Why Do Struggling Homeowners Keep Paying Their Mortgages?

With the housing entitlement firmly in place, borrowers have little incentive to continue making mortgage payments, particularly if they have difficulty with the payment or if they are underwater. [image content warning]

Irvine Home Address … 1 West ALBA Irvine, CA 92620

Resale Home Price …… $675,000


You can get just so much from a good thing

You can linger too long in your dreams

Say goodbye to the "Oldies But Goodies"

Cause the good ole days weren't always good

And tomorrow ain't as bad as it seems

Billy Joel — Keeping the Faith

Homedebtors are struggling borrowers who cannot afford their payments or are deeply underwater. They are keeping the faith in appreciation and dutifully making their payments — for now. Homedebtors are the lynchpin holding together the housing market; if they lose faith in appreciation, as they have in subprime markets, then they may strategically default in large numbers.

The banking cartel in cahoots with the US government created a huge problem for themselves. They provide borrowers an attractive alternative to paying their mortgage; borrowers who strategically default and properly game the system can take advantage of the loan owner housing entitlement and squat in the property indefinitely. Over the last few days, I profiled HELOC abusers in Irvine and Riverside County who are living in homes they don't own and are not paying for, squatting by virtue of signing loan documents — if only lease documents were so advantageous…

It really makes me pause and wonder why any struggling homeowners make their payments. They have much to gain and little to lose. If they stop paying, it frees up thousands of dollars of income each month. That is, after all, why people want to pay off their house, so they don't have a payment. If homeowners simply stop paying now, they will still have a house, and they will not have a payment. It is just as useful as having the house paid off, it is much easier to accomplish, and it requires no patience or discipline — we wouldn't want to burden mortgage holders with that.

Absent false hope and faith in the miraculous recovery, there isn't much reason to hold on. Many homedebtors simply can't afford the properties they have. If they stop paying, the lender will not boot them out; they can dance with lenders indefinitely, and when those ploys run out, they can game the system further. If enough people dance at the same time, lenders will fear stopping the music, and shadow inventory will cover the land.

Millions of defaulting borrowers are occupying homes without paying. Few are saving this money. Some don't save because they are unemployed and don't have it, and some don't save because it is a four-letter word. Much of the money that went into mortgages is being spent by squatters and propping up the economy. Here in California the economy is not showing many signs of life — improvement yes, but activity is not robust. Those that are unemployed are not contributing to the economy, and those that are over leveraged are not either because so little of their income is available to spend.

How Strategic Default Could Save Our Economy

… So what’s the answer? Less debt. Also known as de-leveraging. Not more stimulus and bailout paid for by taxpayers… which partly ends up in the bankers bonus check. The answer is also in getting back to freedom. Our country was founded on freedom and we have betrayed ourselves by thinking it’s ok to owe thousands of dollars to other people. This has robbed our freedom and caused us to be so dependent upon working long hours and doing everything to just “get by”. I am sick of just “Getting by”.

Since the government can theoretically spend only what it takes from the people (taxpayers), its increased spending will drive the people to poverty. We are allowing this to happen to our country.

After 2 and a half years of listening to YouWalkAway.com customers and seeing time after time that by defaulting, they feel freedom again, they can afford a normal life again, I am convinced that a strategic default could possibly save our economy…and much quicker than any other solution that I’ve seen thus far. Let’s look at a real life example.

In the WSJ, there is an article titled: American Dream 2: Default, Then Rent

“It’s just a better life. It really is,” says Ms. Richey. Before defaulting on her mortgage, she owed about $230,000 more than the home was worth. People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.

In the WSJ, there is an article titled: Americans Pare Down Debt

“The speed of the adjustment is lightning fast because it’s happening through debt destruction,” said Joseph Carson, director of global economic research at AllianceBernstein in New York. “It puts us closer to the point where the consumer can start making a stronger contribution to recovery.”

I guess I’m not alone in my thinking. In essence, you are taking back the power from the bank by saying I don’t care about my credit score right now, I care about my economic future. You are creating your own stimulus package by following the law and staying in the home until the bank takes it back. There is a breakdown of how it works here.

“A rapid and cost-efficient mark to market”. consider: Snow Job: Strategic Defaults in an Era of Negative Equity

Strategic walkaways employ laws established to protect them from predatory or avaricious lending practices. They create an efficient, rapid, cost-efficient mark to market, stripping away inaccurate and illusory pricing practices that lenders cling to. Solving the mortgage crisis is going to take more than nibbling away at the edges of valuation, tweaking monthly loan payments through interest rate adjustments and loan extensions.

Being protected from crisis may simply be doing nothing more than preventing and delaying a true healthy economic recovery. Strategic defaults are paving the way for true home values, responsible lending practices and allowing for homeowners that once felt trapped…to be free again.

