Homeowners Making $2.6B Per Month Living In Foreclosed Homes

Here’s one way to make the mortgage mess work for you: According to The Wall Street Journal, the slowdown in foreclosures due to questions about paperwork, note-holders and robo-signers has allowed some homeowners to live mortgage-free for several months; some are even renting out their homes. The Journal estimates that the “stealth stimulus” gives these homeowners a “subsidy” of about $2.6 billion a month.

According to the Journal, some homeowners in states such as New York and Florida can stay in their homes for more than six months while legal issues are worked out. And if the money they’re not spending on their mortgages goes into the local economy, “it’s probably stimulative,” said economist Ivy Zelman. Then there are those who’ve turned their homes into new sources of income:

Some homeowners who have defaulted on their mortgage payments are cashing in by renting out their homes. Joe Mayol, a real-estate agent in Palmdale, Calif., estimates that in his area about two-thirds of houses with defaulted mortgages are occupied, and half of those by renters. “People are getting money out of these houses,” he said.

Ms. Zelman says her research suggests defaulters do spend much of the money on consumer services and goods. “People are taking what they would have been spending on a mortgage and spending it somewhere else,” she says.

However, the Journal is quick to add that local communities still end up getting a bad deal, since they usually can’t collect property taxes on foreclosed homes, and the foreclosure crisis only adds to uncertainty about the housing market.

“I don’t think that’s the kind of consumer recovery we want, if the only reason they’re spending a bit more is that they’re not paying their other bills,” Joseph Carson of AllianceBernstein told the Journal.

Stealth Stimulus: Defaulters Who Live for Free [WSJ.com]

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  1. obits3 says:

    “if the only reason they’re spending a bit more is that they’re not paying their other bills…”

    But isn’t that what our government does every year?

  2. CBenji says:

    Yeah I am sure tons of people are living high on the hog now. They are probably turning the heat up high to all of 75 degrees and then not paying the bill and ordering out every night or some nonsense. Maybe they are even eating at Red Lobster or the Olive Garden every night. With the thought of a possible foreclosure looming on the horizon I think I would sooner just pay the bill.

    • Shouty D says:

      Whoa whoa whoa! Red Lobster or the OLIVE GARDEN?! BIG SPENDERS!

      • CoachTabe says:

        Not that it’s $100/plate or anything, but I can certainly hit $75-$100 – easily – when my wife & I hit Red Lobster. Not exactly go-there-every-week pricing.

        • Gulliver says:

          Dude, you and your wife either eat a LOT, or you are drunks, unless you insist on a surf and turf that is $30 per person. A normal person can go and spend about $40, which is not that bad

          • FredKlein says:

            CoachTabe I can certainly hit $75-$100 – easily – when my wife & I hit Red Lobster.

            Gulliver A normal person can go and spend about $40

            Nothing contradictory about those statements.

        • kerrington.steele says:

          “Where’s Aaandre?! We were going to go to Red Laaahbster!”

          / Tim Gunn voice

  3. Mom says:

    I wouldn’t have believed TFA, until I talked to my coworker this morning. He told me that his next door neighbor bought a Ford Excursion this past weekend, despite being seven months(!) behind on their mortgage.

    Maybe they’re planning on living in the Excursion when they finally get foreclosed.

    • pecan 3.14159265 says:

      That’s insane. And kind of unbelievable, because Ford doesn’t make the Excursion anymore. So even if you got the name wrong and meant Explorer, it’s still unbelievable because even if your mortgage was $4,000 a month, an Excursion easily costs five times as much. I don’t see how anyone who is holding onto 5 mortgage payments (or more) is such an idiot that he would put himself into foreclosure and buy a new car. And ruin his credit.

      • Oranges w/ Cheese says:

        It’s obvious they financed it, duh. No one buys a car with cash!

        • Big Mama Pain says:

          Pssst, I do ; )

        • Mole90 says:

          I find it hard to believe that someone that is 7 months behind on their mortgage would qualify for an auto loan. They most likely saved all the money that they didn’t pay on the mortgage e.g. 7 x $1500 = $10,500.00. You can get an expedition cheap since they are gas hogs and not many people want them anymore. Probably about 10-13k depending on the year. If they had a trade in, then they certain could get one with out financing it.

