Owners Stop Paying Mortgages

great article, more people blaming the banks because they can't pay their mortgage.

There probably aren't many co-op mortgage in default because co-op boards never lowered their requirements the way banks did.

Does anyone have statistics on this? Are there any condos in good neighborhoods in Manhattan on fire-sale?

I find hard to believe that coops do not have a share of this. How else could they get their astronomical asking prices? If there was a bubble in coop prices then that means they relaxed their requirements.

I just love all the dead beats walking away because of their terrible decisions. Then the losers blame "wall street" and greed of others. (haha) The politicians feed right into the cycle. America circa 2010 what a farce.

It's the banks fault....they made me do it....blame them....I'm not to blame.
The Banks came to my house and draged me from my bed. They put ideas in my head that I wanted to purchase a home I could'nt afford then, they made me sign papers against my will. Then they draged me to my new place and demanded that I decorate in a manner in which I could not afford. After that they demanded that I invite over my friends and family to show the place off because everyone thought I was a lazy stupid loser. I showed them!!!!

It's all those bankers...they tricked me...everyone knows I'm a lazy stupid loser...
Until people in this country take responsibility for their own behavior and own up to their commitments we are going to be in deep doodoo.

Predator mortgage sellers lied their butts off to people and sold them a bill of goods. "There's a sucker born every minute," said P. T. Barnum. It's part of the American way to sucker other people, lie, cheat ---- all for a holy buck.
You can't blame the poor victims. They were cheated by masters .......... in one of the biggest cons in the past fifty years.
Hey, I'm glad those folks are relaxing and enjoying things .......

The govt is helping to create this moral hazard by foreclosure moratoriums. It will affect NY RE via the banks which will continue to take hits to their bottom lines for years and will affect the stock market.

Dogis: I agree that a lot of unsophisticated (and even sophisticated) people got in way over their heads because they trusted the banks and succumbed to high pressure tactics from sleazy mortgage brokers -- like Countrywide. However, that was then. This is now.

Even if you are getting away with this govt. induced scam to live rent free, why wouldn't you thank your lucky starts and hunker down. If you are about to be evicted from your home, you should not be going out to the Outback for steaks and going out to expensive movies and other entertainments. Really, the sense of entitlement is amazing. I was in Texas a few weeks ago and the woman behind me in the grocery store was paying with some kind of food stamps. Her cash items included a huge birthday cake and 3 quarts of premium, premium ice cream. I am loaded and I think twice about buying that ice cream. I can accept the birthday cake, but really, she couldn't feed the little rugrats regular ice cream? Prepare for another generation of outlandish entitlement. I think people who get in financial trouble should be dropped in a war zone -- like Rwanda-- for a few weeks and get a dose of reality.

I blame 'trading spaces'. I mean when there were only 1% of the popluation that could paint and decorate, a renovation really would bring an extra $50k to your 'home'. But as soon as Vern showed the 99% how to do it, we all went to home depot, did a Reno and walked out and tried to sell our homes back and forth. And as we all know by now, after 10 coats of paint, ya gotta go back to the studs, and that's expensive with Chinese drywall.

Me too. I miss the days when brokers held open houses with dust bunnies in the corners & unflushed toilets.

Apt23: I too hate it when people buy outrageous things with food stamps. But. But. How do you provide a safety net otherwise? I suppose we could set up a system where only basics can be bought with food stamps.

Apt. 23 ----No, no, no ---- drop the mortgage brokers and investment bankers in Rwanda for a few weeks .....
And eating at an Outback is a cheap evening out for those oldsters ---- hey, they got screwed by the American way. Let them enjoy their bit of the American way in their twilight years ....

there are limitations on what can be purchased with food stamps. i'd be surprised if a prepared cake was on the acceptable list. many people buying with food stamps are only paying for a portion of their groceries with the aid, the rest is cash.

Their attitude seems to have changed since he went into foreclosure. Now their letters say things like %u201Cwe%u2019re willing to work with you.%u201D But Mr. Tsiogas feels little urge to respond.