Jon Maddux, CEO

More homeowners are opting for 'strategic defaults'

Borrowers are certainly sending a message to lenders.

March 17, 2010

[Wynn Bloch bought her Palm Desert house for $385,000 in 2006. Now she says it will never be worth anywhere near the amount of her mortgage, so she stopped paying on her loan and moved out. (Bret Hartman / For The Times / March 4, 2010). Not pictured right?]

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."

Ms. Bloch is right. Her and her lender entered into a contract; they loaned her money, and she agreed to to give up her house if she failed to pay the money back. She is exercising her contractual right. It just annoys me that the lender is passing the loss on to us.

Many homeowners are just coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg.

Stuck with properties whose negative equity won't recover for years, and feeling betrayed by financial institutions that bankrolled the frenzy, some homeowners are concluding it's smarter to walk away than to stick it out.

"There is a growing sense of anger, a growing recognition that there is a double standard if it's OK for financial institutions to look after themselves but not OK for homeowners," said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.

People who conclude it is wiser to default are generally correct. Financially, it is not in their best interest to hang on.

To some homeowners those consequences are a small price to pay to gain a measure of revenge against the financial institutions whose loose money helped fuel the crisis.

Joseph Shull, a 68-year-old marketing professor, said he's planning to walk away from the town house he bought in Moorpark in June 2006.

"I'm angry, and there are a lot of people like me who are angry," he said.

He purchased the home for $410,000 and spent $30,000 renovating. Now the house is worth around $225,000.

Shull admits he overpaid for his property. But he said it fell in value in part because of "regulatory mismanagement."

"The bank stabbed me, but at least I got in a pinprick back," he said. "This is the new economy. The old rules don't apply any more."

As people realize they were screwed by lenders, they default and send their lenders a strong message.

Lenders brought this on themselves

It is difficult to make a case for continuing to pay on oversized mortgages. It is financially crippling to the borrower, and this limitation hurts the local economy because so much borrower money goes elsewhere. If continuing to pay too much is harmful to the borrower and harmful to the borrower's community, and if there are no repercussions for stopping payment with our new housing entitlement, why should borrowers continue to struggle with burdensome debt-service payments? Why should any borrower continue making payments? Why not rely on entitlement? Squat?

I hope you picked up on the subtle sarcasm throughout this post. But my tongue is only slightly in cheek because lenders, enabled by our government, created a situation loaded with moral hazard that encourages people to default in larger numbers. If the entire mortgage system falls apart, you and I as taxpayers will pay for it. Even now, we pick up the unpaid mortgage bills.

You are paying the bills of squatters everywhere.

Irvine Home Address … 1 West ALBA Irvine, CA 92620

Resale Home Price … $675,000

Home Purchase Price … $674,000

Home Purchase Date …. 12/10/2009

Net Gain (Loss) ………. $(39,500)

Percent Change ………. 0.1%

Annual Appreciation … 0.4%

Cost of Ownership


$675,000 ………. Asking Price

$135,000 ………. 20% Down Conventional

5.00% …………… Mortgage Interest Rate

$540,000 ………. 30-Year Mortgage

$139,765 ………. Income Requirement

$2,899 ………. Monthly Mortgage Payment

$585 ………. Property Tax

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

$56 ………. Homeowners Insurance

$79 ………. Homeowners Association Fees


$3,619 ………. Monthly Cash Outlays

-$709 ………. Tax Savings (% of Interest and Property Tax)

-$649 ………. Equity Hidden in Payment

$263 ………. Lost Income to Down Payment (net of taxes)

$84 ………. Maintenance and Replacement Reserves


$2,608 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,750 ………. Furnishing and Move In @1%

$6,750 ………. Closing Costs @1%

$5,400 ………… Interest Points @1% of Loan

$135,000 ………. Down Payment


$153,900 ………. Total Cash Costs

$39,900 ………… Emergency Cash Reserves


$193,800 ………. Total Savings Needed

Property Details for 1 West ALBA Irvine, CA 92620


4 Beds

2 full 1 part baths Baths

2,266 sq ft Home size

($298 / sq ft)

4,320 sq ft Lot Size

Year Built 1980

58 Days on Market

MLS Number S602198

Single Family, Residential Property Type

Northwood Community

Tract Ps


According to the listing agent, this listing is a bank owned (foreclosed) property.

Private Location at the End of a Cul-De-Sac. Sides to Greenbelt, No Homes Behind. Expanded Master Bedroom with Fireplace, Dual Vanities, Walk-In Closet, Seperate Shower and Tub. Fireplace in Family Room. Attached 2 Car Garage with Direct Access. Private Spa in Back Yard. Side Yard on Both Sides of Home, Breakfast Nook, Formal Dining. It does need some minor repairs, but at this price it's worth it.

