Homeowners who 'strategically default' on loans a growing problem

[Liberal_in_LA]

Source: Los angeles times

A study shows that people who abruptly and intentionally abandon their mortgages often have high credit scores, in stark contrast with most financially distressed borrowers.
By Kenneth R. Harney

September 20, 2009

Reporting from Washington - Who is more likely to walk away from a house and a mortgage -- a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to "strategically default" -- abruptly and intentionally pull the plug and abandon the mortgage -- compared with lower-scoring borrowers.

--------------------------------------------

Among researchers' findings are these eye-openers:

* The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year's fourth quarter.

* Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.

Read more: http://www.latimes.com/classified/realestate/news/la-fi-harney20-2009sep20,0,2560658.story

---

Another strategy: Reads another story about people on the edge of foreclosure handing over the keys to allow squatters to strategically squat. One lady handed the keys to a homeless woman who lived in the foreclosed home for 3 months. Another couple gave the keys to friends, telling them to ride rent free as long as possible

[kristopher]

1. I'd speculate that they better know the true value of both money and credit.

Interesting tidbit, thanks.

[Liberal_in_LA]

2. They do... at some point the balance 'underwater' exceeds the pain of 7 years bad credit.

[Xipe Totec]

3. What psychological device did they use to deteremine intent?

Just curious.

How do you determine that somebody defaulted strategically, rather than somebody with previously stellar credit has now joined the ranks of the nouveau pauvre?

[Liberal_in_LA]

4. They are still paying their other bills?

[Xipe Totec]

5. So, they don't have enough money to pay all their bills

and they decide that the bill that won't pay is the mortgage...

As opposed to the groceries, car, medical...

That makes it "strategic"?

Whatever.

[pnwmom]

22. Or they might have plenty of money to pay ALL of their bills, including the mortgage.

But they don't want to owe $600K on a $400K house, so they default.

They lose the house, but also dump a $600K obligation, so they come out ahead. The money they save could pay for several years of rent while they wait out the downturn.

It's not fair to the rest of us who are trying to meet our mortgages, since it adds to the downward pressure on the market. But there it is.

[jasi2006]

49. For the working poor, a home is their greatest treasure.

They will work two and three jobs to keep their home. That's why I never believed that the working poor were puposely abandoning their mortgages and didn't need help. But they are the ones who get screwed really bad; first by the predatory lending and next by the system that denies them help when they need it. I worked for a credit union at a major Fed health agency and believe me I know this first hand: the credit union's greatest number of loan defaults came for the very top echelon of managers who ran the Fed agency. Many of them were wealthy enough to get a good lawyer to take them through bankruptcy or other financial outs like huge tax claims for phoney side businesses. Yet the credit union was hard on middle and low income members who even agreed to sign up to have their loan payments paid directly from their pay checks. This is the system all over the US. If you are wealthy and a cheat, you have no problem maintaining your credit score and getting away with loan defaults. For the working poor, failure to pay for any reason brings down your credit score, and you can never get out of the hole. For many in this foreclosure mess it has left them with poor credit scores so that they can't even get a decent place to rent eventhough they can afford the rent.

[izquierdista]

59. If you owe $10,000 and can't pay, you're in trouble

If you owe $10 million and can't pay, the bank is in trouble.

[chill_wind]

68. Excellent post. n/t

[MARALE]

85. I know a person who works for Wells F

And he did the same thing. He let his home go into foreclosure. He is a VP in the mortgage department so he knows the in and outs. They are still living in their foreclosed home. They try and get away with everything they can. They even would not pay their water bill because the turn off for the water was under their driveway and the water company could not turn it off. They paid right away after they brought their jackhammers out. :)

[kegler14]

33. Umm, that's not at all what's being revealed here.

Read up a little.

[NashVegas]

73. They Have Money to Pay - And Don't

Because they see it as an investment gone bad.

This is the end result of a culture that's spent 20 years training people to view home ownership as a financial investment, for the purpose of investment, vs home ownership for the purpose of shelter.

[gravity]

17. You look at their past payments and bank statements

to check for patterns. For example, that article said that strategic defaulters always paid on time and suddenly stopped, while other defaulters would struggle to make payments over time until they give up.

You can look at other bank records to get a clearer picture of the circumstances and intent.

[DoctorMyEyes]

6. It's a "business decision"

How many times have regular working folks found themselves holding the bag full of shit and been told not to take it personally - that it's a "business decision"?

