The Face of Housing Entitlement Today

Defaulting loan owners are living rent-free in properties, and you are subsidizing this through government bailouts.

Today's featured property is a small wonder over-improved by its owners who are hoping they added hundreds of thousands in value. What will the market say?

Irvine Home Address … 5 FERN Cyn Irvine, CA 92604

Resale Home Price …… $629,000


Living off the fat of the land

They hold their justice in the palm of their hand

Lay down your gun and surrender quiet

Or there's gonna be a Cajun riot

Pain is too good for you

Your last breath, is all you have left

Take it before you're doomed

Cajun hell

Before you're doomed

Exodus — Cajun Hell

Many people currently living off the fat of the land are doomed. Like the condemned enjoying a final peaceful meal, they wait in comfort for a disheartening drop. In the meantime, we manifest a new housing entitlement in the United States; once you sign loan documents and move in, you are entitled to live in comfort indefinitely.

In a recent post I noted the following:

The amend-pretend-extend dance will continue until lenders tire of paying the piper. Shadow Inventory contains the new entitlement class; while unemployed renters sleep in shelters, unemployed homeowners squat in luxury, sustain false lives on lender largess, and exalt their status in preparation for the unceremonious fall from entitlement.

Today I want to introduce you to the one couple living off lender largess — and indirectly they're living off you and I as taxpayers subsidizing lenders — from the LA Times article Many borrowers in default live for free as lenders delay evictions:

Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.

[Patricia and Eugene Harrison, who bought their Perris home seven years ago, have lived there since October 2008 without making any payments on their mortgage. (Irfan Khan / Los Angeles Times / February 19, 2010)]

Do you think any unemployed renters who are failing to pay rent are living that well? Full dinner plates, a solid roof, mementos and permanent storage, comfortable surroundings; we endow these entitlements on those who own.

Often these owners foolishly over borrowed — by the way, how did the couple in the picture get that far behind on a 2002 or 2003 mortgage? These people should be renting or residing in a homeless shelter. Others use their car.

If you can sign your name to a mortgage, you no longer have to fear homelessness, and your level of entitlement increases significantly. Are you comfortable with this entitlement you as taxpayer provide? Is home ownership and loan ownership the new foundation of the American entitlement system? Does this feel just to you?

[Pictured above: Unemployed renter and family who failed to sign loan documents and squat in a house]

When you reflect on it, the threat of homelessness is the pillar of our economic system. If you don't want to work and produce something of value to society, you endure society's minimum standard-of-living entitlement, which isn't a high quality of life (just ask the homeless). In the United States, we use the threat of homelessness to combat sloth; however, now that we have created a new entitled class of loan owners, we threaten the whole system. What is the incentive for couple in Perris to solve their problems and get current on their payments? That costs money. They don't want to repay money, they only want to spend money. Isn't their real incentive to ride out their entitled condition as long as possible?

Back to the article:

It's been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.

A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.

Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They're not planning on going anywhere.

Are these owners unemployed? Did they put 20% down and now they are in default on a $102,400 mortgage? Or did they HELOC themselves to oblivion and leave the bills? If they did not spend their house, why don't they sell it and get their equity? Surely, their house is worth more than a conservative mortgage of $100K? How are they different from Bonnie and Clyde?

"We're kind of on pins and needles, but who'd want to leave when you put this kind of energy into a house?" said Eugene Harrison, 70, gesturing toward a bucolic mural of mountains, stream and flowers the couple painted on the living room wall.

Throughout the country, people continue to default on their home loans — but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.

And with a glut of inventory in places like Southern California's Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.

Yes, housing blogs have been describing the catastrophic effects of inventory dumping for years, and we witness the carnage in markets like Las Vegas, Phoenix, and Riverside County.

Economists say the situation won't last forever, but in the meantime the "amnesty" may allow at least some homeowners to regain their financial footing and avoid eviction.

So while renters get evicted with nothing, squatting loan owners get to luxuriate to regain their footing.