%u201CI need another year,%u201D he said, %u201Cand I%u2019m going to be pretty comfortable.%u201D
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LOVE LOVE LOVE IT! Americans go from overspending on the money pitt that housing is to tasting the free housing lifestyle and they love it! Not a bad trend imho to waste as little as possible on decent housing while saving to build real financial assets (that's what we do at least, and each year we are happier about it).

I just love all the dead beats walking away because of their terrible decisions.
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seems to me that the dead beats are those that bragged about buying at the peak and cannot recognize what a bunch of losers they are, so keep on wasting $ on their money pit imho. many of those losers even wasted money remodeling it thinking they were earning money doing so! you cannot go more loser than that.

very interesting that the increase in retail consumption coincides with the $ freed from the money pit of these people living now "rent free".

btw, anybody saw this movie?

http://www.imdb.com/title/tt0091541/ It's called "the money pit"

Walter and Anna want a home of their own. When Walter's real estate agent friend offers him what looks like the perfect home, Anna and Walter buy it. The house has many problems; structural, plumbing, electrical... These problems only come to light after they've moved in. Hence, the house is a 'money pit'. Also worthy of note are the comical builders and the terrible ex husband, Max, who still chases Anna. Written by Rob Hartill

A young couple sinks their life savings into a house that is falling apart to the extent that it no longer has a main stairway or water. This creates strains on their relationship. Every home owner will recognize some of the situations they encounter. Written by John Vogel

And eating at an Outback is a cheap evening out for those oldsters ---- hey, they got screwed by the American way. Let them enjoy their bit of the American way in their twilight years ....
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Totally agree. These guys at least woke up, they were sleeping at the wheel with a big smile. Their total honesty also serves to educate youngsters about the evils of not using your head and buy the BS of the NAR, the builders lobby, the Mortgage Bankers Assoc, and even grandma about getting ahead, ...

Prepare for another generation of outlandish entitlement.
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the fiscal problem is about the entitlements to those that are 55 and older NOW, not with the young. get a clue.

They should have invested in lottery tickets.

First, ultimately it isn't just the banks that pay for these deadbeats, but TAXPAYERS. None of those interviewed seemed to understand or recognize that fact.

Second, while there are understandable situations of hardship/bankruptcy (eg: medical emergency costs), these people simply bought homes that were far too expensive relative to their incomes. It just amazes me that people made the LARGEST financial decision in their lives and now act as if they didn't know what they were getting into. I blame the banks as well for letting people clearly get way over their heads - and funny enough not lending to extremely qualified buyers today. Both parties need to endure far worse consequences for their actions than they are presently experiencing.

The amount of moral hazard we have introduced into our economy/financial system is turning our country into a ponzi/scam state - with responsible taxpayers picking up the tab.

Strong examples have to be made or we can only expect more people in the future to blame the system for their greed and poor decision making.

Suddenly I feel like a total loser with my 843 FICO score. :(

Now I know why they call it street easy. Real estate. Pay inflated prices with little or no money down. Remortgage or take a home "equity" loan to buy some frivolous consumer items or take a vacation. Stop paying your loans. Continue living in your luxury abode. Hire a lawyer to stall forever. That was easy. No, that was STREETEASY.

Clearly, if real estate had continued upward, these low earning folks would have refinanced to put off the day of reckoning. Maybe have purchased a nice new SUV to reward their brilliant decisions. They will also strip the house of "anthing that is not nailed down" on their way out when they finally are foreclosed upon. I'm sure that they will feel justified because the mortgage bankers forced them to buy the home in the 1st place. Their names should be put in a database available to all future mortgage providers and be banned from receiving a government guaranteed mortgage forever.

Suddenly I feel like a total loser with my 843 FICO score. :(

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only if you used that FICO to buy a house for more than you should have paid and you are still paying for the mortgage, CC, property taxes...

remember these folks not only are not paying for the mortgage, they don't even pay for property taxes. it's really $0 housing costs, an absolute ideal.

The amount of moral hazard we have introduced into our economy/financial system is turning our country into a ponzi/scam state - with responsible taxpayers picking up the tab.