That description is a bit austere, but I appreciate the truthful observation in the final sentence.

Who lived here?

Gaming the System

How many loan modifications are we going to give this borrower?

Foreclosure Record

Recording Date: 11/12/2009

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 05/07/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 12/30/2008

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 12/04/2008

Document Type: Notice of Default

Foreclosure Record

Recording Date: 08/14/2008

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 06/11/2008

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 03/06/2008

Document Type: Notice of Default

Foreclosure Record

Recording Date: 11/05/2007

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 07/02/2007

Document Type: Notice of Default

Who do you think is absorbing the last three years worth of missed payments?

Now we are paying the piano man.

65 thoughts on “Why Do Struggling Homeowners Keep Paying Their Mortgages?

  1. RogBoy

    IR, I always enjoy your posts skewering the sense of entitlement exhibited by both lenders and borrowers. But they also leave me confused as to what should be to route out of the bubble mess.

    I’m happy to accept that a mortgage is a private contract between borrower and lender, and that the penalties for breaking that contract are those specified in the contract. But, when the borrowers talk of their “anger”, all I think is that they are really saying “Wah, wah! my get rich scheme failed. Not my fault. Don’t wanna play no more”.

    Perhaps lenders should be required to complete foreclosure proceedings within a certain time from the first missed payment. If they fail to do so, and the payments are not made current by the borrower, the property should be considered abandoned and the creditors of both borrower and lender should be able to seize it. That way neither party could hold the taxpayers hostage.

    1. Swiller

      You’re kidding right? The homeowners are holding “us” hostage? LOL, think about that.
      The banksters are the ones who BOUGHT your elected official to PAY THEM the losses. That is the problem.

      If housing was AFFORDABLE based on the areas income from the SERVANT workers and not based on the entitlement generations (baby boomers) two class system…the have’s, and the have-nots.
      You sir Rogboy, are being held hostage because you could not vote for representatives with substance, and they in turn sold us ALL out to support the usury institutions.

      This bubble should have been left to collapse, and the banks with it. The people who defalted on their properties should lose them in 6 months as the law allows in CA. The banks should not be given OUR money, but left to sell at what the market will bear. Of course, this would really really drop the house prices of the people here who are “mad”, because people who are losing their homes are “gaming the system”.

      Anyone who is caught in a bad predicament would be a FOOL to NOT use the system as is. Why should the BANKSTERS get money for losses, but the homeowner LOSE their home AND pay for the loss? Sh1t, how about lowering the principal to somewhat realistic levels and keep people in their homes? That price loss would happen naturally anyhow if it wasn’t for the corrupt politicians and the corrupt banksters. The worst part about that is the people who are greedy as hell, support the banksters and not their neighbors.

      How lovely Orange County is….can someone start yet ANOTHER 30,000 christian church here…we seem to have a major loss of christian principles.

      1. Geotpf

        The banks were given money because had they all failed at once (a likely possibility), they would have taken down the entire national economy with them, causing a second Great Depression, and for no other reason. In fact, some banks (who were doing better than others) didn’t want TARP funds but were pressured to take them by the Fed (because they knew there would be political ramifications if they took the money).

        1. neewbie2008

          That’s the standard line. The govt could of nationalized the failed banks instead of “selling” the bad banks and notes to the private banksters at 35% to 60% on the dollar with clauses that bad notes will be made whole at 80 cent on the original note value by the taxpayer to the insiders. There no way the the govt. can realize a real profit, accounting profits for real loss that the taxpayer will be forced to pay. Where such good deals were available to true public shareholder helf bank (no one with more than 5% interest in the corp)?

          Paying makes sense if:
          1. Market is higher than you equility
          2. Rent parity or near rent parity
          3. You have the discipline to save the non-payment of mortgage payments and taxes.
          4. You have the pipe dream of a special turn around or will get a new job will buy your house at appraisal price.
          6. Recourse loan and your not one of the special PC groups.
          7. Personal reasons: memories, kids’ school, pride.

          Irvine Renter is making the internet headlines with his blogs on squatter.

          BHO had preelection talk of making house loans super recourse (unforgivable). Will he sneak that law in by treaty or by what means? GWB, BHO and the other pol. are owned by GS and the banksters, so either they will need to make the banksters whole by reimbursing the loss with taxpayers’ money or change the law to create indentured servants. The latter may not be very popular. Also the banksters will be made whole, not the bank (shareholders).

          1. IrvineRenter

            “Irvine Renter is making the internet headlines with his blogs on squatter.”

            We had 8,779 unique visitors yesterday, about 3 times our normal. I think this issue resonates with people.

