Life In A Subprime Ghost Town: Not Paying The Mortgage Feels "Great!"

We’ve been hearing tales of suburban McGhost-Towns that were submerged by a tidal wave of foreclosures at the height of the subprime meltdown and are now just sitting there, the lawns turning brown one by one.

Tess Vigeland from Marketplace Money found one of these mythical towns and interviewed some of the residents. With so many houses standing empty, one of the few remaining families has decided to stop paying their mortgage. You might expect tears, but the Sinclairs say it feels “great” to be living rent free with a “bank full of money”:

Sinclair: If they reduced our interest rate back to 4.25, we might be able to make the payments, but I don’t think we’re going to.

Vigeland: Now, why not?

Sinclair: We would do it if the equity was there, but in a case where we’re already so behind… Imagine that for five years, say, we’re gonna pay four grand a month and then we’re just gonna be back up at what we bought the house for. We feel like we’re throwing away money.

The Sinclairs say they want to take responsibility for their debts, but right now it makes more financial sense not to.

Sinclair: I mean, you ask a good question. Is it really the right thing to do to let the mortgage companies take up the difference? That’s a really tough ethical question.

Dan says he experienced the various stages of grief, including denial and anger. Now he’s just relieved.

Sinclair: We went through months of being skinflints, because we knew that we were going into the red, so we didn’t buy anything. All the sudden, we had a bank full of money and we’re living rent-free, but we know that’s not really our money.

Vigeland: How does that feel?

Esmeralda Sinclair: Great! Like he said, we were so tight with money…

Dan: It does feel great, because all the sudden, we feel like we have a little margin now where we can go out to dinner, get a babysitter…

Vigeland: But you’re not paying your mortgage. You’re not paying the biggest obligation you have. How does that feel good?

Esmeralda: We already went through the guilt. This is really what we need to do, not what we wanted to do, but what we need to do.

Isn’t that something.

Ghost Town USA [Marketplace Money]
(Photo:Tess Vigeland)

Comments

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  1. Monoplex says:

    What a great example to their children of what “personal responsibility” really entails.

  2. klondikedog says:

    Seems like a great time to call the mortgage company and work out a reasonable payment schedule. If this really is a ghost town any lender is going to say – hey $3000 a month is much better than nothing….

    K.

  3. arniec says:

    It will feel “great” when they try to shove their big screen TV (probably bought on credit) in the back of their car. Where they live because no one will rent to them, let alone sell them another house.

  4. mknoll1 says:

    when historians look back at the collapse of america in the 21st century this will be the reason. Historians may not be able to figure it out but the fact is that attitudes like this are the reaosn that America will fail. America did used to be the greatest country on earth because of our attitudes but we have clearly lost our way and our values. This is really really sad.

  5. darundal says:

    Oh, I am going to be so hated for this, but those people are Douches.

  6. did he skip the bargaining step altogether? cheater

  7. chilled says:

    I’m afraid this is the reality..if they wait long enough,the government will cut them a great deal!!

  8. Cialis Cooper says:

    It is no wonder the rest of the world hates “us.”

  9. beavis88 says:

    We should bring back debtors prisons for people like these. They are degenerates, plain and simple.

  10. thirdbase says:

    It’s just a business decision not a moral one. Don’t ever forget that! The banks and big corporate lenders don’t have morals you shouldn’t either. Make a correct decision based on your situation, and proceed with your business plan. This is not an emotional trip it’s a business decision pure and simple.

  11. novelgirl says:

    God forbid you have to cut back on things to pay a mortgage you willingly entered into. No one forced you to buy a house. This is just mind boggling.
    Why I don’t not pay my rent? Oh yeah, because I get evicted.

  12. toddy33 says:

    @darundal: No, I don’t think you are.

    Heck, I’m usually against the “blame the victim” mentality that sometimes occurs around here, but these folks are NOT victims.

    I particularly like the capital “D” in Douches.

    :)

  13. ivanthemute says:

    Can’t pay the mortgage, but that widescreen has a live cable box on top of it. Nice, motherfuckers.

  14. mikesfree says:

    Um… what will they do when they get a huge deficiency judgement against placed against them?

  15. AtomikB says:

    A mortgage contract is pretty clear cut. There are two options under the terms of the contract:

    A) You make the payments

    or,

    B) The bank gets the house

    If you decide to stop making payments, you’re not doing anything bad or wrong. You’re just choosing option B. It’s perfectly moral AND legal to stop paying any time you want.

  16. stageright says:

    @Monoplex: Responsibility cuts both ways. If the lender made an irresponsible loan, then why is the borrower suddenly supposed to be the responsible one?

    Wouldn’t the responsible thing for the lenders to do be to lower the interest rates back to the level that people CAN make the payments? Again, if the bank doesn’t feel the need to act in a reasonable and responsible manner, I have a hard time seeing why the borrow should.

    In the end, the borrower is going to lose the house as rates go up and up – this borrower is simply choosing to be responsible to his *family*, by putting himself in the best financial position he can when that happens.

  17. moneywrangler says:

    Cry me a river. He wants his mortgage rate back to 4.25. Screw you and the horse you rode in on. The rest of us are working our asses off, paying our fixed 30 year rates on 1,000 sq foot houses. Send in the cops.

  18. JanetCarol says:

    This is an example of great parenting. I mean making a choice so you can go to dinner and hirer a babysitter, and then in a few months be homeless or have to explain to your kids why they are sleeping on grandma’s couch and no longer have a bedroom.
    Wow.
    Way to look out for your kids and their well being. Not to mention the excellent example you’re setting for them.

  19. Wormfather says:

    I want to blame the victim here but the victim is to blame, this makes my Troll CPU say “Does not compute”

    With that said I’m going to take the fall back and blame religion. Yep, this is religion’s fault.

    (No that wasnt supposed to make sense, any of it.)

  20. wring says:

    so how are they still allowed to live in that house?

  21. wallapuctus says:

    Whatever the bank is equally to blame for its short-sightedness. They’re all douches.

  22. katylostherart says:

    @Monoplex: well then they can explain the personal responsibility of the appraisers and realtors to do their jobs honestly. if you’re getting all your fees up front what’s the incentive to not lie about how much something costs if you’re getting a percentage? where’s their personal responsibility? also, they realize that they’re going to lose the house. they’re waiting for the eviction notice and probably saving up to move somewhere to rent. that’s not irresponsible. they’re aware of the consequences they’re just making a different choice and giving themselves a way out when they had none before.

  23. Kmoney says:

    i don’t quite follow what feels great about inching closer to foreclosure? am i missing something or are these folks completely out of their gourds?

  24. JanetCarol says:

    Everyone would feel differently if they did not have:
    Kids
    Giant TV
    tons of money to go out to dinner with
    A job

  25. pinkbunnyslippers says:

    I hope they get evicted and have to live in a homeless shelter and then eventually out in the streets. Let’s see how “great” they’re feeling then.

    Bastards. Seriously.

  26. friendlynerd says:

    @toddy33:
    The difference here is they’re not victims. They signed the docs, whether they should have or not.

    If anyone’s a victim in this it’s the mortgage company.

  27. katylostherart says:

    @novelgirl: but they did cut back and it didn’t save them. that was the problem with these mortgages. there was NO way the people who got these loans were ever going to be able to afford them. you can’t shove your entire salary into one bill. you need food and utilities and savings and people are people and they do need recreation. no these people shouldn’t have taken a loan they couldn’t handle, but they were never supposed to get approved for one either.

  28. toddy33 says:

    @friendlynerd:

    ? That’s what I said…

  29. ndjustin says:

    God help us if our government decides to bail out people like this. Sure, the lenders weren’t being the most moral people out there, but they didn’t hold a gun to anyone’s head.

    We need to learn to live within our means, and the only people being hurt by this whole mess are those who do live within their means. My wife and I refuse to buy a home with the way prices are right now because people like this who drove the prices up.

    A house is not a guaranteed investment, it’s a fairly safe investment but you can’t always expect the equality to grow, and then refuse to pay. People like this make me sick.

  30. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    @wring: There are laws to prevent you from getting kicked out on the curb for missing payments. The foreclosure process is a long one and during that time they cannot kick them out.

    The sad part is that there are enough people in a foreclosure process such that gaming the system is pretty well known at this point.

  31. fostina1 says:

    @Wormfather:

    i agree, religion is the most evil thing ever invented.

    @AtomikB: i agree.

  32. SuffolkHouse says:

    @Monoplex:

    It is a good example. Teach them that when the system fails you, that the working and middle classes shouldn’t always be the one’s holding the bag. Teach them to fight the upper class by handing them their just desserts in the form of a foreclosure.

    Teach them assertiveness that says, “If you, Mr Bank, are going to hold the government and economy hostage for profit, insisting that tax payers bail you out, you are going to reconsider our interest rate.”

    Yes! Teach you kids that knowing that you contract allows you to bail on a stupid investment that assumed neighbors would move in, means exercising that option when it will help your family.

    Yes! This is a great example!

  33. missdona says:

    We just closed on our condo a couple of days ago. At the closing, our attorney told us in the hey-day of subprime he was doing 30-60 closings per month, and now it’s like 10-20. He said that you would see crazy mortgage terms, that freed up like $1K a month and he would say, come back in a year, keep your debts down and we can put you in a 30 year fixed. Where would they go? Straight to Home Depot to start renovating, or purchasing furniture or grand vacations.

    @darundal
    @toddy33:
    The Douches are not victims, so you cannot blame them.

  34. GreatCaesarsGhost says:

    I love all these comments. If you have a mortgage that’s twice your home’s value, and legally you can just walk away from it, you should keep paying because of some vague moral obligation? Hah! Not one of you people would keep paying. You’d be stupid to do so.

    This is a financial obligation. Not a moral obligation. If I decide I don’t want to pay my car note anymore, I stop and the bank takes it. That doesn’t make me a jerk.

  35. whatdoyoucare says:

    “All the sudden, we had a bank full of money and we’re living rent-free, but we know that’s not really our money.

    Vigeland: How does that feel?

    Esmeralda Sinclair: Great! Like he said, we were so tight with money…”

    They make me sick!

  36. elf6c says:

    Nice cat.

  37. manualeject says:

    I live in an apartment. I eat hot dogs for dinner. I cannot afford to eat in a restaurant, but that is just the way it is. I am not bothering anyone.

    Not paying for what you bought is simply stealing, and someone will have to pay for it eventually. As the result, hard earned money is worth less and less everyday.

  38. friendlynerd says:

    @toddy33:
    Oh I know, I’m agreeing. :)

  39. Concerned_Citizen says:

    Blame the banks. They should just give people the lower interest rate they can afford. People keep paying and keep their homes and the banks don’t lose money.

  40. toddy33 says:

    @missdona:

    ? Goodness…how many times must I point out that I said they are NOT victims?!? Sheesh. I even all-capped NOT. I agree!! Honest!! I swear!! Really!!

  41. B says:

    @friendlynerd: The Mortgage company isn’t the victim here either. They offered the couple a loan knowing full well they wouldn’t be able to pay it back. Both parties are equally to blame for the situation, just the Sinclairs are benefiting more from it right now. Of course, the Mortgage company got years of high profits out of the deal.

  42. RandoX says:

    @thirdbase: So what you’re saying is that it would be fine for the banks and mortgage companies to not do their part if they suddenly decided that the contract wasn’t a good economic decision? What if they decided to sell your house out from under you because the values had skyrocketed and they were stuck collecting a measly 6.5% on this uber-valuable property? Just because something makes business sense doesn’t make it ok. It IS a moral issue. It’s doing what you agreed to.

  43. missdona says:

    @toddy33: I’m agreeing. We’re all good.

  44. kelptocratic says:

    These people make me sick.

  45. cybercjh says:

    Reply to thirdbase at 10:26 AM, “It’s just a business decision not a moral one.”

    I say … SPOT FREAKING ON. Businesses make business decisions all the times. United Airlines files for bankruptcy and cancels employee pensions which the government then takes over. BUSINESS DECISION. But, that’s okay. Circuit City lays off > 3,000 employees in an effort to cut costs. BUSINESS DECISION. But, that’s okay. United Healthcare denies medical procedures to people who need them in order to save money. BUSINESS DECISION. But, that’s okay.

    But, Mr. & Mrs. Smith at 123 Main Street decide to stop paying their mortgage because their house is worth 30% less than when they bought it, they’re upside down on their mortgage, their interest rate just reset to 9% and they can’t refinance because the house is worth less than the current balance. So, they decide to stop paying the mortgage, let the bank repo the house and get on with their life. BUSINESS DECISION. Oh no, but THIS will cause the downfall of American Society.

    GIVE ME AN EFF’ING BREAK. thirdbase is one of the few people commenting on here that has half a brain.

  46. Roadkill says:

    It’ll sure feel great when they get foreclosed on and have a black mark on their credit record for many years to come.

    Isn’t it exactly this sort of “satisfaction now, ignore problems down the road” attitude which caused the subprime mortgage crisis in the first place?

  47. zero_o says:

    @mknoll1: I agree, what made America a powerful nation was a populace that worked hard and had a idea of making things better, now it seems like everyone wants a free ride.

  48. Piro says:

    Sometimes, I like to walk into a fancy restaurant, eat a delicious meal, sit my bloated rear on their beautiful toilet seat and then just stroll out the door without paying.

    It feels great, and it’s really the restaurant’s fault for charging $95 for a steak in the first place. (Even if they did clearly indicate the price on the menu before I ordered it.)

  49. toddy33 says:

    @cybercjh:

    Heck, my apparently less thna half a brain thinks United Airlines and Circuit City and United Healthcare are Douches, too.

  50. Mark 2000 says:

    Jeez, if you’re pro corporate why are you people reading consumerist? These people are victims of the same situation as all their neighbors. You know, if one person doesn’t like you its their problem. If 20 don’t like you its probably your problem.

    If one person can’t pay the mortgage they’re douches. If the whole neighborhood can’t pay, if the whole country can’t pay then its the bank’s fault. If one couple figure out how to work the system a little better than the rest hooray for them. Fuck the banks, all of them everywhere.

  51. boandmichele says:

    okay everyone, help me understand this, because im trying to learn how all this works.

    so, who decides to increase the interest rate on these adjustable mortgates? wouldnt it kinda be their fault for making the payments so high?

