patrick.net

The case of home debtors getting large Home Equity Lines of Credit (HELOCs) or Mortgage Equity Withdraws (MEWs) and then walking away could be interesting. Does anyone know what has happened in these cases?

Mr.Fantastic says

Mark is just proving he’s a deadbeat, and unfortunately, he probably has deadbeat kids too. This is why the bubble even happened in the first place, deadbeats and their deadbeat values. How disappointing this can still exist in this day and age.

edit

all of you asshats are typical. no trauma in your lives and always pointing a finger at someone else. when all the wall street types keep giving it to you up the arse. when it the shit really hits the fan and your assets are worth nothing. you will be begging the smart people like Mark and street smart people. to survive and we will watch you starve.

nrc2112 says

all of you asshats are typical. no trauma in your lives and always pointing a finger at someone else. when all the wall street types keep giving it to you up the arse. when it the shit really hits the fan and your assets are worth nothing. you will be begging the smart people like Mark and street smart people. to survive and we will watch you starve.

How about if "we" start with. learning how to it communicate so. we can understand what. you meant.

@nrc2112

Please explain. I may even agree with you but there is "pronoun confusion" in your comment.

nrc2112 says

all of you asshats are typical. no trauma in your lives and always pointing a finger at someone else.

What are you whining about? Are we supposed to feel sorry for foreclosure "victims"?

What I mean to state is that the comments and value judgements towards Mark are coming from typical ignorant persons. Your ideas and values are the same as those who thought going to war in Iraq was a great idea. You probably accept all that the media and the multinational corporations want you to believe in. That this way of life, a life of get what is mine and fuck the rest, that having it all at the expense of time with your children is more important, that your morals are better than

nrc2112 says

Your ideas and values are the same as those who thought going to war in Iraq was a great idea.

You should have said Nazis, or Hitler. I mean if you're going to make a completely stupid comparison to vilify someone, just go right for the Godwin FFS.

nrc2112 says

That this way of life, a life of get what is mine and fuck the rest, that having it all at the expense of time with your children is more important, that your morals are better than

Actually, ironically, I'm arguing AGAINST the kinds of "get what's mine, fuck the rest" attitude that strategic defaulters have. Ya know, the kind of bullshit like "well big evil companies do it, so I should too."

Find a way to gripe where you're at least halfway consistent.

Mr.Fantastic says

Some of them are being ridiculed in local papers, but I agree, the punishment for “strategic defaulting” should include much more severe penalties.
If I go to a bank and rob $350,000, I’m going to prison for 10-15 years if I get caught.
If I buy a house and steal $350,000 of “equity”, I can throw back the keys to the owners, keep the BMW M5, and rebuild my credit within a few years.
Something doesn’t make sense here.

See, the pen is mightier than the sword.

Vicente says

Historically speaking, this is a country of fresh starts.
You can go bankrupt, and have credit card companies falling all over themselves to give you a new card. I know 3 people personally that fell behind and were obviously never going to dig out, and they said screw it and walked. I expect 5 years or so from now they’ll be just fine and not walking around with their heads hung low whenever they see “respectable people”.
....

I'm not so sure this time around it's been 5 years since the beginning of the crash in 2006 and still 5 years later the credit markets remains tight. while in the past it was easy to re-establish credit and have credit card companies throwing cards are you, they are not as aggressive anymore. They are cutting balances and closing accounts for anyone they deem a poor credit risk. Is it possible they learned something?

How about this philosophy for yaz... if someone defaults on some deal they made with some other entity, then hurray -- they freakin' got away with it!!! It's a dog eat dog world out there. If someone is dumb enough to lend money, they deserve to get screwed.

Screw political correctness. Anyone who is dumb enough to be politically correct deserves what's coming to them, and then some. Add a few kicks to the backside while your down, too, for being extra stupid and for trying to spread your stupidity to people who don't give a hoot about your grandiose PC pipedreams.

As if you're going to Heaven. Whoopty do. Not for that, you won't. Screw a banker every chance you have, and you might go to Heaven.

-ep33f5 says

How about this philosophy for yaz… if someone defaults on some deal they made with some other entity, then hurray — they freakin’ got away with it!!! It’s a dog eat dog world out there. If someone is dumb enough to lend money, they deserve to get screwed.

If you think that the pain falls only on the evil bankers and fat corporate fuck execs, you're wrong. Advocating deadbeat behavior shows where your moral compass is.

@nrc2112

Please explain.

Any other interesting stories out there about people who walked away and then later it caught up with them?

I short sold a few years ago, and was contacted by the bank collections department a few months after. A few months after that an outside collection agency called. I sent a debt-validation letter and received nothing. Seven months after that, another agency called. No response by them, either, to my debt validation. Nine months after that, another agency called. Same no-response to my letter. Two months after that yet ANOTHER agency called, and also no response to my debt validation letter.

All totaled I've been contacted by four different collections agencies and none of them have responded to my debt validation letter.

I'm expecting more contact before the statute-of-limitations period ends, and if this goes all the way to court and I lose, the owed amount would be huge, to the point where bankruptcy would be my only realistic option.

tatupu70 says

Mr.Fantastic says

If I buy a house and steal $350,000 of “equity”, I can throw back the keys to the owners, keep the BMW M5, and rebuild my credit within a few years.

Something doesn’t make sense here.

It’s because you are 100% wrong. They didn’t steal anything. The bank made the contract with their eyes open. There was no gun to their head. In fact, most sent out all sorts of propaganda begging you to take a HELOC. They’d send blank checks where all you had to do was deposit them to get the loan. If they didn’t understand the risk, then that’s 100% their fault.
You’re crying that they lost money??

I have to agree 100% the banks knew the risk and from a legal stand point (at least in CA) if you stop making your payment the bank agrees to take the property back..... If you want to talk about moral obligations then start with the lenders, brokers and realtors who talked people into these loans.

Klarek I cannot waste time trying to instruct you

Never try to teach a pig to sing it wastes your time and annoys the pig

klarek says

-ep33f5 says

How about this philosophy for yaz… if someone defaults on some deal they made with some other entity, then hurray — they freakin’ got away with it!!! It’s a dog eat dog world out there. If someone is dumb enough to lend money, they deserve to get screwed.

If you think that the pain falls only on the evil bankers and fat corporate fuck execs, you’re wrong. Advocating deadbeat behavior shows where your moral compass is.

Moral Compass, That is joke, The DEAL is, as follows, If I pay my loan, I get my property and if I don't you get it, Where is that a a moral issue? It is not, that is the deal when they print the loan docs, you pay or you lose it, any one that thinks any morality issues are invented by the ones that are losing.

Will criminal charges be brought on thse that trash their place / steal fixtures and metal from the house?

>A local house just sold at auction after foreclosure. I was planning to bid on it but decided not to after several talks with the county property assessor. The previous owner had gutted it, taking every light & plumbing fixture, kitchen cabinets, even the water heater was gone.

http://patrick.net/?p=635587#comment-720956
(see this post)

While I'm not currently a home owner, and have never walked on a debt, here's the point I struggle with:

Had there not been so many bad loans and defaults which ultimately turned most everyone upside down, people wouldn't be inclined to walk away. The bad loans weren't made in a vacuum, and they have (and have had) considerable effect on the value of property obtained with "good" loans.

Hence the reason the "walk away" crowd doesn't get 100% of my ire--the financial markets/lenders and poor regulation (or overregulation, depending on your view) are at least as much if not more at fault here.

While I was smart enough not to get suckered into a foolish purchase, there are a lot of people who weren't. They had faith in the system as it applied to more than *just* them, and they were wrong.

I’m not sure I wouldn’t be walking if I were in the same situation, too.

Cvoc13 says

If I pay my loan, I get my property and if I don’t you get it, Where is that a a moral issue?

If I profit, I keep the money. If I lose, I stick you with the tab.

Nah..I mean the ability to assume others weren't being given cheap credit, running wild and passing the consequences on to the taxpayer.

Last time I bought a house, the 20% rule still applied unless I wanted to use my zero-down VA benefit. Hopefully those days have returned...even so, I'm not sure I'll ever buy again.

Mr.Fantastic says

Iron Giant says

They had faith in the system as it applied to more than *just* them, and they were wrong.

I’m not sure I wouldn’t be walking if I were in the same situation, too.

Faith in the system? You mean the ability to take cheap credit, run wild, and then pass the consequences to the taxpayer without any risk of punishment? That’s just greed.

I think the original plan was not to pass the consequences to the taxpayer, but to flip it onto another unsuspecting fool.

Nomograph says

Mr.Fantastic says

I bought all cash

Sure, if “I bought all cash” = “I live with my parents in Irvine”
Let other pens dwell on guilt and misery — Jane Austen

Did he move from Florida by way of Pennsyvannia? Are there basements in Irvine?

My opinion on this has shaprd into following:

those that walk away will save a ton of money long term, will have more flexible and better job prospects since no longer tied down. might even profit if they wait for sheriff to show up with eviction and take all that cash (saved from not paying rent / maint) and invest diversify it in stock market.

Mr.Fantastic says

Faith in the system? You mean the ability to take cheap credit, run wild, and then pass the consequences to the taxpayer without any risk of punishment? That’s just greed.

Not according to the banks it wasn't. Remember they supposedly qualified these people to make sure that they were credit worthy. You can ask for credit all you like but they can deny you for any reason they chose. It was all just good business, at least until it wasn't. But how would you expect your average person to know that? You know good and well they don't understand finance. Even many educated and intelligent people suddenly get stupid when it comes to finance. Hell many educated economists didn't understand what was going on back then.

You heap waaay to much of the blame on the borrower, who were often dupes and suckers for predatory loans that never should've been made in the first place.

Predatory loans were a nationwide problem too. Just who do you think made that possible? Borrowers? Hell no, it was the banks. If they don't sell em' no one could get the bad loans in the first place.

If you want to be angry about the bailouts then be angry and the banks, their lobbyists, and the politicians. They're the ones getting the govt. to give our money away to prop them up and socialize the losses while they privatize the profits. If we had the same quality of regulators that we had during the S&L crises not only would the bubble have never formed, but if it did the bailouts probably never would've happened anyways since those banks would've ended up in recievership. Something which was once seen as good and necessary, the "creative destruction" in high finance to clean out bad institutions and make way for good ones, is now decried as SOCIALISM by so many though. You wanna blame borrowers for that too?

Defaulters come in a variety of colors...

Mr.Fantastic says

Actually, yes.

Well then you'd be wrong then wouldn't you?

Mr.Fantastic says

It’s because of stupid fucks, and the stupid fucks they eventually breed. I’m tired of life getting progressively less enjoyable because we have to “lower our standards” for stupid people.

Many of those "stupid fucks" also graduated college or were skilled professionals in other fields. Also for those who really were "stupid fucks", what does it say about the quality of our banks and banking personnel that they were approved for a loan?

If you want to rail on them about not doing "basic arithmetic on a calculator" then you also have to apply that reasoning to the banks and banking personnel as well who apparently are unable to perform that task too.

Mr.Fantastic says

There’s your socialism, prick.

You appear to not know the definition of the word socialism it seems.

Real classy to with the insult at the end there. However old you may be IRL you come off as a 2 year old in your posting.

tts says

Many of those “stupid fucks” also graduated college or were skilled professionals in other fields.

I know plenty of stupid fucks with college degrees. Being born into upper-middle class and getting a college degree doesn't in any way make someone intelligent. Buying into the most obvious asset bubble in history, making the biggest purchase of one's life without a minute of due diligence or hesitation - that removes any doubt whatsoever that the person is a stupid fuck.

tts says

Also for those who really were “stupid fucks”, what does it say about the quality of our banks and banking personnel that they were approved for a loan?

I love that red herring. The implication that people are actually defending banks just because they are calling out borrowers for being greedy morons. It's a cheap tactic with no merit or point.

klarek says

I know plenty of stupid fucks with college degrees. Being born into upper-middle class and getting a college degree doesn’t in any way make someone intelligent. Buying into the most obvious asset bubble in history, making the biggest purchase of one’s life without a minute of due diligence or hesitation - that removes any doubt whatsoever that the person is a stupid fuck.

Intelligence has nothing to do with perception, smart people can be deceived as well as anyone, and bubbles are all about perception.

klarek says

I love that red herring. The implication that people are actually defending banks just because they are calling out borrowers for being greedy morons. It’s a cheap tactic with no merit or point.

You appear to have a)misread and b)made an unfounded declarative statement, an opinion if you will. I wasn't trying to insinuate that "Mr. Fantastic" was defending the banks at all. The point was to demonstrate the flaw in his "logic". He heaps blame on those who took out bad loans, a few of which were no doubt knowingly fraudulent but most not, calling them idiots while giving the industry that gave them away a free pass.

Well it takes 2 to tango, and if he wants to call borrowers idiots then fine he must apply that same standard of intelligence to not only the banks but Wall St. big finance houses, the governments of the world, most economists and even many economic professors since they all either endorsed, assisted in the creation, or actively signed off on the loans.

klarek says

That’s legal recourse, not moral. I already said it was legal. When taxpayers and the public at large are stuck with the negative externalities of someone’s decision to strategically default, that makes what they did immoral and wrong.

The taxpayers and public at large are stuck with the bill because the gov. wants to bail out the banks instead of putting them into receivership and making the investors eat the losses. The only moral dilemma here is the one posed by corrupt officals and bankers. To say otherwise is to blame the victim.

Mr.Fantastic says

I was going to respond to tts, but Klarek basically destroyed his entire strawman with one swift blow.

He destroyed nothing and neither him or you saying so will make it so. The truth and facts still stand, and you still come off as a 2 year old BTW.

OK, getting back to one of the interesting points of this overall. How are banks dealing with people walking away from recourse HELOCs and MEWs?

American in Japan says

OK, getting back to one of the interesting points of this overall. How are banks dealing with people walking away from recourse HELOCs and MEWs?

Usually there isn't anything they can really do. These are considered secondary or tertiary loans. Technically they can force someone into foreclosure over it, but the primary lender gets first crack at getting any money back.

But that is pretty much a joke.

Due to the fact that the vast majority of these people are either broke or nearly so and have no assets to speak off so even the primary lender gets little to nothing, and the 2nd/3rds most always get jack squat. This is why most of the secondary loan paper is damn near worthless, but the banks don't want to realize those losses because it'd probably drive them under. So forcing someone into foreclosure is rarely worth it. Better to let them pay something, anything, rather than to try and squeeze blood out of a stone.

Mr.Fantastic says

tts wrote all of that, and everyone still thinks he’s a dumb fuck for buying an overpriced albatross and not checking the terms of the loan.

I rent and have for years. Also congrats on moving up to the big boy f-bombs, you almost sound like you're 6 now.

@tts >Due to the fact that the vast majority of these people are either broke or nearly so and have no assets to speak off so even the primary lender gets little to nothing, and the 2nd/3rds most always get jack squat.

But am I to understand that if they are foreclosed on and given the boot, that in a few years they are ready to buy another house?? (I may be misunderstanding something here).

Sure, that is a borrower credit quality issue though, and the banks accept that most people's credit is crappy right now. Pre-housing bust that would not go over at all and they'd have been stuck renting for 7 years or so unless they got lucky or had a fat down payment, but most people who get foreclosed on can't come up with that cash.

Used to be also that you couldn't get a government FHA loan if you got foreclosed on for that time period. I think they waived that restriction mid or late last year, so long as you could prove financial hardship you can get a gov. loan soon after foreclosure now too. Basically they're trying to punish those who strategically default.

They've also relaxed loan standards quite a bit too, I think DTI's of 45% are now considered acceptable and you can put down 2-3% if you like, or even effectively nothing at all with a SFDPA. Its basically subprime all over again, though not as bad as the NINJA loans. Defaults have been rising steadily though, and while once the FHA had sub 1% default rates on their loans now they're defaulting around 4-5% of their loans. It doesn't sound too bad at first but their whole "business model" is based on vanishingly low default rates, which is why the government has to keep throwing tens of billions at them each month otherwise they'd have to go under.

Which would be very bad indeed.

The gov. is still propping up the housing market right now. I think around 90% or more of the loans done are done by the GSE's or FHA. If they stop doing that prices would plunge far faster than they're going down right now. Of course we'd also probably be done with all the declines too and would've maybe started a recovery by now if they would've done that 2-3 years ago.

Sure they would've had to put the GSE's and at least 2 or 3 mega banks into recievership, but that is hardly the end of the world much less the end of the economy. Right now our gov. is trying to drag things out as much as humanly possible. So they will bend rules, look the other way, do more bailouts, more QE, whatever it takes to maintain the status quo. I think they believe by the time it really all begins to fall apart they will have moved on and it will all be someone else's problem, IBGYBG as government policy if you will.

I thought that lenders could garnish wages for recourse loans (HELOCs and MEWs)- unless the borrower declares bankrupcy.

Primary is 1st to try sure, but remember what I said about the 2nd/3rd policy guys having to wait in line...and squeezing blood out of a stone.

Foreclosure these days usually means repossessing a property that is upside down on the loan, often by 20% or more, which usually wipes out the 2nd/3rd's anyhow. If there still is anything left the primary usually eats it up, and again the borrower is broke with no savings or assets.

So yes in theory they can garnish wages, but wether they actually get anything is a whole nother story and they know it so they usually don't bother trying.

TTS,
Thanks so far as I try to follow this. You have brought up some missing gaps in what I had known.

My opinion is that some of these people should never be able to get a mortage again (certainly not with less than 20-30% down!) No wonder things are so screwed up still. These deadbeats are still able to get FHA loan while still owing money!

tts says

You appear to have a)misread and b)made an unfounded declarative statement, an opinion if you will. I wasn’t trying to insinuate that “Mr. Fantastic” was defending the banks at all. The point was to demonstrate the flaw in his “logic”. He heaps blame on those who took out bad loans, a few of which were no doubt knowingly fraudulent but most not, calling them idiots while giving the industry that gave them away a free pass.

Well it takes 2 to tango, and if he wants to call borrowers idiots then fine he must apply that same standard of intelligence to not only the banks but Wall St. big finance houses, the governments of the world, most economists and even many economic professors since they all either endorsed, assisted in the creation, or actively signed off on the loans.

Again, I don't see anything in his argument that gives the industry a pass. Where was he defending the banks and lenders? That's an unfair accusation.

fatblond says

In your opinion. Fortunately, that is not shared by everyone.

In addition, individuals acting in their best interest can’t take the supposed “taxpayers and public at large” argument seriously. We are in a capitalistic society which mandates competitive forces and creative destruction. If Banks are doing a end run by corrupting the public officials, the individuals can’t help it.

If they were acting in their best interests, they would have done ten seconds of homework before signing off on the biggest and stupidest purchase in their lives. Now that they are pretending to be responsible (and have doubtlessly learned NOTHING), they want to dump their financial mistakes onto other people. That's not serving one's best interests, that's greed and an abdication of personal responsibility.

tts says

Intelligence has nothing to do with perception, smart people can be deceived as well as anyone, and bubbles are all about perception.

There's no "people get fooled all the time" rationalization. Millions of people saw it coming and stayed away, while those who couldn't resist ignored every ominous warning sign they could.

Intelligent people can think for themselves. If you're going to pause when deciding what you want on your $5 sandwich yet not bother to research buying a house, or rationalize paying $500k for what four years prior sold for $200k, you're a fucking idiot plain and simple.

klarek says

Now that they are pretending to be responsible (and have doubtlessly learned NOTHING), they want to dump their financial mistakes onto other people

This is where you lose me. If someone doesn't pay their mortgage, they aren't dumping it on other people. The borrower did not decide to bail out the banks with public money. If you are mad about the bailouts, then at least direct your anger at the right people.

> "If you’re going to pause when deciding what you want on your $5 sandwich yet not bother to research buying a house..."

LoL!

Still I am surprised how easy it is to get a loan with almost no money down (as low as 3%) courtesy of the FHA. Wasn't any lesson learned?

See:
http://patrick.net/?p=29220

klarek says

Again, I don’t see anything in his argument that gives the industry a pass. Where was he defending the banks and lenders? That’s an unfair accusation.

You're still misreading. I'm trying to point out by his measure there is hardly anyone out there that isn't a "stupid fuck". When you're measuring stick for stupidity writes off that much of the population, most of whom know well and good how to do math and on a calculator too no less, something is wrong with your rule and not the people.

klarek says

There’s no “people get fooled all the time” rationalization.

Of course there is. You can be smart as all get out, smartest in the world, but if you're fed improper info. and/or lied to by a trusted source you're going to fuck up. GIGO right?

klarek says

Millions of people saw it coming and stayed away, while those who couldn’t resist ignored every ominous warning sign they could.

For every million that saw it coming there are apparently tens of millions that didn't. Some of them will certainly be stupid, but clearly not all of them are. When you have these mass financial manias that go on like this it is always the result of some sort of massive systemic failure, in this case the banks/gov.

klarek says

Intelligent people can think for themselves. If you’re going to pause when deciding what you want on your $5 sandwich yet not bother to research buying a house, or rationalize paying $500k for what four years prior sold for $200k, you’re a fucking idiot plain and simple.

No, you just have to be in a bubble. People are not rational actors regardless of intelligence, smart people get played for fools too.

Ever hear the expression "penny wise, pound foolish"? Well that is what a bubble is but writ large.

tatupu70 says

This is where you lose me. If someone doesn’t pay their mortgage, they aren’t dumping it on other people.

Neighbors, condo/homeowner association, property taxes, taxpayer-subsidized bank losses, etc.

tatupu70 says

The borrower did not decide to bail out the banks with public money.

So what? The strategic defaulter who knows that the public money will bail out the bank is knowingly dumping his financial mistake on other people. Hence I think it's immoral, and he's a deadbeat.

tatupu70 says

If you are mad about the bailouts, then at least direct your anger at the right people.

I do blame everybody. You're trying to redirect the conversation from actions people are taking now to decisions that were made by public officials three years ago.