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Owners Stop Paying Mortgages, And Stop Fretting (U.s)

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http://www.nytimes.com/2010/06/01/business/01nopay.html?ref=business

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.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.

Moral hazard could bite the banks in the ass, the people don't want to play and why should they the bankers never did.

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Moral hazard could bite the banks in the ass, the people don't want to play and why should they the bankers never did.

Yep- the financial system is not the only thing they broke.

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Thats all it takes , everyone just stoppes paying.

What would happen here if interest rates rise , houses fall in price , and unemployment rockets, a few million home owners who are underwater instead of fighting to keep their homes just stop paying and sit there untill repossission happens . The banks would be inudated with unsaleable homes and straped for cash flow if a few million just stop paying . Add to that you would get some more people who hear that others are not paying just joining in if they were strugling each month to meet their payments.

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Moral hazard could bite the banks in the ass, the people don't want to play and why should they the bankers never did.

Because unless you come from an upper echelon of the privileged few, or have luckily been bequeathed title for whatever reason, you are just a peon. A servant. Meat.

Get used to it.

The only reason we had good time post WWII is because there was a nation filled with trained warriors, killers; on both sides of the atlantic. This put the impetus onto the priveledged to relax their purse strings, primarily because of fear of retribution from an impassioned public who would definitely turn on them if pushed.

Now we are all fatter, lazier, less intelligent and far more cowardly per capita than our grandparents were, despite all the technological marvels that may inhabit your lounge or trouser pocket.

Hence why you have career villains like Trump and Sugar, and the Dragon's den cabal elevated to a near deity status. Its because we ARE indeed that stupid, we are so in love with money, and are so very scared to be anything else but being part of the herd.

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The only reason we had good time post WWII is because there was a nation filled with trained warriors, killers; on both sides of the atlantic. This put the impetus onto the priveledged to relax their purse strings, primarily because of fear of retribution from an impassioned public who would definitely turn on them if pushed.

Actually the reason the US did well is after WW2, was simply that they ended up with all the money, and a huge manufacturing operation, where-as the rest of the planet was bankrupt, paying debt/reparations to the US, and with their manufacturing/infrastructure in tatters.

Post WW2 everyone had to buy from the Americans everything needed to rebuild their economies.

It's taken the rest of the world 50+ years to catch up. Now they have, the US is f**ked.

The US economy for 40+ years was based on everyone else having to give them all their money.

After that, they started borrowing.

Edited by TaxAbuserOfTheWeek

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Moral hazard could bite the banks in the ass, the people don't want to play and why should they the bankers never did.

The non-payers have been said to have caused a rise in consumer spending in the USA! They could not otherwise find a reason for one. It is now weakening again over there.

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Actually the reason the US did well is after WW2, was simply that they ended up with all the money, and a huge manufacturing operation, where-as the rest of the planet was bankrupt, paying debt/reparations to the US, and with their manufacturing/infrastructure in tatters.

Yes, I agree.

But the 'we' I was referring to was 'we' Britons, and a lot of Europe for that matter.

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The non-payers have been said to have caused a rise in consumer spending in the USA! They could not otherwise find a reason for one. It is now weakening again over there.

So that's the recovery then?

Is it locked in?

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Can't remember the numbers - they're on Denninger somewhere - but as well as the US properties actually in foreclosure, you can add huge numbers in pre-foreclosure pretend and extend. The banks don't want to declare these mortgages as in trouble as it would screw their 'asset' base.

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The yanks don't really have mortgages as far as I can tell; they're just home loans with the home as collateral. A mortgage on the other hand has you in the "grip of death", i.e. they hassle you to pay the principal back for a long time. It seems much easier to break away from the responsibility in the US

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"The only reason we had good time post WWII is because there was a nation filled with trained warriors, killers; on both sides of the atlantic. This put the impetus onto the priveledged to relax their purse strings, primarily because of fear of retribution from an impassioned public who would definitely turn on them if pushed."

I suspect there is a strong element of truth in this.

Although, I wouldn't go so far as to say the "only reason", more like a strong thread running through the tapestry thing.

This gets hit on in a dramatic context in the original brat pack Ocean's Eleven, with Sinatra.

Edited by indirectapproach

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For all the talk of 'recourse' and 'non-recourse' mortgages, in reality there is precious little difference between the situations in the US and here.

