patrick.net

Conventional wisdom during the bubble was 'buy the biggest house you possibly can because prices only go up'.

They were RIGHT but for wrong reason.

You want to buy the biggest bomber you can BECAUSE YOU WILL BE SQUATTING FOR FREE 4EVA - and much better to squat in a McMansion.

Lynn, who didn't want her last name used, purchased a two-bedroom on Tampa Bay in 1998 for $135,000.

As the waterfront property's value skyrocketed, eventually reaching $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.

These people are deadbeats -- they pulled at least $465K in fake equity out of this house, more if they originally put something more than 0% down.

Furthermore, 3 years of payments, even assuming she has a low interest rate, is a huge amount of money. If her interest rate is the current rate of 4.5%, that's about $3K/month or $108K that she has saved in the last 3 years of not paying. If her interest rate is 6%, it's more like $3600/month, and she has saved $129,600.

So now, she has received $465K + another at least $100K from this house, and pissed it away, and we're supposed to feel bad for her?

The government has been bailing out these kind of people left and right.

corntrollio says

These people are deadbeats — they pulled at least $465K in fake equity out of this house, more if they originally put something more than 0% down.

Exactly. The fact that you pulled out almost a half a million in cash, put it into a business (and were too stupid to keep like 50 grand for a rainy day fund) and you both failed at the business and failed to retain any of those funds, means you are just a big ball of FAIL. Lamentable? Maybe. Taxpayer's duty to "help" you out? Hell no.

I personally know of someone who pulled out over 100k in HELOC money (maxed the line out immediately) and used almost half the money to pay cash for a truck, and then used that in a raffle as a give-away to a vendor they used in their business. They used their personal home to finance a free truck to a vendor, just as a "thank you" for doing business with them, and then expect the government to modify their mortgage because the business failed and they cant afford to pay back that money.

Deadbeat is exactly what they are.

corntrollio says

So now, she has received $465K + another at least $100K from this house, and pissed it away, and we’re supposed to feel bad for her?

And she works at a finance company so this should be someone who's intelligent with money. Scary.

I would say pulling almost 500K out of your house and then not making a payment for 5 years is a smart financial move. Playing the "victim" role to the max. We are just victims of the economy. No personal responsibility for their situation. Must be a lawyer or politician with that kind of ability to twist reality that much.

corntrollio says

The government has been bailing out these kind of people left and right.

It makes me sick. Now she's playing victim, claiming that she lives in "hell". People like this ought to be made into examples.

Norbecker says

I would say pulling almost 500K out of your house and then not making a payment for 5 years is a smart financial move. Playing the “victim” role to the max. We are just victims of the economy. No personal responsibility for their situation. Must be a lawyer or politician with that kind of ability to twist reality that much.
Meet the new boss. Same as the old boss.

I know of someone else who requested a modification on their loan, which they took out in 2007 to purchase the property, yet they have not made a single payment on the note. Not one. They signed the papers, took possession of the property, and never paid one cent. They are still in possession of the house 51 months later.

It's funny (albeing maddening) to hear them complain about their situation and how the mortgage servicer is dragging their feet on a modification. I think a foreclosure should be automatic if not one payment has ever been received. None of this loss mitigation garbage, you just lose the house immediately.

"I think a foreclosure should be automatic if not one payment has ever been received. None of this loss mitigation garbage, you just lose the house immediately."

Theoretically, that could happen in Connecticut or Vermont with strict foreclosure.

I blame part of this on the banksters too, of course. They were stupid enough to lend that much money, and they're also stupid enough not to foreclose on some of these deadbeats. What does irk me is that these deadbeats still play the victim card.

What's stupid is that our government buys it. Apparently we must "keep people in their homes." In reality, the houses were never "their" homes to begin with ("interest only" is renting, negative amortization is not even renting, teaser rate is basically renting), and every house that is foreclosed or sold means that someone else gets to live in their own home. Why should we entrench irresponsible idiots of the past instead of moving forward and helping the responsible people in the present?

corntrollio says

What’s stupid is that our government buys it. Apparently we must “keep people in their homes.”

I agree with this sentiment. If somebody wants a loan mod so they can stay in their house, I say we make sure they stay in it. Board up the doors and windows while they are still inside, and burn the house to the ground. There, they got to stay in their house.

corntrollio says

I blame part of this on the banksters too, of course. They were stupid enough to lend that much money, and they’re also stupid enough not to foreclose on some of these deadbeats. What does irk me is that these deadbeats still play the victim card.

Absolutely. The banks want to keep the payments coming in no matter what, so they agree to loss mitigation measures, but really their intent was not to help anyone. They are intentionally doing the slow roll on these foreclosures to try and limit supply on the market, so the one's they do take possession of retain more "value" than they would if they wrested all the properties from the owners immediately and dumped them back on the market. It's nothing more than a supply-curtailment measure designed to squeeze as much value out of assets that they know are theirs in the end anyway. Modifications don't work for the borrowers, that's all but proven. But they do allow banks to limit supply and keep their REO asset values inflated. I believe initially they thought if they could hold on 3-5 years, the market might rebound. They realized that wasn't happening, and that they were getting killed on the cost-of-carry (contrary to what most homeowners think, the last thing a bank wants is the house back. They want their $ back with interest) so they began ramping up the process and you get the Robo-Signing debacle because of it.

But yes, all of this is framed under the context of "helping" people "keep their homes'. People who, for the most part, neither own the home nor deserve help of any kind.

I think people or way too eager to point the finger at each other. The mortgage industry made billions...banks are a business and they took advantage of every opportunity they could to make money. It was great while it lasted but now that the chips are down why can't a regular Joe take the opportunity to stick it back to the banks whom are mostly - not entirely - to blame for this meltdown? I don't believe in bailouts of any kind to anyone. That is not the intended purpose of our tax dollars. But this is survival of the fittest and everyone's moral obligation is to see after their and their family's well being first and foremost. Is Lynn playing the system? Perhaps...and good for her. I pay taxes and I do not want to bail her out but she is the little guy and I am not going to pick on her for trying to survive. There are no victims and I agree stop playing one. We are casualties of an economy gone wrong...get over it. You had your fun now pay the piper, face the consecuences of your actions learn from your mistakes take advantage of what you can to get back on your feet and move on. I can't call anyone a dead beat, mainly because I do not know them and we all deserve respect otherwise who the hell are we? Live and let live. The government is corrupt the banks own the government and together they created this fine mess and all we can do is pick on each other?? Come on people! It is this dog eat dog mentality that allows the governemnt to run us as they please. I know it is easier to pick on the little guy than big brother but there is something wrong when we turn on each other..it is just sad to see all this anger being routed in the wrong direction it is almost cowardly. I'd rather see the freakin banks take a dive, th elittle Joes inheret those properties even if they stretched themselves who cares! I don't believe in BAIL OUTS period. We all partied, now let's face the music together. If Lynn looses her home fine, who cares, she's the architect of her fait if the banks fail and cave tanking the economy that is fine too, it has to happen for anyone to learn a lesson but regular joes don't turn on yourselves for crying out loud. That is just wrong!

Hold the lines says

You had your fun now pay the piper, face the consecuences of your actions learn from your mistakes take advantage of what you can to get back on your feet and move on.

This is exactly the point. The banks blame the customers for not paying. The customers blame the banks for not being fair. The government pats them both on the head and, like a mother coddling a child, "Shhhh...it's not your fault. What did the bad man do to you?"

Im not upset at Lynn, or even Bank of America. Im upset at the government for refusing to let the chips fall where they may. People of all walks of life fucked up ROYALLY, yet the government is hell-bent on making sure no one pays the price (except the taxpayers, many of whom like myself, had no part in this debacle) We didn't ALL party, and now we have to face the music. Some partied, some didn't, and those who did are being let off the hook completely. I can certainly understand why those who chose prudence and good judgement over irrational exuberance, are a little pissed off at a government trying to reward, or at least erase the consequences of, stupidity. What kind of message does that send? "Fuck it, break the rules. We won't enforce them anyway" No one will learn anything from the "consequences" you speak of, because they are non-existent.

I'm not alone in thinking that is not the type of country I want to live in. What kind of a nation rewards foolishness and carlessness, at the expense of the prudent? Absolving one of the negative consequences of bad behavior is the same as explicitly endorsing that behavior. It would be like your mom forcing you to lend $100 to your brother who spent all his money on cocaine and hookers. "Get over it, his money is gone, let's move on already." is not justification enough for me to be compelled to participate in enabling that behavior any further.

Hold the lines says

It was great while it lasted but now that the chips are down why can’t a regular Joe take the opportunity to stick it back to the banks whom are mostly - not entirely - to blame for this meltdown?

They can, and they are. But they are also sticking it to their neighbors, to taxpayers, and to those who lost their jobs yet manage to pay their mortgages and never ask for a handout. The "regular Joe" is a guy who never partook in the stupid housing bubble, and has been laid off. The person who liquidated their equity and got to live 5 years rent-free is a fucking deadbeat. Let's not conflate the participants with those who are doing the right thing.

Hold the lines says

But this is survival of the fittest and everyone’s moral obligation is to see after their and their family’s well being first and foremost.

They neglected this responsibility when they purchased. Call it a mulligan, but there is nothing righteous about what they are doing now. If they applied the same sort of logic and care for their family a few years ago, they wouldn't be in this situation. Now they're teaching their kids how to be a p.o.s. deadbeat.

Hold the lines says

I can’t call anyone a dead beat, mainly because I do not know them and we all deserve respect otherwise who the hell are we? Live and let live.

If the story is correct and she took a half-million dollars out of the house and now wants a bailout, she's most certainly a deadbeat. She is not "the little person". She was given an amount of money, tax-free, that was larger than 97% of this country's population has ever had their hands on before. She was supposed to pay it back but didn't. She's an opportunist, a deadbeat, a cancer on society, and does not deserve respect.

Hold the lines says

I’d rather see the freakin banks take a dive, th elittle Joes inheret those properties even if they stretched themselves who cares! I don’t believe in BAIL OUTS period.

You just said you want these deadbeats to keep their houses, but you don't want bailouts? Your message is inconsistent at best.

I have a better idea: if you extracted over $100k of "equity", spent it all, and are asking for a bailout from taxpayers so that you can keep your house and once again profit from it, you deserve to die. Nothing fancy, just shot in the head, and end your parasitic behavior.

That number ($100k) is arbitrary, so feel free to adjust it upward until you reach the threshold of how much selfishness you can accept from a single person.

I do not believe the government is trying to get anyone off the hook. They bailed out the Wall Street because bankers own the country. This will happen again and again, and nothing short of a violent revolt would ever stop that.
As to the mortgage mod program, it was formulated specifically so it does not help many people, for one reason or another (well thought out). Why would anyone need mortgage help? Hell, many don't have mortgages, what do they get? Bankers failed to keep up the title chain, this is why they cannot foreclose on these properties, otherwise these deabeats would already have been evicted long ago. But banks failed to do their job, and now these properties will take YEARS to sort out. This is what a systemic failure looks like.

The people squatting are agreeing to live with a poor quality of life. If you think differently, you're buying-in to the thinking that made this mess. That thinking being that having a house in which to live is the ultimate proof of quality of life.

FunTime says

The people squatting are agreeing to live with a poor quality of life. If you think differently, you’re buying-in to the thinking that made this mess.

They're living FOR FREE. How the fuck is rejecting your notion that they're living with a poor quality of life in any way resembling a mentality that created this mess? That doesn't make one bit of sense.

Both our landlord's home and our home -- the house we rent from him (his investment property) -- have been in the foreclosure process for over a year.

We pay rent.

He says he's been told that there's a chance he can get a loan modification for BOTH properties.

Hmmm... my stock portfolio went down, can I get a modification on that?

don't hate the player hate the game baby!

klarek says

They’re living FOR FREE.