      • Verdant Pine Trees says:

        Perhaps they bought it used?

        It would be a sensible place to sleep in…

      • tbax929 says:

        I’m going to assume it was finance. That, of course, makes me wonder who in the hell would approve a loan for someone that far behind on a mortgage? I guess the banks haven’t really learned anything.

      • mythago says:

        The guy is citing something his co-worker told him the co-worker’s neighbor did. I wouldn’t take that as evidence of anything except that he doesn’t have enough to do at work.

      • Doubts42 says:

        Because all the Excursions in the world evaporated when Ford stopped making them? I didn’t see where he said the co-worker bought a NEW Excursion. Just that they bought one.

    • CBenji says:

      Actually my idiot neighbor who just walked away from her house had just bought her a used Expedition about 3 months previous to doing so, but they had two really crappy minivans that they sold to buy those. From what I heard they paid cash for the Expedition, but it was used. It could have been about 5 years old.

    • AustinTXProgrammer says:

      It’s common to buy vehicles before bankruptcy… You can keep the car (and the loan, it is secured) after the proceedings. If you wait until afterward you won’t qualify.

      • u1itn0w2day says:

        I know someone who was told to lease rather than buy a car by a lawyer with an impending bankruptcy. He said you want as few assets as possible so the court can’t make you sell it off to pay a settlement.

        It’s their credit history in the end. The same history they’ll need to find a job or rent a place to live.

        • Firethorn says:

          If they just financed it, odds are they don’t have any equity in it, so selling it would actually COST the person money, not recover any. So you might as well let them keep the vehicle.

          Even if they paid cash, judges normally let people keep at least one vehicle for the purpose of traveling to/from work and everywhere else. A judge will normally only order the sale of EXTRA vehicles, or if the vehicle is so outrageously expensive that it can be sold and a quality basic used car bought to replace it while still recovering a significant amount of money.

    • quail says:

      Long before the housing debacle and the Great Recession people planning to go into bankruptcy would perform all sorts of financial calisthenics before officially filing. This is nothing new. Purchasing a car before foreclosure and the tanking of ones Fico score is reasonable.

      Odd how we sing the praises of a CEO for his financial wrangling to save a company. But if an individual does the same we cry that he’s a dishonest S.O.B.

      The saddest part is the hedge funds that pushed the bubble years beyond when it should have burst are the ones sitting with the most money from the crisis.

  4. Eat The Rich -They are fat and succulent says:

    So basically…..

    Bankers angry that consumers are making money off their errors. Turnabout anyone? Find me the worlds smallest damn violin to play for the banks.

  5. CreativeLinks says:

    Step 1: Don’t Pay Your Mortgage

    Step 2: ?

    Step 3: Profit.

  6. Loias supports harsher punishments against corporations says:

    So many angles on this one.

    1. Should homeowners still have to pay their mortgage on a foreclosed (or pending) home?
    2. Isn’t this just retribution of granting a bad loan in the first place, not agreeing to mandated modifcation programs, and/or falsifying documents in order to process the foreclosure?
    3. Should they be allowed to rent a pending foreclosure?
    4. Should they be required to pay property taxes anyway?

    So, SO many things going on here, I have no idea how to process this in my head.

    • RvLeshrac says:

      1) No, because that’s covered in the contract. The bank forecloses on the home and takes it back, which satisfies the debt. (Unless you’re in a backwards state in the South, where the lender is legally allowed to sue you for the remainder of the debt even *AFTER* the property has been reclaimed. And no, you don’t get the property back even if you finish paying off the debt.)

      2) Morally, it isn’t right. Ethically, it IS right. Legally, there’s nothing wrong with it.

      3) No, because once the property has gone into foreclosure, the lender is responsible for the property.

      4) No, because once the property has gone into foreclosure, the lender is responsible for the property. The lender should be wholly responsible for all property taxes and property tax liens.

      • NeverLetMeDown says:

        “Unless you’re in a backwards state in the South, where the lender is legally allowed to sue you for the remainder of the debt even *AFTER* the property has been reclaimed. And no, you don’t get the property back even if you finish paying off the debt.”

        1. Recourse states aren’t “backward,” it’s just a different structure, and lots of non-Southern states (i.e. New York) at least have a recourse option.

