Higher Priced Homes Leading Strategic Defaults

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EDITOR’S COMMENT: High priced homes are coming onto the auction block at an increasing pace. The homes were in many cases falsely valued and now are appraised at huge discounts (call that losses) from the purchase price or last refinance.

As the numbers roll in, people are rolling out, taking short-sales or just walking away in a strategic default. Faced with the option of either paying a mortgage loan that has no value, homeowners are opting out.

The more difficult stories to hear are those who sold everything, liquidating retirement funds in order to do the impossible — pay a mortgage than can’t be paid.

by Pete Carey, Mercurynews.com

The housing crisis, which first devastated borrowers who purchased lower-cost homes with subprime loans, has caught up with people whose wealth helped them hang onto their houses longer.

Throughout affluent communities in the Bay Area, million-dollar-and-up homes are increasingly being lost to foreclosure, or sold as a last resort for far less than their mortgages.

More than 1,500 Bay Area homes with mortgages of $1 million or more were scheduled for auction last year, more than double the number in 2008, according to ForeclosureRadar, a foreclosure tracking service.

“The fact is, upper-end folks are starting to feel the crunch,” said Barbara Safran, president of the Contra Costa County Association of Realtors.

Santa Clara County had more than 400 homes valued at $1 million or more scheduled for auction in 2011, the most of six Bay Area counties.

Anne Walker of Coldwell Banker in Cupertino has a $1.7 million foreclosure listing in wealthy Monte Sereno. Like others in their situation, the former owners have no interest in talking about it publicly.

“Most of these higher-end people are, like, 45 years old plus, and they’ve gone through all their assets,” Walker said. “It’s a really devastating situation for them. They thought they had planned. They had their kids’ college fund, they had their 401(k)s, the stock, the mutual funds, and they’ve been hanging on for the last three years. They’ve gone through everything….

 

22 Responses

  1. Do NOT touch your retirement funds to pay for an underwater home. You can stay in your home for 2-3 years with no payments, save some money and then go rent for a while. The bankers are making out as usual like bandits taking every red cent from you while they dump the house on the market for half the price. Strategic Default is now becoming the wise person’s strategy and much more accepted by the masses. Obama has done zip to help homeowners, and right now he is just pretending to care since he’s up for reelection. I have been in my home for 2 years 2 months with BoA, formerly it was Countrywide, and I don’t even have the first Notice of Default. I discharged mortgages in BK in 2009, which was the best thing I ever did. BoA can’t even call me about these, and they can’t report on it after the discharge. My cc reads 0 balances and closed account. With a BK, all they can do is take the house, and they can have it. No tax liability and no deficiency can happen. My credit didn’t take that bad of a hit, and I got a few credit card offers after 6 months – and they are not secured ccs. Best thing I ever did to deal with the underwater house and lousy mortgage terms. The biggest problem is you can’t get another mortgage until 3 years after the foreclosure auction sale date. That is something that needs to be changed, because the banks are taking forever to foreclose. But right now I don’t want another house, so I don’t care.

  2. DCB

    Great point. I’ve thought that the reason they did not go after a lift stay was because they figure I won’t know about a deficiency judgment they would go after once the discharge is final. I think your point is one of the issues that must be brought forth in a quiet title action; is it not? In my complaint I stated that defendants refused to give me the original blue ink note from my original mortgage. The lein satisfaction filed in the county records, was executed by MERS. My legal argument with regards to this issue is that MERS does not have the legal capability to release the lein, therefore, subjecting me to double jeopardy on that note. Also, the lien satisfaction was prepared by Recontrust, signed by an assistant vice president of MERS in AZ, notarized in Texas for a property located in Delaware. Totally bogus. However, it would appear that basically we are all subject to multiple claims on these notes.

