26 thoughts on “IHB News 12-4-2010”

1. norcal December 5, 2010 at 4:17 am

   Arson? It would be interesting to know when the house burned (at what stage in the foreclosure process) and whether the fire insurance was paid up at the time.
2. Freetrader December 5, 2010 at 8:08 am

   I am a little surprised by this – I would have thought that the lienholder would have some ability to compel that the insurace money be spent on refurbishing the house.
   1. OrangeRenter December 5, 2010 at 8:33 pm

      I’m surprised IR wouldn’t know this, but I guarantee all of you with a mortgage if you look at a copy of your insurance policy it WILL list the “loss payee” as the lender!

      This is also why a lender will require you to cover the “replacement cost” or (if lower) the “loan amount”. If you choose not to carry full replacement cost the only thing “covered” is “the loan amount”.
3. A.W. Chuck December 5, 2010 at 8:43 am

   Unrelated to post, but I am so frustrated by what I heard tonight at the Toys R Us at The Marketplace in Tustin and I know IHB followers can appreciate this…

   My wife and I were looking for a Salvation Army toy gift my corporate office is supporting and we overheard the following conversation…

   “Yeah, we bought our condo in Tustin when we graduated High School in 2003 for $460,000.”

   “Oh, wow. That’s nice.”

   “Yeah, but it’s worth $180,000 now, and I mean, we can get a 4 bedroom house for that now so we’re just gonna let it go. It’s not worth paying the mortgage when we can just let it go and get a house instead.”

   When did it become morally acceptable, or even desirable, to hang the dirty laundry fact out there that you bought stupidly and are now a living moral vacuum that intends on shafting the bank and the taxpayer???
   1. Vincenzo December 5, 2010 at 12:00 pm

      Is it so difficult to buy a couple powerful computers, host them somewhere in China or Sweden, and save information about all abusers for 100 years: how much money their banks lost on the abusers’ credits, etc?

      Then, when an abuser or his wife or his grandchildren will try to get a new mortgage, they will be charged twice as much as honest people because a bank will be able to get info about their previous financial crimes.
      1. CA December 6, 2010 at 7:43 am

         this is just plain retarded
   2. Swiller December 5, 2010 at 7:49 pm

      It became morally acceptable when those nice, conservative, republican christians YOU voted into office, made it LAW.

      I find these posts humorous. These are the same people who will own a corporation, and when business tanks, declare BK, re-organize, and go forth. When an INDIVIDUAL does the same thing….man, that’s morally hazardous and they need to be punished. God will judge them with ever lasting hellfire! Let’s please God and make a debtors prison, God will like our oppression.

      Here’s the thing bud, if you don’t like the LAWS, then vote someone new into office, other than that, suck on your political decision.

      The mentality and in my opinion, SLAVERY, to the banksters mindset and capitalism, will be the downfall of this country, not someone making a WISE and LAWFUL decision. The boomers and ones sitting in homes with half a mil equity only care about themselves, not some nebulous “moral & ethical” stance.

      Welcome to the world A.W. Chuck helped create, I say to the young people…GO FOR IT, do what is best and LEGAL for you, just like the Good Ol’ Boys party does.
      1. Laura Louzader December 5, 2010 at 9:45 pm

         Agree with Swiller.

         Our conservative lawmakers and Supreme Court have created a psychopathic person known as a “corporation” which has all the rights of a natural person but none of the obligations or responsibilities. It can be killed to erase all its obligations while its shareholders, who created them, walk free with multi-billion dollar profits.

         I personally prefer to pay my bills, no matter how difficult it is right now in my semi-employed situation, and avoid running up debts I know I can’t pay.

         We have created a massive Moral Hazard by granting the status of a person to corporations and freeing them from all liabilities while socializing their losses. Shall we have a legal and moral double standard by which individuals have to carry the entire burden of responsibility while the corporations that unloaded their obligations after skimming hundreds of billions in profits and paying their top people multi-billion dollar bonuses, escape all penalty for multiple bankruptcies and defaults?

         In any case, our economy will not move forward until all the debt is cleared. There is no way that most buried home borrowers can ever in a thousand years repay their debts on their likely incomes, so the only way to clear all the debt is through foreclosures. So let these people just walk since it’s all they can do anyway, and let these properties fall to their “market clearing” prices.
         1. A.W. Chuck December 5, 2010 at 10:28 pm

            Laura. Good comment. I can see how a corporation could declare bankruptcy and its owners could walk away with profits, but most common shareholders would be out whatever their investment was. So you could say it’s a lose/lose because the owners get to keep their money and the shareholders and stakeholders lose theirs. I get that.

            But, as the old saying goes, two wrongs don’t make a right. You admit that “we” as in, our government, have created this massive moral hazard by allowing corporations to evaporate but then you approve of a second moral hazard by recommending that people walk away from homes they can’t afford. Even though they read a contract that outlined exactly what they were going to be paying, and signed it.

            ANY moral hazard is bad. Where corporations shift their losses to common shareholders, defaulting homeowners shift their losses to me, and you and Swiller. Your slippery slope of saying which moral hazard is okay and which one is not could get ugly very fast.

            I see people walking away from their homes. I know many people traveling around the world while on unemployment. I know people abusing welfare. So…like the couple that wants to walk away from their home…shouldn’t I do “what is best for me” as well?

            I could respond to all of those government/corporate moral hazards, by doing my own “acceptable” moral hazard of getting laid off so I can go on unemployment and have a 99 week (+13 more months potentially) vacation. Or work for cash under-the-table. Or get welfare money. Or go by a house and then sit in it for a year for free while they foreclose on me. Or stop paying my taxes. Wouldn’t I be “right” in doing all of those things because of all the OTHER moral hazards that already exist out there, created by our government?

            What if EVERYONE did that? What if EVERYONE believed that one of these moral hazards is justified, and did them, because of any one of the moral hazards our government created? Would we even have a country left at that point?

            Slippery slope. We need to change government, but that doesn’t make it any less wrong to walk away from the house. In fact, the worst thing this couple did was BUY the house without reading what they were signing.
            1. Serenity Now December 5, 2010 at 11:45 pm

               AWC,
               I agree with what you’re saying but let me throw something into the discussion. I’ve never purchased a home so I might be wrong, but when you break down your contract with the lender, isn’t it basicly “pay this amount each month or get out”? In the past, with 20% down payments required, the banks got to keep the DP and the property if you “got out”… How is it immoral to follow the loan agreement… they stopped paying and now they’re leaving as per the agreement? Further, you could argue that when the buyers made the agreement with 0 down and no income verification, they had no idea that the taxpayers would one day be called in to pick up the pieces….
               Would it be “immoral” to walk away if the banks absorbed the losses without dragging the taxpayers into it?
            2. A.W. Chuck December 6, 2010 at 2:58 am

               Yes, I would agree that it is “pay this amount each month or get out” and I understand what you are saying, I believe, is that the breaking of the contract is part of the contract so how is that immoral?

               But the bank is just the middleman, so let’s remove it for a moment and reconsider the question.

               Imagine this couple paid $480,000 back in 2003 to the previous owner directly and they had setup a 30 year payment plan with “x” amount to be paid each month, with interest.

               Then they decide to walk away from the home, having only paid a fraction of the $480,000. Not because they couldn’t pay it, but because they didn’t feel like paying it, because the house was worth less than what they agreed to pay way back when. Would that be moral to do that to the previous owner and his family?

               What if the previous owner had a house of his own for his family to pay for, and this buyer defaulting stuck the owner with hundreds of thousands of dollars in losses which might now send HIS family into bankruptcy? Would most people consider such a breach of contract moral?

               I think because an “evil, elitist, corporate, fat cat, Wall Street,” bank is involved as the middleman, it’s easier for most people to accept the immorality of defaulting on this mortgage.

               The reality is, this bank paid $480,000 to SOMEONE…and that someone is long gone and now this new owner simply agreed to pay the bank back for paying the previous owner off. Just because it’s a bank getting screwed (and not a family), and the breaking of a contract is part of a contract, I don’t believe removes the immorality of it.

               Lastly, the definition of morality is, “a code of conduct put forward by a society.” So, if we as a society accept that breaking contracts is an acceptable code of conduct…what are we saying about us as a society?

               And how would other countries, businesses and individuals change their way of doing business with our society under this newly accepted code of conduct where contracts mean nothing and can be broken “just ’cause?”

               I doubt anyone would ever do business with any of us again.

               And then what?

