Monday, May 31, 2010

Live Free

The term "live free" doesn't mean what it used to. It used to be a patriotic statement in fact it's the state motto for New Hampshire. Rebels, hippies, and even militia nut jobs use the term. Today however it's a way of live for those people who stopped paying the mortgage. They are literally living free. The New York Times has this article on this new breed of free loaders.

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.
oreclosure 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.

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.


Oldtimer said...

WTF has happened to people in this country? If you can't afford something, don't buy it. Borrowing money is a privilege. If you borrow money, you do everything in your power to repay your debts.

Unforeseen circumstances for borrowers are not new. People have defaulted on obligations for as long as credit has existed. I feel for the folks who bought homes at unsustainable prices in 2003-2007. They screwed up, their lender screwed up, and the people who financed their lender screwed up. I have less sympathy for people that borrowed against their homes' unsustainable values during that period, but some of those folks were paying medical bills, investing in businesses, etc. versus buying time-shares and Seadoos. So I feel bad for some of them too.

That doesn't alleviate borrowers from doing the right thing. If you took out debt to buy or refinance a home you can no longer afford, quietly give back the keys to your lender, and move on with starting over. Lawyering up, milking your situation, and pointing fingers while ignoring your own malfeasance is morally corrupt.

These people should never be lent another dime.

golfer_X said...

Another and more relevant question should have been. WTF is wrong with the banks, lending money to people who obviously can't afford to pay it back.

john said...

Why is no one in jail. I thought section 8 was bad.

Marcsi said...

Hmmm, Oldtimer. I just want to ask you why should someone leave the house and give the keys back to the bank, if they started a loan mod 12 months ago, was current on the payments all the time and the bank did not even bother to look at the papers? And they used their savings to pay the mortgage because someone lost a job and the bank does not even bother??? They are too busy? They stop making payments and they should just give the keys back to the bank and leave??? Just because they are supposed to be nice? Or CORRECT???? Come on now. Thats BS. It doesn't make sense. Being nice or correct WILL NOT feed you. If you had used up all your money, and could live somewhere for free or somewhere for $1500, what would you choose? Financial decision. The smarter one. You'll get punished with credit being ruined anyway...
Happy for you that you did not screw up and has not lost a job...

smf said...

All should be reminded that the instances of being allowed to live for 'free' are quite limited.

If the house was purchased as an investment, no debt forgiveness will be forthcoming.

Ditto if the house was refinanced, specially if money was taken out for 'other' purposes.

And HELOCs will not be forgiven, either.

The stories are starting to creep out about those who foreclosed, only to have collectors rightly come after them for the unpaid balance.

VectorzSigma said...

I love the part of the article which they mentioned they took out a HELOC to buy a commercial truck to give away in attempt at promoting their business which they mentioned at hindsight was a mistake but it was the bank's fault for not accessing them as a credit risk. It's like the fucking Twilight Zone.

golfer_X said...

SMF, it's not as "limited as you might think. I'm not sure how many people have already lost the house after living for free but there are currently 1.7 million households on the free plan. That's not that limited. Sure some might have creditors come after them but in that case I suspect most will simply file BK or negotiate a much lower payoff since most of these outstanding loans will be sold off to collection companies.

Neudi said...

Hilarious, just read that. Don't fight foreclosure, embrace it! Woo hoo, fill up the airboat!

smf said...

No disagreement, Golfer.

What I meant is that some appear to believe that walking away will be the end of their problems, when that is not the case often enough.

Seen too many articles when the owner of an investment (rental) home decides to let the bank foreclose on them, as if no consequence will become of this.

Or those who took out a HELOC for whatever reasons. Legally, they are still on the hook for that debt and I wouldn't doubt that soon some companies will start buying this debt and then come right back to hunt these homeowners.