In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it's difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.

Did you catch that number? John Husing is describing shadow inventory, and Riverside County has a serious supply overhang. What are we going to do with 100,000 delinquent borrowers there?

"For some reason, banks are being more lenient with homeowners who are behind on their loans," Sharga said. "Whether it's a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure."

For some reason? LOL! Shadow inventory is a much larger problem than bulls are willing to face. Banks are slow to foreclose for both reasons given. While the banks prepare to blast freeloading homeowners out of their bunkers of entitlement, they must figure out what they are going to do with all those properties. Not to worry, they will come up with some solution that continues to funnel your hard-earned money to their pockets.

Irvine Home Address … 5 FERN Cyn Irvine, CA 92604

Resale Home Price … $629,000

Home Purchase Price … $276,000

Home Purchase Date …. 10/1/1999

Net Gain (Loss) ………. $315,260

Percent Change ………. 127.9%

Annual Appreciation … 7.8%

Cost of Ownership


$629,000 ………. Asking Price

$125,800 ………. 20% Down Conventional

5.06% …………… Mortgage Interest Rate

$503,200 ………. 30-Year Mortgage

$131,132 ………. Income Requirement

$2,720 ………. Monthly Mortgage Payment

$545 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$52 ………. Homeowners Insurance

$50 ………. Homeowners Association Fees


$3,367 ………. Monthly Cash Outlays

-$467 ………. Tax Savings (% of Interest and Property Tax)

-$598 ………. Equity Hidden in Payment

$249 ………. Lost Income to Down Payment (net of taxes)

$79 ………. Maintenance and Replacement Reserves


$2,630 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,290 ………. Furnishing and Move In @1%

$6,290 ………. Closing Costs @1%

$5,032 ………… Interest Points

$125,800 ………. Down Payment


$143,412 ………. Total Cash Costs

$40,300 ………… Emergency Cash Reserves


$183,712 ………. Total Savings Needed

Property Details for 5 FERN Cyn Irvine, CA 92604


3 Beds

2 baths Baths

1,350 sq ft Home Size

($466 / sq ft)

4,500 sq ft Lot Size

Year Built 1974

1 Days on Market

MLS Number S607254

Single Family, Residential Property Type

El Camino Real Community

Tract Di


MUST SEE THIS…GREAT CURB APPEAL-Beveled Glass bay window – NEW THOMASVILLE CUSTOM KITCHEN! Cherry wood cabinets, Granite Counters,Frigidare Professional Series Stainless appliances-Vaulted Ceilings-New windows and Doors-Ceramic tile floors-Custom Lighting–Cul de sac–Private side enterance – Concrete tile roof – New roll-up Garage Door – Lush mature landscaping – Tile hardscaping – Large back yard, great for children – Best Schools…5 Deerfield pools..Tennis in the park…Standard sale –

Creative writing: dashes, commas and ellipses with no periods.

HELOC dependency

Day after day, I see sellers who have spent their home price appreciation as it came in as if it were a source of managed income. I believe this practice is so widespread that many who live in California consider it an entitlement; buy a house and you automatically get to double your spending power. With entitlement comes a social acceptance of the means to obtaining that entitlement — taking on excessive debt. To the chagrin of lenders, borrowers have also figured out that if things don't work out it is easy to walk away from debt and start over, and any social stigma associated with foreclosure and bankruptcy has vanished.

  • Today's featured property was purchased on 10/1/1999 for $276,000. The owners used a first mortgage and a $50,000 down payment — well, kind of…
  • On 10/13/1999 a stand-alone second for $50,000 was recorded on the property. The real down payment was $0.
  • On 5/9/2001 they refinanced with a $273,000 first mortgage reflecting a $3,000 decline in their mortgage balance.
  • On 2/13/2004 they went over to the dark side and refinanced for $313,000.
  • On 1/3/2005 they opened a stand-alone second for $90,000.
  • Total mortgage debt is $403,000.
  • Total mortgage equity withdrawal is $127,000.