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i don't agree with this at all. the ponzi was the bubble per se, with half of middle class homebuyers committing mortgage fraud to buy more house and be more in the game. taxpayers that are homeowners cry now cause the losses are finally hyper visible but they were celebrating while responsible young homebuyers had to remain on the sidelines due to unreasonably high prices (that taxpayers/homeowners were celebrating).

come on! it was costly economically wise all the way through, not only now that these dead beats walk away.

Now I know why they call it street easy. Real estate. Pay inflated prices with little or no money down. Remortgage or take a home "equity" loan to buy some frivolous consumer items or take a vacation. Stop paying your loans. Continue living in your luxury abode. Hire a lawyer to stall forever. That was easy. No, that was STREETEASY.
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forgot the BRAG like there's no tomorrow and tell renters htey are losers before hte "Stop paying your loans"

"There probably aren't many co-op mortgage in default because co-op boards never lowered their requirements the way banks did."

Wrong.

The next new wave of foreclosures will be co-ops -- not because people bought more than they could afford, but because, despite following all the rules and passing muster with the co-op boards, they've now lost their INCOMES.

Coops should properly vet prospective shareholders to be sure they're not reliant on incomes to meet their obligations. I'd blame the Vice President of the Board in any building that has defaulting shareholders.

That's cute Alan.

But we both know that the vast majority of all co-op owners are not financially independent, and do, in fact, need to work JOBS for the money necessary to meet their mortgage and monthly maintenance payments.

If they lose their JOBS, there is no more money.

This is not the fault of any co-op board.

flash bulletin!!!!!

nycmatt nominated for nobel prize in economics for recent revolutionary discovery!!!!!

"If they lose their JOBS, there is no more money."

Profound! Brilliant! I wish I had the brains to have come up with this!

Just to throw gasoline on the fire. The issue I have here is that these people who are crawling away from their $250K mortgage (After 500+ days of squatting) because the house is only worth $125K, all have wonderful reasons:

I was duped, bank won't work with me, didn't know what I was signing up for, I-phone data bill is more important to pay at this time, Carlton Sheets infomercial course didn't work out the way I had anticipated. Suppose I accept all of your excuses, and I'm willing to in this scenario. Now, as the over-bloated fat bank cat, I'm going to help you out. I'll write off 50% of your mortgage. Your mortgage is now $125K, and I'll give you a fixed rate of 5.25%. Will that make you happy? Will you start paying your mortgage again? You will? wonderful... Here's the rub, even if I reset your loan, you have an excellent chance of being back in foreclosure in 2 years. It's like recidivism for child molesters. Ain't going to work no matter what the terms are, and I would rather just take the home. So part of your "strategic" default is to have the cops physically remove you from the home kicking and screaming. Maybe you could sell the video of that to "World's Funniest Videos" and make one of your monthly payments?

"If they lose their JOBS, there is no more money."

Profound! Brilliant! I wish I had the brains to have come up with this!"

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Frankly, I wish the government -- and the banks -- had the brains to come up with this, too, rather than instantly disqualifying distressed homeowners seeking assistance because they are facing foreclosure to to UNEMPLOYMENT rather than overspending on their home.

"Here's the rub, even if I reset your loan, you have an excellent chance of being back in foreclosure in 2 years. It's like recidivism for child molesters."

Not in the case of people who can't make their mortgage payments due to UNEMPLOYMENT.

Interesting how none of the individuals in the article profiled are in distress due to unemployment.

Matt, I should have qualified my "deal"... As fat cat banker, I'm only going to do a mortgage work out with you, and reset your loan, provided you CAN pay the lower fee at the time we make the deal. I promise as fat cat banker, I'll do my due-dilligence THIS time around and confirm you actually have a job. And then I'll wait for your second default in less than 24 months.

However, you can't show up to my new deal with no job and no money.

AR and NYC10023: No, she paid the basics with the stamps and then, as I said, her cash purchases were the other items.