  3. @ALL

    Watch carefully the backend sale processes–the prices that homes are sold to collection agency pals-insiders-affiliates——-then flipped shortly thereafter for big gains with little or no markup—possibly credit bids—–ths is a theft og govt FHA and maybe FDIC money and/or articifial increase in your deficiency ———which they will go after irrespective of settlement agreements—-what do you say? —they agreed to let you walk away with a release of deficiency–what if the debt collector never really represented the owner of the note? what if the debt collector did not have right to claim in the 1st place?

    then how can that debt collector do an actual release on the note? –best it can do is say “i promise not to harass you anymore” —no release–maybe not even coming ff your credit report?

    so you give up your home for $1800 ——and a bunch of deceptice promises that the debt collector never was authorized to make—did you get a bargain–or another stick in the etc? Its one thing to get a promise from a bank acting for itself–that is something you might be able to ask to be enforced——but wortless if bank is ” acting as trustee” of a defunct trust—-or a debt collector purportedly acting for everybody involved even remotely. Those promises may not be enforceable–they may disappear as claims in a bankruptcy court while the true owner is looking at you and saying;

    “wheres my house you deadbeat—you gave it away to some thief—too bad for you—pay me”

    And you are back at the 1st level of HELL–that you thought was over–if you get close to signing papers for a mod refi–deed in lieu–any signing–get an attorney and get a name of a REAL bank as guarantor of the promises–or you may simply become a robbery victim along with some invetor pension fund that does not even know that their note has been stolen–their mortgage assigned—-you cannot be relieved of liability by a thief–a thiefs promises are worthless—a thief flying under the name of a BANK AS TRUSTEE is nothing more than a thief—-you cannot hold that bank accountable–all states give immunity to banks as trustees –so long as they do not knowilngly defraud you–necessarily you will find the banks always say “talk to the service” and like the sergeant in Hogans Heroes, ” I KNOW NOTHING–NOTHING!”

  4. Chas404
    Never admit that you are behind or in default on your payments. The burden of proof is on the bank to prove you owe them money.

    oliver@ipa.net
    Mortgage Audits
    Student Loan Audits
    Auto Loan Audits

  5. @Pat1

    My story is almost identical to yours! The only problem with renting is you lose the tax deduction and, therefore, will be paying more of your hard earned income right back to those that were implicit in the fraud and profited from the draining of all your savings. Adding insult to injury, the people you will probably end up renting from were those in collusion in this scheme and bought up masses of foreclosures at rock bottom pricing to rent back to you and for who will be realizing more profits from tax shelters and depreciation. So you see; the joke still ends right back up on us. This is why we must all keep up a very loud and demanding fight. Write and send documentation to anyone in the media and government agencies, your state AG, whomever..to let them know we will not stand for their criminal activities. We have been duped by government sponsored criminals. I can’t believe this is happening in the United States of America.

  6. If I had to do it again I would not have liquidated my 401k and savings! I purchased my first home when I was 20 yrs old and I am now in my mid 50’s I thought I was being responsible and would pull out of this rough patch. Of course I made a promise to pay and therefore since my income had dropped of course I needed to do what ever it took to make my payment.

    Little did I know I was being played!!

    Now this fight has consumed me for three years and the more I have learned the more disgusted I become. I am not a deadbeat, I work hard 12 hrs a day six days a week. I have lost everything except my will to fight!

    My high end home did not sell at the Foreclosure Auction so it went back to the pretender at 45% less then what I owed! They could have received full payment if they had just worked with us. That is when I knew something was wrong. What makes me sick is all I asked for was a reduced payments till I could get a new job (which I did) but they did not care.

    Well I care and I will continue to drag the pretenders into court and cost them as much money as I can. So far i have done quite well thanks to this and many blogs like it!

    I will remain in my foreclosed home as long as I can and thanks to recovering income I have the ability to financially fight the pretenders. it is an awful way to live but hey I am not easily scared and I have so much more to loose then the pretender. They have nothing but legal fees into this home, I have 8 years of payments , down payment , improvements and upkeep and most important memories and a life that I built for my family. Yes this was a HOME not a Security or an Investment it the place that was suppose to feel safe and comforting!

    The value to the pretender is half what it was in 2008. I The value to my family is priceless we saved and dreamed of owning this home for years before we got it. And I did not buy more home than I could afford. The sad truth is If the pretended would have worked with me I probably would not have found this blog or the truth. I would be still be paying a pretender.

    I have been a home owner for 36 years but I would rather go rent then pay a pretended . I think many more high end home owners will have the resources to bury these pretenders in court cases for years to come or they will just decide to walk away and buy with cash in a less expensive area.

    This has the potential to bring prices down in areas that are starting to recover and for that I am sorry but…

    The Banks brought this on themselves…so be it..!

  7. @Chas404,

    And I completely agree with you about HAM, HARP, etc.

    I was rejected for HAMP because… I was current in my payments (and the letter clearly says: “And therefore not at risk of defaulting”. It is written exactly like that!} Now, since I no longer am current, I can’t qualify for the new program.

    That reminds me of a friend who got her nursing diploma. She looked for work for over a year. Each time, same response: “We are looking for experienced people.” I remember her saying: “Well, in order for me to become experienced, I need to have a job, which I can’t get because I’m not experienced.” There is a very special quality to this absolute insanity. Franz Kafka had put his finger on it when he wrote: “The trial”. If you haven’t see the movie with Anthony Perkins and Orson Wells, it is a must see. The thing is: Kafka was a cocaine addicted boozer… Oh! That would be America nowadays! Bingo!

  8. Chas404,

    I think it’s a question of timing and strategy. As an example, I sent my “where the hell is my goddamn note?” (sorry, a fit of anger just got me…) as I was still paying. I was ignored. I then sent my QWR, still while paying. I was ignored. I then consulted with an attorney and told him of my plan. I retained him. And then, I stopped paying.

    My position becomes easier: “Your honor, I was paying. I sent several mail and got no answer. In the absence of a note and a recordation and in the absence of any cooperation whatsoever from the servicer, I was left with a choice to make: pay my mortgage, not knowing whether I was paying the right party or pay for an attorney. It’s been two years and, had I kept on paying the servicer, I still would not know, today, whom I owe the money too but I would have paid 24 additional months to a party that is nowhere on my mortgage. The reason we are here is simply because the servicer will not disclose who my money has gone to.”

    That position cannot be held by someone who first stopped paying and then retained an attorney. The mess is the same everywhere. Yet, each case is different.

    And I am even more adamant about standing since I may be one of the last people able to stand firm on it if the AGs settlement takes place, since, apparently, there is no provision in it mandating disclosure of trusts and trustees on the part of the servicer or even slightly touching upon clouded titles and correction of the records. So, on the basis of that settlement, I expect that judges will sit back, take a breath and say: “Well, AGs agreed to sign off on that because, in their opinion, it was irrelevant. I will not, on my own, reopen that issue which has been put to rest.”

  9. FYI enraged,

    I wonder if we should send offer to servicer to pay if they provide XYZ. Almost like we are offering to tender payment for TILA.

    I kinda did that with a DVL, but maybe we offer to pay if they provide xyz trust and prove authorization of servicer and also review some issues on origination (ie my title insurance $1200).

    I heard TILA case on Mandelman’s podcast the judges do like that offer has been made because at some point a judge will ask mmm how many months no pay.

    And our certified letter says look we offered but servicer/fannie no answer.

    It is all BS I get it but idea being I offered to pay true creditor but i need xyz trust and the correct amount. If bank does not respond that is their problem.

    C

  10. enraged,

    I am closer to your position than you think. i think it is the right way to go.

  11. @Chas404,

    That’s the difference between you and me: I will not, under any circumstance, negotiate with the bank. I am remaining firm on standing. I owe money but I don’t know to whom and I know it’s not the bank. Further, since no one has provided me with the complete accounting and payments were misapplied, I don’t know how much I owe. Therefore I cannot pay to unknown/undisclosed an unknown/undisclosed amount.

  12. Whether or not you voted for Obama or not, I hope you are realizing how disconnected he is and what an idiot he is. So before when I had perfect credit I could not access HAMP or HARP I had to default first. But now I need perfect credit in order to access HAMP 5.0.

