Irvine Housing Blog

This post is no joke.  It is the reality millions of Americans who are currently going through foreclosure, and my reality as well.

I am only answering a question posed, to me.  I do not feel proud or ashamed.  I really don’t feel anything.  I am making a business decision.

Yet, I shudder to think what you what do to the scoundrels that received nearly one trillion of our hard earned tax dollars, yet who continue to manipulate the real estate market to their benefit…...

Not to be mean, but if this is your second walkaway, you haven’t beed too good at making business decisions.  Maybe you should just rent for the next decade?

On the surface you are right.  I have failed and gained and lost a small fortune in real estate.

I have also travelled the world (not in the army thank God!) and lived in foreign countries and had have beautiful and equally crappy experiences that taught me more about me.

Most importantly, I have learned through my failures that my attempts are no greater or less than anyone else’s. 

Isn’t that what this country is about?  The right to try and fail in the effort to pursue self-determination?

Yet would I try again in a heartbeat.  And I may fail, but as long as I learn I am not afraid, and money is not really real.

I probably should rent, but I will probably will end up living in a home without a mortgage.

It’s hard for me to feel groundless or unrooted because as you have explained in your blog many times:  “Mortgage holders are money renters with the bank as landlord”. (or something like that) 

I do desire closure yet for me, each month’s delay represents 3K.  The question is 3K worth an additional month of uncertainty.  For me, 3K represents 60% of my monthly take home pay, or 96 hours in labor. 

I ask myself, is squatting in my home worth the risk that my foreclosure case will resume?  For me, the answer is yes.. Maybe it’s because IL is a judicial foreclosure state. Would you squat in your home if you were guaranteed 18K?

For me, living in a judicial state means that I have a minimum 8 months to stay in my home if I do nothing to defend myself in court.  But I will not do nothing. I will prolong my case as long as possible. 

I actually look foward to showing up in court looking at the various attorney’s faces when I file my motions.  (I have had the judge admonish two of the bank’s lawyers based on their malfeasance).  I don’t really look like the lawyer type, if you know what I mean. 

I feel like a “money renter” who is exercising his rights under the law.  No matter what the opionions of others may be.  And I thank the law firm of my mortgage servicer for their incompetency, and Christine E. Springer (My hero) for her invaluable advice.

The endgame is me walking away with as much money saved as possible.  But I must admit, in my county there is a 90-day redememption perdiod that I could exercise, even if I was foreclosed on tommorrow.  This means that I would still have 3 months to move after the 8 month original process, that I plan to contest. 

And that is if I do not appeal the judge’s foreclosure ruling to the Judicial Review Board which will give me another 6 months).....

Why does your mortgage represent such a huge portion of your net income?  Did you lose income since you bought?

“...I don’t really look like the lawyer type, if you know what I mean…”

I don’t know what you mean.  Please explain.

Not counting my wife’s income, my mortgage represented 60% since I take home about 5K a month.

But to be truthful, after being denied a loan modification, and discovering mortgage document fraud with the help of a lawyer who pointed it out, I just got tired of paying when I knew I could squat and it would be years before the bank could put me out.

I lost money when I bought, and even more after each 3K payment.  I am now 50% underwater.

Let’s just say, judging by appearances, no one would mistake me for a lawyer.  I have had people who were not trying to insult me, tell me “you’re a smarter than you look”, LOL.

ChicagoWalkAway,

Thank you for sharing your experience. I have been sympathetic to strategic default, although less so for the squatting thereafter.

I see your reasoning, I can’t say I disagree with your choices. You have clearly thought through your alternatives and understand the pros and cons of what you are doing.

Yes, thanks Chicago for sharing.  You don’t have to justify your decisions to us, but thank you for explaining your situation. 

It’s a little different here in CA, as you probably know.  There are layers of protections for borrowers to avoid defiency judgments, but it’s also a non-judicial foreclosure state where in theory at least, a foreclosure can occur rather quickly.

IR-

you missed this:
“In IL, under the law, whether or not I leave now or later, I am responsible for what happens in the bank’s house until my lender gets an order of possession from a judge.  So what could be my motivation to leave.”

This is generally true across the US, as I understand it (and IANAL).  Why on earth would anyone leave prior to the note-owner assuming control legally, if they are opening themselves up to liability?

So….the real question is ethics.  In my 35 year career, I have explained every sentence, phrase, and implications in real estate contracts, escrow instructions, loan documents to thousands of buyers.  A part of ‘this country’ you might have missed is ethics.

You are correct.  I forgot the ethics portion when I was a strung along by my lender for 2 years waiting on pins and needles for an agreed-upo loan modification that never came.

I forgot the ethics portion when I was finally advised by my lender to miss 3 payments in order to get the mod, then told to pay up and be prepared that I could be foreclosed upon.  Yeah Right…

I have acted ethically.  My highest ethical responsibility is to my family finances which dictate that I jettison an underperfoming investment asset, my underwater home.  A simple amoritization table tells me that on my 415K loan, at 6.75% interest, I would have paid back over 969,000.  My home is now worth 159K.  I should stay and pay?  Yeah Right…

I’ll be the first to admit I would have stayed in the home if I could have sold for more than I paid.  But since I am under water, I would have paid nearly 1 million in principal and interest, and have been unalbe to recoup my investment.  So I am walking away.  That is the nature of investments.  When you will never get back your money, engaged investors cut their losses.

I will be the first to admit that part of the risk of walking away is getting a deficiency judgement, being issued a 1099 and having bill collectors come after me.  I have already been issued a 1099, and it’s not so bad.  I have a gameplan for the other outcomes.  After all, it is the ethical thing to do.

Excuse me.  But who was it that convinced you that you should make money on this ‘invenstment’ in the first place?  Was that your own idea?  You don’t get it.  Residential real estate is not a short term investment vehicle, like stock.  It just doesn’t work that way.  You cannot pick up the phone one day and call your broker and say, “SELL” and expect it to happen.  You bought apples thinking it was oranges.

I made the decision and I am taking the risk of getting a 1099 and/or deficiency.  I am ready.

Come now, residential as well as commericial real estate are short AND long term investments.  It was working fine that way before the market declined, and no one complained when they flipped and made money, and sold high.  I just got burned.  So what.  I am not complainaing.  Just telling my story.

Just because the market is down and many like me lost our equity does not preclude the fact that government leaders touted housing as an investment, people bought and sold homes as investments, and banks loaned on homes as investments.  They were AND are investments.  Now people say homes are investments because like equity investments, people with buyer’s remorse walk away.  I now possess cognitive dissonance too, so I am dumping the home.  Who cares…. 

Not so fast CO, I could pick up the phone and have my property sold tommorrow just like any stock, bond or commodity.  The difference is that the sale price that buyers are now willing to pay will leave my debt unsatisfied, because the perceived value is less today that it was 4 years ago.  There are other options. 

In reality the utility of the house never changed, just others perception of what my home worth.  This is why I said earlier that I learned through all of this, that money itself isn’t real, just a tool to exercise other options.

In my past, I’ve traded stocks and mutual funds and made and lost money.  However today’s housing exists in a unique environment that allows one to recover any downpayment, loss equity, and years of mortgage payments by squatting and walking away. 

I would be remiss if I did not try to recover my losses since whether I do or not has no bearing on the risk that the bank will come after me.  I might as well be financially regrouped in order to be able to dance the nasty tango that lies ahead. I could argue that failing to squat and save, exposes my family to more unpleasant outcomes. 

You’re wrong about one thing though, I bought apples, believing them to be apples.  They went bad, so I am just making apple sauce.