  52. qikamar says:

    @darundal: I for one don’t hate you. You are exactly correct in this case – these people ARE douchebags, and alot of the REST of us are going to have to pay later for this attitude. Eff them, Eff them hard!

  53. jscott73 says:

    @RandoX: thirdbase is absolutely right, this is a business decision pure and simple and it teaches a great deal to their children. The contract has a clause for what happens when they stop paying and they made a smart financial decision for their current situation. Clearly they will have to pay for it later but that is intangible right now and is probably much less then trying to keep paying their mortgage.

    Te contract does not have a clause for allowing the bank to sell the house whenever they want, otherwise I guarantee you they would.

  54. @cybercjh:

    Exactly. Just because it pays for where you sleep, a mortgage and rent are two totally different things. If your rent went up drastically past what you were able to afford, you know what’d you’d do, folks? Move!

    Well, when you’re tied to a house that you OWN and are making payments on, and it becomes too much, why move until you have to? Why continue to burn money on a house you will never own? It’s not ideal.

    Also, I think a lot of people are missing the point here with monthly expenses. “Cutting back a little” is simply not possible because their mortgage payment is not “a little” above what they can afford. 70 bucks a month on cable isn’t going to save them. I suggest folks listen to the whole story on the Marketplace Money podcast before casting judgement.

  55. SuffolkHouse says:

    @Roadkill:

    Lucky for them, credit scores have decreasing importance to greedy scum who want to move product. And then when the entire industry collapses? What happens? Wall Street opens up it pocketbooks and sends lobbyists all over Washington to bail them out. No one calls them babies. No one says them make them sick. But, the average guy priced out of his home – that makes you sick. Well, you are selfish corporatist apologist!

  56. jscott73 says:

    @zero_o: Actually what made America a powerful nation was an enslaved populace that worked hard or got whipped.

  57. SkokieGuy says:

    The only way their payments would be going up is if they did not convert an adjustable rate mortgate to a fixed. They should not have bought such an expensive home if they could not have handled the potential of an increasing interest rate AND considering rates were reasonable for several YEARS, they had plenty of time to refinance into a fixed.

    Yes, they are making a business decision, I will be furious if people like this eventually receive handouts, tax rebates or some other form of taxpayer funded ‘help’ to deal with a problem that is soley of their own making.

    Gee, if they cut their cable service, sold off some of their possessions, traded their car for a used vehicle,

  58. cmdrsass says:

    They are facing some pretty severe consequences for not keeping up with the mortgage, yet they “feel great”. Way to bury your heads in the sand Douches.

  59. zero_o says:

    Somehow I think we ought to bull doze the empty houses and turn it back into green space. That way, crime doesn’t move in and the all important “new home sales” will go up when people buy the lots and build new houses. I think having a nice empty lot (not a construction site) is preferable to having a abandoned house.

  60. Tallanvor says:

    @thirdbase:

    Two wrongs don’t make a right. Lack of morality on the part of another doesn’t excuse it on your part.

    I have very little sympathy for people who bought more than they could afford. That said, there were plenty of people making money off of them and helping them make poor decisions, so most of these people aren’t completely to blame.

    But in the end, what these people are doing just isn’t right no matter how you look at it.

  61. ClayS says:

    It would be interesting if their employers decided to stop paying them. What a great feeling to have people working without that annoying expense.

  62. kelptocratic says:

    @boandmichele: Anyone who takes a loan with an ARM is pretty much bound to the adjustments.

    Granted, there’s some predatory lending out there, but most of these people saw 1% APR and wound up in houses they could NEVER afforded via traditional mortgages. Yeah, it’s sad in some cases. But in this case, it’s goddamn disgraceful.

    Imagine if Schwab (or whoever) tried something similar… Oh, we’re going to go ahead and not pay you interest or dividends . We like this “bank full of money.”

  63. EvilConservative says:

    @SuffolkHouse: Yours is the biggest Douche comment of the all. What an ass. Who’s money is in that house? It’s not the bank’s, idiot. It’s the depositors. Yours, mine and theirs. They should garnish that “bank full of money” from these people and use it for the foreclosure.

    Class war is just stupid. Nobody poor ever hired anyone else for anything.

  64. katylostherart says:

    @cybercjh: exactly.

  65. coan_net says:

    I feel so sorry for people like that.

    I mean they make a deal to pay a certain amount each month for something, but later decide they don’t want to.

    ….. I wish that would work for me.

    My friend & I went to Vegas, both with $1,000. He only spent about $100. I spent all my $1,000 and my plane ticket.

    Waaaaaaaaa… Where is the government to bail me out like all those subprime people???? Why can’t I get a free handout for getting in over my head????? Why can’t I get something for free?????

    personal responsibility – take responsibility for yourself! Grow up & take responsibility for your own actions & commitments

  66. elijah_dukes_mayonnaise says:

    They’d be more sympathetic if they weren’t throwing away their money on bullshit.

  67. razremytuxbuddy says:

    I agree with those saying that this couple, their mortgage company, realtor and appraiser are all to blame here. I don’t know if that is an actual photo of them in their home, but I bet it could be. I see a room full of new furnishings and electronics, all purchased with credit cards, I presume. Not a single item is a hand-me-down or purchased secondhand. People like this couple have been around long before the mortgage crisis. They were the ones running up their credit cards until it was time to declare bankruptcy, and then starting the cycle all over again.

  68. Gev says:

    @katylostherart: Just because you can do something doesn’t mean that you should.

    With a mortgage it’s easy enough to do some research and find out what your payments are going to be and decide from that whether or not you can afford to take on the loan.

    Relying on the hope that you can unload the house for a profit before the payments on your ARM explode is just a recipe for disaster.

  69. @klondikedog: If it really is a ghost town, why would you want to make payments on a house that’s only going to drop in value further?

    (Speaking of ghost towns, are people this morally angry about people who abandoned their houses and obligations way out west way back when and made the archetypical ghost towns? And were OTHER people that angry at the time at those who did so?)

  70. klondikedog says:

    What I don’t understand is that if the value of their house a t one time was around $600k (based on my quick reading of the NPR story), their mortgage went from $3000 to $4000, they should have some equity (if houses on the street are now going for $200K).

    If they can’t afford the $4000 mortgage, they should work with their lender to work out a reasonable reappraisal of the house to what it is actually worth now and make payments to get caught up.

    Foreclosing on this house is not in the bank’s best interest so its better to get this loan off their books somehow.

    There’s something missing from this story.

    K.

  71. laserjobs says:

    So middle class America is now acting like corporate America. Looks like time to change the game.

  72. toddy33 says:

    It’s the whole idea that they “feel great” for living rent-free with a bank full of money that is so…well, I’m trying to give up language like that.

    It’s one thing to have a genuine hardship and do something about it. It’s another to say that you feel great and you’re over the guilt for just, oh, gosh, quitting obligations that you took on.

  73. evilinkblot says:

    And I actually have friends who wonder why I’m liberal yet firmly against a bailout.

  74. backbroken says:

    “The Sinclairs say they want to take responsibility for their debts, but right now it makes more financial sense not to.”

    Yes, it is always easier financial to not pay your debts.

    “Sinclair: I mean, you ask a good question. Is it really the right thing to do to let the mortgage companies take up the difference? That’s a really tough ethical question.”

    If you think that is a really tough ethical question, well, for once I am speechless.

  75. nadmonk says:

    When my wife and I looked at houses a couple of years ago, we actually said to each other when we saw ones we liked “Yeah, but what if the housing market goes south?”
    Sure, it’s a good deal if the value keeps in creasing by 5% every couple of years, but if it doesn’t, you’re pretty well hosed. We knew most of those houses were overvalued and overpriced. And anyone that expected values to keep rising the way they were was being a bit unrealistic.

    Don’t even get me started on interest only loans.

  76. klondikedog says:

    @Eyebrows McGee: I think I should have said they should try to make some payments. The original payment is probably too high. Being upside down in a house is an almost impossible situation. Presumably they still like their house and don’t want to move, so rather than become squatters, they should work with the bank to pay something for the house. Assuming this suburb doesn’t become something out of Mad Max, it will probably rebound in the future.

    K.

  77. FooKoo says:

    Waaaa victim waaaaa waaaaaa.

    “This is a financial obligation. Not a moral obligation. If I decide I don’t want to pay my car note anymore, I stop and the bank takes it. That doesn’t make me a jerk.”

    Here’s the difference: we don’t have a bunch of pussy, power-hungry politicians willing to sacrifice the entire country’s financial well-being in order to bail out losers who bought more CAR than they could afford.

    And, yes, knowingly, voluntarily foisting your debts off onto the shoulders of responsible members of society, even if it’s in some way not illegal, DOES make you a jerk.

  78. jerros says:

    Wow theres a lot of hate towards these guys. I can’t really say I blame them, they made an investment in a home and that investment has lost probably more than half it’s initial value do to the “McGhost Town” effect, mean while their payments are skyrocketing. They are being forced to over pay for a home that’s lost the majority of it’s initial value.

    At some point you just have to cut your losses. No it’s not moral to stick the bank with the debt, but who needs to hold the moral high ground when you’ve got a family to support? We aren’t talking a couple grand here, we are talking hundreds of thousands of dollars in debt that they would be paying for the next 15+ years on a home which will never again be worth what they paid for it.

    I can’t say I have a lot of sympathy for a bank.

  79. A sad and terrifying number of people here fail to understand how contracts work.

    When your failure to understand the simple process of contracts lands YOU in the shitter in the future, and other I-don’t-understand-contracts people get up on THEIR moral high horses and excoriate you for making decisions within the bounds of that contract and how you shouldn’t have signed the contract in the first place if you don’t understand how it works, all while making clear their utter inability to understand the most basic processes of contracts, you better not whine about it.

    That is all.

  80. kelptocratic says:

    @Eyebrows McGee: I think the difference here is that these people are almost gloating about the fact, making them deadbeats of a particularly bad variety.

    Yes, making payments at this point would be, to borrow a particularly absurd phrase, “like pissing in an ocean of piss.” But the last, the LAST thing they should be doing is eating out and hiring baby sitters.

  81. bobblack555 says:

    How on earth have these people not had their house siezed by the bank and kicked to the curb??

  82. kelptocratic says:

    @bobblack555: Because there are a great deal of protections in place to prevent this sort of thing. As was mentioned above, the bank doesn’t want to foreclose. It can take months to go through the proper channels – similar to eviction proceedings.

  83. uberbucket says:

    Financial responsibility be damned!

    Is it really that difficult to live within your means?

  84. EvilConservative says:

    @Eyebrows McGee: Fine. If they want to stop paying they should get the hell out of the house and hand it over to the bank.

  85. SacraBos says:

    @wallapuctus: Actually, from a Bank perspective, letting them live in the house might do more to maintain the value of the investment than letting it sit vacant and deteriorate. The home is likely still insured, taxes paid, and lawn mowed. They have just gone from home owners to house sitters.

  86. katylostherart says:

    @Gev: i’m not saying i would take on a payment like that either, but i can understand why someone would. especially someone with kids.

    you look at something you thought you’d never be able to get, you figure if you’re approved for it that means the bank thinks you can afford it so you accept that deal. you say to yourself “i want to give my kids something good” and you take this house in the nice neighborhood with a yard and a good school near by. you say to yourself, i will try this. and with a payment of $4k a month you can tell it’s not like they weren’t trying HARD to make this work. that’s not a small mortgage by any means in any area of the country.

    and like most people who get a mortgage, they thought the payments they did make would turn into equity that could be later used to refinance. that is not an unreasonable expectation by any means. so then it turns out when they thought they’d skimped on everything else to make these payments the bubble burst and all of a sudden they had NO equity and NO refinancing option despite making their payments through hell and highwater.

    i can’t understand how so many people fail to step into these people’s shoes while saying it must just be them not thinking ahead. clearly if they were thinking ahead they probably timed out their ability to make payments to coincide with when they would refinance with their equity which now they can’t do. even people who didn’t get a subprime mortgage with actual equity can’t get refinanced now.

    i don’t think it was really lack of planning in as many cases as it seems.

  87. backbroken says:

    @cybercjh: THen don’t ever ever ever complain when any company does you wrong.

  88. arthurat says:

    We now live in a society where it is OK not to honor our contractual commitments. The Uniform Commercial Code is now meaningless!

  89. WraithSama says:

    @backbroken:
    I agree with your observations.

    Here’s the bottom line. If they decide that they can’t afford the house and want to stop making payments, that’s fine. No problem! But move your ass out of the house! Go get an apartment and let the bank foreclose. The only immoral part of this story is not how they stopped paying their mortgage, but how they are now squatters on a property they have no intention of paying for.

  90. Ex_EA_Slave says:

    They need to return to the trailer from which they spawned. No sympathy for these asshats. I’m struggling to pay my mortgage and it sucks. I however was not raised to be a scumbag deadbeat, so I continue to go without in some areas of my life for the sake of owning my own home.

  91. @klondikedog: The loan amount doesn’t adjust based on the value of the house. Just to use imaginary numbers, if you bought a $100,000 house and it went up to $120,000, you would suddenly have $20,000 in equity that you didn’t “pay for” — the loan doesn’t increase to reflect that.

    Similarly, if your $100,000 house is now worth $80,000, you have LOST that equity, but the loan doesn’t adjust.

    So let’s say they put $60,000 down, have paid about $40,000 towards principle in their regular mortgage payments, and their $600,000 house is now worth $200,000, — They took out $540,000 of loan, of which $500,000 is outstanding, and the asset backing that is worth only $200,000. Their “equity” has disappeared completely, and until that loan is down to $200,000, they’re not building equity; they’re merely paying off debt.

    @boandmichele: The interest rate is held constant (typically below a fixed-rate mortgage rate) for a period of time, then adjusts to match various index rates, such as the LIBOR. If interest rates are low and your home price is rising, it’s an excellent bet. If interest rates are high, however, your payments are going to skyrocket when the rate adjusts — and if your home price is falling, you’re screwed.