          2. priced_out

            You were also linked to from patrick.net yesterday. I don’t know how much traffic his sight brings, and I do know that you’ve been linked from there before, but it may explain some of your increased traffic.

            I certainly like your squatters articles.

        2. matt138

          Geotpf stop with the apologist bs. we are currently entering the second great depression only this time it will be inflationary. the only thing they accomplished was delaying and magnifying the pain.

  2. MarkyMark

    Why do borrowers stay and pay when they are underwater? I suspect it’s some of the following:

    – homeowners continually over-estimate the value of their home. This means that it takes a long time and lot of evidence before they themselves accept that their home is worth a lot less than the mortgage.

    – they worry excessively about the damage to their credit score if they walk (forgetting that there are so many walkers now that many will get new loans). Most people still think that housing will have recovered in say 5 years that that homeowners will be the winners again. They want to be in a position to get a loan to play the game again.

    – they may have recourse debt.

    – some might have tax problems on debt forgiveness.

    – they wrongly worry about what work colleagues, the church, family etc will think if they get foreclosed on.

    – it’s admitting defeat in the American dream which is to own a home.

    – they want to own rather than rent where they can get kicked out by the landlord at short notice.

    Most of the above are not genuine economic reasons for staying. More and more will stop paying because it makes economic sense to do so.

    As for the anger I think homeowners are angry that their house has crashed in value (it was the asset which they hoped would help pay for their retirement) and direct the anger at the banks as the banks got bailed out when the homeowner didn’t.

    1. Geotpf

      You forgot a few more non-economic reasons:

      1. “It’s not a house, it’s a home.” That is, people become emotionally attached to their house and don’t want to leave it.
      2. Moving is a pain in the ass.
      3. If they have children, moving may require them to change schools.

      There’s also this economic reason: In some areas (although probably not in Irvine), mortgage payments, especially after a loan mod, will be lower than rent of a comparable house. That alone is a strong reason to stay, even if their down payment/existing equity (if any) has been wiped out.

  3. Anonymous

    re: why keep paying?

    The question you should ask yourself is – why don’t the banks foreclose? Why do they want to keep the real estate asset and the freeloader in it to maintain it? Isn’t the usual bank motivation profit? If the banks want to keep it – maybe you should too, maybe you should keep paying.

    Marc Faber and inflation

    1. newbie2008

      You need to distingush between personal profit and corporate profit. For a delayed FC (2 year free rent), the personal bankster profit on the bad loan will be real, cash bonus. The bank’s profit on the bad loan will only be paper profit unless the govt makes the bank whole. The non-cash income is listed as income, receivables.
      If the bank is letting them stay free, it’s best to stay and save the money for a new place or rental when needed.
      The shuttle bus drive brags, how he refinanced the entire house and saved the cash “eqility” or gave it to his wife. Then stopped paying and short sold for ~$50,000 more than the cash from the loan. The new buyer was his wife. He didn’t even need to move. Your tax dollars at work.

    2. ear;

      The problem w banks is that they were made immortal dec 24, 1913. If you can’t come up with your payment you default, but banks have no such problem. They can hold a house to eternity. They only have a reserve ratio and the fed told them to forget it and declare the value to be the original loan price. They can’t and don’t want to dump all these houses on the market and drive down the prices even more. The entire bank government system is crooked and wiring the system for inflation and inflation hedges and then pow…the credit system blew up for which there is no fix except lower house prices.

      Being immortal is like a casino that wires the odds against you and then sez ‘good luck’ to you when u walk in to lose you money guaranteed!

  4. Swiller

    People keep paying for underwater homes because:

    A. They love where they live and have a family living there as well.

    B. Paying for an underwater home is on par with an equivalent rental.

    C. People are hoping the housing market recovers and they can recoup their investment costs.

    D. They are conned into believing they have a “moral” or “ethical” obligation to pay, and lack the understanding that all they are obligated to do, is either abide by the contract, or break the contract. The system already has it setup to deal with those whom default…6 months and you are out.

    1. winstongator

      If B is the case, then strategic default is a bad strategy. A default is only really strategic if you can rent comparably for much less than your current payment, or what your payment will become upon option-ARM recast to fully amortizing.

      ‘A’ is less an issue when there are plentiful comparable rentals.

      1. CA

        It’s like these neg-am loans where sometimes the payment is several hundred dollars cheaper than comparable rentals. home debtors are just sitting tight, paying their mortgage until it recasts….THEN they’ll strategically default.

        i remember reading an article on this a while back…it’s like a ticking time bomb out there.

    2. AZDavidPhx

      Oh the poor house debtor! Conned by his master! Woo Woo Woo!

      I love it when Swiller talks about grown adults like they are children and starts bleeding his heart all over my lunch.