I don't blame people for making their own personal "business decisions" when they find themselves so upside down on their mortgages that they'd be fools to keep throwing money at the very banks that falsely inflated the home prices in the first place.

If you could save yourself a hundred thousand or so by buying a cheaper house that's just as nice as the one you're being gouged on - and can only do it while your credit is still in good standing what reason would stand in your way?

[Deja Q]

12. Logical. If corporations have the same rights as individual people. Then vice-versa should be equal

in return.

[truedelphi]

25. Yep, just becuz we have blood running though our veins

Doesn't mean that we should not be able to figure out which side of the bread
holds the butter.

If they can strategically decide to pull the plug on our economy, get us to bail them out for the supposed purpose that then they will help us with loans, then decide it would be better to put the money elsewhere, why can't we be devious also?

[sendero]

76. Exactly..

.... if I were in that position, all I'd ask myself is "what would a banker do in my position?". The answer is abundantly clear, I'd mail in the keys.

The bankers created this mess, fuck them.

[Roland99]

7. They're just now figuring this out? HELLO?!

With the glut of foreclosures going on, of course people who wanted to get out of 2-3 mortgages had plenty of opportunity to engage in "jingle mail" and walk away. They could go rent a house or an apt. easily and save a crapload of money and in a few years after they've started to rebuild their credit, buy another house and this time not be saddled with 2nd and 3rd mortgages. I would be surprised if this *wasn't* happening! Esp. given the glut of McMansions and people consuming and buying more stuff than they need or can afford. Bet plenty of these families still have a nice car or SUV (or multiple) and still vacation and buy the best clothes and go out to eat a lot, etc.

Ayn Rand was right, you know? :eyes:

[Ruby the Liberal]

8. FICO and other scoring weighs heavily on open credit

ie, those with the most credit lines have the best "credit".

It is those folks who are living beyond their means - not the working poor that the rabid-right blames for taking out inappropriate mortgages.

[Deja Q]

13. Which can be ANYBODY thanks to this "new economy" of middle class jobs vanishing,

in favor of "$12/hr being the new good wage" jobs.

http://money.cnn.com/2009/06/04/news/economy/green_jobs/index.htm

[Ruby the Liberal]

15. I saw a job ad the other day that wanted inside sales (telemarketing)

experience along with social media, marketing and database knowledge. College degree required, post graduate preferred. Pay? $12/hour.

This in the suburbs of Philadelphia.

Rude awakening time comes when these Masters of the Universe are rehiring once the economy rebounds and their employees bolt.

I look forward to that time.

[juno jones]

44. I see those too.

After all the student loans they are making nothing.

Sad is what it is.

[Grateful for Hope]

36. Good point. n/t

[superconnected]

61. Actually the right usually attacks the poor.

[pscot]

9. Just better at arithmetic

n/t

[flvegan]

10. They're idiots too.

Never understood this. If these same folks applied the same false sense of economics, they'd walk away from their car loans as soon as the ink on the contract was dry. Difference is, real estate will at some point appreciate again. That car? 99.999% of the time never will.

[ArcticFox]

35. Apples and Oranges

Home mortgages are often non-recourse loans, meaning the bank can't come after you personally, but can only take back the asset. Not so with auto loans; although they can take back the asset, they can also send the debt collectors after you.

[flvegan]

39. Not in some states, thank you.

Personally speaking, in Florida, the lender can seek a Deficiency Judgment. It acts like any other sort of civil suit judgment, including the ones obtained by an auto loan lender or credit card company. If they wanted to, should you ever buy another piece of property in Florida, they could certify it in the county you buy that property in and it attaches to the new property for years and years. Statute 55.10 if you'd like to look it up.

Secondly, it's not apples and oranges. Both are assets. The mentality of walking away from one loan because it's "underwater" but not the other shows the stupidity, especially considering the auto will almost surely NEVER appreciate again, the real estate will at some point.

[Xithras]

47. Depends on the market.

Where I live, our market has depreciated by over 60%. Normal non-"bubble" property appreciation rates were about 3% per year. A resident of this area who bought at the peak will be waiting 20 years for their home to reach its purchase price again.

A 20 year investment with a 0% return is generally considered a bad deal.

[Robb]

53. No

Both are assets, but statistically one gets paid off, and within 5 years. 30 years is another matter.

