Foreclosure-proof Homeowners
Jingle Mail?
Forget that! Its so 2007.
For 2008, let's try a little reverse financial engineering: Squatting in $3 million dollar waterfront mansion in Florida and paying nothing.
At least, that's a new and growing problem we learn of via MW in South Florida. MW is a local developer, and claims this has become "very serious." (I have been able to independently verify this with a local resident, who tells me the local papers are filled with such tales).
He writes:
"There is a very important phenomena that is occurring that has only been covered in an only "glancing" manner. Beyond the concept of "jingle mail" -- which suggests that folks who can pay their mortgages may just choose to walk away given the dramatic loss of equity due to housing's collapse -- consider the following: As a developer, I had stepped to the sidelines and rented beginning in 2005, because I was sure that housing was unsustainable and was bound to collapse; it took 2 more years for it occur.
Nonetheless, as I have followed several of the homes that my wife and I were interested in a few years back, they are all on the market now. What is shocking, that in each and every case, I have been told by brokers and banks that the owners, have ceased paying their mortgages in some cases for nearly 2 years and have continued to occupy these homes. Now, these are homes in excess of $2,000,000 in the very best neighborhoods in South Florida. Brokers have added that these buyers further complicated things by putting huge home equity lines on top of their mortgages and now have no possibility of selling their homes for amounts needed to cover their accumulated debt.
This may not seem like news, but understand what this means: There is currently an 8-10 month wait to get a court date to have a foreclosure filing heard in Dade and Broward counties. The bankers have non-performing loans on their books to the best heeled borrowers in multi-million dollar amounts with no immediate means for recovery; with a non-secured second mortgage in place, there is no possibility for a "short sale" that will satisfy all of the borrower's debt. They are reluctant to take a haircut knowing that they have the home equity debt still around their neck and are likely to frustrate any near-term sale.
There is no clean way to sell the home that would guarantee "clean title" hence a foreclosure is the only means to separate the property from the dead-beat speculator/squattor. Banks do not want to spend the $50,000 required to take a home through a foreclosure and clear the title -- only to put the house back on the market for a deeper loss afterwards. Most likely, they have not revealed these owner occupied defaults to their shareholders, thanks to the sheer numbers of non-performing loans on their balance sheets, and the daunting task of foreclosing on all of them. This is the ultimate seizure and full stop of the market whereby everyone is standing in a stalemate. As one broker said to me, "these bums sitting in $3,000,000 homes overlooking the water are likely to be left alone by the banks for 2 years before the banks even get serious about foreclosure."
So here is the difference between "walking away," these folks are doing anything but walking away, they are sitting on lounge chairs sipping martinis living cost free! (not to mention that they have ceased paying property taxes and insurance). I can only imagine what this market will look like in the coming years . . ."
All I can say is wow.
"MW" has been hearing this for the past six months. He believes both the local and national lenders are in a state of disbelief with no understanding on how to proceed.
If anyone has any local newspaper stories on this, please post in comments.
Tuesday, March 04, 2008 | 02:35 PM | Permalink
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Sipping martinis and feeding the kangaroos......
what a novel idea.......
Posted by: MarkTX | Mar 4, 2008 2:47:50 PM
Stunning. Stupefying. I'm at a lost for words. Other than this article does a lot to further my longing for full-on Class War, along with my hatred of the "rich."
Posted by: Mike Nomad | Mar 4, 2008 2:49:01 PM
CNBC's Fast Money has covered the saga of one Joe Lents, who hasn't made a payment since 2002 on his $1.5 mortgage. Everytime someone comes to evict him, he asks them to prove who owns the note, and due to the slicing and dicing Wall St. has done in recent years, no one is able to produce the document.
http://www2.tbo.com/content/2008/feb/23/bz-mortgage-note-issues-help-debtors-avoid-foreclo/
http://www.google.com/search?hl=en&q=joe+lents+florida+mortgage
Posted by: Chief Tomahawk | Mar 4, 2008 2:50:48 PM
This is going to be an amazing story in the NYTimes next month!
Seriously though, if word of this gets out we're going to have a nuclear summer. The mortgage on a $2m house is something like $10k a month. If you can get away with not paying for two years that's a quarter million dollars you get to keep in exchange for bad credit. But if you have money then you may not need credit.
I'm picturing rich people walking away from their checkbooks and using the cash to add furniture to their rent free mansions.
Posted by: KirkH | Mar 4, 2008 2:51:30 PM
Whoa, very interesting. When confronted like a problem like this, or even much smaller than this, lobbyists usually went around doling out cash to state legislators to find a way out. Look for behind the scenes lobbying to pass draconian laws to facilitate quick foreclosures, some sort of summary judgment and County Sheriff court order in-a-day type legislation. The problem is getting any politician in their right mind behind such a thing. Maybe they'd go to some sort of state regulatory commission so that three members on a board of five could take the heat for six months while they evict thousands of people, then retire in style courtesy of the banking lobby. Then of course a voting regulatory commission could contest the evictees' new voter applications once they found a place to live! Ah, Florida.