        2. You don’t get the property back, but it’s not as if the bank makes money on this. The bank can only pursue you for the deficiency. So, if you have a $300k mortgage, you default, the bank forecloses, and sells the house for $250k, the bank can only come after you for $50k.

        • Awesome McAwesomeness says:

          Make sense to me for people to have to pay back the value of what they borrowed some way, somehow. Doesn’t sound backward at all. If you borrowed $300,000, that’s what the banks should get back.

          • bbf says:

            Well, the HOUSE was supposed to be collateral for the Mortgage. It’s the mortgage giver’s responsibility to ensure that the down payment on the house is large enough, and the mortgage is small enough such that the house could be foreclosed to pay for any remaining unpaid principle… at least that’s how the system was originally supposed to have worked before people/companies starting gaming the system and thinking of housing as something that was to be flipped for a quick profit, and not lived in for 30+ years…

            That’s why in some areas, the only recourse for a bad mortgage is collection of the collateral, which would be limited to the property associated with the mortgage.

            In the last few years, brokers made money “approving” mortgages and then rather than one bank/investor holding on the mortgage, the mortgage holders chopped them up and sold them to other investors, thus washing their hands of their shoddy mortgage and leaving somebody else holding the bag of poo… and unluckily, that would be fanny mae, freddy mac (bailed out by US taxpayers) and a lot of pension funds.

  7. foofad says:

    That people aren’t using these unexpected benefits to their advantage in GETTING OUT OF DEBT and instead “putting the money into the local economy” is disgusting and just goes to show how insane Joe Blow is with regards to money.

    • wrjohnston91283 says:

      If you’re so low on money that you aren’t paying your mortgage, my guess is that you’re more worried about putting food on the table and having clothes for the winter than paying down debt.

      • Not Given says:

        And keeping the lights and water on
        getting their prescriptions filled
        maintaining a vehicle so they can get to a job or look for one

  8. Oranges w/ Cheese says:

    Ms. Zelman says her research suggests defaulters do spend much of the money on consumer services and goods. “People are taking what they would have been spending on a mortgage and spending it somewhere else,” she says.

    BUT WHY?! Pay your damn mortgage!

    • Loias supports harsher punishments against corporations says:

      Yeah, that irks me. At the very least, save the money. You’ve probably tough roads ahead if you’re forclosing.

      • Gulliver says:

        How do you know what their financial situation is? Here is a scenario. Guy loses job that pays $75 k per year. Easily affords mortgage. Falls behind 3 months on mortgage after being unemployed for a year. Mortgage company wont renegotiate when guy gets new job at $60k. Guy says, well I will save half the mortgage payment (in foreclosure the bank CAN NOT accept payment anyway), and spend the balance how he sees fit. Bank gets property, former homeowner has money to get new rental place.
        There are a million similar type scenarios. When KMart filed for BK protection, or United Airlines was allowed to walk away from their debt, it was accepted as being part of the system. There is no moral obligation to pay any debt. Interest is the payment banks use to accept the risk. If the risk is too high, the interest rate must go up. It is simple math. People need to take ethics and morality out of financial decisions. Realize they are just that. Raping little boys is a moral decision. Destroying the environment from and oil spill is a moral decision. Murder is a moral decision. Walking away from paying money owed in a contract is a financial business decision.

    • RvLeshrac says:

      Since the banks have been acting unethically, why should the borrowers be expected to act any more ethically?

      It should also be noted that those most likely to engage in this type of behaviour are the ones who aren’t in any financial trouble in the first place.

      • Awesome McAwesomeness says:

        One person or group’s unethical behavior doesn’t make it okay for someone else to act just as unethically. That is terrible logic. If everyone justified their wrongs by saying it’s okay because someone else did something similarly wrong, then there would be no order or decency in the world. Each individual is responsible and accountable for his or her own behavior. It all comes back around in one way or another.

        • crashfrog says:

          No, I think turnabout is fair play. It’s not that another completely unrelated person’s behavior justifies your unethical behavior to an unrelated third party; it’s that when someone you’re in business with treats you in bad faith, it’s not unethical to treat them with the same bad faith in return. But just them, specifically, not anybody else.