I gave these owners a "D" because the $90,000 stand-alone second is more than just paying off a few credit cards; that is simply adding to a mortgage to get the money to spend which crosses the threshold of knowingly spending anticipated appreciation which is a "D" by definition. Since their withdrawal was relatively small by Irvine standards — $127,000 — and since they paid down the mortgage at times, one could argue for a "C."

Not a bad take for a $0 investment — plus, if they get their asking price, they stand to make another $200,000. They won't get it.

I have been inside both neighboring properties 1 Fern Canyon and 3 Fern Canyon, the latter in particular was much larger and very nice inside. It appears that the original listing was for $529,000 — a more realistic although still inflated asking price. Perhaps the owners feel they added $100,000 in value by installing an over-the-top Thomasville kitchen. ~giggles~

46 thoughts on “The Face of Housing Entitlement Today

    1. priced_out

      Commas, dashes, and ellipses. Why end a sentence with a boring period? Periods are for losers who want to get interrupted. But this Realtor knows this property has too many professional features to let anyone interrupt.

      1. AZDavidPhx

        The oversized bowtie is only available on the 2010 model. This feature alone should add significant value to the house compared the the house across the street whose professional ice box is wearing the smaller 2009 bowtie and in desperate need of an upgrade.

        1. priced_out

          It’s a definite step up from the 2008 model that only had a tie. The bowtie + tie combo is as essential to professional quality cooking as stainless steel + marble.

          1. Frank

            This reminds me of the Will Farrel movie where he goes to a job interview wearing a tuxedo. In what professions is a tuxedo considered appropriate:

            – Maitre d’
            – International spy
            – Croupier

            Are there others? Is this really a 007 fridge? Watch out for the booby trapped idebox!

      2. priced_out

        oh – – ha — I didn’t even noticed that IR said exactly the same thing about the commas, dashes, and ellipses.

        Commas, dashes, and ellipses, Oh my.

  1. Planet Reality

    “Did you catch that number? John Husing is describing shadow inventory, and Riverside County has a serious supply overhang. What are we going to do with 100,000 delinquent borrowers there?”

    What do you think they are going to do? Allow the banks to continue to claim the asset at peak value plus interest on defaulted payments, that’s what.

      1. Planet Reality

        Fractional banking is a fantasy. It was a fantasy 20 years ago and will continue to be a fantasy 50 years from now.
        What is funny is that people are more likely to believe in a banks balance sheet that the tooth fairy. Both have always been fantasy.

  2. Stock Investor

    “while renters get evicted with nothing”

    Renters may get “free” rent too. There are legitimate defenses to delay eviction (motion to quash, motion to strike, bankruptcy petition).

    Use your imagination. 2 underwater homeowners can rent their houses to each other: $100 per month, 3-year term. Foreclosure does not automatically terminate tenancy with legitimate long-term lease, doesn’t it?

    1. tonye


      IR better edit out this comment before it goes viral.

      Did you notice how the “responsible” homeowners pay the most tax?

    2. 90 days notice

      I think I read somewhere that (in California) if the buyer, of a foreclosed home, intends to occupy the property as primary residence, then he/she can give the tenant a 90-day notice to vacate and can collect rent for the 90-day period as well.

  3. Chris

    OT: I just finished my tax forms today. Frankly, I’m thankful that I’m out of California. Although the **reduced** amounts on both standard deduction and exemptions (especially the amount on dependents) for CA are not that significant for me, I’m sure it’ll be a hit for those that are counting their dollars in this economy.

    At least the amounts on the Federal level are still increasing.

    1. Misstrial

      Why are you on the IRVINE Housing Blog then if you are “thankful that I’m out of California”?

      I am so tired of people in the Flyover coming on to California blogs to state how wonderful they have it…what’s the matter, aren’t there any folks who speak english where you live now?

      or, is the real situation that people where you now live can’t put 2 sentences together and that’s why the cost of housing is so low???