Also, there are matters of scale; an auto loan is obviously much smaller, the "foreclosure" process much quicker and neater, the lender has already built depreciation into the lending model, and the secondary market is speedy enough to make it worthwhile to repossess. Stop paying on a car, they will come get it within a month or two. Stop paying on a house, and all kinds of systems kick in to try to make you keep paying something, anything, while they work it out. Consider why.

You are correct, FL is one of a handful of recourse states. But many states are non-recourse for purchase loans. Those states tend to lead walk-aways, unsurprisingly.

[Deja Q]

11. Looks like the Ken Lay chick started a trend:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=385&topic_id=368348

Still, my interest rates better not go up because of others' actions...

[Trillo]

14. It would be informative to correlate those results with

educational level.

[Dreamer Tatum]

16. You mean there was a housing bubble? Wow, what breaking news.

Maybe if they controlled the study for number of mortgages held at once, it'd be interesting.

[Robb]

18. Very disappointed in DU responses to this.

Many seem to assume these are all people living beyond their means, somehow undeserving of whatever they're scraping off the belly of the beast here.

Not so. Why assume it?

And why so many here are siding with the banks, through some misplaced loyalty (which reminds me of the poor who vote GOP), is beyond me.

It's a very simple equation. The banks loan you money. You put your house up for collateral. If you stop paying, the bank can come get the house.

Both sides are responsible for the contract they sign. The bank, just like the debtor, was assuming real estate would always increase in value. It didn't.

If the banks have to take a few lumps, so be it.

[Alcibiades]

19. This is big out in Cali

Many of the same people who learned how to play the real estate money game when the market was up are looking to play it when it is down. My step brother has done this, and he is exactly as described: sold a house for $700k, bought a bigger one for $900, had it reappraised, took money out to make more improvements. Now he owes $1.6 million on a house NO ONE HAS EVER PAID that kind of money for. He could afford his payments, but he is choosing not to pay, because he owes more than the thing is worth, so he's walking away.

He seems really angry that his god (the real estate boom) is dead.

[pnwmom]

23. People who "strategically default" haven't necessarily been living beyond their means.

They might well be able to pay their mortgage and their other debts. They simply choose not to.

I don't think DUers should be applauding those people, do you?

[morillon]

38. I don't think it's as simple as that.

Some people abuse the system, sure, but that's true of everything. For people whose home value has dropped to 50% of their original purchase price, it can be pretty tempting to walk away. Yeah, they could plan to stay in the house for the next 25-30 years, but they can't possibly sell it any time in the next 5 years, maybe even far longer, and not have to bring tens or even hundreds of thousands to closing.

I know a couple who would have to bring $140K to closing if they sold their house at its current market value, and these people aren't speculators or folks who lived beyond their means. The property values in their area are absolutely in the toilet, and people who still live there are stuck, stuck, stuck. The job market where they are sucks, too, so they can't leave for a city that has more jobs.

[Robb]

52. "Simply choose not to" is where you run into trouble.

And we're not talking about their other debts here, only the mortgage.

If you have the money to pay a mortgage that has recently doubled for a home that's lost half its value (and you believe it's not coming back for 5-10 years), OR could use that money for your children in some manner, would that choice be acceptable to you?

How about if you could just barely make the payment on the house, if you stopped doing anything with your family but eat beans and rice. Would you do it?

What misplaced loyalty. Where exactly do you see the banks, who are half the equation here, enduring any hardship in response to the housing bubble they apparently could not foresee?

You apparently want to broad-brush everyone who is walking away from their mortgage with your vision of a smug investor who is balking. Ignorant and arrogant.

[PurityOfEssence]

71. A deal is a deal; it's morally wrong

Agreeing to a long-term contract like a mortgage is a moral contract as well, and if we all have ethics of convenience, society itself starts to come apart.

The argument that many of the downtrodden make is that the lender is obviously just an evil corporation, so they had it coming to them.

I remember posting with disgust when Mike Gravel was asked about defaulting on credit cards with an answer that he wishes he could have stuck them with even more debt. There were VERY few posters on this board who saw anything wrong with this, and that was a very depressing display. Many people reveled in besting the evil corporations, and that was just plain nauseating.

Society is held together by people being beholden to their word, and NOT just when it's convenient.

Defaulting on contracts should only be done as a last resort, not as a welching of convenience when the deal isn't as advantageous anymore. That this needs to be pointed out to people as much as it does is deplorable.

