full well that they will just turn around and file for bankruptcy if they do so they just write it off. I don't understand how this works either. After the change in the bankruptcy laws they would at least get what ever money they could for 5 years provided the people make at least the median wage for their state.

Some good friends of my wife's walked away from theirs last summer and moved in with her parents but that was due to him losing his job. I talk to her all the time but it's not exactly the type of thing you ask about.

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.

There are 114,000 home loans of more than $1 million, according to First American. About a quarter of all mortgaged homes in the U.S. have loan balances bigger than their current value, known as being upside down or underwater, the data company said.

Year-end bonuses for people at hedge funds, asset- management firms and insurance companies probably will drop an average 20 percent, the firm said.

“There’s a lot of distress,” said Tracy McLaughlin, co- owner of Morgan Lane Real Estate in Ross, California, north of San Francisco. “You have hedge-fund guys whose funds evaporated and a year-and-a-half later they’re still not working.”

Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview.