

Homeowners in Foreclosure Find a Rent-Free Approach - mahipal
http://www.nytimes.com/2010/06/01/business/01nopay.html?pagewanted=all

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tptacek
What these people are doing is exactly equivalent to what tendentious tenants
do to avoid eviction. We almost uniformly hold those tenants in contempt;
they're perpetrating a fraud. The only difference here is that it's banks
holding the loans, not independent landlords.

I see how you could sympathize with a ruthless defaulting homeowner; after
all, what else are they going to do? Are we really asking them to vacate
_early_ solely to make the bank's job easier? On the other hand: what they're
doing is morally indefensible, and any costs to the bank their behavior incurs
is largely going to be borne by good-faith mortgageholders and new prospective
good-faith home buyers.

Maybe they shouldn't be bragging about this. Here's to hoping it catches up
with them sooner than later.

~~~
jasonlotito
A family member of mine is in the same position: they bought a house, and now
they can't afford it. I'd love to feel as if the bank should be held
accountable, but at the same time, I look at my family members, what he does,
how they spend their money, and I can't feel sympathy. They dug their own
hole.

And yet, the amount of entitlement coming from them is just insane. They feel
as if it's not their fault; they point at everyone except for them. It's the
governments fault they aren't getting money. Ignore the fact that they both
dropped out of college, bought a house together before marriage, had a child
before marriage, and are now on their way toward a second child, while
basically unemployed.

I've tried to help. Bought them a computer for school, send them gift
certificates so I know the money goes toward the kids. Bought them a washer
for their clothes. But when they go out and spend $200 on a tattoo for a
birthday gift (not to mention an iPod touch!), I can't help but wonder what
they are thinking.

And still, the self-entitlement they reek of is horrible. My wife and I work
hard, pay our bills, and still rent. We make more than enough to get a house,
but we want to pay off the few outstanding debts we have, and save up money
for a nice big down payment before we settle on a house. We look at them, and
wonder how they were given a loan, how they could feel like they should get
one, when we can't imagine getting one right now.

Maybe the lenders should be held accountable in some regards, but this doesn't
excuse the borrowers. The worst part is the kids. With a second a month away,
I just can't see how they'll be able to afford everything. I know they are
using their credit cards right now, but spending it on stupid crap ($200 for
carpeting for the new babies room.. seriously?)

Sorry. Long useless rant. Just had to get it out somewhere.

~~~
oldgregg
Hard to believe that 10 years ago you would often hear your average middle
class white person say "those black people need to get a job!" -- when was the
last time you heard that? An atmosphere of entitlements is overtaking the
middle class in this country and it doesn't bode well for our future. The
housing crisis will resolve itself in a few years-- the entitlement mentality
lasts forever -- and destroys civilizations.

~~~
tptacek
The entitlement mentality is hardly the only thing holding back the economies
of Europe.

------
icefox
“We could pay the mortgage company way more than the house is worth and starve
to death,”

This implies that if the house was worth what they were paying that they would
still starve to death and really they made a bad choice in buying the house in
the first place.

"But the couple also refinanced at the height of the market, taking out cash
to buy a truck..."

sigh...

~~~
sethg
For every unwise borrower there is an unwise lender. My sympathies are more
with the borrower, since the lender, as the side that supposedly hired people
with financial acumen, bears a majority of the responsibility for assessing
risk.

~~~
gsmaverick
In this case the problem lies with the political pressure applied by both Bush
and Clinton on Fannie Mae and Freddie Mac to continue giving out more
mortgages.

~~~
MichaelSalib
A bigger problem is the homeowners mortgage interest deduction. In terms of
its stated policy rational, it is a complete joke, but modification let alone
elimination remains political suicide.

------
patrickgzill
The banks don't want to foreclose, because they do better with "extend and
pretend" ... until the day before the foreclosure they can still carry the
worthless loan as an asset at 100% of its original value (if I understand this
part of the process correctly).

Who is the greater criminal?

Some old lady living in a crappy $125K house in Florida--or bank execs who in
concert with corrupt regulators are hiding billions in bad loans and meanwhile
paying themselves 100K bonuses or more?

~~~
tptacek
If you remove the word "criminal", which doesn't apply, and replace it with
"bad actor", I'm going to go with: "they are both bad actors". Squatting in a
$125k house you promised to pay for but now refuse to pay for is still bad.

This is the same lazy argument that runs though any discussion of any abuse of
any service anywhere. "Sure, I stole 10,000 credit card numbers --- but the
credit card companies are evil organizations that prey on low-income people,
and they're the ones that are going to end up paying!"

------
edw519
_“They’re all crooks."_

Let me see if I got this right... You borrowed money. Now you choose not to
make the monthly payment that you have already agreed to pay. And spend that
money on other stuff. And you call them the crooks?

~~~
MichaelSalib
Maybe both parties are crooks? This is not a zero sum game...they can both be
crooks at the same time.

~~~
kqr2
And unfortunately, the real "victims" in this episode are people who act
responsibly by paying their mortgages and taxes while receiving very little
interest on their savings.

------
istari
The Chinese sees the housing crisis from a different point of view: The US
cheated China out of billions by selling them bonds backed up by inflated real
estate, money saved up by hardworking Chinese. It's a completely different
take on the situation.

Someone had to provide the money in the first place. That someone sure as hell
wasn't the banks, the banks were intermediaries. Often times that someone was
a Chinese or German institution chasing higher interest rates with no clear
understanding of what was being sold to them.

Who benefited from the transaction? Whoever sold the home. A lot of foreign
money came into the US and stayed in the US.

------
tjmaxal
Imagine I decided to move into a foreclosed home and live there rent free
until the banks could legally force me out? What is that called? It's
stealing. Every month these people live in these houses they are stealing from
the banks. Yes, the banks are at fault for creating the opportunity to get
robbed but that doesn't justify the actions of these squatters.

Would you say that a rapist is justified in raping someone because they acted
in a sexually lewd manner?

The "they had it coming" argument just doesn't hold water.

------
tjmaxal
Didn't these people learn in grammar school that two wrongs don't make a
right?

~~~
MichaelSalib
In economic terms, two wrongs can certainly make a right. In many cases,
having these people move out would serve no purpose other than to destroy the
houses' values as well as the values of the surrounding homes. People who stay
in their homes prevent squatters from moving in and perform some maintenance.
Banks often make economically foolish decisions regarding foreclosure for a
whole host of reasons.

Plus, after reading articles like
<http://www.mcsweeneys.net/links/panoramaexcerpts/Ali.html> regarding how
mortgage servicers and banks deal with foreclosure, I'm disinclined to believe
that they are ever acting in good faith.

~~~
tptacek
Wait, you're saying you came by your principles on this issue through a
_McSweeny's_ article about a couple who knowingly stated an income 12x their
real income to buy a house that they could only hope to afford if the housing
market continued to appreciate stratospherically, and who then blamed the
_economy_ when their completely untenable loan blew up?

You do realize that it's perfectly reasonable to be disgusted with the
mortgage originators, the Wall Street financiers, the CDO managers, the CDO
manager's clueless investors, _and_ the feckless homeowners who got into bed
with them, right?

~~~
MichaelSalib
The article I linked to is not fiction. Do you have reason to believe that the
attorney who wrote it was lying?

And yes, I think the homeowners there pretty awful. But the banks didn't
determine that they were awful before they acted in bad faith; they acted in
bad faith from the get-go, for everyone, whether or not their actions merited
such treatment.

And from where I sit, it seems like the banks and servicers are the ones who
completely failed to do any due diligence and then blamed the economy when
their unsustainable loans proved, well, unsustainable. The average person is
functionally innumerate. They are going to make poor decisions regarding
quantitative matters, especially quantitative matters couched in ways that are
deliberately obfuscated. This is not true of the average bank. I expect better
from them.

~~~
tptacek
It's not fiction. But it's McSweeney's. It wasn't edited for accuracy or logic
or fact-checking or bias; it was edited to make it read well. I like
McSweeney's probably almost as much as you do, but would hesitate to cite it
in an argument about economics!

Your other two grafs don't actually rebut anything I said. Yes. Banks bad.
Very bad! Also: require Thomas to sit on hold to wait to talk to someone in
Bangalore about mortgage. Ridiculous fees, too! Bad! Unfortunately: _still not
OK to defraud them._ Contracts with bad evil banks? _Still valid._

~~~
MichaelSalib
_It wasn't edited for accuracy or logic or fact-checking or bias_

In general, I do not expect main stream publications to be able to edit
articles regarding economics. Journalists and editors are astonishingly
ignorant of basic economics, to say nothing of statistics or law. There's a
reason that economics professor Dean Baker keeps an entire blog devoted to
correcting the idiocies and distortions found in traditional reporting (see
<http://www.cepr.net/index.php/beat-the-press/> ); it is the same reason that
economics professor Brad Delong regularly lambastes major newspapers on his
blog by chanting "why, oh why can't we have a better press corps?" (see
<http://delong.typepad.com/sdj/better_press_corps/> ). So the fact that this
article didn't appear in the Washington Post (where I've read "fact-checked"
articles which presumed that inflation does not exist) doesn't really trouble
me. It is written by an attorney and officers of the court are generally
subject to sanction if they misrepresent cases.

 _I like McSweeney's probably almost as much as you do_

Um, I don't read McSweeny's; I read this article because it was linked from an
economics/policy blog I respect.

 _Unfortunately: still not OK to defraud them._

I don't believe the behavior in question falls under fraud statutes.

This is surprising: generally we expect corporations to act in their best
interest taking full advantage of their rights under the law, even if doing so
violates the spirit of the law. How odd that we apply such different standards
to individuals.

~~~
tptacek
Your argument here seems to boil down to, "the Washington Post has inadequate
editorial standards for business reporting, so we should be happy to cite
outlets that have literally no editorial standards for business reporting."
Sorry, I disagree.

But you should read McSweeney's. It often pretty excellent.

~~~
MichaelSalib
It is not just the WAPO. I've seen the same appalling ignorance in many
publications. I've also talked to journalists and I feel very confident in
saying that people in journalism generally don't have the skills needed to
fact checking in this area. Beyond that, "fact checking" as traditionally done
is a very narrow activity that allows all manner of deceptions to be
published. Your childlike faith in the utility of traditional news
organizations to ensure accuracy by fact-checking is charming, but also
ridiculous.

And McSweeny's certainly does have editorial standards. Libel is still a
crime, which both McSweeny's and the attorney who wrote the article are very
much aware of.

