we've all heard the stories about his person or that person living free in their home. A myth? Not so much. The LA times recently published an article about it.
It's been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.
A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.
Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They're not planning on going anywhere.
Throughout the country, people continue to default on their home loans -- but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.
Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.
And with a glut of inventory in places like Southern California's Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.
Finally, allowing borrowers to stay in their homes helps protect the bank's investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender.
"If the person's in the property, there's less chance for vandalism, and they're probably maintaining the house," he said. Economists say the situation won't last forever, but in the meantime the "amnesty" may allow at least some homeowners to regain their financial footing and avoid eviction.
In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it's difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.
More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008.
"For some reason, banks are being more lenient with homeowners who are behind on their loans," Sharga said. "Whether it's a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure."
Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America "continues to exhaust every possible option to qualify customers for modification or other solutions," spokeswoman Jumana Bauwens said.
Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed.
Such policies may partly reflect the fact that lenders can't keep up with all the foreclosures, some say.
"The mortgage lenders are so backlogged that some people are able to slip through the cracks," said Kathryn Davis, a real estate agent at America's Real Estate Advocates in Corona. That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it belonged to someone else and that it was empty.
"In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that," said Guy Cecala, editor of Inside Mortgage Finance, a trade publication.
In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn't hear anything from the bank, First Franklin, until a real estate agent showed up at their door last month saying she was going to sell their house.
Sandy Fraguere wasn't surprised that it had taken the bank so long to ask them to move. "I don't think they really knew what was going on or who was there," she said.
I actually know a family that have not made a payment since Feb 2008!