      Get a clue…

        1. Misstrial

          Nope, no anger here.

          As usual, people such as yourself in the Flyover just cannot make a correct observation about Californians on a message board. Get a clue.

          Try citydata. Its a wonderful site for people in states like yours!

  4. Yummyhatorade

    These owners took money out of their property, put money into their property and are not in default.  The only entitlement I see here is the entitlement to piss on anyone and everyone who doesn’t conform to your world view.

    1. priced_out

      The entitlement here is the notion that the money they spent was fairly earned. It’s apparent in their asking price.

      They should have to sell their house for what they purchased it for. Why? Because the next generation of home buyers — my generation — is otherwise getting screwed.

      1) My generation is not being offered pension plans. That idea lasted only until people started retiring and the actual bill for the promise offered boomers showed up.

      2) My generation is not seeing higher wages. Wages have been stagnant for the past 20 years, but somehow, I’m expected to pay twice as much for my housing?

      3) The jobs that boomers relied on to build their nest eggs are now gone. They aren’t there to be filled by members of my generation. They’ve all been shipped to China where a single party system has allowed slave labor and a rigged monetary policy to undermine the US economy.

      How are we supposed to assume the debt burden conceived of by the boomers?

      IR — nice blog post this morning. In spite of its very cool, calm writing, I found myself having to alt-tab away 3 times to keep from punching the screen.

      1. wheresthebeef

        Well said priced_out.

        The baby boomers royally screwed this country. They got theirs and Effed everybody behind them. The boomer generation who has been running this country for the last 25 years were ignorant, greedy, short sighted…but that all doesn’t matter because they have fat investment portfolios and you and I will be paying for their “well deserved” entitlement programs as they ride out into the sunset.

        1. lowrydr310

          “but that all doesn’t matter because they have fat investment portfolios”

          It’s all good until the markets crash but that would never happen again, would it?

          1. wheresthebeef

            When I say investment…that is real estate, stocks, bonds, etc. The housing market could correct 50% and many boomers would still make out like bandits. As far as stocks go…anybody close to retirement better not have much of their portfolio in the market. If these boomers are smart, they would have already cashed in their gains and live on fixed income. When you get a fat pension, fat SS check and a fat monthly withdrawal from your 401K/IRA account…living can’t be all the bad.

      2. Planet Reality

        This is only scratching the surface of the global wealth transfer that has occured and will continue to occur at the extremes.

        It amuses me when people talk as IR does assuming a magical market correction This manipulation has occured for milenia. The only way we will see change is with bloodshed, even then based on history the change is ephemeral.

    1. HydroCabron

      At one point around 10 years ago, I asked my boss for a raise. He was one of those strange managers who while shrewd in some ways, was really obtuse in others, which was why upper management liked having him between us and them. He once asked me why Australia has summer during our winter months.

      Anyway, he shrugged off my request with “But that’s exactly what I was earning in your position in 1984.”

      What does one say in such a situation?

      1. Planet Reality

        On the other side of the spectrum the boss of your boss has seen his income go up 5 – 10 X, welcome to american fascist capitalism.

      2. lowrydr310

        I know exactly what you mean. I’m earning a decent living right now, but looking back to when I started my career nearly ten years ago, many of my 30 year old peers were making the same dollar amount. (That doesn’t include those directly involved in the tech bubble; they made even more)

        I have many friends who were in their 30s around 2000, and at the time had established careers, some decent savings, and were able to buy homes they could afford, and still having enough money left to entertain themselves. Many of these friends are in the SF Bay area, didn’t buy into the HELOC ATM madness, and are living comfortably right now.