So are people in jail. Sounds like hell to me. Huge losses of autonomy and independence when you practice these kinds of living strategies. Might look great on the surface, but deeper digging exposes a life with many needs unmet.

I'm not thrilled to send my tax money for these purposes, but I'm less thrilled with other top places where tax money is allocated.

These people are smart.

All these idiots paying thier mortgages are the ones creating our problem. If EVERYONE stopped paying thier mortgage the banks would HAVE to foreclose in a timely manner or society would collapse.

But we only have a few million people living for free now so 'thats affordable to subsidize' but if 100 millino stopped paying in no way could the feds/banks be so so sweet and kind.

I guess its called cheating the system - it can only work for a few smart people.

I say we all encourage every single person we know with a mortgage to STOP PAYING until they get a 2% loan mod AND a 200k principal reduction. (it might be coming in BO term#2...he can get away with murder then).

This is exactly the point. The banks blame the customers for not paying. The customers blame the banks for not being fair. The government pats them both on the head and, like a mother coddling a child, “Shhhh…it’s not your fault. What did the bad man do to you?”

I'm sorry but If by "pat on the head" you mean loan mods...I'm going to have to recommend people like Lynn to take a pass and keep playing the system becuase the system is tryong to play her big time. Who are loan mods suppossed to be helping anyway? Not the underwater homeowner in any way shape or form, but the Banks.

I would call this a "stab on the back, punch in the mouth and kick you while your down type loan modification program". So the smart thing to do is say no Thank You Mr. Sam and Bankster. The Weak and highly incompetent Government Regime is assisting the Banksters to "keep that cash cow alive". I say ithat f you want to be enslaved for the rest of your natural live than by all means it is your god given right to do so.

Banks behave like businesses so when they can't pay they just raise their hands, out or up, don't matter - but they raise them becuase it is not good business to throw your good money after bad. The Government sides with the banks giving them the tools to keep underwater homeowners -well - underwater and the loan mods are simply there to keep that cash cow paying until hopefully one day the market recovers and they can send them all to the slaugther house. Do you really think that banks aren't taking houses back because they are overwhelmed? I'll believe manythings but that one. My point is, push comes to shove and the home debtor has the right - and should - push back in their own defense. Don't be fooled, it is not the homedebtor whom is taking our tax dollars it is the Government and they are giving it to the banks not the people. And there is nothing you nor I can do about it exept to fight back if we can. So Lynn, go ahead and bleed the system who's gunning for you. My tax dollars are not going to help you anyway, at least not the bulk of them, those are reserved for those whom have benefited the most. They tell us so don't they - "Too Big to Fail" can't we read the writting on the wall?

APOCALYPSEFUCK says

monoliths of perfidy

Yes, I just reached for my dictionary while reading an internet comment. Who knew?! Maybe I WOULD benefit from more time on the interwebs, like all my friends tell me. I'm off to read that anthology...

I think people or way too eager to point the finger at each other. The mortgage industry made billions…banks are a business and they took advantage of every opportunity they could to make money. It was great while it lasted but now that the chips are down why can’t a regular Joe take the opportunity to stick it back to the banks whom are mostly - not entirely - to blame for this meltdown?

The logic behind this notion is one of the most basic fallacies of all: two wrongs make a right. While I completely agree with you that banks are the more culpable of the two players, there's a strange kind of apologist sentiment gaining traction on behalf of the deadbeat. Notice the endearing, all-American, apple pie 'Joe' to which you refer to them as, as opposed to, say, bag-of-shit or shameless taker.

It's worthwhile at this point to make the distinction between a deadbeat squatter and the strategic defaulter: both creatures are guilty of innumerate numbskullery and poor decision making; however, one exercises his contractual option to default on a bad business decision in order to free up his capital for other future failed ventures, while the other is a parasite, hiding out in perpetual moral twilight. The CNN article linked to above provides a pretty vivid profile of the latter.

I don’t believe in bailouts of any kind to anyone.