Once, when I made a business gamble and wound up with major credit card debt, friends counseled me to declare bankruptcy. I was aghast; most of them knew that I wasn't in dire straights, but just that it would be advantageous for me to keep our house and wipe away some inconvenient obligations. Some of those friendships haven't been the same since then; I saw the people in a different light. Yes, it took me a few years to pay off the cards, and yes, I had to work harder at various jobs I didn't much care for, but I put whole paychecks into the bank, delayed having kids a bit, and did the right thing. This shouldn't be the mark of an exemplary person, this should SIMPLY BE WHAT IS EXPECTED OF AN HONORABLE MEMBER OF SOCIETY. This is basic coexistence.

Sadly, that kind of raving falls on deaf ears, just as railing against using pirated software, music and movies does.

[Robb]

75. Interesting.

How would you quantify the moral obligation of the bank?

In other words, if the agreement was, loan me money, here's my house as collateral, what's the moral dilemma of not returning the money and letting the bank have the house?

[PurityOfEssence]

79. Because that wasn't the deal

The deal was "loan me the money to buy this house, and you hold the ability to foreclose and take the house if I default". It wasn't "loan me the money, and if I feel like paying it off, I might."

Walking away makes it harder for everyone else in the future; our actions have repercussions.

Banks don't generally want to be owning the houses. That wasn't their intent, and they were counting on you to pay on a regular basis until the loan matured.

[Robb]

81. That was exactly the deal.

Default is default. Why is never discussed. You are reading much into a contract that is not there.

If banks don't want to be owning houses, they should not loan money based upon the premise they will take the house if the money is not paid, because it *will* happen, because that is the deal they are striking.

They will try to only loan to people who won't do that, it's true. But their model for identifying those people failed, not their contract, nor the people they loaned to.

[bemildred]

78. Moral integrity is a two-way street, and corporations make fetish out of their lack of it.

When you say "screw the public, we are only here to make the stockholders rich" you are giving carte blanche to everyone else to do likewise to you when the chance offers.

[PurityOfEssence]

80. We have met the enemy, and he is us

Just because many corporations are evil doesn't mean we can be reckless with our personal obligations. This leads quickly to a scofflaw society where the only real law is successful perpetration.

I fully agree that this attitude from corporations begets such behavior, but that doesn't make it "right" or "constructive" or "fair", it just makes it understandable.

Sadly, many people LIKE feeling wronged; it gives them free rein to do as they damned well please, since the world's been so mean to them.

Your point is well taken and very accurate, but when one force in society decides to flaunt the law and thumb their noses at the rest of us (be they human or corporation), the morally just response shouldn't be to feel loosed of the obligation to be decent, it should be to hold the miscreants' feet to the fire.

Nice avatar. I wonder what Walt would say...

[bemildred]

82. There is no "personal obligation" here, and banks never feel any "personal obligation" either.

Since they are not persons.

It's an investment. That is how it is sold, and that is what it is. The mortgage is a contract, and exercising it's provisions is a legal right. The bank's security for the investment is the house itself, that is what you owe to them if you no longer want to pay, and that is what they get, and you have every moral and legal right to do exactly that, walk away. If the banks do not like that, they should do a better job of valuing the security they accept for their loans. They have it coming, and I hope they get plenty of it.

[The Stranger]

87. Morality and the law are not the same thing.

Corporations, business entities, and governments of all kinds intentionally breach contracts where it makes economic sense to do so, where the costs of performance are greater than the costs of breaching and performing a different contract. From an ecomomic standpoint, scarce societal resources are more efficiently allocated that way.

Law professors call it the "efficient breach." And it happens all the time.

[Scout]

88. +1 n/t

[truedelphi]

26. Plus it really was the banks resposnibility to figure this out

If the Bigger banks had scores of people working from them, recruited from the top universities, all of theese great young minds putting together analytical computer programs to figure out the status of the banks' economic activities, then shouldn't the banks be taking the bigger hits?

When you read that the computer models created to analyze the economics happenings NEVER took into account the notion that there might be a bubble and that it might burst, then you realize how irresponsible the banking system really was.

[Gormy Cuss]

57. I won't defend the practice, but as some wrote upthread, it's a "business decision"

similar to the ones justified that way by corporations. I'd cheer on the people who are pulling this maneuver if it weren't for my general disgust at corporations and individuals who play the game this way and of course my fear that somehow I'll end up paying for it.