               Sticking to our promises, following the Golden Rule, doing unto others…these are moral contracts and they still apply to real ones too.
            3. A.W. Chuck December 6, 2010 at 3:23 am

               Just to clarify one more thing…

               As an amateur economist, as much as I agree that what this couple is doing is immoral, I understand why they are doing it.

               We are all motivated by incentives and disincentives. They are incentivised to abandon this property. I’m not condoning it, but I accept it.

               I blame our government, going back to the creation of the Community Reinvestment Act of 1977, the recent enforcement of it, the creation of Fannie Mae and Freddie Mac, and the politicians that created the mechanisms that allowed the banks to unload mortgages they knew the buyers couldn’t afford onto the tax payer (Fannie/Freddie) or Wall Street (then on to the taxpayer through bailouts).

               I’m not the Happywoodchuck, I’m the ANGRYwoodchuck, I don’t have to LIKE what these people are doing or condone it, or find it morally acceptable…even if I understand and agree with the reasons they are doing it.

               It IS immoral, but it is also in their own best interest. Each of us has to answer to themselves in these situations and it’s OKAY if we don’t give them a “morality pass” just because we understand WHY they are doing it.

               Why do we have to redefine the word “moral” just because we might agree with what they are doing?

               It can still be immoral AND understandable.
            4. Swiller December 6, 2010 at 8:07 pm

               A contract is a contract, signed and dated.

               A promise is your word, a verbal contract of honor.

               I agree Chuck, people and business should be run with the Golden Rule, but the way I think you interpret it, is the banksters/government get the Gold, and we as citizens, get the Rule.

               I base my morality on God’s Natural Laws, not what some preacher/politician/law enforcement interprets and directs me to believe. The “Golden Rule” has been around since the beginning of man, for it is, a natural law.
            5. A.W. Chuck December 7, 2010 at 2:30 am

               No, I agree.

               That’s why I have a John Locke magnet on my refrigerator.
         2. Chris December 6, 2010 at 9:46 am

            “It can be killed to erase all its obligations while its shareholders, who created them, walk free with multi-billion dollar profits.”

            Wrong, it’s the *insiders*, not the *shareholders* that walk free with profits. Shareholders are usually screwed in the end (the ones that are left holding the bags).
      2. A.W. Chuck December 5, 2010 at 10:07 pm

         First, why would you even pretend to know who I voted for? I have no idea who you voted for and it would be irresponsible for me to guess and then use my guess as the foundation for my entire argument. Stick to what you know as fact.

         Second, the difference between individuals and corporations bankrupting is that I am FORCED to subsidize the loss created by this couple walking away from their mortgage by my government through the bailouts they receive that are paid for with my taxes, but if a company declares bankruptcy, the shareholders that lose out had a CHOICE to invest in that company or not and they only lose what they invested…I will be paying for these bailout losses my entire life.

         And the assumption is, an investor only invests what they are willing to lose…and if they see things getting bad they can try and sell…but I have no idea how much I will lose from these bailouts, and I couldn’t “sell,” so who is to say whether I could “afford” this loss or not?

         Third. Bud? Again you are basing your argument on assumptions. I have in fact been very active in changing out our government, both Republican and Democrats. It has taken time away from my career and my family and cost me money in donations, but I think it is important that this country try a new approach to government. I don’t know if it will work, but I am doing more than my fair share to try.

         The only thing I am guilty of is my complacency. I was not active in government before…I was busy finishing college and getting a career started and getting married. As long as gov’t stayed out of my way, we were fine. I’m still young though, and now that government has gotten in our way with the stock bubble, the housing bubble that keeps us in an apartment and the Great Recession that has evaporated our annual bonuses and increases…now I am very active in government because government won’t get OUT of my way.

         Included in that, is a government that forces me to pay, under threat of imprisonment, to bailout banks that are stuck with homes people walk away from. People who were irresponsible enough to not read and understand what they were signing on the largest invest in their lives, and how much it would cost them.

         Now it just costs me and my family and I want to know why they think it’s okay for them to shift their debt to my family.
         1. Swiller December 6, 2010 at 7:46 pm

            Nice post Chuck, but here’s the thing…you voted for our corrupt government, they set up the rules, and the rules are what they are. Now when ordinary people have to default in order to protect their interests, you condemn them, but at the same time, you do not condemn the very same business practices that have been in place for years.

