5 Years in a Mansion: Cost $0

[Malathor]

Comedy gold from the WaPo.

[Huzurdaddi]

I am seeing this *all of the time* now that I am looking for a new home.

So many of the houses are short sales where the residents have not paid in over a year. It is comical (infuriating) that I (we) am paying for this.

But it gets worse. I have been looking at homes where they took 2nd and 3rd mortgages on the house, clearly blew the cash on hookers and blow, and now they are living rent free. They made off like bandits. Put down 100k for a 1M+ house (maybe less), then as the price rises get more money from the bank, enjoy the hookers, and then fight the forclosure since it is "their house, where they have had such good memories".

[charmtrap]

That's kind of bad.

OTOH, I'm not crying any tears for the banks or the investors. Nor really for the taxpayers, who kept electing the politicians who allowed this mess to happen. None of the parties involved covered themselves with glory in this cluster.

[Jason McCullough]

To bring reality into this discussion, most of these houses take forever to foreclose because the loan holder doesn't want to foreclose. If they do that, they have to revalue the house at the new, accurate, collapsed price which screws their balance sheet.

The Maryland processing time is fairly ridiculous, however.

[AndrewM]

A guy I know rents his apartment from somebody who was foreclosed on. Apparently this has been going on for a year or more. He gets various scary notices plastered on his door all the time. But he likes it because he doesn't have to worry about getting his rent raised because nobody would want to move into such a place.

[Aleck]

That's kind of bad.

OTOH, I'm not crying any tears for the banks or the investors. Nor really for the taxpayers, who kept electing the politicians who allowed this mess to happen. None of the parties involved covered themselves with glory in this cluster.

While I have zero sympathy for any of the characters involved here, I do find myself wishing there were some more permanent way (i.e. permanently bad credit?) of dealing with people who clearly are screwing everyone else over. The "we love Jesus" angle is pretty obnoxious, too (which is, I assume, why the writer included it).

I admit I'm a bit biased in this, since I have friends who have been foreclosed on for far less than what these folks have done, but it seems to me that some sort of maximum time for the banks for foreclose (in order to finally deal with the reality of their balance sheets) would help with this situation. If the bank isn't willing to foreclose, give the property to the state to sell at auction.

[Manresa]

I think this says it all:

According to federal prosecutors and court records, Ritter bought real estate and then put the properties in the names of family members. When he fell behind on mortgage payments, he filed for bankruptcy protection in his relatives’ names in various jurisdictions to stop foreclosure proceedings. Then he tried to get the bankruptcy filings dismissed without telling the mortgage lenders. He pleaded guilty in 2000 to bankruptcy fraud and was sentenced to 15 months in federal prison in Petersburg, Va.

There's plenty of blame to spread around in the mortgage crisis & financial collapse, but I have zero sympathy for these guys. Maybe I should put in a bid on the house ... nah, too long of a commute.

[drewl]

Hmm, for the heck of it, I've been perusing some local foreclosres to see if I could get a bigger house for a decent bargain and happened to notice alot of very large local houses that have been in pre-forclosure for quite a while.

[Huzurdaddi]

To bring reality into this discussion, most of these houses take forever to foreclose because the loan holder doesn't want to foreclose. If they do that, they have to revalue the house at the new, accurate, collapsed price which screws their balance sheet.

It is both. Don't discount the red tape meant to protect people people from "predatory loans" -- give me a break. Of the 2 houses I saw last week and the 2 I saw this week that were in some stage of foreclosure, I can tell you that the owners were not preyed upon one iota. They got a solid deal.

The only people preyed upon were the bond holders.

I wish I had gotten in on this scam, free hooker and blow. That.sounds.awesome.

[Jason McCullough]

I didn't say they were preyed upon, just that a substantial number of homes stay in that foreclosure limbo because the banks really, really don't want to take the balance sheet hit.