What makes it usefully to me is that it's another nail in the coffin for the simple minded thinking that credit reports and credit scoring models are the best determinant of credit worthiness.

[tinrobot]

20. It's called cutting your losses.

The people who get behind and still try to pay no matter what are at great risk of throwing away a lot of money. If the house gets taken back, they're out everything, including those payments they could barely afford.

People who walk away when they know they can't pay are simply smart enough to know when to cut their losses. It's probably why they had good credit to start.

[pnwmom]

24. What about the people who walk away when the market goes down -- even

though they COULD afford to pay for the house they contracted to pay for?

[tinrobot]

64. There is no difference.

They're essentially making the same business decision. Do you continue to pay a mortgage on a house that is worth a lot less than the mortgage?

Not defending people who do this, but from a financial standpoint, the decision is the same regardless of whether you're broke or have a million dollars in the bank. It's a simple matter of whether the money is being wasted or not.

[laughingliberal]

28. I am in that place right now

My husband and I have been pretty destitute for the past 2 years. Have quit paying everything except the mortgage. We have just managed to make enough house notes to hold on to the house but are likely to wind up losing it at some point, anyway. I think often we would be better off if we had dumped it and rented something cheaper but he is determined to try to hold on to it. So, in deference to him, I just keep going along with it.

[Fire1]

31. Exactly. But I put the blame where it belongs. The banks

are the culprits who over valued these properties in the first place. I'm taking what is perhaps my last shot at selling a rental property just to get out from under the loan. It's my understanding the buyer is paying cash. If the deal falls through for whatever reason, I'll see if the bank will take it back. If not, I'll have to cut my losses. Simple as that.

[chill_wind]

21. Speculators by any other name.

I'm decidedly unappreciative and unsympathetic.

[Jack_DeLeon]

27. Alot of times its better to have money and bad credit, than no money and good credit

[virgogal]

40. I'd RATHER have money and bed credit. If I had the money I

wouldn't need the credit.

[kelly1mm]

29. In almost all states EXCEPT CA the bank can go after the

mortgagee for whats called a "deficiency judgment" which is the same the difference in what you owed the bank (including fees and interest allowed in the mortgage) and the price they get for the home at the sheriff's sale /court house steps. They USUALLY don't do this but they can. The deficiency judgment is just like any other judgment and can result in the seizure of other real property, assets, bank accounts and garnishment of wages. Most can get away with it but I know banks are going after those with other identifiable assets when they try to do this.

[happyslug]

32. But that liability is discharge in Chapter 7 Bankruptcy

Given that fact, most creditors will NOT go after the ex-homeowner, why spend $2,000-$10,000 to get a Judgment that only forces the ex-homeowner to file Bankruptcy?

Remember the Federal Exemptions in Bankruptcy (Effective is ALL states UNLESS the Debtor opts for the State Exemption of the state their reside in):

522(d)(1) Real property, including mobile homes and co-ops, or burial plots up to $20,200. Unused portion of homestead, up to $10,125, may be used for other property.

Personal Property:

522(d)(2) - Motor vehicle up to $3,225.

522(d)(3) - Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $525 per item, and up to $10,775 total.

522(d)(4) - Jewelry up to $1,350.

522(d)(5) - $1,075 of any property, and unused portion of homestead up to $10,125.

522(d)(9) - Health aids.

522(d)(11)(B) - Wrongful death recovery for person you depended upon.

522(d)(11)(D) - Personal injury recovery up to $20,200 except for pain and suffering or for pecuniary loss.

522(d)(11)(E) - Lost earnings payments.

Pensions:

522(b)(3)(C) - Tax exempt retirement accounts; IRAs and Roth IRAs up to $1,095,000 per person.

Public Benefits:

522(d)(10)(A) - Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.

522(d)(11)(A) - Crime victim’s compensation

Tools of Trade:

522(d)(6) - Implements, books and tools of trade, up to $2,025.

Alimony and Child Support:

522(d)(10)(D) - Alimony and child support needed for support

Insurance:

522(d)(7) - Unmatured life insurance policy except credit insurance.

522(d)(8) - Life insurance policy with loan value up to $10,775.