  5. avobserver

    The most bizarre thing about this credit/debt bubble Ponzi scheme and the ensuing gov’t/Fed policies to “rescue” the economy is that these events have collectively turned our economy into a casino. Financial/economic models that used to be able to indicate (more or less) the direction of the market movements or asset prices cease to function because all the parameters are no longer predictable. Fed/Gov’t actions have destroyed the last trace of predictability in housing and other asset markets. How can anyone project median housing price in OC (in foreseeable future) if mortgage rate, median income, supply, gov’t subsidy, and rental trend can all change, swing and flip flop wildly based on the totally unpredictable level of future intervention from Fed and US gov’t. In addition, the so called “unprecedented” rescue mission from Fed and Gov’t fiscal/monetary policies have also guaranteed an extremely unpleasant ending for this whole saga – but, we don’t know “how” it will end. Hyperinflation will eat savers (those opt not to participate in stock/housing market style gamble and defiantly collect 1% on their CD accounts) alive. Japanese style stag-deflation (an equally likely scenario) will destroy the net worth of those who dare to hedge inflation by jumping into asset markets with both feet.

    Here is the thing – in a casino economy, we are all gamblers – whether you are a professional speculator, or an unwitting participant. You have nowhere to run, and nowhere to hide. We are all like that fabled traveler who is presented three doors: open the right door you get to go on to find the treasure (or the princess to marry as the story goes); open the wrong door, you are devoured by the beast hiding behind it.

    There are a couple of twists to our casino economic model – (a) in a regular casino at least you know the odds against you at a blackjack table and the rules stay constant. But in today’s casino economy rules change constantly and you will never be able to find out the real odds against you in any situation. Fed could stop buying RMBS tomorrow or it could all of sudden decide to double down. Out of blue Congress/White House may conjure up some other “xxxx for cash” schemes or throw more tax credit to some group of lucky ones. (b) only two groups of people will turn out winners – those who can influence the change of rules (cronies, GS alum), and those who have dumb luck. Those with analytical skills and reasoning ability possess little edge over those without. Unless you are one of the well connected, your chance of winning (or even breakeven) is very dim no matter what you do. And yes, many winners are the one who made foolish/reckless decisions under normal circumstances. But our current situation is anything but normal.

    So blaming those who defaulted their loans but lived in their house rent free is like blaming the guy next to you at a blackjack table for winning all the chips. House debtors live in their house rent free because our system allows them to do that.

    Question: how did these people know that lenders and our gov’t would let them do that back in 2006?
    Answer: they did not. But they have dumb luck.

    1. IrvineRenter

      Very astute observation.

      It is the casino aspect I find most troubling because it is random and unpredictable and it manifests in all sorts of mis-allocations of capital. Plus, the obvious effect of not knowing where to safely store wealth.

    2. Stock Investor

      What is difference between gambler and investor? Exact knowledge.

      Most people do not understand how DVD player works. Unfortunatly, economics is much more complicated then electronics.

      Stock market is war zone. What is common to all wars? 90-95 percent of the casualties are unsuspecting civilians.

    3. HydroCabron

      “Here is the thing – in a casino economy, we are all gamblers – whether you are a professional speculator, or an unwitting participant.”

      It’s not so much the fact that it’s a casino, it’s how nonsensical of a casino it has become. Even in a sane capital market there will be a number of manias and seemingly contrary price moves, because investors are always trying to outguess one another, which prices many events into markets before they happen: then either the event happens, with no demand remaining for any significant price jump, or the event fails to occur, which creates some other superficially bizarre move.

      It has always been a casino economy, at least over shorter time intervals. If it weren’t, everybody would soon follow the most successful investor in the market, and, with everybody buying the same things at the same times, the market would grind to a halt because there would be absolutely no point in investing in anything.

      Don’t believe me? Ask yourself what would happen if everyone purchased nothing but an S&P500; index fund.

      Assuming even a rational/efficient market, people will try to get a jump on events, fail to notice other events, or become hysterical over a short-term move and overreact.

      It has always been possible to invest sensibly and with discipline, yet get your ass handed to you. There are more than a few 30-year periods of history where bonds have outperformed equities. Given risk premiums, and the ever-increasing productivity throughout history, no sensible informed stock investor should expect to lose to the bondholders over such a long period, but it happens, often without government “help”.