          And it’s not at all clear why anybody has an ethical obligation to repay a loan that doesn’t make sound business sense. Sure, you made a contract to repay a loan, but the loan had a default option with terms that you can choose to suffer – and you paid for that option in the interest rate, which is the bank’s charge to cover the risk that you might not repay. It’s legal to default on a mortgage, or on any other debt. Lenders knew that when they got into lending. They knew the risks. Why are they more entitled to be repaid than anybody else?

          • Doubts42 says:

            part of that contract says you will move out and give the house back to the bank. if you are still living in it, or renting it then you are in the ethical and probably legal wrong.

            • crashfrog says:

              No, the exact opposite. Unoccupied homes depress neighborhood home values as well as the value of the home itself. By continuing to live in your foreclosed home, you maintain property values for your neighbors, maintain the value of the home for when the bank ultimately takes ownership – assuming they actually can demonstrate they own it, which is somewhat of an issue these days – and keep a roof over the head of your family.

              That’s a fundamentally ethical act. You’re just one more demonstration of how people’s moral intuition, in these economic cases, actually lead to outcomes that cause more harm than good.

        • Saltpork says:

          Businesses aren’t people & don’t have to act morally or ethically.
          They might have the same legal rights as people, but they aren’t and certainly don’t act like people do.

      • Doubts42 says:

        Did you go to Kindergarden? Did your mother never teach you that 2 wrongs don’t make a right?

  9. evnmorlo says:

    If cities are unable to ever get the property tax, the banks are the only one’s getting a free ride. Occupying space is does not count as income.

  10. ldub says:

    Hey – I’ll rosin up the bow for that teeny tiny violin! I say GOOD FOR THE HOMEOWNERS! Why should the little guy play by the rules when major corporations and licensed professionals felt free to do whatever the h*ll they wanted? Maybe this kind of fallout will help the big players do a better job in the future – but I’m not going to hold by breath.

    • Rachacha says:

      Perhaps because the “little guys” that for whatever reason went into foreclosure and are not wasting their money to support a lifestyle that they can not afford arescrewing things up for the little guys who are living within their means and paying their bills on time. I am currently building a new home, and while my current home is paid off and I have no debt, and the bank has indicated that they would pretty much loan me any amount I wanted (reasonable based on my income), they would not loan me money for the actual construction process because so many people have defaulted on loans that they are not willing to take on the higher risk of construction even for a customer that has nothing to indicate that they are a risk.

      • mythago says:

        Why are you taking what your bank says at face value?

        • Rachacha says:

          Well when 7 different local and national banks tell you the same thing and you then go to a very very small local bank that has not seen such a high rate of foreclosure and they are willing to give you money provided you jump through several hoops to minimize their risk (more hoops than have been encountered in previous years) there are not many other options available.

          Ultimately, we were able to find a bank that was willing to take the risk of a construction loan, but only because we had excellent credit, had no debt and were able to put 30% of the total purchase price down, therefore having 30% equity in the property before the first shovel of dirt was even dug. Unfortunately, not many people are in a position to be able to do such a thing.

  11. djanes1 says:

    At the end of the article was a small acknowledgment.
    “This article in the Wall Street Journal is sponsored by Bank of America.”

  12. Big Mama Pain says:

    Who would rent a house that was in foreclosure? I think this is an exaggerated economics think exercise that most likely bears no resemblance to the actual truth, which is that people that are in foreclosures that have been halted are clinging onto their finances (and living situation) by a thread. If any of this funny business is going on, it’s likely by the assholes who “strategically” stop paying on their homes because they are now upside down, and they should at least be liable for the damn taxes so they aren’t screwing over their town (whose finances are also probably taking a huge hit).

    • NeverLetMeDown says:

      Why exactly is somebody who is making a perfectly rational business decision, in 100% compliance with the terms of his contract, an “asshole”?

      • Verdant Pine Trees says:

        …for all the reasons listed after the word “assholes” in her comments? Namely, they continue to utilize the neighborhood amenities (roads, lights, sewage, other benefits such as fire/911) paid for by taxes, but cease to pay for them? I mean, even if my neighbor decides to keep up his or her house before it becomes abandoned, if I’m paying for services they’re using for free… that’s not a peachy thing to do to the other neighbors.