522(d)(10)( C ) - Disability, unemployment or illness benefits

522(d)(11)( C ) - Life insurance payments for a person you depended on, which you need for support

http://www.thebankruptcysite.org/exemptions/federal.html

If the debtor can put himself or herself under the above (and it is NOT that hard) any and all other debts (With certain exemptions such as student loans, debts do to Criminal activities, Taxes etc).

Note: Remember the above are based on RESALE value of the items being protected NOT what you paid for it. Thus if you own a Car it is NOT what you paid for it or what you would pay for it today but what you can sell it for today. i.e. paid $20,000 for the car, on a dealer lot for sale at $10,000 but if you traded it in you would get $3,225 for it, then the car is 100% covered under the Federal Exemption. Worse if its trade in value was $5000 but had a $2000 more to pay off the Vehicle, then again it is below the federal exemption (Which is based on Equity value of the car, its trade in value LESS any lien still on the car).

[kelly1mm]

37. Correct - that's why lenders have not gone after mortgagees for

deficiency judgments in the past. However, this thread is about people who (at least some of them)have incomes, assets, maybe even other property but are simply making a "business decision" to walk away from an underwater mortgage. Those people are not what is commonly known as judgment proof. The BK court may, in evaluating the income of the debtor, find that they do have the income to pay most/part/all of their unsecured debt. Remember, some of these people could make the payment, but rather choose to no longer as the present value of the asset is less than the debt associated with that asset.

However, bankruptcy is/can be very complex and vary from state to state. And I am certainly no expert in it. Anyone who is thinking about this please seek legal counsel and don't say down the road when your ex mortgage holder sells the BMW you bought with the money you saved from not paying your mortgage that someone on DU said it was OK.

PS - true story - 64 year old mom gives paid off house (worth about 150k) to son for medicaid planning purposes - meaning she still lives there and thinks of it as hers. 4 years later, son (who could pay the mortgage) decides he does not want to pay 400k for his house anymore as he could buy the same model down the street for 265k so he does not. Just before he stops making the payments he buys the 265k house with a big down payment. 400k house mortgage holder knows about his new house AND his "owning" his moms house. Foreclose on the 400k house, sells for 235k at court house, they DO GET a deficiency judgment against him, have the sheriff tag the MOMS HOUSE - remember, in his name for Medicaid planning purposes- and they schedule it for sale 4 months later. Mom comes to me 3 days before sale. I cant help her. Mom, now almost 70, is evicted from her home 2 months later by new owners.

[Liberal_in_LA]

45. a**hole son.. I hope he's renting a nice place for his mom

[shimmergal]

56. If the house was paid off,

How the #@&^* did he end up with a 400k mortgage on it? Doeesn't make sense. Or are you talking about 3 different houses here?

[kelly1mm]

58. 3 houses - "Moms", his 400k house, his 265k house. Sorry I

was not more clear. By title he "owned" the 150k house that mom lived in, he was paying the mort. on his first house that had a mort of 400k but was worth 265k. He went out and purchased the third house (265k) and let his 400k house go into foreclosure. He made a "business decision" to stop making payments for the house he was underwater on. Good advice if you are judgment proof or live in CA where all purchase money 1st mortgages are non-recourse. He was not in CA so the bank did a records search and found "moms" house sitting there free and clear. They ended up with it in the end.

Sad story and one which I try to tell my clients about when they walk in and say they hear they can put their kids names on everything so it doesn't go to the government when they need nursing home care. (Not even going to start with my objections to that as a matter of public policy btw.) You would be amazed at what problems come up between seniors and their adult children. Lots of outright theft of funds and unintended consequences of "coffee shop estate planning".

[PassingFair]

84. What is the deal with jewelry and art under these circumstances?

Are they considered assets?

How are they handled under medicaid?

[Sen. Walter Sobchak]

63. The real question is the raw sewage debt investment industry

They have yet to make an appearance, they WILL sue anybody. Although I am not sure the law in most states would give them the first party rights required to secure a judgment. You as a financial institution can sell a deficiency judgment to a third party, I don't think many states would allow you to sell the deficiency balance in itself with any sort of first party rights the same way you could sell a delinquent credit card balance for instance.

[JayNYOne]

89. Hard to go after debtors for default loans...

As a former member of the “raw sewage debt investment” industry (notice I said “former”; such a horrible industry), I can tell you that they are chomping at the bit to purchase default mortgages. They already have a stranglehold on the auto loan companies and it honestly is one of the most difficult debts to collect on. Most of these debts are not owned by the agencies themselves. They are still owned by the loan originator and are given out on contingency basis.

