Refusing to abandon ship

More and more homeowners, faced with foreclosure, are just stopping making payments and enjoying the extra cash they have to enjoy life while the bank takes its own sweet time throwing them out. In Florida, attorneys are making a very nice living helping homeowners delay the proceedings even longer. I’m sure Bridgeport, home base for most bankruptcy attorneys, has a full bank of lawyers eager to help  you do the same thing here.

Does it work? You bet. There’s one house I know of that has been in default and ready to go via foreclosure for over  a year now. 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. Whereas they once had passed word to their broker that they’d accept any bid that would pay off their mortgage (about 2/3 of the then asking price) once their equity disappeared they decided to hold fast to the ask, knowing they won’t get it, because they prefer their current situation.

And why not? How many people have ethics that forbid them from taking advantage of a bank’s laxness? Not many, I suspect. Look for this to be the new model of homes for sale in Greenwich: over-priced and going nowhere, just the way their owners like it.

11 Comments

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11 responses to “Refusing to abandon ship

  1. pulled up in OG

    Ghetto slobs (Lavery’s term, not mine) can enjoy the skiing in Gstaad too. Just refinance your deed-restricted (to $116K) affordable housing condo for $250K . . . before it’s foreclosed on.

    http://www.stamfordadvocate.com/localnews/ci_13591218

  2. Old School Grump

    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?

    • christopherfountain

      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.

  3. Old School Grump

    Phew, glad to hear it.

  4. shoeless

    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.

    • christopherfountain

      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.

  5. Helsa Poppin

    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?

    • christopherfountain

      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 …

  6. shoeless

    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:

  7. KC

    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.

  8. shoeless

    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?