    A lot of people used ARMs with the intent of flipping the house during the low teaser rate because home prices were rising so fast. For imaginary-number example, if you’re in a market with 20% yearly inflation in home price and you buy a $100,000 house with a two-year ARM teaser rate at 3% while 30-year fixed is at 6%, you can sell that house two years later for $140,000ish, a $40,000 profit, having paid substantially less in interest by choosing the ARM, and having never faced the adjustment.

    Many non-flipper homeowners chose ARMs for the initially cheaper payments because they expected by the end of the teaser period their salaries would have risen enough to cover the adjustment. Others intended to pay enough extra in principle during the low rate to build equity and reduce the post-adjustment payment. Others bet on interest rates remaining low, and others, like yourself, did not understand how ARMs worked; they did not understand the increased risk, simply that the broker was offering them a lower payment.

  92. unravel says:

    While I feel bad for some of those that have been hit hard by the mortgage meltdown, this couple is, at best, a pair of flaming dickbags. Don’t cry about your financial situation, and chalk not making any payments up to need, and then have the gall to mention that it’s great because you can go out to eat, and get a babysitter every now and then.

  93. @kelptocratic: They’re not exactly my favorite people either (McMansions and consumer-product-driven lifestyles strike me as immoral in and of themselves, not because of mortgage defaults!); however, I read their “it’s such a relief” as fatalistic, not as “woohoo, we beat the bank.”

    I thought they were saying, “The worst has officially happened, now we don’t have to live with crushing fear and can relax and face it.” One expects a little acting out (in this case, getting sitters, eating out) when the fatalism finally arrives.

  94. Nytmare says:

    The summary subtly implies but doesn’t really mention that they’re early into their loan and their home value is way down. That’s probably why it feels like continuing to pay the mortgage is only throwing money away.

    There used to be safeguards against this, like 20% down payment and private mortgage insurance — I don’t understand what happened to them.

  95. headhot says:

    You have no more moral obligation to a bank then you do a rock. Cooperations are not people, and they answer to no one except government regulations and the market. Cooperations do not make moral decisions, and with dealing with them, neither should you.

    Banks give out loans with the expectation that their will be defaults. This is why there is a contract. If the banks nmake bad loans, more then their default rate expectations, then its their own fault. Mortgage holders are under no obligation to help the banks out because of the banks mistake.

    At the same time, families must make decisions in their best interests. If that means taking a credit rating hit, not paying a mortgage they cannot afford, and getting foreclosed on, it may make more sense then making payments and getting foreclosed on 6 months from now. The only difference is 6 months from now they can have a bank account with a balance, or one with out.

  96. kelptocratic says:

    @Eyebrows McGee: Yeah, I see where you’re coming from for sure. I personally couldn’t imagine how I would face a situation like this.

    But going on NPR and talking about how “good” it feels is a questionable decision, to say the least.

    When it comes down to it, the people I really feel for are their three kids. This family is in deep, and from the sound of this interview, still digging.

  97. cybercjh says:

    by backbroken at 11:12 AM … “@cybercjh: THen don’t ever ever ever complain when any company does you wrong.”

    Interesting comment. Could you please explain further?

  98. crabbyman6 says:

    @arniec: haha, that’s exactly what I was thinking.

    They act like now they have “all this money in the bank” they can just go out and spend it all rather than even attempting to pay down their debts. I’m sure they’re out there racking up more credit card bills with that money that’s not even really theirs.

  99. SkyeBlue says:

    I guess they think what they are doing makes sense, but after they find out their credit rating is TRASHED and that because of that a good employer might not hire them in the future, that their insurance rates will go up next time their insurers checks their credit report at renewal time, that they will pay higher interest rates on loans, that no one will rent to them after checking their reports and on and on…………….they need to take a few hours, go out and “have a nice dinner” to discuss what they are going to do when the you know what hits the fan and their world of “magical thinking” starts crumbling around them.

    They sound like the type that will blow through ALL the money they have in the bank then end up homeless, out on the street when the Sheriff comes and evicts them from their home because they don’t have a dime to their name, and no where else to go. Then be on TV crying to some news reporter about how evil their mortgage company is!

  100. kelptocratic says:

    Also, for what it’s worth, the nature of Stockton being the so-called sub prime epicenter is pretty interesting.

    I live in the Bay Area, and Stockton is about 40 miles east of where I am. What is interesting, particularly, is that housing prices have not shown any sign of slowing down, whereas somewhere as close as Stockton is almost nuclear.

  101. wild_bill says:

    It’s plain and simple people: even in good times, if you have to get a variable interest mortgage, YOU DON’T HAVE THE MONEY for that house!

    Pinch penny’s, buy a crappy car with cash, stop eating out, blah blah blah!

    Just because some salesman says you can do it, doesn’t mean that you should. If someone told you to jump off a bridge, would you?

  102. Jaysyn was banned for: http://consumerist.com/5032912/the-subprime-meltdown-will-be-nothing-compared-to-the-prime-meltdown#c7042646 says:

    @cybercjh:

    Great Comment.

  103. @nytmare: “There used to be safeguards against this, like 20% down payment and private mortgage insurance — I don’t understand what happened to them.”

    There’s a whole nexus of issues, leaving aside poor regulatory decisions and bad lending decisions. For example, due to radically increasing student loan debt, a ballooning housing market, and stagnant salaries, young college graduates are delaying and delaying and delaying their entry into the housing market (and the not-shitty-car market, for that matter), which is providing considerable drag on the economy (though it’s low on the list of problems right now and largely masked by other problems).

    In most cases, a married couple of recent college grads with $80,000 in federally-subsidized student loans, no consumer debt, two solid jobs, looking at a house where payments will be no more than 30 to 40% of their salary, with only 5 to 10% to put down is an excellent risk (especially in markets where renting and owning cost around the same amount, because it means there’s no “socking-away-money” savings to renting and takes longer to build to the 20%). More flexible boundaries on mortgages, INTELLIGENTLY APPLIED, can boost the economy and help reduce the massive entry barriers that have appeared in the last 20 years to what we might call “full adult participation in the economy” for young adults, or immigrants, or other “good risks” who traditionally were able to enter the market much more quickly.

    The problem is in the total lack of intelligent application. :P

  104. Me - now with more humidity says:

    Klondike: Lenders don’t want to renegotiate. They won’t even talk to you until you’re 2-3 months behind. Then they make it virtually impossible to renegotiate. And if you’re dealing with a servicer, the lender often can’t be found. Servicers are notorious for dragging their feet for months and months and “losing” workout packets. Short sale deals die every day for just that reason. The servicer would seemingly rather f$#k around and take a property back for the investor who owns the loan (and doesn’t want the property) than accept a sale that would only mean a $10,000 loss to them on a $500,000 mortgage.

    Just because your mortgage goes up doesn’t mean you have equity — I don’t even want to know how you came up with that idea. I know a family in a house in LA that has dropped in appraised value (BofA’s) from $800,000 to $540,000 in less than a year. At the same time, the buyer’s affordable $2895/mo payment increased to $5,110/month with just 45 days notice because it was tied to the LIBOR index. They tried to refinance, but their 20% equity vanished and they are now underwater.

    A mortgage is a secured contract. The bank agrees to give you money for the purchase. You agree to pay. If you can’t pay, the bank agrees to take the property. You part ways and it’s all done.

    And in California, it’s a non-recourse loan, so those of you screaming that the debt should hound the homeowner forever can just chill. That’s not the way the law works.

    Foreclosure takes as little as a couple of months or as long as a year or more (late payments, plus NOD through to the sale), depending on where you live. It’s VERY expensive for the bank — $50,000 or more,not counting the loss on the property when they sell it as an REO.

    But when you’re that far underwater and living in a ghost town with values dropping even more, walking away is the only smart business decision. You have to protect your family first. The bank knew the possibility was there when they agreed to the deal.

    As for the erstwhile homeowner, you take the credit hit, file BK if needed, and rebuild. And to the poster who said they’ll have to live in the streets, get a freakin’ clue. There are plenty of landlords who will rent to you if you’re upfront about your situation. You may have to pay an extra month deposit, but you can find a decent place.

    All that said, these people have a skewed view of what’s appropriate. They should go ahead and get out, be upfront with the bank, and use that money they’re not spending on the mortgage but are spending on dinners and babysitters to rent a place and start rebuilding.

  105. @SkyeBlue: “but after they find out their credit rating is TRASHED and that because of that a good employer might not hire them in the future”

    I’m curious, Consumerist (and commenters) — has anyone seen anything on this lately? I’d think that as defaults increase, particularly in the really bad markets, you’d be seeing, say, 1 in 3 candidates for a job with a foreclosure on their credit rating, and will employers be able to be picky about it forever?

  106. samurailynn says:

    @katylostherart: Actually, from what I read it sounded like they were able to pay their mortgage when they cut back, but that meant they were no longer able to afford to go out to dinner and hire a babysitter.

  107. Snarkysnake says:

    I can’t get enough of the moralizing on this board…

    It’s pretty plain what these douche…Er, people are doing. they’re perfectly willing to trade an uncertain tomorrow for a pretty good today. No problem. But it’s not like the bank (or other mortgage lenders) have not done the same damn thing in extending these douche…Er,people credit.So enough of the “who’s fucking whom” here, okay ?

    “But Snarkysnake !” (you might say), “Won’t this drive up the cost of MY mortgage a few years down the road?” “Won’t I have to pay for these douche…Er,people’s fuck ups?”

    Not so fast,my friend.Banks can only charge what the general rate of interest is or be left with no market share. Keep YOUR credit clean and you can guarantee that you will not pick up the tab for these assho…Er, people some time down the road.(This of course does not factor in a tax paid bailout,the cost of which will be borne by everyone that pays taxes)

  108. cybercjh says:

    SkyeBlue at 11:24 AM … I think your view on ‘life after foreclosure’ is a little drastic. First, your credit score will drop about 200 points if you have just a foreclosure on your record but all other bills (like credit cards) are paid on time. So, you can potentially go from 750 to 550 fairly quickly. And, the foreclosure stays on your credit report for up to 7 years. But, after 2 years, the foreclosure weighs less and less on your score if you’ve maintained a flawless credit report otherwise. In 2 years, you’re back up to 625. A few years after that, 675. 7 years later, welcome back to 750, or maybe even higher. You can get a rental with terrible credit. You’ll just have to pay several months in advance and pay a higher security deposit. Yes, your car insurance may be higher and your interest rate on a new car will be higher. But, this situation is almost always more favorable and you’ll still come out very far ahead when compared to remaining upside down on your mortgage for year after year and paying a very high rate because you’re unable to refinance due to being upside down. Run the numbers. That is how you make decisions when it comes to finances. Numbers. The same way the banks do it.

  109. SOhp101 says:

    @darundal: Why would u be hated? They really are douches.

  110. jerros says:

    @FooKoo: You make it sound like a Mortgage contract is a 1 page document which outlines all the terms in non-legal speak for the consumer. The reality of the situation is that Mortgage documentation is hundreds of pages of documents with the conditions and terms spread through out the documents in mostly legal speak. There are very few people who actually “understand” it all, and for those who don’t understand it but still would like to purchase a home they rely on the advise of their financial advisor, or mortgage broker.

    So if the advisor’s telling you you can afford the home and says “Don’t worry about the ARM you can refinance in a year after you’ve built some equity in the home and get a fixed rate before the ARM ever kicks in” and everyone else you talk to says the same…what do you do?

    No one that got stuck in this sub-prime meltdown ever thought that the home they were buying was “More than they could afford”, in fact every mortgage broker in America was telling them “You can afford that home”. The brokers preformed a slight of hand trick and suddenly the payments look like what you wanted and although the mortgage is adjustable everyones telling you to refinance after you’ve built some equity in the home and then get a fixed rate before the ARM resets.

    It all looks good & it all sounded good. And unless you some how caught on before you put those 20 signatures and initials on the hundreds of pages of legalese dubed “A Mortgage” you got taken advantage of.

    Should we be bailing them out? I don’t know, do you want millions of americans walking around on the streets homeless and collecting welfare? If so we shouldn’t bail them out. Otherwise it’s probably a pretty good idea.

  111. youbastid says:

    Really, the number one problem with these people is that they used “all the sudden” TWICE.

  112. WhirlyBird says:

    @Wormfather: Well, when you raise people to believe that their imaginary friend in the sky will eventually make everything OK, if you just pray hard enough, then, yeah, religion might be to blame. If they’re Catholic, they’ve probably already confessed their sin and been forgiven. Who cares what mere secular authorities think, when the mighty sky fairy forgives you?

  113. jtheletter says:

    I think my favorite part of that picture is the big cat tower in the background. I’ve got a cat and I priced those out before; for one that stands ~5 ft like in the picture Petco wants over $100. So in addition to other unnecessary expenses others have pointed out, you can add a cool $100 for their cat toys alone.
    My cat seems to get by just fine with the version I built from scrap wood and carpet samples for $8. ;)

  114. Me - now with more humidity says:

    Eyebrows: The stigma of foreclosure is vanishing quickly, especially with all the media coverage of the meltdown. Same with bankruptcy.

    You can find a rental easily. You can buy a home again within a year or two doing a lease-option or seller financing. Insurance companies use their own version of credit scoring and give more weight to claims history, etc.

    Yes, you’ll pay higher interest for a few year on anything that requires a loan.

    But you can recover quickly if you do it the right way.

  115. jeff303 says:

    Lesseeee, who have we not blamed yet? Ooooh I know! The financial firms that sold the CDOs. Yes, curse them! OK what do I win?

  116. PaperBoy says:

    One of the big myths out there right now is that “banks will work with you.” Not if they think you have the money. The whole reason mortgage aid isn’t working is that banks want to keep people like this paying every nickle they make for the mortgage, even if it means working second or third jobs, not saving for college and retirement, etc.

    The banks count on decent middle-class people being racked with guilt over defaulting on a loan that the bank shouldn’t have given them in the first place. Banks expect that the homeowners will bleed themselves white, giving the bank that extra income, THEN go into foreclosure or bankruptcy when they’re tottally broke.

    The bank made a business decision, so should these folks. What leaves them in the best position to recover and rebuild down the line? What leaves the most money in their pockets?

    As for responsibility, two things: One, the fast-talking mortgage brokers undoubtedly assured this coule they would NEVER, EVER have to pay the higher interest rate because they could just refinance (and give the broker more fees). Two, there never has been a situation where property values dropped all across the country like this. In some markets you could have a downturn, but mostly prop. values in bad times stayed flat instead of going negative.