      I think you’re absolutely right to lament the complete nonsense which has been introduced to the market of late. It has become so nonsensical that there is little point in playing at all, except to place bets that the casino will catch fire and burn down, via gold or tangible goods as opposed to paper.

      In that sense, the market is like mother nature: it will fix everything in the end. But how long do we have to wait?

  6. Theyenguy

    Three Comments:

    First comment, here is my take on the 5 FERN Cyn Irvine, CA 92604 property:

    Trulia relates that the median sales price for homes in ZIP code 92604 for Nov 09 to Jan 10 was $475,000; so if one offers that and the offer is accepted the mortgage debt of $403,000 is applied leaving $72,000 gain. I suggest that they get out while the getting is good. They refinanced and obtined financing as the real estate wave went up. All I can say to them is hurry, plese sell now.

    Second comment: To answer your question does the couple living free seem just to you? Well to help answer that, I would want to understand what living in Perris is like … Is it like living in Irvine, CA or Excelsior, San Francisco or The Presidio, San Francisco?

    So I did some research on Perris to find out what the place is like and here are the results:

    Perris, is in Riverside County, CA, has a population of 46,000, with zip codes 92570, 92571, 92572, and 92599 … Wikipedia relates that On March 20, 2007, Perris was featured on ABC’s Nightline news show during its “Realty Check” segment. The story dealt with the rising trend of home foreclosures in Riverside County, and Perris was referred to as the “epicenter”.

    City-Data provides the following information upon which I provide some comment.

    Median house values — real estate prices peaked in September 2006 at $400,000 and now are at $150,000.

    Unemployment in October 2009:
    In Perris: 22.9%
    California: 12.3%

    Perris and Riverside County California is another Detroit Michigan or Camden New Jersey in the making; yikes, this is a slumburbia!!!

    Most common industries for males(%)
    Construction (19%)
    Administrative and support and waste management services (7%)
    Transportation equipment (6%)
    Accommodation and food services (5%)
    Miscellaneous manufacturing (4%)
    Educational services (4%)
    Public administration (4%)

    This is a working class construction worker town; there are
    no financial, banking, or real estate service jobs.
    no technology or, biotechnology jobs.
    no health care jobs – the hospital closed in Perris.
    few UPS or Best Buy, other distribution center jobs.
    few manufacturing jobs.
    few university or college instruction jobs.
    few Federal or state jobs.
    few US or state government contract jobs such as computer programmer.

    When both adults in the family works, the total household income is still about sixty percent of that in The Presidio in San Francisco, CA.

    People came to Perris to build homes in Riverside County, the boom is over and now these workers are experiencing the bust. Talk about a poor place to live, City Data relates that the hospital has closed — not good at all.

    Average household size:
    Perris: 3.7 people
    California: 2.9 people

    Percentage of family households:
    Perris: 84.1%
    Whole state: 68.9%

    Residents with income below the poverty level in 2008: — yes it is another Detroit.
    Perris: 20.4%
    Whole state: 14.2%

    Estimated median household income in 2008:
    Perris: $47,867
    California: $61,021

    #11 on the list of “Top 101 cities with the highest unemployment in 2009”
    #11 on the list of “Top 101 cities with the highest unemployment growth from 2000 to 2009”
    #12 on the list of “Top 101 cities with the most other race residents (pop 50,000+)”
    #19 on the list of “Top 101 cities with largest percentage population increases in the 1990s) (population 50,000+)”

    Part of the real estate property crash in Perris and Riverside County is due to the fact that the banks and mortgage companies made loans to those newly immigrated to this country who did not have technical jobs skills which command the earnings capable of sustaining mortgage payments.

    #2 on the list of “Top 101 counties with the highest Ozone (8-hour) air pollution readings in 2005 (ppm)”

    Frankly, I would not want to live in Riverside county — the smog level is just plain unhealthy.

