More homeowners are opting for 'strategic defaults'

[FarCenter]

Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert home, even though she could afford the payments.

Bloch paid $385,000 for the two-bedroom in 2006, when prices were still surging. Comparable homes are now selling in the low-$200,000s. At 66, the retired psychologist doubted she'd see her investment rebound in her lifetime. Plus, she said she was duped into an expensive loan.

The way she sees it, big banks that helped fuel the mess all got bailouts while small fry like her are left holding the bag. No more.

"There was not a chance that house was ever going to be worth anywhere near what my mortgage was," said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. "I haven't cheated or stolen."

Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans while watching the banks and lenders that helped trigger the financial crisis return to prosperity.

<SNIP>http://www.latimes.com/business/la-fi-walkaway17-2010mar17,0,2297178.story

---

You can do this without much downside in CA if you don't have a second mortgage or HELOC. Not so easy in other states.

[Zoeisright]

1. There's only one word in that story I would change.

The banks and lenders TRIGGERED - no, CAUSED the financial crisis. They did not 'help' trigger it.

[FarCenter]

2. Well, realtors, appraisers, developers, mortgage brokers all did their part too

[guruoo]

9. They joined the party that was allready in progress, IMO. n/t

[Skink]

3. cases like these might invite lawsuits.

[notadmblnd]

4. I doubt it.

[FarCenter]

6. In CA, a purchase first mortgage is only secured by the value of the property

If the purchase mortgage has been refinanced, or if there is a second or HELOC, the situation is more complicated for the homeowner. But the first mortgage holder is still only secured by the property and cannot force bankrupcty or get at judgement against the homeowner for the deficiency.

I don't see why a bank would lend money for a first mortgage in CA unless it can sell it to Fannie or Freddie and stick it to the US taxpayer.

(Or package it up as a mortgage backed security, get it AAA rated, and foist it off on some unsuspecting Norwegian retirement fund.)

[CoffeeCat]

5. I just had a discussion...

...about this with a friend who told me that her neighbors quit paying their mortgage. They
live in a very nice 400k home. Both lost their jobs and were unable to pay and the bank
wasn't willing to work with them AT ALL.

To worsen matters, the house has masonite siding. For those of you unfamiliar with masonite
siding, it's a homeowner's worst nightmare. After ten years or so, the siding begins to
crumble, warp and erode. So, they were unable to sell their home, due to the defective
siding that would have cost them 30k to replace. They were stuck.

They quit paying, and since foreclosures take a while--they were able to stay in their
home rent free for 18 months. They took a similar attitude as the woman in the OP's
story. They were talked into creative financing, their realtor urged them to buy
a bigger house and no one told them about the defective masonite siding.

They figured they needed a break.

That siding issue is horrendous. My friend showed me her issues. She can put her hand through
her house and reach into her dining room. She joined the class-action and got a whopping $200
for a job that will cost her $30k. They are also upside down on their house, because the value
dropped 40k. Crazy. The builder built up these gorgeous 4BR suburban homes with cheap masonite
and entire neighborhoods are crumbling and homeowners are forced to cough up thousands.

I don't have any negative or judgmental feelings toward someone who walks away from a mortgage.
Homeowners and the little guy has been screwed seven ways to Sunday by banks, mortgage
companies and the entire housing industry--realtors included. Sometimes you just have to stick
up for yourself. The banks took a risk when they screwed over so many people and made
billions doing it.

[Lance_Boyle]

7. 'Duped' into an expensive loan?

Now pull the other one, lady. Nice for you that you have no qualms about fucking over the neighborhood you bought into 4 years ago for your little case of buyer's remorse. Good for you for being a selfish greedy bitch! How's it feel to be no better than the bankers you rail against?

[guruoo]

10. "...a selfish greedy bitch!"

:rofl:



Wall Street banks in $70bn staff payout
Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn),
a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so
far this year - despite plunging the global financial system into its worst crisis since the 1929
stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite
being the beneficiaries of a $700bn bail-out from the US government
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking


July 31, 2009
Bankers Reaped Lavish Bonuses During Bailouts
By LOUISE STORY and ERIC DASH

Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year,
even as their employers were battered by the financial crisis.

Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000
of their traders and bankers bonuses of more than $1 million apiece for 2008, according to a report released
Thursday by Andrew M. Cuomo, the New York attorney general.

At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan
Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America,
million-dollar awards were distributed to hundreds of workers.

http://www.nytimes.com/2009/07/31/business/31pay.html

[gratuitous]

8. Individuals being rational actors

Talk about the worst possible news for the banksters and their henchmen! As long as individuals can be reviled, or shamed, or otherwise compelled to operate against their own interests, the banksters and the finance big boys can continue to make out like the bandits they are. But when individuals walk away from bad investments (just like the big money boys), it can only spell trouble for the vultures who prey on the individuals.

Remember the energy "crisis" in California, caused by Enron? Futures contracts were driven by an overheated market, artificial shortages set up, and panic buying was the order of the day. When the scheme fell apart, Enron insisted that all the panic contracts for thousands of dollars on the megawatt had to be honored. There was to be no negotiation, no reset. Enron had successfully gotten electric companies to sign ransom notes, and they were not about to let these contracts go. When the full story started to come out, suddenly Enron was a hapless victim in all this, and Linda Lay went on the teevee to cry about being down to her last four luxury homes.

It was disgusting then, and it’s disgusting now.