    It is all BS. Back in October 2011 I was considering sticking it out to see about this new HAMP/HARP 5.0. It turns out OK fine idea if it had happened 2 yrs ago but it is too late now. Plus it is not a law and will most likely be shot down anyhow. U have to read the fine print anyhow and u will see how Obamas HAMP is only 4% approval rate. So figure he hits a homerun and this one is 8% effective. No. Best thing I did was stop paying and that was $10,000 ago already in 5 months. I hired attorney and we wait.

    It will be easily another 6 months and another $10K before this goes into place IF ever.

    Stop paying and hire attorney. I will negotiate in good faith with the ‘bank’ whenever their lawyer tells me what trust the loan is in and stop stonewalling.

  13. Also…that is why the heat is on to give refis to the “responsible” higher priced homeowners. They see that they are starting to just walk away so they will bend over to accommodate and make sure they are taken care of. They won’t be able to rent out those higher priced babies to common “deadbeats” like us; so they will get stuck with them.

  14. @ chris

    Same here. I told my husband we should have just defaulted while we still had savings and he wouldn’t do it. They played us like a fiddle, strung us along until they got every last dime. Organized banking mafia is what they are protected by those in office who we pay through our tax dollars. What a slap in the face that is. I don’t think we can win until there are revolts in the streets. These paid off politicians are all the same and they don’t give a rats ass about us except to keep collecting their tax dollars.

  15. Hello,

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  16. http://www.aljazeerah.info/Opinion%20Editorials/2012/February/6%20o/Why%20the%20AGs%20Must%20Not%20Settle,%20Robo-Signing%20Is%20Just%20the%20Tip%20of%20the%20Iceberg%20By%20Ellen%20Brown.htm

    For some reason, LL is censoring this article. I find it very important: apparently, the MBS frenzy keeps on going as strongly as, if not stronger than, before 9/23/07.

    Read it and draw your own conclusions.

  17. […] View article: Higher Priced Homes Leading Strategic Defaults […]

  18. It can’t go on indefinitely.

    The pendulum has swung way too far on the side of the 1%. When it swings back, it will be completely on the 99% side (i.e., the return to social programs allowing people to regain their financial independence, fronted by higer taxes on the 1%, the return to infrastructures, investments into education, stringent laws forbidding representatives from earning more than their salary payed for by the tax payer, in short, the return to a well-balanced and equitable society. It may have to be through a bout with some kind of socialism but, at this juncture, I am coming to view that as the lesser of two evils…

    It may take longer than we would like. It will come back, one way or the other.

  19. chas404,

    I suggest that you stay in your home and pay no one. I have worked with a lot of folks who have not paid any payments toward a Mortgage as there is no Mortgage.

    I am now working with Student Loans to a great success as most of them are all securitized.

    oliver@ipa.net
    Mortgage Audits
    Challenge Student Loans and Auto Loans

  20. So true Chris,
    WHO do we vote for?
    We have no choice in those that will run as none of them represent us.
    Liars and thieves. All bought.
    We may never see justice in this in our life time unless we get our children involved in the REAL world of politics and history.
    We need to let our 20 somethings know what to expect. How they will be taken advantage of unless they know how Banksters have taken advantage in the past.
    Although they may not listen at that age, we must start there.

    The way we teach them about American history has to change.

  21. I am on the same road. I should have jumped about 1 year sooner when I considered it. Now that I am 5 months into the wrecked credit etc I feel much much better having done this. I considered using my IRA but thankfully did not, but I burned through a ton of cash. We will see.

  22. This is becoming the new norm.

    I have done the same and when the tax base is substantially declined so will the monies in DC, they are spending, right now. My personal view: If I had it to do all over again, I would have stopped paying and walked, with all of my pension money, savings and personal property.

    These banksters are the most vile, disgusting creatures that walk among us. Jail is too good for them. Their acts have caused an entire class of people to collapse and no one is doing anything about it. Our country is becoming a cesspool for liars, cheats, thieves and corruption. Where do you stop all this? Voting is becoming part of the problem. Who, in fact do you vote for, they are all in bed together.

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