  5. Freetrader2

    IR, you are overlooking one important point here: a home is not an investment, it is a home. Short of unemployment or other life-changing event, there is no excusible reason for someone to walk away from their home. If you agreed to pay $800,000 for it in 2006, why not stay in the house. Nothing’s changed, except the neighbors houses have lost value. Note that all the idiots say “the bank ripped me off”. Huh? If anyone ripped you off, it was the person you bought the house from. Or you ripped yourself off. The bank simply made a bad call by loaning you money (at an artifically low interest rate, I might add). Nothing to get made about there, except it makes people feel better if they ascribe their behavior to some ‘other’ who is supposedly a bad guy. I don’t see walking away from the mortgage in the same black and white terms as I do a HELOC abuser, but the rationale is the same.

    1. Swiller

      Yes, you DO see walking away in the same light as a HELOC abuser.

      “Short of unemployment or other life-changing event, there is no excusible reason for someone to walk away from their home.”

      That’s brainwashing horse excrement. If you bought outside your ability to pay, you have to walk or face BK and lose it all anyhow. People make mistakes and the system is set-up so the house WINS, they do after all, get the property back, so who loses here? Well, that would be everyone when you have corrupt politicians giving money to banksters to cover those losses. Don’t blame the people, they aren’t gettign a damn dime from taxpayer money…blame the banksters and corrupt politicians.

      I think Freetrader would love to have a debtors prison…if that’s the case, then Freetrader would be in jail himself, as would every single person living in the U.S. What’s our national DEBT up to now?

      Maybe we could ALL be prisoners. We would have jobs (anything the system would assign us to do) we would all have health care, and we would all have housing. Labor costs contained, freedoms contained, crime controlled, no more surprises. The solution is DEBTORS PRISONS!

      1. Freetrader2

        That’s the point Swiller. Go ahead and walk away — but don’t make me listen to some BS about how it was some banker’s fault.

        1. AZDavidPhx

          Oh but it’s the evil bank’s fault! The banker kicked in my door strapped me to a table and waterboarded me into buying the 350K house! I never wanted the house! They made me buy it! I am the victim!

          Disgusting. Just as repulsive as the crooks running the lending scheme fishing to sell these mortgages to incompetent douchebag borrowers.

          I say we take all the lenders and borrowers and sentence them to highway trash pickup for 30 years. Get our taxpayer moniesworth.

      2. AZDavidPhx

        Hey Swiller –

        If you are so motivated to go and help your struggling house debtors then why don’t you pony up your own cash rather than volunteer the rest of us for your philanthropic crusade.

        I’d rather see my tax dollar spent on things like health care, education, public transportation, etc. Why do I need to help you pay your mortgage? Do you help me pay my rent? Since when does taking out a mortgage entitle you to my help? I have no vested interest in your financial circumstances or where you live be it on the street or in a McMansion – that is your problem.

        I for one am tired of being volunteered to help everyone out from the asses churning the mortgages to the asses signing them.


        1. Swiller

          You sound like John and Ken, those drones from KFI. Stop being an a$$. You are not paying anything for me buddy, I pay my mortgage. I also put down 20%, which at the time would have bought me a HOUSE in other places besides OC, so blow me on even referring I’m not paying my share. Not to mention taxes, etc. I don’t TAKE from society, I GIVE.

          That being said, I view things very much different than quite a few here on this board, but then again, I don’t blindly adhere and accept to what the media blares out…I THINK about things.

          The bubble came from the top, simple. Blessed by everyone. Everyone is at fault, including the buying public who bought at insane prices (including me), but it could have been controlled through oversight and control, controls that have been systematically dismantled since good ol beloved Reagan.

          I never backed any buyout and was cursing at the TV when our damn government was kicking money down the bankster pit. No homeowner should get a damn DIME of taxpayer money, and they DON’T, but the banksters sure do. Yes, many people are “gaming” the system, but to what end? Most of the time it’s simple survival, and that’s good, people should LEARN from this and live within their means, that means NO credit…zero, period.

          1. E


            You’re the one sounding like an asshole…….PAL!


            You obviously DON’T THINK. If you DID, you WOULN’T have bought a house AT THE PEAK!!!

            You put down 20%

            Big fucking deal.

            Who the fuck pays stupid people like yourself so highly?

          2. Swiller

            Yet another highly intelligent post by the classy fans of IHB. Good job, way to show that awesome humanity!

          3. lowrydr310

            I also put down 20%, which at the time would have bought me a HOUSE in other places besides OC, so blow me on even referring I’m not paying my share.

            Only if your 20% came from savings/investments, and not bubble equity from the sale of a prior residence.