    Ok, lengthy, verbose, I know …. Well the picture here is that Perris and all of Rivreside County is an “economic dead zone” so I can understand why a couple might stop making house payments … So my answer to your question is “no not just — but it simply the way it is — and I have to deal with reality”.

    Third comment: I’ve done lots, I mean lots of research and come to the conclusion that the California state debt has reached the toxic level; California has gone beyond the point of no-return on it’s debt; bankruptcy is inevitable.

    So, my encouragement to you is to flee California, perhaps you could leave Orange County, and come to Whatcom County and be The Semiahmoo Renter — Semiahmoo, it’s a nice plsce to ride out the coming economic destruction that is going to wipe out America.

    1. priced_out

      I’m curious about your third comment. Can you share your argument with us about why CA’s bankruptcy is inevitable?

      1. Kelja

        California is bankrupt now.

        Revenue does not meet obligations. The government is between rock and hard place. No room to tax more; no stomach to cut programs and services. They are living in fantasy land.

        When push comes to shove they will cut services but will wield the threat of cutting the most necessary and basic of services – i.e. police, firefighting, etc. Plenty of fat is there to cut. Plenty of fraud and inefficiency to root out. But that won’t happen (never does).

        The question isn’t whether bankruptcy is inevitable – the question is whether a state can declare bankruptcy legally. I don’t think legally there is a mechanism for that to happen. The state will be bankrupt whether or not they get to declare it like an individual, corporation and city.

        Most likely – there will be draconian cuts in services; fees and taxes will be pushed to the limits (or maybe beyond, generating a tax revolt) and the Fed government will bail the state out with freshly printed US dollars.

        That’s inevitable.

        1. Planet Reality

          California will be bailed out with freshly printed dollars and US government debt.

          To think otherwise is completely irrational.

        2. A.W. Chuck

          Whatever the end result, the reaction from the politicians was predictable.

          They immediately pulled the “Washington Monument Syndrome” card and started threatening to close down public parks. Typical dirty politics.

          Does anyone remember in May of last year when Schwarzenegger threatened to close 220 parks? That was to save $143M in a $24B budget gap. Wow…so that’ll shore up a whole 0.6% of the budget gap. Now if he could only figure out how to pay the other 99.4%.

          I loath politicians. They know the easy way out is to just raise our taxes. The easiest way to do that is to shut down services that hit us where it hurts…our parks, our roads, public transit, whatever gives us a nice whack below the belt.

          And for only ONE reason, to make us submit, to get us on our knees and let them raise our taxes. That is so much easier for them than addressing the real problems, the real costs…firefighter, police, teacher and other government employee union pay, pensions and health care.

          Why deal with the real problem when you can just twist our arm until we scream uncle. I guess it could be worse, the politicians could let all the criminals loose on us and really scare us…

          Oh wait…

  7. oc bear

    1/3 of people own their home outright — no mortgage
    1/3 of people rent
    1/3 have mortgages
    9% of mortgages are in default (Source Associated Press)
    so 3% of households are in default.
    These 3% are holding the other 97% hostage. As more people learn about rent-free living that is sure to grow.

    Lets get this over with. Foreclosure and Bankruptcy are the solution not the problem.

  8. cynthia curran

    What percent is Perris hispanic. Usually, in Calif high poverty rates mean a higher than average hispanic population or afro-amerian populatiom. Remember in Santa Ana houses once were selling for over 600,000. A lot of second and third generation hispanics have moved to Riverside since they couldn’t afford La or Orange. One of the reasons for the default problems there since even second generation hispanics are behind non-hispanic whites as a group in income. This is not racists its the true.

  9. cynthia curran

    Well, everyone here talks abou how great No Calif is but there are bad markets in places like Oakland. Oakland is the Santa Ana or Compton of the Bay area. It has one of the highest crime rates and low home ownership. Not certain how badly it defaulted.

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