[Marcus]

When I was looking at houses last year the other fucking problem we ran into was the fact that the first loan might take the short sale but the 2nd and 3rds said to go fuck off and in two cases actually told us that if we really wanted the house we would have to come up with extra cash to pay down those other loans. Ha fuck that shit.

[Dan_Theman]

So is this threatening to become the new "welfare mothers" meme?

[Huzurdaddi]

When I was looking at houses last year the other fucking problem we ran into was the fact that the first loan might take the short sale but the 2nd and 3rds said to go fuck off and in two cases actually told us that if we really wanted the house we would have to come up with extra cash to pay down those other loans. Ha fuck that shit.

Asking the buyers is comically irrational, what leverage do they think that they have? That their house is a special snowflake? I suppose there is nothing wrong with asking. Ha.

[Huzurdaddi]

So is this threatening to become the new "welfare mothers" meme?

Your point being?

[Jason Townsend]

I think it's less about a specifically anti-Democratic message like "welfare queens," and more about Republicans channelizing (conservatives') frustration and anger at the financial/property farce at someone, anyone other than the rentier class they serve the interests of.

[Dan_Theman]

Your point being?

It was a question, not a veiled point.

[Jason McCullough]

Like I was saying.

Forced by the harsh realities of the real-estate market, lenders are increasingly likely to allow defaulting owners to remain in their homes — a change in attitude and strategy that is helping to buoy some neighborhoods while further slowing the nation's foreclosure process.

Some lenders are now willing to make deals with owners to let them stay after defaulting, offering to pay home insurance, for example, while the resident pays for utilities.

Other lenders simply look the other way, quietly putting off foreclosure sale dates, knowing that the costs of the ordeal probably exceed the diminishing value of the properties.

[ElGuapo]

They don't pay on their mortgage for 5 years, and I pay cash for my house, out of my hard earned savings, because a bank wouldn't give me a loan (because I'm self employed).

These people are scum. That is all.

[Huzurdaddi]

These people are scum. That is all.

Don't hate the player, hate the game.

Seriously, people generally try to get the best deal that they can. Blaming them for that is irrational. Try to determine why this is happening and what can be changed to stop it.

A clear example is the regulations protecting against foreclosures -- pitched to mush heads these laws need to die in a fire. Also accounting practices probably need to be changed.

[AaronSofaer]

Actually, it seems to me that the problem isn't (or certainly isn't just) the regulations protecting against foreclosures. The banks don't want to foreclose on a lot of these houses because it would force them to ... I don't know the formal language, but reevaluate the value of the properties and put the loss on paper.

They really, really don't want to do that. So even in cases where they can foreclose, they're not.

I don't know if that's a healthy thing to allow. Sure, superficially it's good - it's Pareto-optimal for the two parties involved - but I feel like it's verging on fraudulent. Maybe one of the actual economists can weigh in here? The impact of having a system that can be defrauded like that is totally beyond my capability to analyze.

[ElGuapo]

No, hate the people. It's pretty clear from the article that they lack any kind of shame or integrity. If someone pulled this shit my family, they would be looked down on and ostracized, instead of helping their relatives commit various acts of chicanery and deceit. Good lesson they are teaching their kids, too, if they have any.

Why can't we call scum out anymore? It's like anyone can justify any action or course of actions these days by explaining it away as circumstance.

[CLWheeljack]

Actually, it seems to me that the problem isn't (or certainly isn't just) the regulations protecting against foreclosures. The banks don't want to foreclose on a lot of these houses because it would force them to ... I don't know the formal language, but reevaluate the value of the properties and put the loss on paper.

They really, really don't want to do that. So even in cases where they can foreclose, they're not.

I don't know if that's a healthy thing to allow. Sure, superficially it's good - it's Pareto-optimal for the two parties involved - but I feel like it's verging on fraudulent. Maybe one of the actual economists can weigh in here? The impact of having a system that can be defrauded like that is totally beyond my capability to analyze.