Dogis: I appreciate that the oldsters (wow, it is gettin close for me) should enjoy their bit of American Dream. However, if they have been living off that dream for decades while I have been working my ass off and saving money -- all the while not eating steaks because it is detrimental to third world countries who can't sustain pasture land at the expense of growing food to feed the starving-- they can stay at their taxpayer financed home and kiss my ass. The guy who refinanced his home and took out money to give away a truck to his salesmen -- instead of taking a marketing class to realize how stupid that idea was now that his business is going belly up -- he can stay home and grow vegetables in his back yard as far as I'm concerned.

I am a lefty liberal. But this is beyond the pale. When people think it is okay to soak the taxpayers and allow people to live a grand American life-- sure go out to a steak dinner at Outback-- as a result of a loophole to allow the needy to have shelter, then it is bad for everyone. If you are living off the backs of hard working taxpayers, you are not allowed to have luxuries. Do you think the asshole in this story deserves to soak the poor Louisiana fisherman that is risking his health cleaning up the oil spill. No, the asshole in this story has strategized that he will get his credit back and all will be right with the world. It shouldn't happen that way. He should be ashamed.

The interesting part of the story was a graph shown on "Big Picture" , which showed lengthening lags to liquidation of mortgages. This put an interesting spin on the moderation of liquidation rates, which I believe have to spike sharply at some point due to the high amount of non-current loans..

http://www.ritholtz.com/blog/wp-content/uploads/2010/06/01nopayGrfx-popup-v2.jpg

I would recommend against increasing what the government does for people.
Look, I'm white, but you see a lot of minorities who didn't have these great opportunities to buy homes, so now they don't have the opportunity to basically steal their homes from the banks like some of these in the middle class and whites.
Plus, now all of these people get universal health care. Where is the pain for them. It is like now another generation of young people see this in the middle aged, and think that it is ok to do this. Did anyone see how fewer teenagers are trying to get summer jobs? They expect too much for everyone else. Going to art school and protesting when the budget cuts come for THEIR art classes, or taking stupid majors like philosophy or psychology which you can do nothing within unless you have a Doctor degree.
Unbelievable. These people walking away are paying less than a responsible person who was renting. Its bullcrap and I can't wait to hear from some of the liberals on this board, basically like the Greeks, who blame the system or just make smart ass comments.

Why all this discussion of the borrowers? This is a market economy. These borrowers didn't "steal" -- they made voluntary contracts with highly paid, highly sophisticated professionals who, no doubt, charged them fully for the privilege. Banks and bankers who make bad loans should be responsible for the consequences of their actions.

The borrowers paid for this loan. Some BANK choose to take a fee from these borrowers as well as a heavy dose of taxpayer funded welfare in order to lend them this money,and probably more to be bailed out for screwing up the loan. Some BANKER got paid a salary and a bonus for making this loan, either because he exercised his highly trained and highly paid professional judgment and concluded -- incompetently -- that they were capable of paying it back, or, more likely, because he concluded that he could scam the government into paying if they didn't. Some UNDERWRITER got paid for making a professional decision that these people were good risks, even though they weren't. Some APPRAISER got paid real money for claiming that their house was worth a bubble price, when two of the three standard appraisal methods said it wasn't. A large number of FEDERAL RESERVE and TREASURY department officials and REAL ESTATE shills who were paid lots of money for their expertise repeatedly told Americans that housing was a good investment, the foundation of a stable neighborhood, and the best way to assure security in old age. PETER PETERSON's paid minions made lots of money telling everyone that social security was insecure and doing their best to make their prophecy come true.

Isn't it time to apply normal capitalist rules to the capitalists? The usual rule is that a lender that makes loans on bad deals has to take the loss. That's why lenders are paid interest: to evaluate deals and take the risk that they'll go bad. When a business can't pay, it just gives the collateral back. The lender took on the risk and the lender is responsible.

Why don't the ordinary rules apply here? Banks were irresponsible. Bankers made loans they had no business making. Banks and bankers and appraisers and underwriters and all the other paid professionals who expected to (and probably did) profit from these loans were either incompetent or venal. Professionals who knowingly take risks should expect to pay the price when their bets go bad.

But fannie and freddie created an artifiical government market financeguy.