    Homeowners had little reason to expect they’d be upside down in their homes, and brokers encouraged and assured them that an E-Z refinance would always keep them from paying higher rates.

    The bank didn’t look out for hese people, they shouldn’t look out for the bank. Assert their rights, run out the string, save up their money and let the bank foreclose. Why should the homeonwers feel a moral obligation when the lenders feel no guilt over giving them a loan they couldn’t afford?

  117. cabalist says:

    It is a business and a moral decision. Any attempt to divorce the morality from the decision is useless and only works in a vacuum. Making the ‘business’ decision to walk away hurts others and, in the end, is selfish. This is immoraltiy. Hurting others people who are innocent is immoral. I do not understand how people again and again say that this is ‘just a business decsion’. The decision might be made for business reasons but it is not ‘JUST a business decision’. Once the business portion of the decision has been made a moral person needs to look at the situation and determine not only whether the decision is best for them (and theirs) but also whether is hurts others (innocents). I am not talking about the banks or mortgage brokers, I am talking about your neighbors and their property value and how it will be affected when your home is foreclosed on and the years it will take to work its way back through the system, I am talking about people trying to get loans but because of your (and so many other’s foreclosures) cannot get the loan although they are otherwise qualified (who cares about THAT family, the one who didn’t think that they could afford a mortgage before and were probably right), I am talking about pulling your own weight. Just because someone is myopic enough to believe that they are acting in a vacuum and that their actions affect no one but themselves does not mean that that is true. There are far-reaching repercussions from this situation and people like this, who take advantage of the situation, are only making it worse. These people bought more than they could afford (and only an individual knows how much they can afford, right?) and now are gaming the system and walking out on an important commitment.

    Do people just walk away from their car when the it is worth less than they bought it for–but wait, that happens as soon as you drive off the lot? Why do people not just drive new cars around for 6-9 months and then ‘just walk away’. It is arguably the same situation. No downpayment, an ‘investment’ that you are immdeiately upside-down on, high ticket (probably second only to home buying).

    Simple rule: DO NOT WRITE A CHECK THAT YOUR BUTT CAN’T CASH. Apparently somebody needs to tell everybody that this applies to houses too.

    In this situation they were starting to feel better about the whole situation, “[they] can go out to dinner, get a babysitter…”; maybe I should stop paying my mortgage, I would certainly have a lot more pocket money!

    Richard

  118. smoothtom says:

    Gee … they bought a McMansion when prices were high, the bottom fell out, and now they feel like they shouldn’t have to repay the loan because the house wasn’t worth nearly what it was when they bought it. So, when my car is worth less than the outstanding loan, should I just tell the bank to fuck off? When my TV/computer/other electronic piece of shit breaks down before I’ve repaid the outstanding credit card balance on it, should I just tell Bank of America to forget about receiving any payments?

    Dumbasses.

  119. Phonespider says:

    The last line in the story is the key statement: “Vigeland: Their next home, the Sinclairs say, will be a much smaller one.”

    The family bought too much house and lost their housing market gamble.

    They are already in the middle of their foreclosure process according to the article. So stopping payments is the right thing to do, they are going to need a cash reserve once their credit is ruined from the foreclosure.

    They are going to have to find a house renter that’s willing to accept a security deposit instead of credit. Afther that they are going to need to learn to: “Don’t Buy Stuff You Can’t Afford.”
    [consumerist.com]

  120. asphix20 says:

    @ndjustin:

    AMEN! I’m in the same situation… I want to purchase a house but will not with these absurd prices.

    The jump in home values over the last 10 years is disproportionate to past decades and it makes me sad… it was artificially infladed due to people seeing housing as a way to make money, not as a utility to provide a comfortable and happy living environment.

    I’m a big fan of capitalism… I believe ones work should be proportionate to their worth… but in situations like these I see myself loosing some of my faith in the system.

  121. bohemian says:

    Banks extended these mortgages, they should be the ones writing off some of these in the form of lowering interest rates or sharing some of the value loss with the owner.

    I do think there needs to be more investigation into some of these 3rd party loan originators. Me thinks there may have been just a teensy bit of fraud going on in some cases.

    Some of these house prices though are just on crack. $800,000 for a tract house anywhere it utterly stupid. Nobody in the process should have been involved in that deal.

  122. @jerros: “No one that got stuck in this sub-prime meltdown ever thought that the home they were buying was “More than they could afford”, in fact every mortgage broker in America was telling them “You can afford that home”.”

    (This may double-post, but I think it got eaten when firefox hiccoughed.)

    When we bought our (first) home in 2004, on a 30-year fixed-rate, bank after bank offered to qualify us for THREE TO FOUR TIMES what we felt was an appropriate amount for us to borrow. Our current mortgage payment is 1/4 of our takehome pay (as we still have student loan payments, we felt this was a more appropriate number than 1/3), and place after place after place was willing to qualify us for loans whose payments would be almost our ENTIRE take-home pay.

    “Oh, don’t worry, your salaries will increase in a couple years, and then you’ll have plenty of breathing room!”

    But I don’t even WANT that much house, I can barely keep my apartment clean!

    “You know, if you buy a house that small, you’ll just have to move in two years when you have kids, and it’ll cost you more in the long run. You should just start out in the bigger house.”

    I just ran my numbers through an online calculator, and two national banks were willing to offer me a mortgage today, 30-year fixed-rate, 10% down, with payments 3/4 of my takehome pay, so with student loan payments (which the calculator included), 7/8 of our takehome would be going to mortgage and student loans. How would we afford food and heat???? How would I pay property taxes and insurance????

  123. That70sHeidi says:

    Having worked in HR, what employer checks your credit rating!? Unless you’re being bonded, there’s no need and I don’t recall it being legal. It has nothing to do with “a good job” or a bad job. Neither McDonald’s nor a private LLC will check your credit rating before or after hiring you.

    This same histrionic BS is handed around when bankruptcies are talked about. A ‘trashed’ credit rating has no impact on your employment. Why is this so damn hard to understand!?

  124. mikesfree says:

    @AtomikB:

    Um…. read about default judgements in reposessions. See how you like plan B, They dont just get the house, they can come after you for the differnce when they sell if for dirt cheap.

  125. jinjin1080 says:

    Let me guess? They have no equity because they opened a HELOC to buy a new SUV or BMW.

  126. Nakko says:

    You can’t villify this guy while allowing the government to bail out shitty lenders who allowed this system to spring up to begin with. This guy isn’t repaying a mortgage. Drop in the ocean. Big banks are costing our economy *hundreds of billions of dollars* because they were wayyyyy too speculative.

  127. Mike626 says:

    @FooKoo: Yet. Wait till oil hits $200 a barrel. Will we see a ‘Big Oil’ bailout? Perhaps where the feds give a tax rebate to purchase a car, truck or SUV and offset the increasing cost of fuel?

  128. @cabalist: Now THOSE are intelligent points about the morality of the situation.

    However, if everyone around them is bailing, are they still morally obligated to stick it out and be the one stuck holding the stick as the last man standing?

    I realize that means everyone is going to scramble for the exit, state-of-nature style, so as not to be the one stuck screwed at the end, and that that will lead to self-reinforcing negative effects. But when coordinated action isn’t possible, and all the neighbors aren’t working together to keep values from falling (or can’t fight the broader market forces pushing them down), are any of them truly morally obligated to make a sort of “last stand” and great personal detriment in the failing neighborhood?

    That is to say while in a normal situation, such as the dude across the street from me in foreclosure, his best efforts at either paying the mortgage or getting out cleanly are appreciated and benefit his neighbors*; in this kind of situation where the most moral action in the world doesn’t benefit anybody, is it necessary, required, or even still qualifiable as “moral”?

    *Though I gotta say, we don’t benefit nearly as much from him staying in the mortgage as he suffers from it. I’m not sure I can say, as long as he’s not actively trashing the house, that I think, as an affected “innocent,” that he ought to harm himself in that fashion to give me a tiny benefit. But then his problems aren’t sub-prime related and aren’t spread throughout the neighborhood.

  129. daengh says:

    @jerros: “I can’t say I have a lot of sympathy for a bank.

    What about the bank (or other financial institution) that has your retirement account(s)? If they have to write off losses because of folks like these and you get no interest payments or the value of your shares drops because of ID10Ts like these? “Well gee, Mr Jerros, we’d like to pay you back but the money isn’t there. You see, the Douches in Sacramento didn’t pay back their mortgage which we loaned them from your retirement account in order to give you the returns *you* were expecting.”

  130. peacemongermom says:

    @cybercjh:

    Exactly. This is a business decision, plain and simple. They have to keep their cars, so that the can go to work, so that they can continue to make money, so they can’t stop paying on their cars.

    They have to have money for a rental place to live, apartment or whatever, so they have to come up with that cash somewhere. The banks aren’t gnashing their teeth and rending their garments over the huge amounts of money they’ve got rolling in from the sneaky credit card insurance rate scams they are pulling (late on one payment and BANGO, your interest rate is at 32%).

    Additionally, I don’t *expect* corporations to behave morally. They are amoral entities, and the biggest mistake we as a country made (well, until this whole Bush thing) was allowing corporations to have person status in the eyes of the law. Corporations are allowed to be treated as people in courtrooms, but without the additional headache of that pesky thing that so many of y’all are hollering about: morals.

    I’ll treat the corporations morally as soon as they start treating their customers morally. It’s that simple.

    More power to these folks.

    And one other thing – bankruptcies and foreclosures don’t trash your credit nearly as much as you might think. Seriously, people. Wake up and smell the coffee.

  131. ChuckECheese says:

    @That70sHeidi: A bit more on this topic of employers checking out credit. When an employer does a “background check” it is usually just a criminal check. However, in certain industries, including banking, some insurance, and curiously, call centers, your credit will be checked. I was recently bonded for a job and they only looked at my (nonexistent–lol) criminal history.

  132. spoco says:

    This reminds me of when we bought our house. We found a $200,000 house in a nice Nashville suburb and applied for the mortgage.

    $200K was a very comfortable payment for us. We figured we could have afforded up to about $230K, but we liked this house and as a bonus, it was a little cheaper.

    So we apply for the mortgage and all of a sudden, we are approved for nearly $500,000! The interest only payment on the $500K was a few dollars more than the fixed rate on the $200K. I looked at the agent and told her that was ridiculous. There was no way we could afford 500K.

    The agent then tried to talk me into looking for bigger, more expensive houses. “It’s a great investment,” “You’ll make tens of thousands and you can refinance.” “Your income will go up before your payment does.”

    We ended up buying our little $200K house, but I wondered how many people bought way too much house- I guess we see now.

    Personal responsibility is all I have to say.

  133. Juggernaut says:

    @GreatCaesarsGhost: That they can’t afford their bills doesn’t make them jerks… staying in a house you can no longer afford, not notifying the note holder of your situation and not paying anything at all makes you a jerk… morally and financially

  134. Pro-Pain says:

    I absolutely love these people. Life’s a game and they are merely playing the hand they’ve been dealt. Good for them. Who cares, wins!

  135. That70sHeidi says:

    @ChuckECheese: Yup, any place you can actually steal profits! But do you really consider banking, insurance, and call centers a “good” job/industry? ;)

  136. spoco says:

    Also, I have a friend in the mortgage business. He has been saying the next big thing (and they already exist in some areas) is going to be 40 and 50 year mortgages so that people can afford more house.

  137. madanthony says:

    While I understand the logic of the business decision folks, the problem I have with it is that it’s going to make it worse for those who are responsible and keep paying their mortgages.

    In the past, mortgages were pretty much thought of as loans that people seldom default on, which (along with the fact that they are secured by collateral) is why the interest rates are low. The idea was you were buying an asset that you would keep, and most people did whatever they had to to make the payments so they didn’t lose their house.

    In the last year or two, the mortgage seems to have become more like trading on margin – if I win and the house increases in value, I’ll pay it off, if not I’ll default. And that kind of risk hasn’t been priced into mortgages in the past, but will be in the future.

    That means that mortgages will be more expensive. For the honest consumer who wants to buy a home, they will pay more for financing. And the honest consumer who wants to sell a home will find it’s value shot even more because fewer people will be able to afford mortgages.

  138. Juggernaut says:

    @cabalist: Mom?

  139. katylostherart says:

    i think it’s great how so many people are attacking them for going out and getting a babysitter. i’m sorry but recreation as an integral part of being a healthy human being. you can literally go insane if you do not get out and play. i’m also fairly sure this couple is not going out on $1000 dinners, flying to nyc for a weekend, taking cruises. give me a freaking break. they’re paying some girl $10 an hour for 3 hours out and a dinner at applebees. it’s ridiculous to mention that as horrible.

    PEOPLE NEED TO TAKE BREAKS.

  140. @Eyebrows McGee: The college debt thing will be the next bubble to blow up in our faces. You wait until a large majority of recent college grads can’t pay up. Sallie Mae will implode.

    Of course, my advice to students is (1) go State and (2) go local, stay at home, and buy a decent car with the difference. Despite what U.S. News And World Report says, a degree is a degree, no matter where you got it, as long as it’s accredited.

  141. cabalist says:

    @ Eybrows McGee: “However, if everyone around them is bailing, are they still morally obligated to stick it out and be the one stuck holding the stick as the last man standing?”

    I understand your concern but I do not believe that they will be left holding the stick. WE have been left holding the stick. Everyone who took a standard mortgage (15/30yr fixed) has been left holding the stick as the US government rushes to the aid of the businesses affected by the fiasco while the individuals scramble for cover. My mortgage is around 6.00%, the Sinclairs say that if their rate was reduced to 4.25% “[they] might be able to make the payments”. Who is holding the stick here? I am, to the tune of 1.75% over the life of my loan. Trust me, the stick is held, and it is not in the Sinclairs’ hands.

    The US government IS OBLIGATED to help its citizens and needs to step in soon with a well thought out plan, not just a hasty takeover of a venerated if not impotent Wall Street firm.

    The easiest way (and there is no truly easy way since these mortgages [or mortgage products] have been bundles and sold [essentially unregulated insurance, really] to other banks and investment firms) to get out of this would be to try and fix the situation on both sides of the fence.