I can actually imagine certain nightmare scenarios where a bailout is the appropriate course of action; however, I think the idea has been very badly tarnished thanks to bungling approach by this administration and the last. Just for starters, a bailout shouldn't mean get-out-of-jail free with no-strings attached and bags of free money for your troubles. That's another story, though.

...this is survival of the fittest and everyone’s moral obligation is to see after their and their family’s well being first and foremost. Is Lynn playing the system? Perhaps…and good for her. I pay taxes and I do not want to bail her out but she is the little guy and I am not going to pick on her for trying to survive.

Perhaps, nothing -- Lynn is blatantly gaming the system. There's ensuring one's survival and well-being (foraging in the wilderness for grub worms and wiping your ass with a banana leaf), and then there's gigging the system for your own gross aggrandizement while having the temerity to cry victim as you do so.

There are no victims and I agree stop playing one. We are casualties of an economy gone wrong…get over it. You had your fun now pay the piper, face the consecuences of your actions learn from your mistakes take advantage of what you can to get back on your feet and move on. I can’t call anyone a dead beat, mainly because I do not know them and we all deserve respect otherwise who the hell are we? Live and let live. The government is corrupt the banks own the government and together they created this fine mess and all we can do is pick on each other?? Come on people!

This is a little too *Up With People* for me, but I think your heart is in the right place. I get it -- the banks are the scumbags with a capital S, but I'm sorry, that does not serve as blank check vindication for egregious self-interest as profiled in the story above.

I’d rather see the freakin banks take a dive, th elittle Joes inheret those properties even if they stretched themselves who cares!

I will say at least this much for Little Joe -- He Sure Can Sing.

http://www.youtube.com/watch?v=nuSmxLK2ze8

If you assume that the "borrowers" put 10% down of the original price and assume that they paid about 10 years of payments at a conservative (but compounding) interest rate,
and then look at how much actual cash the bank put in (10% of total) due to the supernatural power of fractional reserve lending, I think you will find that the "borrowers" were in for far more actual money than the banks were...

If you do the math, it changes the ethical equation a bit, IMO.

Also, the bank hasn't taken the house because it is not in their financial interest to do so, not because they are some kind of victim here.

Those of us who diligently pay our mortgages may resent the alleged homeowner, but both sides are acting in their own self interests. I for one would not want to live a life of constantly looking over my shoulder, but hey if they want to do so, that's their business.

Wow these people extracted equity, lived it up, and are still living better than me for free...while I pay taxes to bail them out, live like shit.

Sign me up for the next bubble and scam.

CaffeineAddict says

Sign me up for the next bubble and scam.

You don't have to wait. You can start your own scam. See what that life's like.

FunTime says

klarek says

They’re living FOR FREE.

So are people in jail. Sounds like hell to me. Huge losses of autonomy and independence when you practice these kinds of living strategies.

Epically awful false equivalency for a number of reasons, not the least because these folks are choosing to stay in the "dream" houses they wanted to buy, yet aren't paying for. Yeah, it's like jail......

APOCALYPSEFUCK says

I just assume for the sake of argument that everyone in America is a wanton criminal psychopath

A-F, you've kinda become my personal hero...

pkowen says

APOCALYPSEFUCK says

I just assume for the sake of argument that everyone in America is a wanton criminal psychopath

A-F, you’ve kinda become my personal hero…

Yeah, he said everyone. Haha.

klarek says

folks are choosing to stay in the “dream” houses they wanted to buy, yet aren’t paying for.

Well, if you think that comes with no negative psychological effect, then we just disagree. I think the adage "nothing comes for free" works with a lot of human experience. Peace of mind is worth a lot.

Norbecker says

I would say pulling almost 500K out of your house and then not making a payment for 5 years is a smart financial move. Playing the “victim” role to the max. We are just victims of the economy. No personal responsibility for their situation. Must be a lawyer or politician with that kind of ability to twist reality that much.
Meet the new boss. Same as the old boss.

Same old pretend-victims. Too bad we have to bail their sorry asses out.

