Posted on 12/09/2009 10:03:59 PM PST by TigerLikesRooster
American Dream 2: Default, Then Rent
By MARK WHITEHOUSE
PALMDALE, Calif. -- Schoolteacher Shana Richey misses the playroom she decorated with Glamour Girl decals for her daughters. Fireman Jay Fernandez misses the custom putting green he installed in his backyard.
But ever since they quit paying their mortgages and walked away from their homes, they've discovered that giving up on the American dream has its benefits.
Both now live on the 3100 block of Club Rancho Drive in Palmdale, where a terrible housing market lets them rent luxurious homes -- one with a pool for the kids, the other with a golf-course view -- for a fraction of their former monthly payments.
"It's just a better life. It really is," says Ms. Richey. Before defaulting on her mortgage, she owed about $230,000 more than the home was worth.
People's increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.
Thanks to a rare confluence of factors -- mortgages that far exceed home values and bargain-basement rents -- a growing number of families are concluding that the new American dream home is a rental.
Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That's freeing up cash to use in other ways.
(Excerpt) Read more at online.wsj.com ...
Ping!
Even moreso in Las Vegas
My sis, who works in the banking biz tells me rents are about 1 / 2 of the old payment.
Easy to move up, and so long as Bammy is running things, unlikely to get better.... for the banks.
I am one of those still looking for work and we are on a three month payment plan with chase. We have made the three payments with no problems and we do not want to walk away.
We have to submit new paperwork again and we will see if they will extend these payments or foreclose on us.
I really do wish and hope they will work with us instead of forcing us out into the streets.
Sorry to hear that.
I hope you can get it all worked out, and get back on your feet.
Won’t the bank pursue them for the difference in property value when they sell it?
> Won’t the bank pursue them for the difference in property value when they sell it?
Generally, no.
So-called “recourse loans” which are common in other parts of the world are, for some reason, not prevalent in America.
Time for the taxpayers to default on the salaries, benefits, and pensions of government “workers” like these.
Well Glass Steagle ws undone by former Treasury Secretary Paulson, it took him two concerted attempts but he did the deed and we are suffering from it. Our banking system has reached 2/3 the size of our GDP and the consumer is super saturated with debt. This credit cycle is over.
Donald Trump leaves his creditors sitting on worthless paper twice and he is idolized.
Someone $200K underwater leaves his creditor sitting on worthless paper and he is demonized.
The contract was signed between two parties that specified the consequences of a default. These individuals are willing to accept those consequences - so what is the problem?
If I was in the same situation I would do the same particularly considering the behavior of banks (ie B.S. credit card fees, holding your payments to make sure you get hit with penalties and interest etc, out right lying to you). Not to mention taking all the Treasury and Fed money to cover up their gambling.
Uh, sounds as if they are SPENDING lots of money.
No, the banks didn’t act immorally. Don’t try to spread the blame. If you take a loan from someone, you, and only you, are responsible for paying it back.
To any significant degree, how exactly did the banks know the loans wouldn’t or couldn’t be paid back or the properties would be destroyed? Did the folks taking these mortgages state they weren’t going to pay or were going to destroy the homes? No, they signed agreements stating they WOULD pay and they had to submit documents (in the vast majority of cases) proving they had enough income to pay the payments.
So don’t try shift blame on everyone like a liberal does. Everyone is not guilty. All that does is spread the blame so much that everyone is effectively absolved or no one is guilty enough to be penalized. Yeah, the “system” did it, everyone made a mistake, etc. That’s a cop out!
I have accounts in 3 banks and almost every other month Citibank hits me with a monthly service charge in error.
I call them and they immediately remove it and apologize, but I have to think they do it on purpose figuring they can steal millions from people who don’t notice or think they should be paying the fee when in fact they had an average balance which exempts them.
Certain states prohibit lenders from pursuing borrowers for the negative equity portion. Arizona, for example.
Having said that, why did lenders like BofA and Wells lend 5% down loans in a bubble market with zero deficiency judgments?
I argue that lenders KNEW the risks lending in these markets and now people are strategically defaulting and the banks are whining about it. Sure, borrowers are morally obligated, but lenders and the gub’mint have an obligation to behave as well. They didn’t either!
Citibank held a credit card payment that was sent seven days in advance of the due date (going within the state even). They credited one day after the due date. I called and raised heck, and they removed it. I later signed up for an Amex Card which was an extension on my Mastercard account (these give American Airline miles). I was assured that no fee was involved - that it was covered with the MasterCard fee. I get the first Amex statement, and it had a fee associated with the card. It was an outright lie. They fixed it after I got real ugly over the phone. Once I get my miles (reach my anniversary date for the next fee) - we will part company permanently.
Recourse loans are much more prevalent in the United States than “no recourse” loans are. The frothiest of the bubble markets were in those states that are “no recourse.”
Certainly here in NC, you can be pursued for a deficiency judgment, for any shortfall between the amount owed and the amount the property fetches at auction or through an REO bank sale. No bubble here, either, unless it was second home properties on the coast, large recreational lakes and mountain resorts. Even most of these could be had at peak for less than a normal 1800 sf, 3 bedroom, 2 bath ranch in a decent neighborhood, in much of California.
The half-million plus that was normal for a regular house there, would have gotten you a very nice executive home in any city, or a lake house, or an oceanfront condo, here. Still does, just cheaper by 10-15%, generally speaking. Some areas haven’t fallen back that much, and a few not at all. Compare to urban and suburban California, -50%.
They knew going in, that they could walk with little consequence. It fuelled the speculation.
Banks knowingly lowered their standards, and then took bailouts and didn’t spend the taxpayer money the way they said they would when they asked for the money. The people who took the loans are to blame, and should pay them back, but the banks are not blameless.
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