          4. Swiller

            Interesting, so anyone who sold homes or owned multiple homes over the course of the last 20 years got “bubble equity” and no real gains. Shame on all you millions of americans!

            I’m sure all the “bubble stock equity” falls under that category as well, as I made quite a chunk of change while the going was good 🙂 I’d best not re-invest those ill earned gains.

      3. littleplanet

        Couldn’t agree more:

        The point that many seem to conveniently forget, is that a few smart foxes back in 2005 were quietly whispering warnings that if house prices DIDN’T keep going up, we were in for a bumpy ride (as Bette Davis stylishly observed.)

        Nice bumps, huh?

        2007 to the present was the casino version of “play it one more time” (and of course, millions played.)
        That’s how casinos make money.
        That’s how pigeons get plucked.
        I can hardly blame the pigeons for being pissed.

        I just wonder….with all the so-called “experts” out there – advisors, agents, lenders, financial associates, etc. ad nauseum….somehow everyone of them just sort of “missed” the obvious – overlooked the inevitable, misread the signs….
        and happily distributed the yards and yards of expensive and highly profitable hanging rope to all comers. wow.

        If I had a real potent gun collection locked in my den, do you suppose I’d surrender the key to my kids for fun and enjoyment?
        They might dig it – but I’m the expert who knows better – my point.
        Morals, if they belong anywhere at all, certainly belong on both sides of the fence.

    2. AZDavidPhx

      Freetrader2 is exactly right.

      These people borrow X amount and then walk away because the home is now worth .5X. Why does it matter what the home is worth now if they were willing to pay more in 2006? They paid extra for the premium of owning in those boom times.

      It just shows us that all of tthese people never intended to pay off these mortgages in the first place and were willing participants in the scheme. As long as house prices go up, they’d service the debt – but otherwise it’s screw you not my fault.

      She says she was “duped” into the loan. BULL.

      I can understand being pissed off that the bank gets bailed out and you are left holding the bag, but hey, you signed up for it right? It did not stipulate anywhere that you were entitled to profit from your house.

      I have no sympathy for these debtors who failed to do their homework and overpaid for a house only to cry foul because their paper value did not increase.

      Hopefully the state government will levy a nice tax bill to our troubled boomer.

    3. Kelja

      No excusible reason?

      The excuse is in the mortgage contract. Stop paying your monthly payment you forfeit the house. People should stop being idiots and believing the government is going to turn this around. They should look out for themselves and their families – enlightened self-interest.

      Everyone who is underwater should walk away from their mortgage.

      If that happened market forces would return. Prices would drop and those who can afford a house would buy a house.

      I’m speaking as a would-be buyer who’s not about to buy. It’s too uncertain. Thank you U.S. government for injecting oceans of uncertainty into the market.

      We used to be free.

      1. lowrydr310

        “I’m speaking as a would-be buyer who’s not about to buy. It’s too uncertain. Thank you U.S. government for injecting oceans of uncertainty into the market.”

        That’s responsible behavior. We all know how responsible folks get rewarded under the current system…

        I’m not buying anything either, primarily because I don’t know where I want to settle down, and also because I can’t find anything reasonably affordable (I refuse to pay 4x my current salary for an outdated 2BR condo with a carport, especially when I can rent the same place for half of what PITI on a mortgage would cost).

        Something tells me I’m going to again get screwed in the near term (5+ years) for being responsible, but I’m confident that there’s one inevitable outcome that no amount of intervention can prevent.

        1. Swiller

          It could work against those responsible and are saving cash. If/when inflation hits, that cash buying power will drop fast. It would make sense. Prop up the prices with inflation. Sure the house is still essentially worth $300,000….but paying $600,000 will be easier when tons of freshly printed federal reserve note hit the streets.

          That would be sad, but with the way things I’ve seen handled, it may be the way the are designing it, who the hell even knows anymore?

      2. Freetrader2

        It is certainly legal if you don’t mind destroying your credit rating (and if we assume that the loan was not obtained fradulently in the first place, not an easy assumption these days). But that is beside the point — ethical/moral and legal are different things. Even more to the point, the issue we were discussing is why someone underwater would want to walk away — even if you discount a ruined credit rating and reputation (which could affect, among other things, ones job prospects) there is nothing logical in walking away, unless one views one’s home as primarily a financial asset, not a residence — which is exactly how we got where we are in the first place.

  6. Stock Investor

    “People who conclude it is wiser to default are generally correct.”

    It may be too early to declare victory.

    What if inflation will hit 5-10% in 2011? CPI is +2.1%. Wages are +0.7%.

    1. Geotpf

      Inflation is currently very close to zero; possibly negative (deflation). Deflation in 2011 is more likely than inflation of 5-10%.