            I’m VERY tired of the baby boomer moral/ethical control. From throwing people in prison for prostitition, using drugs, or even being gay (yes, the good ol’ boys mentality made oral/anal sex ILLEGAL because it’s an affront to morals).

            I’m PISSED OFF too Chuck, and it’s mostly at the older generation for F’ing us with your shit politics, hypocritical “morals/ethics”, and your complete lack of understanding to anyone outside of your “acceptance” of what is right and wrong.

            There were plenty of dirtbags that engaged in fraud, and the good Lord knows, this blog has paraded them over and over, but there are thousands and thousands of people who got hoodwinked and what could you say…”they should have read and understand what they signed”. BUD, have you even tried to read and understand the tax code which you have to comply with.

            No one, and I mean no one, reads the entire package down to the small print. The system was gamed from the top, yet all you hear is people calling out the average Joe, yet the same people will still march to the pools and vote for the same corrupt PARTY line. This is out of FEAR that the other party will do more damage.

            Now you FEAR that people leaving their homes will cause you to suffer loss, so what better way to channel that fear than victimize the victims?

            That’ll do pig, that’ll do.
            1. A.W. Chuck December 7, 2010 at 2:26 am

               Swiller. Never saw the movie. Thanks for the compliment on my post.

               You’re really focusing on my lack of prior action in establishing a less corrupted government, but honestly, I’m in my late-30’s and let’s be honest…that’s like telling a 15 year old he keeps doing bad on his Calculus tests because he should have started studying when he was 5. At 5, he had other things to worry about and nobody was telling him about the impending Calculus test in 10 years and how important it would be. At least he’s studying his ass off now.

               Now, if our public school system made it important for citizens to understand their civic responsibilities, “the price of liberty is eternal vigilance,” the dangers of government and the centralization of power, monetary and fiscal policy, etc… then I would agree with you that I have been negligent. Seeing as it’s the government we condemn that teaches us about government, nobody should be surprised that we aren’t taught anything in school that matters and we walk around not knowing what the hell is going on.

               So we wanna get out of H.S., then get outta college, then get a job and then get married and somewhere along the way, hopefully be happy or rich or both and not hurt anyone along the way. We’re not really paying attention to what the government is doing, because we are preoccupied with getting a LIFE started and nobody is giving anyone a heads up in school for us to know any better about government evils.

               Since I started my war as a bachelor against government in 2005, I was 32 when I “woke up,” so to speak. Considering that most of your 20’s is spent partying, studying in college, and girl shopping to bring home to mom…I think I corrected course pretty early. I’ve only been alive long enough to vote in five elections, and I’m still happy with my Ron Paul vote in the last one and I only voted in two others…so really? You’re gonna hammer me for not paying attention during my teens and 20’s on the two elections I followed? C’mon now…

               Saying, “…older generation with your politics” and “your acceptance of what is right and wrong,” is inaccurate. You’re assuming my politics again because I believe in the morality of not breaking contracts…the Golden Rule morality, not the religious one. I think I can speak for my friends and others my age that I know when I say, most of US anyway are in the dilemma of being socially liberal but fiscally conservative. Where is the party for us?

               We would say, the gays can get married, the drugs can be legal, sex is whatever you want it to be and you can believe whatever religion you want as long as it isn’t the basis for passing laws that religiously bind people to a “religious morality.” The Golden Rule is a common sense moral, the right to swing my fist ends at the beginning of another man’s nose is a common sense moral, whereas gay marriage is a religious moral, abortion is a religious moral (or at least a personal choice), and yet we only have two parties to choose from with all or nothing options.

               I have to screw the next seventeen generations with debt to let the gays get married, or I can have low taxes but everyone gets measured by God’s yardstick. Where is the OTHER choice?

               Why can’t the fiscally conservative principals be applied at the federal level and the social ones be left with the states. I believe that was how it was supposed to be.

               And yes, I don’t understand the tax code but I have read books on Peter Schiff’s father Irwin, watched a movie on it, read some of the cases…I am learning…and I hope many others are too. I have a one year+ old anti-government blog, wrote a personal letter to every Supreme Court justice, faxed my congressmen, attended my first two rallies ever 2,800 miles from here, and donated to candidates I believe are “different” from the establishment. I walk around on the weekends with anti-big government t-shirt propaganda. I teach friends and family about government & economics. I’ve read over 30 books on monetary and fiscal policy and economics.