    To help the people, the rates on their mortgages need to be re-reset back to the introductory ‘teaser’ rate that they can afford.

    Note: I would probably force people to prove a certain amount of ‘hardship’ to get this fix versus keeping their current ARM.

    But not so fast, the dollar difference between the teaser rate and the current rate (the reset rate) would be moved to the back end of the loan and added into the payment. The loan might go from being a 15yr ARM with an intro rate of 4.25% that has reset to 6.00% (or whatever %) to being a 20-30yr Fixed Rate with the additional time on the end of the loan to pay the difference between the teaser rate and the adjustable rate throughout the life of the loan. Their payment would remain the same (read: it would match the original payment that they presumably could afford).

    What would be other viable solutions…seriously.

    Richard

    Remember, in a good compromise no one is happy.

  142. zentec says:

    I was going to call these people scumbags, but you know, they’re acting just like the people who created the mess in the first place.

    Mortgage bankers have long called a house an “investment”, and the people buying the risky loan portfolios would have no problem walking away from an investment gone bad, so why shouldn’t these people?

    The good news is that this will be the last time in these people’s lives that they get to have a mortgage. The mortgage industry will realize that there was a reason why 20% down was once the norm before writing a loan. And irresponsible borrowers like these people will be renting for the rest of their lives.

    The pendulum has begun its swing, and those who stuck their necks out the most risk it being a guillotine.

  143. officeboy says:

    Hate to start with the victim blaming (who am i kidding, I’m not starting it)
    But what these people are doing is fine. They entered into a contract with terms and conditions. One of these terms and conditions was what happened if they stopped paying.
    And they have stopped paying. It’s the banks fault for giving them any money in the first place. Of course if these people were a little smarter they would have been able to figure out that they couldn’t afford the house they wanted to buy. But in this case both parties are willing to enter into the conditions of the contract that take place when payments stop being made. It’s probably the best financial decision these owners (renters? or now even squatters) could have made.

  144. jimconsumer says:

    @No Credential: 70 bucks a month on cable isn’t going to save them. … Plus another 70 for cellular phones, 50 for Internet access and God only knows what other frivolous expenses, this really starts to add up. If I were having trouble paying my mortgage I could cut $300+ a month out of my budget real fast by dropping non-essential services. I think most everyone else could, too, if they were honest with themselves about what is truly essential and what are, let’s face it, extravagant luxuries.

  145. ogman says:

    I have all th sympathy in the world for people who can’t pay their debts or were somehow ripped off by their lender. However, these idiots need to be put on the street!

  146. ogman says:

    @Steaming Pile: Excellent point on student loans. The private lenders are already falling.

  147. cybercjh says:

    mikesfree at 12:15 PM said “Um…. read about default judgements in reposessions. See how you like plan B, They dont just get the house, they can come after you for the differnce when they sell if for dirt cheap.”

    I think you mean deficiency judgments. Most of the time, they don’t happen. Some states make it very, very easy for a mortgage company to enter a deficiency judgment. Most make it very difficult. For example, in NJ … a mortgage company can only enter a deficiency judgment for the amount between the appraised value home (fair market value) and the amount they received at sale. That amount is generally a small amount and not worth pursuing a deficiency judgment over. They cannot include other fees (attorney, etc.); they’re not allowed to. And, this all had to be done via a judicial foreclosure – a very expensive and time consuming proposition for the mortgage company. If they did a non-judicial foreclosure which is much easier and less expensive for the mortgage company, they cannot enter a deficiency judgment. Most mortgage companies look at foreclosures and figure out how to minimize their loses. Chances are, entering a deficiency judgment against you will INCREASE their loss and they don’t want that. On the off chance they did successfully enter a deficiency judgment, then file bankruptcy.

    These people did their homework. They know what they’re doing.

  148. jimconsumer says:

    @cabalist: The US government IS OBLIGATED to help its citizens – Ridiculous. You do know that when you say “The US government”, you really mean the taxpayers, right? Because it’s taxpayer money that will be used to bail these people out. Now tell me, why do you feel it’s OK to take my money and spend it helping people who, let’s face it, most of them had no business buying a house in the first place? Here’s a hint, it’s NOT OK. I waited to buy my house until I had sufficient income and credit to qualify for a standard 30 year fixed. Why should I be penalized because a bunch of idiots jumped the gun?

    I have some “friends” who pulled this. Got a house on an ARM with a 3 year balloon payment because that’s all they qualified for. No money down, initial payment 50% of their income, in consumer debt up to their eyeballs with multiple car payments and a half dozen maxed out credit cards. I told them not to do the deal, to keep renting until their debt was paid off and they had a down payment. They ignored me and are on the verge of losing their house right now. And you know what? I don’t give a shit. Fuck them. Let them lose their house. They have no business owning a house. They can go back to renting an apartment where they should have stayed in the first place!

    The same goes for all of the rest of these subprime yahoos. Banks should have never made these ridiculous loans; they’ve always been a stupid idea. Now the greedy bankers who wanted an easy buck and the greedy mortgage holders who wanted a house without sacrificing and saving for it are all going to pay. Let them default. Let the banks burn to the ground. Screw them. They don’t deserve a dime of my tax money.

  149. @cabalist: Oh, I don’t know what a viable solution would be to a problem this big. I’m just a professor of ethics and I thought your moral points were quite interesting. :)

    I think there’s a second interesting question about who’s truly left “holding the stick” in a situation this systemic; can individuals (such as these people) be held responsible to individuals (such as you and I)? Or in a situation so systemic, can anyone truly be said to have a moral responsibility to the SYSTEM, when no individual’s actions can solve the problem, only a systemic response? (Which will doubtless have to come from the government.)

    Not that I expect YOU to have an answer. Just that I like your moral questions. :)

  150. lightaugust says:

    Why is it that when a bank walks on a bad deal it’s wise policy but if a family does it it’s a moral failing?

    The fact that people feel some moral obligation to the absolute thievery that’s happened makes no sense to me. Do people honestly think for a New York minute that ANY of these companies or banks would show a ‘moral obligation’ to the families in these houses?

  151. veterandem says:

    @darundal:

    No arguement. These people CHOSE to stop paying their mortgage. They might have been mislead (or outright lied to), but they still chose to stop paying their bill. I have sympathy, but not much.

  152. cybercjh says:

    Reply to Eyebrows McGee at 12:56 PM…

    Can individuals (such as these people) be held responsible to individuals (such as you and I)?

    NO.

    In a situation so systemic, can anyone truly be said to have a moral responsibility to the SYSTEM, when no individual’s actions can solve the problem, only a systemic response?

    NO.

    That’s my opinion. :) Good questions – got me thinking. :)

  153. AustinTXProgrammer says:

    To everyone blaming these people, have you ever lost money on an investment? Ever been laid off?

    The banks and mortgage companies load consumers money as an investment, they hope to get more when the loan is paid off. Investments are typically not without risk.

    Unfortunately they constructed loans that people weren’t going to be able to repay and didn’t properly account for the risk. Now we will all pay with higher interest and stricter lending standards.

    Corporations don’t repay their debts to fulfill moral obligations, they do it to keep their credit rating. Individuals are free to make the same decision. These consumers were going to go into foreclosure and the value of their property was wiped out by their neighbors foreclosure. They are going to have to pay more in rent or for future mortgages forever. A deficiency judgment may force them to declare bankruptcy giving their remaining money to the banks anyways.

    The only way what they did was immoral is if they took out the loan with the intention of never repaying it. That would be fraud.

    Trying to rack them with guilt for what they have done doesn’t accomplish anything, unless you are miserable and just want company.

  154. cabalist says:

    @ jimconsumer: You do know that when you say “The US government”, you really mean the taxpayers, right? Because it’s taxpayer money that will be used to bail these people out.

    #1 – The US government IS OBLIGATED to help its citizens. Period.
    The four basic roles of governments:
    1. Promote the General Welfare.
    2. Provide for the Common Defense
    3. Ensure Domestic Tranquility
    4. Establish Justice

    #2 – In your careful reading of my post where did you see tax payer’s money being spent?

    #3 – Laws can be passed that do not spend money. Federal regulations regulate. Sometimes they spend money. Sometimes they don’t. Running the government does cost money so I guess it does cost some money (sigh) but that money is certainly well spent for a number of reasons.

    But again, where did I say “take tax payers’ money and give it to these dimwits?”

    I said to readjust their loans. I also said that they would have to pay the full portion of their loan.

    ???

    Richard

  155. vladthepaler says:

    He’s right, it’s a sensible economic decision. I’d argue it’s ethical as well, though: it’s the banks’ fault, not his, that his property value is declining. So it’s fair for the banks to pay for their mistake.

  156. AustinTXProgrammer says:

    One more thing, these crazy mortgages grossly inflated home values, making it very hard for people who were or are renting to ever enter into the market.

    The amount required to reach 20% has been growing much faster than most people could save.

    The problem: Payment mentality.

    People buy a house on whether or not they can afford the payment. If people can afford $1500 a month, they are going to buy however much house cost $1500 a month. Dropping the interest rate means people will buy a more expensive house, not pay less per month. Unfortunately the same number of houses are being sold to the same people (or even more people). This is a recipe for massive home value inflation.

  157. cabalist says:

    The shout out for possible solutions was more or less just an invitation to anybody with a good idea. We need one.

    @Eyebrows McGee: “[C]an individuals (such as these people) be held responsible to individuals (such as you and I)?”

    I would say yes, they can. Just because they feel alone, or removed, individuals exist in a society and take benefit from that society. Even if that benefit is just the safety maintained through our standing army and local constables, buying groceries (or indeed the availability of so many products to by), or it extends even further, individuals do benefit and therefore owe a certain amount back to the group.

    “Or in a situation so systemic, can anyone truly be said to have a moral responsibility to the SYSTEM, when no individual’s actions can solve the problem, only a systemic response?”

    I would again say yes, and the SYSTEM involved is SOCIETY and they are part of that system, it is not external to them. The vagaries and size of the modern world make the sensation more difficult to define but it absolutely still exists. As societies’ hegemonic representative actors governments should move to the need of their people as the sound of a drum moves to the beat of the mallet impacting its head. It should serve as a reflection of its people, their wants, desires, and needs. They need to be examples to others and to their government. Idealistic, esoteric even, I know, very sorry.

    Good thoughts.

    Richard

  158. nickripley says:

    Can I say that everyone involved in this story is probably to blame to some degree? I think the family, and the bank created this situation. To me, it’s great they are “sticking it” to the bank, but I wish it were better people that weren’t so enamored of entitlement.

  159. katylostherart says:

    @cabalist: morality is relative.

  160. Fly Girl says:

    My mother is a Realtor in the Central Valley and my father is a fire chief in Patterson. I’m damn familiar with the situation that’s going on down there.

    A couple years ago my sister bought a house and got an ARM. My sister’s ARM changes this year and their mortgage payments are going to get quite a bit higher. Plus, they’ve lost almost $100,000 in equity.

    However, my sister didn’t buy a $600,000 house. She bought a $300,000 house. Still an expensive house, by national standards, but affordable (for them), EVEN WHEN THE ARM CHANGES.

    The idea that ALL of the houses were in the $600,000 range and that their equity was skyrocketing is a complete and total fallacy. Anyone with a brain knew that the bubble was going to burst, and there were always PLENTY of homes in the $200k-$300k range.

    But people, like the people in this article, were GREEDY. There’s no way that they could have afforded a $600k mortgage without some crazy ARM or loan terms. And if they’re smart enough to make enough money that they could have afforded those initial loan payments, they were smart enough to know how the mortgage worked.

    Plus, Patterson is a fucking SHITHOLE. It’s a dusty farmtown with nothing but stripmalls and big box stores. Really? The people in this story really thought that their equity would just keep on growing and that, before they knew it, they’d have a million dollar track home in Hickville, U.S.A.?

    This is a story about greed, plain and simple.

  161. Okay, disclaimer: I work for a nonprofit counselling agency that helps people through situations like this all day long. Predictably, I’m about to rain fire on all of you who are blaming this family for the way they decided to handle a situation that you don’t understand half as well as I do. Okay, ready? Good.

    Wow, they’re easy to blame, aren’t they? But in my job, I see people like them (actually, like they were several months ago) all the time, and sometimes, the decision they made IS the right one. Sometimes I TELL people to make that decision — and yes, the law is on my side in doing it.

    Look. You’re raising kids, you can’t pay for groceries and utilities, but the mortgage company wants all your money just so you can keep a house that’s worth half what you’re in debt for? Mortgage companies aren’t offering anything close to reasonable deals for anybody without an attorney (or sometimes even after I get them one) — they just want all their money now, and that’s all they’ll take, 90% of the time. People can choose to drown while trying to save a house that nobody in their right mind would tell them was worth the money, or they can back away as gracefully as possible.

    And no, they’re not douches, and once again I’m glad to see the spirit of “there but for Grace go I” is still alive and well here…they’re people who ended up in a situation where they had very few choices, and they ended up having to ask whether it made sense to spend all that money, then still lose their home and be destitute (since nine times out of ten, there’s *nothing* they can do to stop the mortgage company from taking it), or stop spending the money and save it towards their future relocation expenses. Anybody can live “rent-free” in a home for six months before they get kicked out — that’s the law, it’s called a “redemption period”, and it’s there specifically to help people in this situation. Yes, the law makes provisions for this, just like it does for bankruptcy. You people think everyone who declares bankruptcy is a douche, too? Can’t you possibly imagine situations in which it’s the best thing someone can do? (If not, stop trying to think about finance — just stop, because you suck at it.)

    The mortgage companies want them to feel like crap about it — and they do; they’ve been through hell by this point, and their credit will be wrecked for a decade over this — but the truth is, they’re making a wise financial decision in a tough situation. You would prefer that they pay their debt even though it means not being able to afford the necessities — and thank goodness for YOUR opinion, because you obviously understand exactly what it’s like where they’re at and know all the details, far better than me; all I do is sit here every day doing budgets for people like this and trying to find them help — but it’s simply not a good move. It’s as stupid as your Grandma paying her credit cards at 30% interest instead of buying her medication. (I talk to those Grandmas, too, and I tell them to stop paying their credit cards. You’re welcome, if I’ve gotten your Grandma back on her medication this way.) Sometimes, when things get tight (and they’re tight for a LOT of people right now, even people who did everything right), you have to make tough decisions to protect your family.