      1. matt138

        I will say this until I am blue in the face: we can still be experiencing inflation even if the CPI is negative. The CPI SHOULD be FAR MORE negative during this economic contraction. It hovers around 0 due to gov/t subsidy.

        Example 1: stop paying your mortgage and all the sudden your discretionary income rises like magic. Multiply this by 1 million. This is inflationary and completely due to gov/t subsidy.

        Also, you’re telling me you trust the CPI numbers? Talk about massage.

        1. Geotpf

          Do you have some alternate inflation figures you wish to share with the class?

          Plus, this whole blog is based on the premise that housing costs are going down (deflating).

    1. AZDavidPhx

      Oh but at least housing will be back to normal in 2011 PFFFFFFF. I love these quacks who keep predicting a recovery as a foregone conclusion. Japan you are forgotten.

  7. newbie2008

    Too bad I couldn’t borrow 100% to invest in my 401k and when the market went down, I could walk away from my debt. I had to have a real loss of my 401k money and other investments.

    Somehow this rule doesn’t apply to banksters, large hedge funds and home debtors.

    1. HydroCabron

      My mind is in flux – partly due to the concept of $410,000.00 for a Moorpark condo – but support gels somewhere in my brain for the abolition of the mortgage-interest tax deduction and the end of non-recourse real estate lending, as well as automatic property tax basis reset each time a HELOC or refinance appraisal is conducted.

      Bankruptcy should be kept available, to allow for economic crashes and medical disasters, as well as to make lenders responsible for the consequences of their actions, but debt should be debt. If you need to evade debt, you declare bankruptcy and take the credit hit.

      This would be accompanied by equally bitter medicine for lenders. I’m thinking we should prosecute any institution found to be practicing fractional-reserve lending, and abolish the FDIC. Banks can scramble for whatever they can earn through flat-out commissions and interest, and risk the capital of their investors.

  8. HydroCabron

    I just chugged down a liter of the milk of human kindness, so I’m going think the best of the guy who paid $410,000.00 for a condo in Moorpark, and conclude that he had suffered a cerebral hemorrhage or severe head trauma.

    $410,000.00 for a condo in Moorpark. It’s not necessarily the WTF price. It’s the leading “4” so close to the word “Moorpark”, a word that is “kraproom” backwards.

    I guess my sense of bewildered awe has not been completely worn down through over-use. That must have been quite a head injury.

  9. MikeInIrvine

    “…..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…”

    …”Joseph Shull, a 68-year-old marketing professor, said he’s planning to walk away from the town house he bought in Moorpark in June 2006….”

    This is just the first wave of Baby Boomers sticking it to the rest of us. This demographic is just going to suck money out of the economy until the bitter end.

  10. Sam

    What if employers of the “walkaways” treated them in the same manner as they treated their mortgage holders? I could just imagine the huge uproar if the boss of a walkaway simply decided not to pay them even though they had done work for the employer over the last pay period. A dozen state and federal agencies would jump on the employer and make them pay the wages they owed within a few days.

    However the same gov’t is in no rush to help the mortgage holder evict the non-paying homeowner. In fact the leftists are trying to make it harder for the mortgage holders to foreclose on the properties.

    Where in life is there a guarantee that you will always make money in Real Estate?

    1. HydroCabron

      There’s no such thing as back mortgage payments, as opposed to back wages. The mortgage contract says that once the mortgagor ceases to pay, the mortgagee obtains the property.

      If the banks wanted the borrower out of the house quickly, Congress would move heaven and earth to make eviction prompt.

      I recall the previous administration, a far-right one, doing everything possible to artificially support house prices, just as all other administrations have done since the 1930s.

      1. Swiller

        Stop making logical sense in your posts Hydro or I’ll retaliate with personal smears and unsubstantiated attacks!

        P.S. Banksters don’t want the citizen/servants out of the home. They want them to live there while they fleece the american people with buyouts from the boughtout politicians. If people were evicted promptly the houses would sit empty. (many are) It’s better to have the people living in them for free take the brunt of anger from their fellow citizens. Divide and conquer….or subjugate.

    2. HB_Surfer

      What if we could cut off the fingers of people who made idiotic internet posts?

      See, anyone can come up with ideas for laws. People walking away from a mortgage aren’t breaking any. If you want to change that, elect officials in the legislative branch of government to make it illegal to break any debt for any purpose. If you are angry at the banks for not foreclosing on homes faster – don’t use their services and let them know. I’m serious, pull your money out of Bank of America or Wells Fargo and tell them you don’t like the way they are running their business. That’s what I do. If a business does something I don’t agree with, I stop using them and most times even tell them why.

  11. Frank

    What if the walkaway’s boss decided to withhold the walkaway’s paycheck? There would be a dozen state and federal agencies jumping on the employer to pay the back wages. However when people refuse to pay their mortgage holders the same gov’t agencies are trying to make it harder for the mortgage holder to foreclose on the homeowner.