Only after 24 months will the originators consider selling the debt for pennies on the dollar. Then and only then will an agency pursue legal action. And they do their research prior to filing suit – doing asset searches and employment verification for purpose of salary deductions. However, most of the debtors are either honestly broke or are smart enough to hide assets - or even THEMSELVES - from the prying eyes of debt collectors.

Most of these bottom-feeders, though, do not have the time or financial backing to file such suits. It will be ultimately in the hands of the loan originators to chase any action on debtors for the default amount. I, personally, don’t see them taking the time to do so unless it is strictly a vendetta against said “Strategic Defaulters.”

[lib2DaBone]

30. Bankster/Gangsters write the rules.. and our servants in Congress rubber stamp them..

$12 an hour would be a FANTASTIC paying job. $6 an $7 an hour is more the norm in today's job market.

And for $6 an hour.. they want a college degree, shift work, total loyalty and they treat you like a step child.

This is the hell that the senile ignorant Ronald Raygun unleashed on us.

If everyone in America refused to pay their credit cards it would bring these greedy bastards to their knees.

[kelly1mm]

41. Since the federal minimum wage is $7.25 per hour as of 7/24/09

I think your numbers above are outdated.

[superconnected]

62. Not for many fields still, including farm labor and waitress.

Someone correct me if I'm wrong.

[kelly1mm]

70. You are correct as to farm labor and server positions. However

the post I replied to said in part "$6 an $7 an hour is more the norm in today's job market. And for $6 an hour.. they want a college degree, shift work, total loyalty and they treat you like a step child."

Even though the economy is bad and jobs are scarce, I don't think farm labor and restaurant employers are asking for college degrees (yet?).

I get his/her point though - and I keep trying to remind myself not to point out inaccuracies in peoples posts but it is an occupational hazard and, in reality, makes for better debate against RWers. They tend to jump on these types of mistakes and it can discredit the underlying point trying to be made.


Sorry about the dupe post - replied to wrong post 1st time.

[kelly1mm]

69. You are correct as to farm labor and server positions. However

the post I replied to said in part "$6 an $7 an hour is more the norm in today's job market. And for $6 an hour.. they want a college degree, shift work, total loyalty and they treat you like a step child."

Even though the economy is bad and jobs are scarce, I don't think farm labor and restaurant employers are asking for college degrees (yet?).

I get his/her point though - and I keep trying to remind myself not to point out inaccuracies in peoples posts but it is an occupational hazard and, in reality, makes for better debate against RWers. They tend to jump on these types of mistakes and it can discredit the underlying point trying to be made.

[appamado amata padam]

34. We are rapidly descending

into economic survivalism. I have been told that "I may be called for a second interview," or "may be put on the short list," or "my name will be given to HR" for $9 or $10/hr jobs. I feel grateful to not have kids to support, or a mortgage. If these people have weighed all their options, and have decided that this is what they have to do to avoid a bloodbath, I don't have too much problem with it...

[shellgame26]

42. something is afoot

in America. We are reaching a boiling point. I really don't know how much longer people can endure what is happening without some spontaneous eruption of revolt. The supreme court is about to declare corporate personhood and once that happens, say goodbye to any last shred of democracy remaining.

[Javaman]

43. Yeah, just like they strategically got laid off as well.

:eyes:

[electricray]

46. This was me

We struggled and struggled to make all of our payments. When I lost my job, I contacted my bank and let them know that I would be going back into training for 18 months at a 40% pay reduction and that I would need assistance to continue to make my payments. They said that they could not do anything for me because I had never missed a payment.

We sat down and did the math. A bankruptcy and a foreclosure later we have savings and actual security for once. Yes, I was irresponsible with money prior to losing my job. No I did not have a cushion to fall on when shit hit the fan. I didn't feel gleeful about doing what I did, but I know beyond any shadow of a doubt that my strategic default was the best possible decision for my family.

I had excellent credit and all it got me was a chronic yearning for over-time to pay the interest on my irresponsibility. Starting over is prudent sometimes. Now I work 40 hours a week in a union job and the stress is gone.

[Liberal_in_LA]

48. great story

[glowing]

50. Yep, staying in an overpriced home is not a winning financial strategy.

It adds nothing to your family finaces. If you are underwater, then you are paying more for less. Bottom line, its a stupid thing to do.