Posted by: Jay | Mar 4, 2008 2:59:13 PM
Another little piece to the puzzle and proof of why BB was telling the bankers to lower the loan values today in a speech to said bozos. I am afraid that taht solution will not touch the squatters in this article. It looks like we are going from a moral hazard to a moral neutron bomb.
Posted by: larster | Mar 4, 2008 2:59:53 PM
I second that WOW!!!
Posted by: SINGER | Mar 4, 2008 3:03:49 PM
Sounds like the making of a great Bette Middler comedy!
Better yet, a reality TV show! Who knows how long a run it will have?
Posted by: Bob_in_MA | Mar 4, 2008 3:04:13 PM
It may spice up the story by using $2 million waterfront homes in Miami but presumably the occupant of a double-wide in Podunk could do the same damn thing.
Posted by: ramster | Mar 4, 2008 3:08:02 PM
Even Abbie Hoffman wouldn't have thought of this one...
Posted by: wnsrfr | Mar 4, 2008 3:08:49 PM
Drink martinis till you jam the market in the last hour,
It is that easy......
Posted by: MarkTX | Mar 4, 2008 3:16:33 PM
So now the very rich are the worst deadbeats. Absolutely fascinating.
Posted by: Ed Miller | Mar 4, 2008 3:18:04 PM
OT (sorry):
Marketwatch/cnbc is reporting yet another ambac bailout! in case you were wondering what turned the indices around...
seriously, i'm just sitting on my hands. and if 1320 holds by week end, i'll eat them. :)
Posted by: karen | Mar 4, 2008 3:26:04 PM
And to think here I am saving my money to buy. In America, a person who saves their money and lives within his means is a sucker.
Posted by: Mike M | Mar 4, 2008 3:28:45 PM
MarkTX wrote: "So now the rich are the worst deadbeats"
Now? Where have you been all these years?
Posted by: MOB | Mar 4, 2008 3:34:40 PM
Not in newspapers yet (I live in Central Florida) but have already heard the term for it, "Abando."
Posted by: Jack Stevison | Mar 4, 2008 3:44:56 PM
"So now the rich are the worst deadbeats"
What makes you think these people are rich? With no money down and no payments you don't need to be rich to lounge in a $3M house.
Posted by: grace | Mar 4, 2008 3:45:42 PM
.....and the taxpayer is going to be the bagholder.
Posted by: Stuart | Mar 4, 2008 3:49:59 PM
Just on basic principles, I say evict these bums, sell all their furniture, cars, furs, jewelry, etc., and give 'em one-way bus fare to the nearest homeless shelter. I realize it still leaves the question of what to do with the property, but it's an affront to nature that these losers get to live for free while millions of Americans in Podunk and elsewhere are trying honestly to make ends meet.
Posted by: bluestatedon | Mar 4, 2008 3:52:36 PM
Karen, I couldn't agree more. It isn't paying to try to do things right.
I do know for a fact that this is also happening in Myrtle Beach, SC. My Mother lives in a well-heeled development, and one of her neighbors told her that she and her husband are doing this. Just squatting in a million dollar home.
Bank hasn't approached them. Yet. They've not paid a cent in over a year.
Posted by: Tony Shifflett | Mar 4, 2008 4:00:09 PM
Maybe we should move homeless people into these homes. When the deadbeats call the cops, ask to see proof that they are indeed the mortgage holders and not squatters themselves.
Posted by: Camille | Mar 4, 2008 4:06:54 PM
It looks like we've come full circle. During the great depression banks were able to "call" loans and foreclose on property instantly and "draconian" laws were passed to prevent banks from doing so now we are considering passing "draconian" laws to allow banks to foreclose on squatters much quicker.
My only regret is that I didn't buy a 2 million dollar home in Florida where I could have been living it up for 4 or 5 years with no worries of being evicted :(
Posted by: Dude | Mar 4, 2008 4:10:43 PM
I echo the sentiment of how revolting this seems in the face of millions attempting to keep their homes in an honest way.
But I can't see any downside to forcing banks or any kind of organization to prove they own the note. The fact that we "know" they own the note doesn't make any difference. We all know a lot of things in life that when brought before a judge then must be supported by proof.
Posted by: Hazel M. | Mar 4, 2008 4:14:06 PM
You can file bankruptcy in Florida and still keep your home no matter what the value. Scumbags from all over the country have been fleeing there for years to protect their assets. I'm thinking that even after foreclosure they get to keep the equity they took in.
Posted by: Bob A | Mar 4, 2008 4:14:41 PM
rich deadbeats are probably better neighbors than squatters...
Sure, both bring down values of the neighborhood, but rich squatters won't spray paint graffiti everywhere.
Posted by: bex | Mar 4, 2008 4:14:50 PM
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