  12. tonyE

    We got to get the Mafia involved.

    Wanna strategically walk away from your mortage… Cousin Vitto and his hire Puerto Ricans will pay you a visit that you won’t forget.

    Stop paying the mortgage when you can afford it? The Monteverdi brothers will drive their big american sedan to your house and over you a couple of times.

    Nothing like the Mafioso to put the fear of God to you.

    Of course, the banksters and real estate quacks would have to suffer the same fate.

    Give some poor schmuck some bad advice about a house (“they always go up”) and your office gets torched.

    Come up with some crazy schema to make a lot of bad loans, securitize them, get them an A rating and sell them to widows via your brokerage house? Consigliere Alberto Mardini will see that your company is bankrupt and that nobody gets a bonus and that you, personally, get to mee the fish in the East River.

    CEO of a Wall Street Firm with buddies in DC that wants a billion to cover bad loans and pay 500MIL in bonuses? Aaah.. now we call the Russian Mafia. Take a trip to a Gulag and dig some dirt, you dirtbag.

    Nothin’ like simple justice between thieves.

  13. HB_Surfer

    If someone defaults on their mortgage, takes a credit hit, loses any equity/down payment in their property – what is the problem with them? (I can see having a problem with the people that establish the rules if you don’t agree) They aren’t escaping the consequences or breaking the law. I don’t even think this crap is covered in the bible.

    It makes as much sense as getting mad at people for paying late fees if they didn’t return a videotape on time. Or get angry at people who pay speeding tickets and drive up car insurance.

    Channel all the hate you have for people who faced the consequences into changing the laws/conditions/penalties for defaulting on a mortgage if that is the cause you want to champion.

    1. Misstrial

      “I don’t even think this crap is covered in the bible.”

      The wicked borrowth and payeth not again….

      1. Swiller

        Oh, you bet it’s covered in the bible:

        Just find an online bible, or even Google. “Usury and the Bible”. It’s not a good thing, in fact, it is referred to as “evil” many time over.

        1. Freetrader

          Really? So the Bible defines a 4.5% interest rate as usury? Is there an APR table in the Bible as well? Well, I guess that makes stealing OK then. But wait, isn’t there a Commandment about that also?

  14. Woodbury Renter

    Don’t underestimate the importance of your credit score beyond getting low cost credit. Every executive job search includes a credit score check. It has become SOP for good paying jobs.

    1. Planet Reality

      Traditional lending standards are back. You can no afford a home in the vast majority of markets. You simply may not be able to afford a home where you want to live. If you are middle class you can now afford a home in 90% of markets. If you want to live in Irvine or a few other places you may not be able to afford the home you want. That’s life.

  15. romeotybalt

    I my friend, am not paying my mortgage. I have walked away from my 350k Chicago home and have not paid the mortgage of 5 months.

    1. Misstrial

      Interesting how you value your internet service as opposed to a roof over your head. :/

  16. matt138

    Fight it or don’t, free market forces will have its way with us. The free market exists everywhere at all times. Like rust, it never sleeps. You cannot fight the free market. So, why waste all that money on futile, inefficient snakeoil fixes?

    The pain will be endured regardless because the pain has already been created.

  17. newbie2008

    My concern is not the little guy, walking away with some free rent, but the big fish and banksters walking away with millions yearly to billions and setting up the taxpayers to bend over again and again for trillions of debt for our children and grandchildren.

    It almost an unholy alliance of the banksters making personal profit on bad loan, the borrowers getting free rent and money, and the govt. making the banksters whole while shafting the taxpaying working man and women and shareholders. It looks like the shareholders are losing the bank and the banksters get to own the reorganized banks with loss limit set by the govt and govt backed profits from the “bad notes.”

  18. littleplanet

    Aye, just a luvly post, um?
    When pondering the staggering number of “owners” out there who couldn’t afford what they bought – but bought anyway, because they could (shame shame, lenders) and because the religious doctrine verily testified that the smart move was to cash in on rising appraisals (say what?) well, we all know what happened. The butler didn’t do it.

    And there it lies. Ain’t it pretty? Tho’ the monied establishment owns all of life, and makes the rules thereby, the peasants revolt with their wallets, after all. Adorable.
    Just a snifter of Sneekey Pete while whistling past the graveyard…shhhh! maybe nobody will notice…..
    Hallucinated wealth, it was – sort of like those piles of coins in Uncle Scrooge’s vault…..
    to a kid, a mountain of nickels dimes and quarters is real fortune: in the real world it’s chump change.
    Did America just begin to grow up, in spite of itself? I hope so.

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