    And then, of course, everyone with a comfy home and no huge mortgage bill hanging over their heads gets to judge you a loser on the Internet. Ah well. Life is hard.

  162. zeekle says:

    Well I wish for the days when you bought a house to live in it and not to make you some money. I just can’t think that the “greatest generation” would have on whole bought a house for X and then later when someone told them it was worth x – 20% they would have quit paying the mortgage.

    The US is going to crap.

  163. @lightaugust: THANK YOU. You are my hero for saying that.

    We let companies get away with everything in these situations, but heaven forfend a family should think of themselves first.

  164. juniper says:

    I don’t know – a mortgage is a cause-effect agreement: you pay it, or the bank takes your house. If you already know that you’re up to your ears and you’ll never make headway, it makes good business sense to stop putting money into a sinking ship and let the bank take what’s theirs.

    If they were smart, they’d be taking the money they would have been paying in mortgage and putting it in high-yield accounts to save up some for their next living situation when their home is inevitably foreclosed.

  165. MrEvil says:

    Is it just me, or is this sub-prime meltdown happening only in the <5 year old McMansion neighborhoods? I mean those houses are ALL over valued with fixtures made in China, the crappiest lumber at the yard, and built by illegal immigrants.

    My house was built in 1957. It has GENUINE OAK hardwood floor (that I’m working on restoring) and not that parquet crap either. We’re talking the good stuff. My house is also framed with some of the most beautiful yellow pine that would be considered furniture grade these days. The rest of the houses on my block were built around the same time and nobody’s being foreclosed on, in fact the Mortgage Servicer tried to steal this house from my dad a couple years ago because he got a great price on the place and had tons of equity.

  166. cybercjh says:

    @Mary Marsala with Fries: *even more applause*

  167. powerjhb says:

    I just want to know how they justify that they should still be paying 4.25%. I could have gotten a 4.25% teaser rate or lower, but I was responsible and got a 30 year fixed rate loan. Now I have to bail out these folks and their bank.

  168. toddy33 says:

    @Mary Marsala with Fries:

    I suck at finance because I refuse to put myself in situations that are beyond my means and can’t imagine doing it?

    Wow. Just…wow.

  169. koffeesforklosers says:

    the bailout game has been played this way for decades between corporations, financial institutions, and the fed itself. loan upon loan will be made, and each time the borrower will eventually realize they are only widening the hole they’ve dug. eventually, the borrower will refuse to pay, and terms will be renegotiated. When this part of the game can no longer be played, then the terms will have to be restructured and the fed will be brought in to guarantee loans either through a promised safety net or outright credit. The reasoning behind the fed’s involvement is to “stabilize” the economy and look out for the good of the people. In all reality the influx of cash only depletes our buying power, and the only ones who pay any price for the printed money is the common man who labors for money printed out of thin air. I think this seems so foreign to the average consumer, because we are not used to seeing this on such an individual level.

  170. @MrEvil: The Atlantic (or Atlantic Monthly? I get confused) had an article not long ago, Consumerist linked to it, about how the new slums were going to be exurban McNeighborhoods. As costs rise, those neighborhoods become too expensive to live in (house size, commute length), and most of them lack the sorts of things that make a community vibrant (walkable schools, churches, light commercial) and entice people into the neighborhood. The neighborhoods are not “stable” per se because while the homes might all have belonged to wealthy young professionals, there isn’t the 50-year investment and multigenerational community that builds up in older areas, where you start to develop anchoring families too (whose mortgages are paid off already in many cases!).

    On top of that, as you note, the homes themselves have little intrinsic value as they’re built with inferior materials and not built to last. Urban slums (as the magazine notes) can recover because those brick rowhouses were built to last 200 years. McMansions aren’t built to last 30, so even if the trend reverses, nobody might want back in the houses. (And during the boom there were certainly neighborhoods with newer houses where they were all considered “teardowns” because the value is all in the LOT, and it’s so cheap to rebuild another McMansion on the spot.)

  171. fostina1 says:

    compound interest and organized religion will be the downfall of the human race. and global warming

  172. lemur says:

    @Mary Marsala with Fries: Thanks for keeping it real.

  173. Sudonum says:

    @RandoX:
    It’d be the same process. The homeowner would take the bank to court, the court would rule that the bank breached their contract, and the court would provide the homeowner with the appropriate relief.

  174. lemur says:

    @toddy33: I suck at finance because I refuse to put myself in situations that are beyond my means and can’t imagine doing it?

    She did not actually say that.

  175. Me - now with more humidity says:

    Mary Marsala: BRAVO!

    Mr. Evil: No, it’s happening all over. Go to LA. Go to Denver. Go to Detroit. Go to Indy. It’s widespread, in neighborhoods of all types.

    powerjhb: and just how exactly are you being forced to “bail these people out” today? Tell me exactly where and how many of your personal dollars are going right this minute to “bail out” anyone? Can’t answer? Thought so.

    Sheesh.

  176. Kanti_V2 says:

    What the fuck is wrong with the people on this board? Seriously. The blame the victim idiocy here has really jumped the shark. I’ve never seen such a collection of heartless myopic assholes in my life. It’s like a moronic libertarian convention. Who gives a flying fuck if these people aren’t paying the banks or lenders? They deserve to get screwed over, this housing crisis is their fault (along with the idiots who deregulated the industry to allow for this). For fuck sakes, they have kids, and assholes here are screaming for their blood, and saying they hope they wind up homeless.

    And a quick history lesson for the ‘personal responsibility’ retarded children here, this is not uncommon. In fact around the time that all this happened before, the Great Depression, when an unregulated banking and lending industry was once before taken down by a housing boom gone bust, this happened all the time. Defaulting on your mortgage, and saving what you could before your house was foreclosed was the only responsible thing you could do for your family. And it makes more financial sense then paying more and more every month, as the value of your home decreases, essentially paying your way into debt.

    And for the idiots trying to blame the housing crisis on people like this, remember that MANY of these people could have gotten prime mortgages, but lenders pressured them, and in some cases lied them into these sub-prime mortgages.

  177. Mr. Gunn says:

    cybercjh: This is between the bank and the mortgagees. If the bank decides it’s not even worth the property taxes to repo the house, that’s their decision to make, just like it was their decision to loan droves of people houses with 0% down. Who are you to say that they shouldn’t continue living there if the bank doesn’t care? I imagine most of these people will eventually work out some sort of deal, once everybody gets over their initial shock.

    The way the Consumerist phrased the post, it’s obvious troll-bait, and I’m not surprised many have risen to the occasion, but decline of Western civilization this is not.

    Now, if the IMF has to bail out the US, maybe it’s time to consider more dire prophecy, but we’re not there yet.

  178. Mr. Gunn says:

    Kanti_V2: “assholes here are screaming for their blood, and saying they hope they wind up homeless.”

    To be fair, this reaction is what the post author was looking for by their choice of wording.

  179. Phonespider says:

    @MrEvil: Your right it is mostly a problem with newer homes.

    Back in the 90ies people were all outraged about how “Poor people can’t buy homes because they can’t get credit” So our wonderful and compassionate federal government started loosening up credit regulations.

    See the Community Reinvestment Act, Glass-Steagall Act, etc…

    A good thing to do would be to put the regulations back in place and use the foreclosure process to fix the problem.

    The best thing to do would be to put our momentary system back on a concrete standard (gold, sliver, etc) and have the government get out of the business of ‘managing the economy’. They only thing they have proven them selfs to be successful at is causing inflation and screwing things up (Savings and Loan, price controls, China buying up our debt, etc)

  180. toddy33 says:

    @lemur:

    Not quite, but these are the exact words that I am responding to:

    You people think everyone who declares bankruptcy is a douche, too? Can’t you possibly imagine situations in which it’s the best thing someone can do? (If not, stop trying to think about finance — just stop, because you suck at it.)

    And to me, it’s close. This particular situation that we are talking about is honestly not anything more than people having willingly put themeselves in a position that was irresponsible from the get-go, and then saying that they are genuinely happy about just walking away from it.

    No, I can’t possibly empathize with that–that’s all I’m saying.

  181. toddy33 says:

    @Kanti_V2:

    Honestly, I was about to react negatively, but you may have a point.

    Several, as a matter of fact. :) To be clear, I’m usually an anti-blame-the-victim sort.

    The thing that just gets me here is in the end details, not so much the default itself. It’s the tone of being in default and then just sort of having a laissez-faire or even happy-go-lucky attitude about it (i gotta disable the hyphen key…).

  182. Oryx says:

    @cybercjh:

    Well said sir, well said.

  183. MBirchmeier says:

    I think one of the problems here is very people are realizing that a home should be a place to live first and an investment second.

    The only true ‘value’ in a house is gained from living in it, and the ability to live in it for years to come.

    There’s a lot of back and forth argument about ‘morality’ in this situtation, well they haven’t lost their jobs, they haven’t gotten sick, from what I can tell the only thing that’s changed since they took out the loan is the value of the house.

    Relying on the value of the house to go up substantially (or even on it not going down) is about as ethically responsible as taking the rent money and betting it on red. It might have seemed like a safe bet, but guess what, the rent’s due and the wheel came up black.

    -MBirchmeier

  184. TPS Reporter says:

    Actually it is morally wrong. By signing that mortgage paper, you agreed to pay the payments. You didn’t agree to pay or not to pay. You said “Here is my word that I am committing to pay this.” Taking the house back is a consequence of not paying, of defaulting. Defaulting is defined by Websters as: failure to do something required by duty or law.

  185. fostina1 says:

    money problems have effects on marraiges, their decisino likely saved the marriage.

  186. Saboth says:

    @GreatCaesarsGhost:

    Sure you can walk away from it…and your house can walk away from you once the bank forecloses on it and boots you into the street. Personally, I like having a good credit rating. I was pretty well-informed on my mortgage, and had many options available to me…variable rates that were cheap, etc, but I understood low interest rates don’t stick around, and even if it was a higher rate, a “medium” rate on a fixed loan was far better. I hope the government doesn’t do a damn thing to bail these people out. 4k house payment? So apparently they went for the maximum they could afford? My house might not be big and fancy, but if something happened, I could withstand to double my house payment each month with no problems.

  187. MBirchmeier says:

    I had a long comment typed out and I think it got lost in the nether, but the gist of it was it seems as a nation we’ve forgotton that the main purpose of a house, to live in it.

    It’s great that it’s a good investment, but the primary value comes from living it it and the ability to do so into the future, not to get a house than turn it around to make a buck or two, or be able to take out a loan on it.

    From what I can tell about this situation is they haven’t lost their job, they haven’t had health issues, rather the only thing that’s changed is the value of their home, and they were probably hoping to refinance before the value of their home went down. While it might have seemed safe at the time how is this any more responsible ethically then betting your rent on black on the roulette wheel.

    -MBirchmeier

  188. modenastradale says:

    These people obviously come across as brazen and entitled. But, along with all the moral judgment, bear in mind that corporate culture in America is exactly the same: do as much as you can get away with to benefit yourself, all external consequences be damned.

    Do you think these people would have the same attitude if they were making mortgage payments to an individual? I doubt it — most people would feel an ethical dilemma because they’d see themselves taking advantage of another person.

    But in the loyalty-free social/business climate that our form of capitalism has given us, people just don’t feel ethical responsibilities toward multinational corporations. And why should they?

  189. mariospants says:

    While I agree that these people are douchebags of the highest order for reneging on their obligations, I can sympathize with the frustrations that brought them here.

    Let’s not forget that housing prices have been rising ever higher over the last 15 years. It’s unfair for someone in the middle class to not be able to afford to buy a home for their family just because of a situation beyond their control. Lower introductory interest rates and ever-rising home prices obviously become very attractive options for home ownership. How much dumber are these people from similar purchaser who bought homes that appreciated greatly 10 years previously? Wrong place, wrong time. Let’s not forget that mortgage lenders are guilty for creating the circumstances that not only allowed for easy equity cashout but but also encouraged the rise in housing prices. If half the people on your block get home equity loans you can be sure that they will be getting home value estimates that are either at the top percentile or are even over-estimated. That means that house values artificially rise and since the interest rates are so attractively low and there really is demand for housing, people tend to panick and buy in at ever-increasing prices.

    I feel kind of sad for these folks in a way. Yeah, they’re doing something really scummy, but if they were 20 years older and living in a different time, they would be able to afford to pay their mortagage and get a baby sitter and buy a TV once every 5 years.

    Here’s a quote from the interview with them:

    Vigeland: What’s happened to your home value?

    Fiddler: It’s gone down probably 35 or 40 percent.”

    That’s not chicken feed, folks. That would pretty much make anybody’s life frustrating.

  190. mariospants says:

    Is it me or is this new comment system not working? I’ve lost at least 3 comments today.

  191. modenastradale says:

    @MrBill38: That’s a very antiquated set of beliefs about contracts that, frankly, no one believes anymore. When you enter into a contract with someone, you aren’t really promising them you’ll perform your end of the agreement. You’re promising them that you’ll either perform your end of the agreement, or you’ll be subject to other provisions of the contract, or ultimately that they’ll have a right of action against you in court. But it’s not been a moral issue for decades — contracts aren’t about one’s “word.” They’re just a statement of economic position.

    As a matter of everyday, routine business, bear in mind that “respectable” companies default on their contracts with each other regularly. It isn’t because they can’t peform — it’s because something has changed, they no longer WANT to perform, and they figure it’ll be cheaper just to take the consequences.

  192. prameta1 says:

    a lot of these comments are absolutely sickening. what’s with all these vague and nondescript “morals” and “moral obligations”? let’s show some empathy, okay?

    further, let’s make one thing nice and clear. the bank couldn’t care any less about you or your family. not one possible bit less. these people aren’t bad people. their only wants appear to be an occasional restaurant dinner together.

    their obligations are to their children. those are their obligations. they’re doing what’s best for their family. they’re looking out for their future.

    i can always count on this website to see some real vapid-minded comments, consistently lacking in any kind of empathy or meaningful understanding.

  193. evilplushie says:

    To be honest, after reading the actual article, the folks in the interview got screwed over by life. The wife lost her job and then she got pregnant for the third time. That’s not exactly going to help keep expenses down.