Collectively we want big government - this is it.

Its fantassssstic to get 500k tax free money from MEW like this couple AND live for free for 5+ years.

Lets all congratulate these people for knowing how to prosper in our crazy CCCP-like system.

You sure as hell can't do this well saving money and renting. Take notes people this is HOW ITS DONE and its all legal.

Schizlor says

Im upset at the government for refusing to let the chips fall where they may.

No matter what the consequences are? It's better to kill the US economy? The taxpayers definitely lose in that case--but you're right, there is no moral hazard then...

tatupu70 says

No matter what the consequences are? It’s better to kill the US economy?

The market corrects and life goes on. Trillions in artificial home equity were magically created, and thus can magically disappear.

FunTime says

Well, if you think that comes with no negative psychological effect, then we just disagree.

What psychological effect? They are choosing to live in those houses, for free, and they picked out the house to begin with. Is there a psychological effect of "I get to live for thousands less per month than I was planning on living"?

FunTime says

I think the adage “nothing comes for free” works with a lot of human experience. Peace of mind is worth a lot.

Obviously these people have found it worthwhile to sacrifice that peace of mind, or probably aren't losing it at all.

Any other false scenarios and b.s. repression you want to put out there? You have used the analogy of going to prison and of psychological torture, so you're going to be hard-pressed to top your own bullshit.

PockyClipsNow says

You sure as hell can’t do this well saving money and renting. Take notes people this is HOW ITS DONE and its all legal

The sad thing is [certain] media parades these people as victims still. Somewhere down the line concept of personal responsibility went out the window and these people lived off the rest of us.

Good old redistribution from the savers to the spenders. I didn't cash out like they did via the bubble, so I'm just a taxpayer left paying for people like that "Lynn" person in the article. The system basically takes away from our family, our children, and hands over free money to these deadbeats.

And Obama, the great man himself, is trying everything he can to rescue these deadbeats at our expense over and over. Frustrating and infuriating.

tatupu70 says

No matter what the consequences are? It’s better to kill the US economy?

Please. We have a robust financial system that can roll with the punches on this. We haven't truly gotten that close to Armageddon.

Even in many of the worst cases, many transactions offset from notional value, and some shareholders and bondholders may have lost their equity stake, but it wouldn't have killed the economy any more than pretending the systemic problems don't exist does.

FunTime says

I think the adage “nothing comes for free” works with a lot of human experience. Peace of mind is worth a lot.

This is just purely childish, "life is harder, can't always have ice cream, wah wah wah". They made the choice, and they refuse to face the consequences as long as taxpayers are paying for their stupidity. If it was so bad, they would have moved on. But they choose not to, because they are living at the expense to others like some sort of parasites. I will simply disagree that these people are victims, most are just deadbeats taking advantage of the economic situation.

klarek says

The market corrects and life goes on. Trillions in artificial home equity were magically created, and thus can magically disappear.

Really? You're willing to bet the US economy on that? I don't know one way or the other, but even with the bailouts and intervention we still had the worst downturn since the Great Depression. So it doesn't seem too far fetched to think that without them it could have catastrophic.

corntrollio says

Please. We have a robust financial system that can roll with the punches on this. We haven’t truly gotten that close to Armageddon.
Even in many of the worst cases, many transactions offset from notional value, and some shareholders and bondholders may have lost their equity stake, but it wouldn’t have killed the economy any more than pretending the systemic problems don’t exist does.

I like the story Buffett tells of a trade he made during the worst of the crisis.

"On the insanity of the financial crisis: I sold a Treasury bill in December 2008 for $5,000,090, and it was a $5 million bill due in April. The guy was going to get $5 million for it. So he was saying that the Treasury bill was $90 better than his mattress. He could have put the $5 million under his mattress and been $90 better off."

I think we were a lot closer to Armageddon then you'd like to believe.

Here's a link to the interview with Buffett--it's pretty good.

http://www.fool.com/investing/general/2011/02/14/warren-buffett-speaks-out-about-the-financial-cris.aspx