What?

ahhhh, leave it to "financeguy" to impart his cogent conclusions to the masses. thanks! have to disagree with you on this dude w67th. still think he is chavez in drag. nobody is saying the banks shouldn't (deservedly so) take a hit on these loans - they will and they have and continue to do so. what i think most have an issue with here is these folks gaming the system and purely putting it on the backs of the rest who are trying to make good and smart decisions. yes, you can extend the same logic to the morgan stanleys of the world and TS, point is it sucks just as hard both ways. ya know, kindergarten stuff. two wrongs don't make a right. but i can do it cause look what he just did. its new version of "dumbing down" of personal responsibilities of the 2000's.

Fannie and Freddy, of course, have been subsidizing bankers since the 1940s, as has the tax deduction for mortgage interest.

But what does that have to do with this article or these folks? They were suckers in the largest housing bubble in US history, and the various professionals who were supposed to protect them screwed up. Or, more accurately, used their political connections and the blindness of the deregulators to profit while shafting a decade's worth of overpaying buyers, excluded renters and misled homeowners.

The government should have stopped the game, of course, and maybe if it had been captured by the Reaganauts it would have. But the banks have no business whining that no one was protecting them from their own incompetence, greed and bad bets; they are the big boys here.

had NOT been captured

just brilliant.

Rangersfan -- Except they aren't moral equals. The bankers are living high on the hog off their welfare payments and the fees they were paid for doing this deal. The home-debtors are losing their homes and their credit ratings and trying to make the best of a bad situation. They should have known that they couldn't afford this -- but all the professionals told them they could. That isn't a relationship of moral equality. That's fiduciaries and quasi-fiduciaries acting like grifters, scama artists, and, of course, real existing welfare queens really driving, well, not Cadillacs, but Beemers.

And now, the home-debtors are acting reasonably responsibly, on the whole, even if they were suckers (and like all marks, a little too greedy themselves). But the scam artists and the welfare queens are mainly on the other side.

And all this stuff about how these borrowers are hurting the rest of us is just nonsense. Taxpayers are paying the salaries of the entire financial industry while they "rebuild capital" by borrowing from the Fed at 1% in order to lend our money to the Treasury at 3%. All Americans are paying for the unemployment and the social disruption of the bubble the professionals fed and profited from and campaigned to keep going.

But we are paying less, not more, for these home-debtors having defaulted -- no mortgage payments means no mortgage interest subsidy, and the bank (or next owner) will have to pay the real estate taxes if it is ever competent enough to foreclose. And the economy will recover faster, not slower, if all the loans that can never be paid back are just written off, as eventually they'll have to be, and the debtors, like the people in this article, can get back to doing something more productive than subsidizing undeserved banker bonuses.

Half a Dozen States Delay Tax Refunds - http://www.nytimes.com/2010/06/02/us/02refund.html?hp

Procrastination is no longer just for the taxpayers who wait until the last moment to file their tax returns. Thanks to the economic downturn, at least a half-dozen cash-poor states are now delaying their tax refund checks.

So, if the taxpayers are underwriting the banks. The banks are underwriting deadbeat borrowers. And now, the taxpayers are underwriting the dead beat tax collectors. Help me with this - what's next?

"So, if the taxpayers are underwriting the banks. The banks are underwriting deadbeat borrowers. And now, the taxpayers are underwriting the dead beat tax collectors. Help me with this - what's next?"

free housing for all!!! LOL Did you guys paid attention to people in Harlem asking for empty condos to become NYCHA rent controlled affordable housing? That land went to the city due to landlords walking away and not doing maintenance, the city gave it to developers for $1, now developers are walking away... The result might end up being affordable housing. Convoluted way, but a way after all. Arguably much better than an empty and dirty lot.

SJ: In most states, mortgages are non-recourse. That means the borrower has a legal right, that he or she paid for in real money, to turn the house over to bank rather than pay the loan at any time.

Borrowers who exercise the option they bought are NOT "deadbeats" and the bank is NOT underwriting them (in the sense of subsidizing them) in any way.

