Green Room

Old and busted: paying your mortgage. New hotness: living in foreclosure without paying anything.

posted at 12:59 pm on June 1, 2010 by

The housing crisis is still ongoing. While the national conversation has shifted away from foreclosures in favor of unemployment and big government bailouts, many Americans are still in trouble with their mortgages. I seem to remember there used to be a time where, if you were in trouble with a loan, you would pay any little bit you could. Maybe you paid half at the beginning of the month and half on your next paycheck. Maybe it was even less than that. What counted was that you were making the effort. You work with your lender to avoid going into foreclosure at all costs.

That was then. Now, the new hotness is just to say to hell with paying your mortgage. Homeowners are letting themselves go into foreclosure with no intention of paying their mortgages, so that they can use the extra money on truly important things… like going out to eat at Outback and taking trips to the Hard Rock Casino.

For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Get that? In today’s loony liberal land, it’s all the lender’s fault. It couldn’t possibly be the homeowner’s fault that they bought a house they couldn’t afford. Right?

Maybe not. The couple quoted in this story, Mr. Pemberton and Ms. Reboyras, aren’t exactly blameless in this situation. Just like most people who go into foreclosure, really.

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.

It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

So they refinanced their home to buy a new truck — not even a truck that they needed for themselves, but a truck to give away. And yet, this was a stupid move by the lender?! Right. It’s the big bad predatory lender’s fault for not telling poor Mr. Pemberton that he was a big fat idiot.

And by coincidence, I’m sure, Mr. Pemberton and Ms. Reboyras’ lawyer seeks out these kinds of cases and encourages people to not pay their mortgages. This way, you get to live in your house — for free!

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

It’s sickening, really. There are people out there milking the system for all its worth, taking no responsibility for their bad decisions, and then blaming the lenders when they end up in trouble. It’s usually the bad decisions of the borrowers that put them into foreclosure to begin with, and then they just want to sit back and do nothing, because somehow, everyone is apparently entitled to live in their home without paying the mortgage on it now. There are always alternatives, ways to avoid foreclosure. It isn’t like selling the home isn’t an option, but no one wants to do that. They can’t renegotiate their loan either, because the lenders are big bad predatory crooks out to get them. Apparently, the right thing to do is to squat in a house you don’t even fully own yet without paying what you legally owe.

In reality, this is theft. It’s a crime, and the bums should be thrown out on the street like they deserve. I have no sympathy for someone who pays nothing on their mortgage and willingly goes into foreclosure so that they can go out to eat, go on airboat rides, and gamble at the Hard Rock Casino.

Part of this is thanks to Democrats and Obama in particular. The endless demonizing of Wall Street and banks and big business has given people like these bums a ready-made excuse to stop paying their mortgages, yet still expect to live in their house. These people said so themselves. The banks are crooks. Lenders are greedy. They’re getting what’s coming to them, right? No one forced these people to take these loans, no one made them refinance, but it’s always someone else’s fault.

I understand that people sometimes fall on hard times. Honest people don’t use that as an excuse to abandon all responsibility and ignore their own bad decision-making. What is happening here is theft and the lowlifes should be thrown out on the street where they belong.

Hey, if they live on the street, they can still use their money on what really matters, like steak at Outback and gambling at a casino.

Follow Cassy on Twitter and read more of her work at CassyFiano.com and Hard Corps Wife.

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Lawyers are one of the Democrats biggest and most reliable donors. What a surprise.

uknowmorethanme on June 1, 2010 at 1:37 PM

I am in the mortgage business and we have been seeing this phenomenon for a long time. And it has caused a big problem, because it has ruined all the models of defaults. Lenders made loans and priced them relying on longstanding behavior that people would pay their mortgage first, because a foreclosure would be so costly to their credit rating. Now, people want and sometimes need to pay their credit cards first. They have determined that they can live without a house or without more credit for a while, but they can’t live without the credit cards. People are putting everything on plastic, even their utility bills and groceries. If they lose the credit cards they believe they have lost everything.

This isn’t just changed behavior and views about mortgages. It’s about the pervasive dependence on credit cards. Most people who run into problems paying their ortgage are leveraged to the hilt and have big credit card bills too. The banks are much more aggressive about collecting on delinquent credit card payments and much quicker to cut off credit.

rockmom on June 1, 2010 at 2:11 PM

shame

This is becoming extinct.

rukiddingme on June 1, 2010 at 3:56 PM

This isn’t just changed behavior and views about mortgages. It’s about the pervasive dependence on credit cards. Most people who run into problems paying their ortgage are leveraged to the hilt and have big credit card bills too. The banks are much more aggressive about collecting on delinquent credit card payments and much quicker to cut off credit.

rockmom on June 1, 2010 at 2:11 PM

Not everyone follows this pattern, though. I bought a house and deliberately bought one well under what I was qualified to borrow in case I ran into trouble. Unfortunately, my employer saw fit to lay me off literally a week after I moved in. I have NO credit card debt. I emptied my retirement savings paying the mortgage for over a year while I looked for a job.

Then I ran out of money. Fortunately, I got a job at a huge pay cut. I negotiated with the bank for mortgage modification but they were totally nuts. They offered me a $70/mo reduction, which was useless. They even refused to take my payment one month simply because they had some sort of record-keeping error on my account. I just gave up and moved out. I figured screw ‘em, let them foreclose. Someone offered to buy it for half the price and now it’s almost sold in a short sale.

Daggett on June 1, 2010 at 3:57 PM

Brilliant idea of the century: found a bank that only makes mortgage loans to Republicans.

joe_doufu on June 1, 2010 at 3:59 PM

Brilliant idea of the century: found a bank that only makes mortgage loans to Republicans.

joe_doufu on June 1, 2010 at 3:59 PM

Tom Perez and the Civil Rights Division would quickly sue you for lending discrimination.

rockmom on June 1, 2010 at 4:23 PM

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.
“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

Wrong answer Ms. Reboyras. The bank will issue you an IRS approved form that says you “earned” whatever the bank losses on a repo sale, and they take the actual loss out of their shareholders. You know, your friends and neighbors that have money in their 401k’s that buy stocks an such. You are placed on the hook to the IRS for what the bank lost. Had two different couples that this happened too. They are in hock to the IRS for pretty much the rest of their lives.

Johnnyreb on June 1, 2010 at 4:45 PM

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Allahpundit on June 1, 2010 at 11:08 PM