I don't think it's fraudulent unless there's collusion before-hand, although I haven't thought it out that much.

One thing that's interesting about this is that (unless I'm misunderstanding) it's kind of an implementation of the most naive solution to market crashes / panics: what if everybody just pretends it's still worth more than it is, until the market stabilizes a bit. In this case, everybody has a motivation to just stay the course, and by not selling, they're preventing an even deeper drop in prices of other houses by restraining supply. It's kind of a win-win. Note that I'm talking about when the banks voluntary decide not to foreclose, rather than regulations preventing it, which are probably somewhat distortionary influences on the market.

As for whether mark-to-market is a good idea in general, there's good arguments for both sides, and I'm not sure where I sit on the issue.

[Tortilla]

Don't hate the player, hate the game.

Seriously, people generally try to get the best deal that they can. Blaming them for that is irrational. Try to determine why this is happening and what can be changed to stop it.

A clear example is the regulations protecting against foreclosures -- pitched to mush heads these laws need to die in a fire. Also accounting practices probably need to be changed.

I don't know if there's anything clear about this at all. There's no such thing as a perfect set of regulations because unfortunately we don't inhabit a perfect world. Good regulations prevent the majority of injustices, but there's always going to be edge cases that result in weird outcomes. It's hard to get too outraged by this story without knowing if it's a symptom of a larger problem or just an outlier.

[Jason McCullough]

In conservative land, economic collapse is due to individual personal moral failings. You also totally shouldn't use the perfectly legal routes available to you if it looks bad.

[charmtrap]

In conservative land, economic collapse is due to individual personal moral failings. You also totally shouldn't use the perfectly legal routes available to you if it looks bad.

If these people were a large multi-national it would be instantly excused by conservatives as "just business".

[Malathor]

In conservative land, economic collapse is due to individual personal moral failings. You also totally shouldn't use the perfectly legal routes available to you if it looks bad.

In Liberal land, things are very different. Economic collapse is due not to individual personal moral failings, but due to certain individuals being "greedy" or just plain bad. They also totally shouldn't be allowed to use the perfectly legal routes available to them because after all they are bad or greedy.

[Jason McCullough]

The only liberal on this board who'd agree with that is probably Dawn Falcon.

[JoshV]

When I was looking at houses last year the other fucking problem we ran into was the fact that the first loan might take the short sale but the 2nd and 3rds said to go fuck off and in two cases actually told us that if we really wanted the house we would have to come up with extra cash to pay down those other loans. Ha fuck that shit.

Yeah, same crap, different state. Made an offer on a short sale (a reasonable one I might add, lower than other houses in the neighborhood that were for standard sale but ours wasn't updated and the smallest one in the community). First mortage company approved it fairly promptly, second company took months then counter-offered something ridiculous, and we decided that we'd be better off just looking for a non-shortsale. We walked away, no regrets, found something better, and it's been another few months and that house is still 'pending'. We've seen a quite a few of those during our search, short sale houses that would sit on pending for months, and then go back on the market briefly, only to go back to pending for months again.

[Huzurdaddi]

Actually, it seems to me that the problem isn't (or certainly isn't just) the regulations protecting against foreclosures. The banks don't want to foreclose on a lot of these houses because it would force them to ... I don't know the formal language, but reevaluate the value of the properties and put the loss on paper.

That's why I said both the regulation has to die in a fire and we need to revamp accounting practices. The only reason I said 'probably need to be changed' instead of 'need to be changed' is that it is complex because the actual value is unknown. It can be modeled and I think we are doing a better and better job at that but it is still evolving.

[Huzurdaddi]

Why can't we call scum out anymore? It's like anyone can justify any action or course of actions these days by explaining it away as circumstance.

It is a financial transaction, not some moral decision. They are bound by the letter of the contract, no more and no less. The contract, the system, should be robust it should not depend upon guilt/emotion or those people who are bound by such things will lose -- this is not a world you want to live in.