               I don’t think there is a lot of room based on my age, public education, and the actions I’ve taken since 2005 for you to try and condemn me for bringing about the crappy government we are currently oppressed by. I had 14 years of ignorance behind me and 43 years of waging war on big government completed and in front of me.

               You wanna help me or just complain about how I didn’t do enough when I was a kid?
            2. Swiller December 7, 2010 at 7:45 pm

               Excellent post! Sorry this is a late comment, but I’m working as well to change America.

               I, like you, am socially liberal, and fiscally conservative.

               In no way am I trying to condemn anyone. My posts are meant to inflame emotion, I stretch things to unbelievable, and sometimes hilarious proportions, but it is ALL meant to provoke, to get one to think. The posters at each others throats are probably the most searching to share, and even, learn.
            3. A.W. Chuck December 7, 2010 at 11:39 pm

               Fair enough Swiller, and thanks for the comments.

               With any luck, more people will self-educate, get involved, and we can make the changes that need to be done.
   3. . December 6, 2010 at 2:03 am

      “Yeah, we bought our condo in Tustin when we graduated High School in 2003 for $460,000, but it’s worth $180,000 now,”

      Have condo prices in Tustin really fallen 60%? Are you sure he didn’t say Moreno Valley? I find that hard to believe, but if it’s true, he (or his parents) should have bought in Irvine.

      I will believe you when you said a high school graduate bought a house.
      1. A.W. Chuck December 6, 2010 at 2:26 am

         I was not sure I had heard her correctly either, but my wife confirmed it. We were both standing close enough to reach out and touch her, all of us staring at a wall of Lego toys.

         She had a baby stroller, was very young, and the girl she was talking to was someone she knew from High School and they had not seen each other in awhile. The conversation was “catch up” talk.

         The other girl asked her where she lived, and she said, “Here, in Tustin” which is how the whole house conversation got started.

         In fact, the girl who I am quoting said something about “their” 10 year reunion coming up and she wanted to get out (of her mortgage) before then.

         Believe me, the whole conversation was strange from the beginning which was why my wife and I both tuned into it.

         My wife even said, “Wow, she’s going to have the whole checklist done before her H.S. reunion; married, house, kids, bankruptcy…”

         I can’t say whether her figures are accurate, I can only tell you those were the numbers she spoke, and we both heard them. She might be exaggerating for effect, who knows…
4. BD December 6, 2010 at 12:14 am

   If people take BK like a company they will dodge the debt. But, if they try to walk away and have any resources or savings at all.. the banks will come after them and their assets. Most people refinanced at least once so all of the purchase money mortgage protections are gone…

   BD
   1. CA December 6, 2010 at 7:47 am

      yeah but not likely to happen even if the debt is recourse due to the one action clause. i’ve yet to see any recourse debt go through judicial FC.
   2. Swiller December 6, 2010 at 8:00 pm

      This is TRUE BD.

      Current limit for a family/household of 3 for a Chapter 7 in CA is $70,000. Anything more than that, and the homeowner is forced to Chapter 13. The good thing about a Chapter 13, is you can erase the second mortgage by combining it with other debt to pay back the trustee.

      If you walkaway, the 2nd can come back on you (if it wasn’t used for purchase), as well as any other debt.

      I’d all for people doing walkaways, because I know no matter how much gimmicks are tried, these people cannot afford their homes and they need to be cleared out to make room for AFFORDABLE housing for those who are responsible with their incomes.

      The sad rip-off was all those defacrats and repugnanctans voted to cover the losses of banksters and big business, refuse to cover the little guy, and EXTRACT the payments through forced Income Tax.

      For the amount of amazingly educated and allegedly intelligent readers/posters here, it astounds me that the majority cannot see the forest for the trees.
5. Ochomehunter December 6, 2010 at 7:47 am

   I am surprised that this home came back to the market. Actually it had a lot of wood on site already for rebuilding, it was six months ago and folks were bidding and I was told that about 30 folks bid on it, all speculators/flippers. The home may not need more than $150K to make it brand spanking new, I wanted to put my offer under 203K loan but bank wanted to go all cash only. Now it shows as pending sale again, wonder what is going on there.

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