Comments on: Refusing to abandon ship

By: shoeless

shoeless — Tue, 20 Oct 2009 19:32:13 +0000

Ooops! That’s gonna leave a mark, huh? If that is the case, then I can’t see the attraction in “squatting”. Wouldn’t an agreed-to short-sale be a better outcome in this instance?

By: christopherfountain

christopherfountain — Tue, 20 Oct 2009 18:15:32 +0000

Shoeless, Connecticut is not a non-recourse state. It often proves to be because, at least in the past, by the time an owner lost his house he’d expended all his assets trying to keep it. These days, not so much, so if someone is thinking they’ll just walk from their ill-advised purchase while holding on to their IRA, SEP, and stock market fund, they may not be as free to do so as they would be somewhere else.

By: christopherfountain

christopherfountain — Tue, 20 Oct 2009 18:12:42 +0000

Technically, Helsa, no. But I’ve got a house under contract right now where that’s exactly what we did and exactly what happened. So …

By: KC

KC — Tue, 20 Oct 2009 17:11:20 +0000

This phenomenon is even worse in owner financed situations. Based on what I’ve seen, these long delays in getting a delinquent property back or auctioned can be brutal for naive sellers who took too much for granted back when the market was stronger.

By: shoeless

shoeless — Tue, 20 Oct 2009 16:06:30 +0000

Addendum:

Banks are simply slow in dealing with eventual forclosures (mark to myth gets harder when you actually have to put the asset back on the balance sheet), but they are coming:

http://www.ritholtz.com/blog/wp-content/uploads/2009/10/delinquent-percent.PNG

By: Helsa Poppin

Helsa Poppin — Tue, 20 Oct 2009 15:57:41 +0000

Let’s say you know of such a house, tour it and like it. Can you make an offer and cc the mortgage holder on it? Can the mortgage holder compel the homeowner to take it?

By: shoeless

shoeless — Tue, 20 Oct 2009 15:34:57 +0000

From a moral persepctive, I am in agreement that this behavior is reprehensible. OTOH, it is also entirely rational and, in fact, perfectly legal. By the fact that mortgages are non-recourse, the onus is on the lender to make sure that the buyer is worthy. Clearly these buyers were not, but it is, inevitably, the banks’ problem and by extension (though it should not be this way) the taxpayers’ problem. Much like what the FHA is doing presently, giving money to people who have no intention of ever paying it back is not a successful recipe, unless of course the lender is Too Big To Fail.

By: Old School Grump

Old School Grump — Tue, 20 Oct 2009 14:20:33 +0000

Phew, glad to hear it.

By: christopherfountain

christopherfountain — Tue, 20 Oct 2009 13:38:25 +0000

Grumpy, I am not saying their behavior is aceptable and I was raised by a father who would never condone that behavior. I am merely reporting a phenomenon spreading around the country and, sadly, most people in our fair land were not raised by my father.

By: Old School Grump

Old School Grump — Tue, 20 Oct 2009 13:12:59 +0000

Chris, you wrote “…The owners stopped making payment a long time ago when they realized a total loss was inevitable and have been trotting off to Europe and enjoying winter in the Caribbean ever since. … And why not?”

In your telling, these people have not suffered a personal financial disaster. Rather, they are peeved that their home purchase hasn’t worked out the way they felt they were entitled to, so they’ve decided they are entitled to walk away from it.

And you think this behavior is acceptable? As in, look your mother in the eye and tell her you think it is acceptable?