[alcibiades_mystery]

51. The banks "strategically" fuck homeowners ate every opportunity

From writing the loan to handling delinquency. So why shouldn't homeowners develop strategies to fuck the banks? Free market, right, conservo-idiots? Survival of he-who-fucks-his-neighbor-most-efficiently.

[mbperrin]

54. Yes, banks do not hesitate to sell loans, accelerate payments, change

interest rates (even now, ARMs are going up, even though real interest rates are close to zero with the huge influx of federal money), and in general, do anything they want to to anyone they want to.

Get a little bit of their own treatment? Crybabies. Glad I haven't needed a bank for over 30 years for anything....

[Rage for Order]

55. "Buy And Bail" was becoming a trend as well

For example, someone lives in a 2,000 square foot home for which they paid $300,000 3 years ago. Now, with the glut of foreclosures on the market, they can buy a nearly identical 2,000 square foot home for $150,000 a few miles away from their current residence. In order to qualify for another mortgage, people were representing to lenders that they were going to rent out their current residence. They would then buy the new home, move in, and let the $300,000 home go into foreclosure. They had just slashed their mortgage by 50% without giving up anything in terms of standard of living. Of course, there's the matter of that pesky foreclosure on your credit, but if you won't need another loan for a few years it's not that big of a deal.

Lenders have recently changed their underwriting guidelines to combat this phenomenon. Now you have to have 25% - 30% equity in your current home in order to buy another home that is only a short distance away. It's called the "Buy & Bail" underwriting guideline.

[Liberal_in_LA]

60. heard for 'buy and bail', didn't know lenders had changed guidlines to combat

thanks

[chill_wind]

66. Good new guideline. There's a big difference between

these nice educated "business minded" ripoff cons- "they had just slashed their mortgage by 50% without giving up anything in terms of standard of living" -- and people with so few resources who attempted to resolve their difficulties in good faith and still ended up on the street or living out of their cars.

I resent the Hell out of the former class category and how they significantly helped create this effing fiasco. It's not JUST about the contemptible predatory lenders and the overblown demographic myths of who was at "prey".

Old DU thread (Consumer Finance Study).

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4168807#4169059

[dugaresa]

65. if people know they will go under, they will not pour good money after bad

so they walk away. two can play the game and the market doesn't like it.

the banks and wall street concocted this nightmare and some folks figured out how to walk away from their mortgages. make it right? not really but none of this should have happened in the first place if people played fair but they don't.

[chill_wind]

67. Except that it isn't the banks who pay and suffer for the deadbeats

who can just walk away and still own or rent another nice home or otherwise give up very little of their lifestyle-- it is US who pay. WE bail out the banks, WE pay the higher interest rates, WE see small business getting credit choked off. 18% calculatedly willing to stiff the rest of us indirectly with their tab is not a trivial percentage.

[bemildred]

72. It is Congress that is fucking us.

Not these individuals that are making sound business decisions in the face of a failed investment.

[high density]

83. The sound decision was to not buy a house during the top of the market

Congress can't fix that. People thought that homes were infinite money machines. They can now pay the price for that assumption, just like I would if I bought a stock that goes belly up. It's more of the socialized losses/privatized profits way of thinking we've had recently, just on a more individual scale.

[bemildred]

86. The two things are not mutually exclusive.

It is indeed a good idea to not buy at the top of a bubble ("Buy low, sell high") and it is indeed Congress that is fucking us.

It is, for the record, not a good idea to loan money on inflated notional valuations at the top of a bubble either, and the banks earned a fucking just as much as any borrower.

[sendero]

77. Blame Obama and congress..

... for the decision to backstop the banks. It's not the homeowners fault.

[Generator]

74. This means they are smart enough to look out for themselves

first. Oh banky no like it. Tough shitola.

Oh and the outcome is the same-their credit will be trashed and they will no longer live in the house. It's not like they really got away with anything-just smart enough to find someplace else to live first. And we know the banks hate it when that happens. It's better to put every dime you don't have into a house you will never be able to afford and have no money and be homeless. Just to please Fox Business channel? I don't think so.

[Matariki]

90. I wonder if this isn't a meme to paint people in foreclosure as somehow 'cheating'?

As if they were all really rich and therefore not deserving of help or sympathy?

Who would want to spread such a meme and why?

And why are there a number of relatively new posters in this thread with anecdotes supporting the idea that it's well off people cheating the system?