A non-recourse mortgage is a straightforward capitalist act between consenting adults in which the bank was paid to insure against the risk of a massive deflation of the housing bubble. Banks are sophisticated and diversified and actually somewhat in control of the risks of housing bubbles; they are appropriate insurers of this risk. Ordinary homeowners are not.

You people who feel so sorry for the oppressed bankers of the world because they might have to fulfill their contractual obligations ought to try a little market economics once in a while. It feels great and it works too.

financeguy - thats really again just populist bs your promoting. there is no such fiduciary requirement on mortgage brokers and providers - just patently untrue. now, to the extent some of these bozos falsified info or committed outright fraud or reckless lending, they can and should be prosecuted to the fullest extent of the law.

that still doesn't abolve the "takers" of these loans and refis that just defied any sensible justification on the part of certain consumers.

and if you want to rewrite the tax code that you feel is so imbalanced to home ownership, get a movement going. just quit the crazed loon that seeks to push blame all around the block.

Rangersfan: Not populism. Just a strong view that capitalist markets ought to be structured to promote productive behavior and a firm belief that democratic government was not instituted to steal from the middle class in order to give to the rich.

You are right that many of the financial intermediaries are not legally fiduciaries; that's why I called them quasi-fiduciaries. They merely allowed their marks to think they were acting in their interest, as good salesman and scam artists alike always do.

After securitization, the bankers turned into loan salesmen who could profit on any loan to anyone regardless of whether they could pay it back. Any borrower who didn't understand this radical change in the world -- and that would include anyone who listened to Alan Greenspan -- was simply a mark, ripe to be plucked.

The central problem, of course, is the invisible hand (which is just another name for the legal system that structures markets) creating massive incentives for highly paid professionals to exploit ordinary people, by selling them loans they couldn't afford to overpay for houses that weren't worth the price, while making them think they had money, ownership and stability they didn't.

Plenty of blame for that lies on the ideologues who convinced voters that "the problem is government," the politicians they elected, and the enablers/deregulators they appointed, who changed the laws to allow this. Moreover, the victims are partly at fault -- almost no scam can work unless the mark is at least partly complicit: anyone who really understood their own finances or the national housing market would have realized something was wrong. (Of course, one reason you go to a banker is because you don't understand those things, or, quite correctly, don't believe you have the objectivity to evaluate them in your own case -- well advised developers routinely take mortgages even if they didn't need them in order to get the benefit of the lender's expertise, objectivity and sharing of the risk).

But primary blame is always on the thief, not those who took the locks off the door. There is no moral equivalence between the scammer, on the one hand, and the mark or the police on the other -- even if they'd could have prevented the crime by being a bit more alert.

When bankers made loans to people they should have known could not afford them, based on collateral they knew would be inadequate in the event of the inevitable downturn, knowing that they were risking destroying individual family lives and the economy as a whole, just because they hoped that the bubble would last long enough to make it someone else's problem and in the meantime they expected to get a big bonus, they were thieves. Quite well-paid thieves in some cases. The home-debtors were deluded. It's not the same.

No one should feel sorry for banks that are now forced to live by the deals they made. The deals were unfair, one sided, and totally in the banks' favor. Over all, they made enough money to pay for an extraordinary number of overpriced NYC apartments. The fact that they'll make a little less than they hoped is not a reason to change the rules in their favor.

I agree with rangersguy.

you don't think the mortgage companies, which were often subs of the big banks, had any responsibilities to their shareholders? that's just bullshit.

I wonder how one would rate the potential responsible parties?
0 = entirely blameless / 100 = guilty as sin
Home/Condo/Coop buyer
Developer / Builder
Real Estate Agent
Mortgage Broker
Appraiser
Lending Institution
Real estate adverising / journalism / blogs
Government (tax collector, regulator)

AR, yes they did. and thats why a good number of them (lehman, bear, merrill, countrywide, etc) no longer exist. the "invisible hand" of the market took them out - as well as their shareholders. and a good number of employees at these places lost everything too - despite financeguys assertion that they are driving around in their beemers. maybe most stopped paying on them too....