  194. etherealclarity says:

    @Kanti_V2: Hey now, don’t lump the libertarians in with the response you’re complaining about. Mortgage contracts include provisions for a default, so there’s no breach of contract here and thus nothing for a libertarian to get up in arms about. Taxpayer-funded bailouts, yes, but walking away from a mortgage when you have no better choice, no.

    Everyone else who thinks these people are “douches” or something similar: I am all for personal responsibility, and yes, they clearly could have made some better choices, but this is the way the mortgage industry is built. Also, if you read what they’re actually saying, they’re not “happy” because they’re “screwing over” the bank, they’re more or less relieved that they’ve finally made an incredibly difficult decision that was clearly causing them a lot of heartache.

    And finally, for all of those people saying they would NEVER put themselves in a situation where they had to declare bankruptcy or stop paying on a mortgage… what happened if you lost your job and simply COULD NOT find another one (or at least not one that paid enough for you to meet your financial obligations) no matter how hard you tried? Even a 6 months expenses emergency fund will only take you so far.

  195. QuiteSpunky says:

    @Eyebrows McGee: You are one smart lady.

    Your question of debt to the system is also really intriguing. As a side note, I think the whole subprime crisis belies a mistaken underpinning of our national values, namely that the individual’s desires take precedence over the importance of society. This me-first attitude permeates the entire situation: individuals buying more than they can afford, real estate brokers encouraging them to take on a larger debt so they can get a bigger fees, banks giving loans to people they shouldn’t have, and investment firms trading in dubious/unregulated markets. Perhaps what we are seeing is a systemic collapse from everyone having the “I will do what’s in my own best interest” attitude.

    I’m not advocating communism. I’m advocating a move toward more community-based resources. I live in a studio apartment, but I have coffee shops, parks, libraries and restaurants all within blocks of my house- to me these are shared spaces for everyone. Yeah, my apartment is tiny, but I am close enough to walk to work which means I don’t have or need a car. I also think the notion of owning a home may be a vestige of a former America that will start to disappear in the next generation. Owning a home is great if your goal is to own a home, but as we can see, owning a home as an investment may be a risky proposition.

    On personal note, the town where I grew up was once a very rural place. Over time, it’s become a sprawling mass of suburbs and McMansions. The weird woods and fields we used to run around in as kids are gone. One particular valley that was once occupied with farms and that holds a stunning view of the nearby mountain is now covered in McMansions throughout the valley and on both ridges. Everyone wants their piece and their private view of the mountain, but what everyone ended up with was a view of other McMansions. You win, I win, We Lose.

    And that’s my rant!

  196. SuffolkHouse says:

    @EvilConservative:

    Wrong, Few actual banks hold these loans. Most of them were bundled into securities at the blessing of the US Senate. With virtually no oversight, these securities were purchased by cities and individuals as investments. Yet, no one knew the level of the risk involved in them because they aren’t properly regulated – A blessing of the GOP.

    So, nope. You are wrong. And whether someone hires someone else doesn’t make him/her valuable. Whether someone is alive makes him/her valuable. The people in this story are raising children, which makes them even MORE valuable. But you’d have them out in the street.

    A good conservative christian, eh?

  197. econobiker says:

    @spoco: Yeah, the agents and laon people are sad when you qualify for a high amount and actually buy alot lower. About 8 years ago my cousin (1st time buyer/blue collar job) qualified for about a $180k loan. This amount was insane given his pay rate but he had great credit (from not living above his means). He said the huge amount of deflation in the loan person’s tone of voice was readily evident when he called back to get financing for his $96k home.

    Moral is that you have to make the right decision for your actual situation – not the fantasy the real estate agent wants you to believe for their commision or the loan officer wants for their commision…

  198. Wimpkins says:

    $4000 a month !

    LOL

    The Jones Family is losing.

    Yes ! I’m finally better than them.

  199. drunken marmot says:

    I have no sympathy for these people. Every few years or so, my husband and I discuss the feasibility of buying a house. We always decide against it as we don’t want to be house-poor. I want to enjoy my weekends, not spend them fixing leaky toilets. if you can’t afford a home, DON’T BUY ONE!
    I’m sick and tired of the popular misconception that home ownership is the best financial decision you can make.Sure, it’s nice for the kids to have a yard. But wouldn’t an affordable apartment give you more money to spend on little luxuries?
    You used to buy a home and fix it up gradually over a period of years. Now if it doesn’t come with a whirlpool in the master bath and a 3 car garage, no one is interested. Unfortunately, people buy into a lifestyle they can’t afford, and we, as taxpayers, will pay the cost.
    It isn’t right.

  200. brennie says:

    @Eyebrows McGee: Question for you. As I understand it, the index rates you refer to are going down. Doesn’t this mean that ARM resets should be resetting LOWER not higher? I have read here and there (patrick.net) that the loans could very well do this but that banks are withholding this information from customers who would potentially benefit since it means less money for them (the bank). Basically committing mortgage fraud or inviting the customer to ‘lock in’ a rate of the banks choosing now before the customer reads the fine print, does the math, and realizes they owe LESS not more (excluding neg am loans). If that’s true, then I definately say screw the banks. Your thoughts, Mr. McGee?

  201. GearheadGeek says:

    Ah, the entertainment of “piling on.” I’ve seen lots of comments about personal responsibility, buying too much house, etc. but no one has mentioned this little nugget from the transcript of the interview: The house is 3600 square feet, with a 4-car garage. WHAT? I see 2 kids in the picture, I didn’t read anything about a half-dozen more… what the HELL were they thinking buying a 3600 square foot house with a 4-car garage?

    Now, if they’d bought a reasonably-sized house in a McMansion ghetto that’s experiencing the same sort of foreclosure problems, they’d still be up to their eyeballs in problems, but still the concept of a 4-person family “needing” a house that’s almost as big as all *3* houses I’ve ever owned COMBINED just boggles the mind.

  202. milqtost says:

    @mikesfree: Thanks to some recent “relief acts” the banks can’t come after people for the difference in what they owe and what the property ultimately sells for. The bank has to eat that. I think that applies for foreclosures between Jan 2007 and the end of 2008. So other than the credit history hit there is no penalty.

  203. emmybee says:

    it’s really funny reading about the collapse of real estate prices while living in manhattan. if only…

  204. cybercjh says:

    @Mr. Gunn: Did you even read what I wrote? You ask, “Who are you to say that they shouldn’t continue living there if the bank doesn’t care?” Um, I never wrote that or anything like it.

  205. backbroken says:

    The one phrase that keeps coming to my mind is ‘tragedy of the commons.’

    It may have been the best decision for them. But it really is fucking everyone else. That’s why folks are responding the way they are. I’ve already got to pay for the war 51% voted for, now I’ve got to pay to bail out the people who invested in your worthless mortgage so you could rent a McMansion for 5 years.

    I suppose someone is already typing up a reply, “Well why don’t you move to Russia then?”

  206. Lerg says:

    I try (and often fail) every day to live up to my own standards of the type of person I want to be, and to portray that value system through my actions.

    How I view myself is far more important than my credit score at the end of the day, and that is the true motivator to acting with honesty and integrity in life. This couple shows neither.

    If I were this man, I couldn’t look my wife in the eyes anymore without being so ashamed of my failure as a provider that I would consider suicide. Although, I don’t think my value system would ever allow my to be in this position. I have more personal responsibility and integrity than this.

    If these people were in my life, this action would make me question their values and judgment on all areas of life. These are not people I would look up to or respect, nor would I emulate their behavior in any way.

    There are a number of ways they could retain their integrity and exit this bad financial situation. They are choosing the easy short term way. This is not a system of values to be upheld in our country.

  207. etherealclarity says:

    @backbroken: They aren’t the ones fucking everyone else, it’s those who made the original risky loans that are fucking everyone else. Those people, and the people who think that anyone “deserves” a tax-funded bailout from this situation.

  208. binaryspiral says:

    After hearing about how much money the banks gave brokers as kickbacks to get people into these loans, I don’t feel bad for the banks or brokers. Very little regulation and even less common sense was used during this mortgage boom – this recession is no surprise.

    With that being said – these people signed the papers and should have been 100% sure of what they were signing – because in the end, it’s a legal document and they MUST be held to the document.

    Not paying a mortgage just because you don’t like the value of your house going down and your interest rate going up – it just irresponsible.

    I bought a house I could afford in a stable established neighborhood. Why do that when I could have scored an ARM for a giant house in a new subdivision?

    Three years later, I’m the one still paying my mortgage and actually enjoying equity.

  209. BigElectricCat says:

    @FooKoo: “Here’s the difference: we don’t have a bunch of pussy, power-hungry politicians willing to sacrifice the entire country’s financial well-being in order to bail out losers who bought more CAR than they could afford.”

    FWIW, I don’t support homeowner bailouts. That said, I don’t support bank and brokerage bailouts, either. Those individuals and families who made bad financial decisions should have to bear the consequences of those decisions. And so should the banks and financial institutions who also made bad decisions in this area.

    @FooKoo: “And, yes, knowingly, voluntarily foisting your debts off onto the shoulders of responsible members of society, even if it’s in some way not illegal, DOES make you a jerk.”

    Hmm. So that’d make the directors and executives of Countrywide and Bear Stearns jerks too, right?

    The posters who observe that not paying one’s mortgage is a business decision are more-or-less correct. It’s no less ethical than a corporation defaulting on its debt, handing its pension plan over to the government or telling its employees how to apply for Medicaid. Business decisions often seem quite cold and immoral, but let’s not kid ourselves here — individuals aren’t the only persons making decisions like that.

    Eventually, this family will face foreclosure, and Mom & Dad’s credit ratings will turn to crap; those are the business consequences of their business decision. IMO, unless you’re willing to come down on every business in America that makes ‘immoral’ business decisions, then you’re being hypocritical for coming down on these folks for doing exactly what businesses do every day.

  210. mwwilk says:

    @darundal: Don’t go giving douches a bad name.

  211. BigElectricCat says:

    @Eyebrows McGee: My wife works in HR, and unless she’s looking to fill a managerial or director-level position, a foreclosure or a lousy credit rating plays no part in her decision. She is, however, intensely interested in the results of a criminal background check.

  212. MightyCow says:

    People who want to buy an affordable house and are willing to actually pay for it are having a harder time now, because all these DBs either bought houses they couldn’t afford, or tried to flip pieces of junk for huge profits.

    They deserve to have to live with the responsibility of their greed, but the government will probably bail them out at the expense of the rest of us.

  213. sarsbar says:

    They’re in debtors’ prison already — that’s what the American Dream has become. What these two are doing is staging a breakout. Say what you will morally, ethically… me, I say more power to them. Between screwing a bank and spending the rest of your life in the red and beholden to big business? Eh? At the end of the day, **** ‘em.

  214. taylorich says:

    To the folks who say no one will rent to these people…reality check. After probably 5 months of living in their $4K per month home without paying before they arte forced out, along with a $3-5K “bonus” (if not more) from the banks for not trashing the house before they leave (google it) they have probably over $20K in CASH. Go to any apartment and say “Here’s $10K up front for 6-9 months.”

    One word. Approved.

    And these people don’t care about credit reports. There are ways around these scores if you want something. A friend of mine got credit approvals 5 months after bankruptcy…unsecured credit approvals for THOUSANDS.

    Question: Would you give up your great credit score for $25,000??? Or would you give up and take the cash?

  215. Ninjanice says:

    “If they reduced our interest rate back to 4.25, we might be able to make the payments, but I don’t think we’re going to.” So, basically, even if their ARM was a fixed mortgage at the interest rate the signed up for, these people wouldn’t pay their bills. No one forced these people to buy a home that was out of their price range.

  216. radio1 says:

    Good God.

    The family is not nearly as culpable as the mortgage companies and the banks foisting this on the American public, I believe.

    The free credit reign of the past few years was a free-for-all. Mortage companies popping up everywhere. Every one and his uncle becoming a mortgage broker or house-flipper. The sub-prime meltdown was just a huge market correction. Stagnant banks looking for more growth to please stockholders invest in riskier and unstable investments.

    Think about it… There’s no metric to measure intent of borrowers to pay of what probably amounts to a jumbo mortgage. I know a credit rating does, but since people are arguing a ‘moral’ intent- I’d like to stick to that moral base for a minute.

    Say 50% of borrowers intend to pay off their McMansions and the other half does not- they just want to ride wave and get foreclosed on. The ‘pre-cog’ dead-beats should have been sniffed out in the process of application. Who’s at fault there? The lender is, for relaxing whatever standards they did have for greater reward and risk. They gambled and lost.

    Now what about the first 50% who had intended to make good? Well, even you take half of them (25%) and attribute their woes to stupidity. That still leaves the last 25% of borrowers who did nothing wrong and are left in the lurch.

    So, in my mind it seems that the majority of the problem (75%) is actually the lender’s fault.

    Christ, why not bail out all the consumers for once? I am so tired of hearing about multibillion dollar bail-outs and tax-cuts for industries that either don’t need them (Big Oil) or for entities that should die (Bear Stearns).

    Why in our society do we persecute the individuals and not prosecute the corporations? Why is something that would benefit everyone on personal level like universal healthcare or financial bail-out considered socialism and therefore evil. But then you turn around and offer the same for coporations and industries, and suddenly it’s for the good of the country? F*in corporate socialism. Screw that.

  217. scoli83 says:

    @Applekid: The length of foreclosure depends on the state. For example, in Texas, once a lender decides to foreclose you would have AT THE MOST 60 days, but more likely 30-40.

  218. groberts1980 says:

    And this is why I rent. I simply don’t believe in buying, especially in this market. I may rent for the rest of my life, and I’m okay with that. At least I’m not entering into an agreement that can turn around and fuck me if the economy goes tits up.

  219. lemur says:

    @modenastradale: As a matter of everyday, routine business, bear in mind that “respectable” companies default on their contracts with each other regularly. It isn’t because they can’t peform — it’s because something has changed, they no longer WANT to perform, and they figure it’ll be cheaper just to take the consequences.