Very few UK home-owners in trouble with their mortgages will have any other assets of any value worth protecting; indeed the vast majority will have large amounts of unsecured debt in addition to the mortgage. It is amazing how a person struggling under the burden of unmanageable debt can suddenly arrive at the state of mind that says 'WHAT THE FOOK !!'

I know people with £50k of negative equity, a mortgage they can't afford, and another £30k of credit card debt. Almost every penny they earn goes to servicing debt. There are millions of these people. When they arrive at the 'WTF!' mindset what happens?

It will take well over a year of missed mortgage payments before the lender will repossess. Not only have banks been put under pressure by the government that saved their skins not to repossess houses, they are also only too aware that this course of action across the board would be the trigger that would collapse house values and so their own balance sheets. So our 'WTF!' couple get to live in their house for a year or so rent free.

Same thing with the credit card debts. Stop paying and what actually happens? Make the minimum payments every month and absolutely nothing happens except they increase your credit limit!

Once the 'WTF!' mindset has been reached the banks are screwed. All power has shifted to the debtor.

Ultimately of course, the house will be repossessed. Before that happens however, the canny debtor will have secured a nice rented home with a big deposit from the stash he has been building up for the last year or so of living for free and on maxing out his cards on food etc. Then he goes bankrupt and waves goodbye to every last one of his debts - including any shortfall on the mortgage after the house is sold. After 6-12 months he's discharged and able to rebuild his life completely debt free and now able to afford to live.

Can you see how attractive this scenario must be for someone mired in debt?

The 'WTF!' mindset is not built into the banks' business models. They assume that their threats of sanctions will ensure that most debtors stay in line.

I think they might live to regret this complacency...

Edited by Mr Yogi

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For all the talk of 'recourse' and 'non-recourse' mortgages, in reality there is precious little difference between the situations in the US and here.

Very few UK home-owners in trouble with their mortgages will have any other assets of any value worth protecting; indeed the vast majority will have large amounts of unsecured debt in addition to the mortgage. It is amazing how a person struggling under the burden of unmanageable debt can suddenly arrive at the state of mind that says 'WHAT THE FOOK !!'

I know people with £50k of negative equity, a mortgage they can't afford, and another £30k of credit card debt. Almost every penny they earn goes to servicing debt. There are millions of these people. When they arrive at the 'WTF!' mindset what happens?

It will take well over a year of missed mortgage payments before the lender will repossess. Not only have banks been put under pressure by the government that saved their skins not to repossess houses, they are also only too aware that this course of action across the board would be the trigger that would collapse house values and so their own balance sheets. So our 'WTF!' couple get to live in their house for a year or so rent free.

Same thing with the credit card debts. Stop paying and what actually happens? Make the minimum payments every month and absolutely nothing happens except they increase your credit limit!

Once the 'WTF!' mindset has been reached the banks are screwed. All power has shifted to the debtor.

Ultimately of course, the house will be repossessed. Before that happens however, the canny debtor will have secured a nice rented home with a big deposit from the stash he has been building up for the last year or so of living for free and on maxing out his cards on food etc. Then he goes bankrupt and waves goodbye to every last one of his debts - including any shortfall on the mortgage after the house is sold. After 6-12 months he's discharged and able to rebuild his life completely debt free and now able to afford to live.

Can you see how attractive this scenario must be for someone mired in debt?

The 'WTF!' mindset is not built into the banks' business models. They assume that their threats of sanctions will ensure that most debtors stay in line.

I think they might live to regret this complacency...

+1

though I imagine a lot will carry on with their spend thrift ways, and not have any savings from this rent & debt repayment free period

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Can you see how attractive this scenario must be for someone mired in debt?

The 'WTF!' mindset is not built into the banks' business models. They assume that their threats of sanctions will ensure that most debtors stay in line.

I think they might live to regret this complacency...

To be honest if I was that screwed I'd certainly have that mind set, fook em.

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The yanks don't really have mortgages as far as I can tell; they're just home loans with the home as collateral. A mortgage on the other hand has you in the "grip of death", i.e. they hassle you to pay the principal back for a long time. It seems much easier to break away from the responsibility in the US

You would have thought that the banks would have been more careful how much money they gave out, considering that all they can get back is the house. It's not like they can chase the owner up for the difference, like they can over here.

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You would have thought that the banks would have been more careful how much money they gave out, considering that all they can get back is the house. It's not like they can chase the owner up for the difference, like they can over here.

That's why the prudent banks purchased a kind-of insurance against this happening, called a Credit Default Swap. And thus the problem was solved :D

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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