    That’s quite true. I used to work for a service company. Our contracts were always written so that it was very clear what would happen in case of default of either party. Lawyers and accountants crunched numbers and stuff and decided on something. It did happen that some companies defaulted on their contracts with us and it did happen that we defaulted. Each time, the defaulting party paid the consequences of the default. That’s how business works. We must keep in mind too that there is a reputation penalty besides what is stipulated in the contract. It is understood that a company can default sometimes but if it defaults too often, its reputation goes down the drain.

    Sometimes we decided to default on some contract because it was more economical for us to pay the financial penalty and pay the reputation penalty than to go ahead with the contract. And we’ve had other companies do that to us too.

  220. lemur says:

    @groberts1980: At least I’m not entering into an agreement that can turn around and fuck me if the economy goes tits up.

    That sounds like some sort of threesome.

  221. lemur says:

    @lemur: The first paragraph was supposed to be in italics, darn it!

  222. nightshadowon says:

    @ivanthemute: Not only the big screen TV, but the gas fireplace is on and the Dad is in shorts , he is standing over a laptop, isn’t that a leather couch?, those cat trees are expensive.

    And here I am only able to rent because a mortgage would be twice as much. Hey at least my big screen TV is payed off.

  223. modenastradale says:

    @Lerg: “If I were this man, I couldn’t look my wife in the eyes anymore without being so ashamed of my failure as a provider that I would consider suicide.”

    God, that’s melodramatic. And outdated. If you were that guy, I hope you would stop wallowing in melancholy over your failed nonexistent 1950s social role, recognize that you (through some fault of your own) got trapped in a huge, unanticipated economic meltdown, and then pragmatically assess (along with your wife — duh — these are joint decisions) your best options going forward.

  224. joellevand says:

    I just want to point out that, as someone who’s currently job hunting, a lot of places now run credit checks. They don’t care about my late credit card payment in 1999 (when I was 18) or the legal battle Capital One and I have been fighting for five years. Nope, those aren’t a problem. But you know three things that are:

    1. Defaulting on a student loan.
    2. Bankruptcy.
    3. Defaulting on a mortgage and going into foreclosure.

    Hope these douchebags don’t lose a job in the upcoming recession or they’ll be looking to the government for another hand out (after the Fed bails out the idiot home owners who entered into a contract where the lender would change the terms (the interest rate) periodically!) which will come out of…you guessed it…the pockets of those of us who are fiscally responsible.

    Jerks.

  225. BigElectricCat says:

    @joellevand:
    “Upcoming” recession? S’already here.

    And as far as Fed bailouts go, you *do* realize that the taxpayers just ate $30 billion in worthless Bear Stearns L3 assets, right? How do you feel about that?

  226. mannyv says:

    You know, a lot of the kvetching here is “well this might happen, well that might happen, bad credit, whatever.”

    But really, maybe it really doesn’t matter. A lot of the consumerist readers tend to view money in moral terms (managing your money, keeping it, saving it), but really, it’s just money.

    Bad credit basically means that you pay more. Sure you may not qualify for a car lease. So what? Are you proud of that 780? Well some people don’t care about it.

    They’re living in their home for free. How can you beat that? They’re essentially negotiating with their bank and going on a payment strike. One day the bank will come back with a counter-offer. Big deal.

    Money handling as a sign of character is quaint, but come on guys, it’s 2008.

  227. gruffydd says:

    @darundal: You are loved!

  228. tmed says:

    I can’t bring myself to feel pissed at the people or sorry for the mortgagor.

    Eventually the people get thrown out and the mortgagor sells and cuts their loss. This is the system they set up. I’d rather the people not throw this back at the lender so cavalierly, but if you CAN’T pay your bills, and the finance company threatens action on partial payment, why the hell would you give them a partial payment?

    Eventually wages have to catch up to the cost of living or no one is going to make any money.

  229. 3drage says:

    I wonder why I should pay rent to my landlord, since I don’t have equity in the house I’m living in. Oh wait, it’s because I made a contract, and follow through on my obligations.

  230. ThomasD3 says:

    I totally support them:

    Businesses care about costs, not ethics.

    Any reason it should not go both ways?

    The day America will be an example of Moral and Ethical behavior, it will be ok to frown on this family. Right now, they got one of these crappy loans, the lender knew exactly what they were doing. It just backfired and now this family is having it their way. I find that cool.

  231. Rusted says:

    S L O W D O W N.

    Read the story. Just a standard foreclosure process.

  232. BigElectricCat says:

    @3drage:
    If you fail to pay your rent, your landlord can undertake proceedings to have you evicted. In addition, your landlord might choose to sue you to recover the rent he/she didn’t receive from you.

    And if you fail to pay on your non-recourse mortgage, your lender can undertake foreclosure proceedings. And then put you out on the street, and mess up your credit rating. But that’s it. Story over. No jail cell, no beatings, no stern lectures. That’s what a ‘non-recourse mortgage’ means. A HELOC’s a different story, as is a cash-out refi, but for people who are just paying on a first mortgage, that’s the extent of what the lender can do.

    Frankly, it sounds like some posters here are *disappointed* about that.

  233. Techguy1138 says:

    @3drage:
    You pay rent only because you would get kicked out if you didn’t.

    The exact same way that you would stop paying rent of your landlord locked you out.

  234. Techguy1138 says:

    What they did makes PERFECT sense.

    They are pretty much guaranteed to get evicted. instead of being turned out on the street with no money to support them selves they will have some saving that they can use to get a deposit on a new place.

    The bank may actually prefer this. They may get the foreclosure but not evict them. The home is actually being maintained and the utilities kept on. The bank has to otherwise pay people to do this. It sounds like they were maintaining nearby houses as well.

    Also the more abandoned homes in a neighborhood the less the property is worth. By living there they are driving UP the values of the surrounding homes.

    The bank may be able to get more money from them then a new owner. If their mortgage was for 400k and the home is maybe worth 200k the bank will take a 200k loss plus the cost of foreclosure in addition to the cost of maintaining and selling the home.

    The bank stands to loose 200-300k on that property. It makes sense to forgive a portion of the debt, lets say 100k and revalue the home, then issue the home owners a fixed mortgage.

    The owners will get taxed on the windfall, but will have to pay. The bank will take a short term loss but a far smaller one and make long term profit.

    This is business and the bank was stupid. They need to figure out how to loose the least on their awful decisions. Then they need to make good decisions for long term profits.

  235. Mr. Mangold says:

    “If one person can’t pay the mortgage they’re douches. If the whole neighborhood can’t pay, if the whole country can’t pay then its the bank’s fault. If one couple figure out how to work the system a little better than the rest hooray for them. Fuck the banks, all of them everywhere.”

    My wife and I are still paying our mortgage, it’s actually easier than it was a year ago. We got a reasonable home with a fixed mortgages. You see, we aren’t Douches.

    In fact, last month we were considering buying a new vehicle. We looked and decided we could have made the payments but it would have stretched our money a little more thin than we were comfortable with, so we decided to instead sell one of our two vehicles we have now and use the car payment money we are saving to save up for a down payment on a new vehicle next year. Instead the good business decision would have been to buy the new vehicle and stop paying our mortgage and just wait for the government to come along and pay it because after all banks are Douches. At least that’s what some of you seem to think.

  236. Me - now with more humidity says:

    milqtost: you’re thinking of the 1099 tax changes. You can no longer be hit with a tax bill for the difference. Non-recourse is a state by state issue.

    Lerg: Aren’t you just f%$king special, Mister Holier than Thou! Come back and see us when you lose a job or have a medical disaster that wipes you out. Cry me a river.

  237. Techguy1138 says:

    @Mr. Mangold:
    Actually no For you to stop paying your mortgage may be a bad business decision.

    Just like an asops fable of the ass and the monkey what is a good idea for one person is a horrible idea for another.

    If you can actually make your payments, save money and buy food defaulting on your house is a bad idea,aka bad business.

    If your home is leaving you broke without enough to buy food and you are in the process of loosing it don’t be stupid. Save up some money so you can live in an apartment instead of the street.

  238. Me - now with more humidity says:

    joellevand: Not true for most businesses and employers. Criminal background check, yes. Drug test, yes.

  239. Me - now with more humidity says:

    Nightshadwoon: That big screen is an older model. My leather sofa cost $100 at a thrift shop. My laptop was $500 3 years ago. I wear shorts in the house in the evening in winter because my wife gets cold and turns the heat up.

    All I’m sayin’ is you can’t be certain of anything.

  240. excite37 says:

    I don’t get what the big deal is with all of you. Sure, it’s not the best example they are setting for their kids. But they acknowledge that the money is not really their’s…yet.
    I’m sure they ARE gonna get a break if they hold on long enough. If you ask me, I say big ups to them for finding a way to work around the system. I just hope they don’t spend all the money.

  241. jefffromNY says:

    Three cheers for a good cup of “screw our obligations!”

  242. GearheadGeek says:

    @Me: You can be fairly certain that a family of 4 didn’t need a 3600 square foot house with a 4-car garage.

  243. Me - now with more humidity says:

    Gearhead Geek: I absolutely agree with that.

  244. coold8 says:

    We stopped paying our mortgage starting this month….., the difference is, the bank sent us the deed, after we sent the check God damn subprimes!

  245. redkamel says:

    I have no sympathy for the bank, they offered and accepted a deal they knew would fail.

    I have no sympathy for the Sinclairs, since they signed a pact they could not keep.

    They made a smart financial decision I suppose. The bank essentially screwed itself by trying to screw the Sinclairs…although its not like the Sinclairs are doing THAT great…

    but it makes me sad that the government helps out banks who make stupid decisions, but not people.

  246. I blame the Gov’mint. If I buy a crappy Rolex knock-off at the flea market, it is my fault for not knowing that $100.00 doesn’t get you a Rolex, it is also the fault of the crook that sold it to me, and the local law enforcement for allowing the crook to get away with selling it.
    These “Americans” are doing a less than honest thing, as are the mortgage lenders’ who after all are humans everyone capable of making honest decisions. If everyone in evil corps., banks, etc were true to their honor then there would be no one working for The Evil.

  247. Also, a ton of these assholes are abandoning their pets at shelters because now that they are renting, Scruffy has to go.

  248. wdnobile says:

    It still boggles the mind why anyone would ever buy a home on a variable rate mortgage. Hey – wanna buy this house? It’ll be cheap to start but then we ARE going to raise the monthly bill significantly. Who DOES this?

  249. B1663R says:

    Holy cow there are a lot of comments here!

    anyway, how the heck and why the heck would they want a mortgage of $4000 a month!!

    i live in a semi detached house with 2500sq feet and my mortgage is $1400 a month. my monthly household income is around $5500.00

    they are idiots for out living their means

  250. ikes says:

    “We went through months of being skinflints”

    Maybe if they had lived that way to begin with, none of this would have happened. It amazes me the number of people who refuse to live within their means.

  251. Piro says:

    @wild_bill:

    Dead on, wild-bill.

    When I bought my home 7 years ago, I was “prequalified” for about $60,000 more than the home I actually bought- and that was with a fixed mortgage. I looked at what I was making, and decided that topping out my approved loan would leave me vulnerable in the future- so I opted to scale down.

    I probably could have taken out an ARM and bought a considerably nicer house than the one I’m in, with a pool, a couple of extra rooms and all kinds of luxuries. However, common sense told me that if I couldn’t afford it now, I sure as hell wouldn’t be able to afford it when the ADJUSTABLE mortgage, well, ADJUSTED.

    When people set themselves up to fall, I’ll be damned if I feel sorry for them when they do.

  252. GearheadGeek says:

    @wdnobile: Well, it boggles the mind that people would buy a house with an ARM at the BOTTOM of the rate curve. When I bought my first house in 1993, mortgage rates were quite high. I bought with an ARM and it adjusted downward every year for several years and when I thought rates were as low as they were going to get, I refinanced with a fixed. Rates actually went up for a while after I did the refi, then went down MORE, but I was happy with my fixed rate. *THAT* is when an ARM makes sense, either when you’re going to be in a place less time than the initial fixed period, or when rates are historically high.

  253. WraithSama says:

    I stated it earlier and it bears repeating: if they feel it’s best for them to stop paying their mortgage, that’s fine. No problem. The problem is that they need to find an apartment and move out. They’re now squatters on a property they have no intention of paying for.

  254. Techguy1138 says:

    @WraithSama:
    No way. That is bad for the bank. Once they move out the bank will be responsible for maintaining the property. If the bank can’t meet the obligation they may foreclose but not repossess. That would leave the home owners responsible for the tax and up keep of a home they no longer live in or near.

    It is far better that they stay there until they are relieved of their tax and maintenance obligations by the court.

  255. Me - now with more humidity says:

    Techguy: You are correct. Unless they file BK, in which case the Trustee takes responsibility for the property on the filing day.

  256. @beavis88: Debtors prison sounds appropriate. Plus their children should be put up for adoption. Nothing worse than a new generation of fucking deadbeats who think it’s cute to not pay your bills and “feel “great” to be living rent free with a “bank full of money”” like these assholes are. I’ll bet their cell phone bills are big too (yet get paid on time every time). Deadbeats.

  257. synergy says:

    wtf. Seriously. It makes financial sense to sell drugs out of my car or to drive down to the Walgreens and crash through the door and take off with the ATM, but I don’t do it! Ugh.

  258. George_Seldes says:

    @Eyebrows McGee:

    Well, since getting through law school and the bar exam in two states and handling a bunch of contracts cases means that I might have a little understanding of how contracts work, let me try explaining it to you: these people are choosing to breach, which is their perfect right. Corporations do it EVERY DAY, with full intention. If the deal works, they’re happy; if not, they breach, take their lumps, and walk away.

    Every contracts law casebook in the country has one or more cases dealing with exactly this situation, voluntary breach that makes economic sense for the breacher — the rule is that the other party should be made whole, no more. There’s no punitives for this, because voluntary breach is an inherent part of contracting.

    The idea that these people should impoverish themselves to keep feeding the beast at the other end is simply nonsense. As long as they leave the house in good condition (and without trashing it) when they are foreclosed, they’re just doing what any financial entity would do–make the best financial decision for themselves in light of the new circumstances.

  259. Rusted says:

    @Me: My credit rating has been checked for employment but then most employers here think every job seeker here is a deadbeat drug addicted illegal alien criminal anyway. Not all but enough I guess.