        • ParingKnife ("That's a kniwfe.") says:

          You do realize the delay is in large part due to banks that don’t have their acts together in the first place. Things would go a lot quicker if they did. Why is it the homeowner’s fault that the process itself is slow?

        • mythago says:

          You realize that mortgage payments and property taxes are different things, right?

          • Awesome McAwesomeness says:

            Not when your taxes are folded into your mortgage payment.

            • Verdant Pine Trees says:

              This.

              If my neighbor is taking care of taxes and so on, yes, that’s certainly more responsible.

              I do understand the need for some people to do what they have to, in order to make sure their kids keep eating and that they survive. That’s very different from your characterization of a “rational business decision” – which might mean, for instance, a person who could keep paying, but doesn’t because the loan is upside down.

              I also don’t think that people have to wear hairshirts – certainly, when we had more debt, we still went out to dinner occasionally. But they will be resented by neighbors if they’re perceived to be taking advantage.

              I do suspect that some of these folks also don’t prioritize, even when they really need to. It’s more important to keep shelter over your head and keep up utilities than a car, a car that gets you work is more important than revolving debt, etc.

    • Verdant Pine Trees says:

      Though I agree with you that they are not a majority, I would not be surprised if more than a handful of renters found out the hard way that the house they were renting, was being foreclosed on. Particularly in certain resort areas where people bought second homes for income or weekends. If they don’t live locally, particularly if they have a management company handle business, the renters are “out of sight, out of mind”.

      Long before this crisis, I rented what turned out to be an landlord’s “summer home”, put on the market for all year living. A real nightmare. No winter insulation, plumbing issues, and wood packed with mold. Neither the management company nor the landlord gave a shit.

    • tbax929 says:

      My folks are renting a house in foreclosure. They found out when the notice was taped to their door. I assume most renters aren’t aware of the house being in foreclosure until it’s too late.

    • lettucefactory says:

      It really is possible not to know. Happened to a friend of mine. Had no idea her rental was in foreclosure until a notice arrived at the door. And she had even gone through the trouble of checking beforehand.

  13. Thyme for an edit button says:

    I knew someone who was renting and then found out the home was going into foreclosure. Renter was pissed and decided to quit paying rent since he figured he was never going to get his security deposit. Landlord sued for eviction. Renter hired an attorney who threatened to countersue for fraud. Landlord dropped the eviction and stopped trying to collect rent. Renter moved out a couple months later. Used savings from rent to buy a sweet new TV.

    • Geekybiker says:

      What fraud? The owner still owns the property until the foreclosure goes through.

      • Verdant Pine Trees says:

        What else would you call it if the person had no intent of returning the security deposit (or perhaps did not store it properly in the correct account)?

      • Thyme for an edit button says:

        Because the owner leased the property for a year when he quit paying the mortgage. The matter never got to discovery so who knows all the facts though. Landlord didn’t hire an attorney and chose not to fight over it.

      • Megalomania says:

        The renter presumed (odds are correctly) that the deposit was illegally misappropriated by the homeowner rather than kept in escrow. It’s a pretty reasonable assumption when you find out that the landlord is being foreclosed.

  14. UltimateOutsider says:

    As a mortgage-paying homeowner whose property taxes went up while my property value went down this year, this news pretty much pisses me off. How do *I* get some free rent?

    • tbax929 says:

      It pisses me off, too. I just found out a friend of mine hasn’t paid her mortgage in a year and a half. Her situation hasn’t changed; she’s just decided to stop paying her mortgage.

      I know I’m supposed to be all rah rah consumer, stick it to the banks. But I still don’t think two wrongs make a right. You applied for the loan and took the loan. Now pay it back. It doesn’t seem right to me.

      • Verucalise (Est.February2008) says:

        Nah, it doesn’t make sense. If they have the funds, pay them. Don’t fuck your neighbors.

    • u1itn0w2day says:

      You too can get free rent by screwing your credit history and sticking people for a bill. That’s not so hard.

  15. Verdant Pine Trees says:

    I do find it somewhat believable. I’m not talking about a two income family in which both parents lost jobs and are having trouble scrounging up the mortgage that normally would be covered by just one income… the kind of people most of us have as neighbors, who would do everything to try and stay afloat…

    I’m talking about the more irrational people who invested in houses during the height of the bubble insanity.

    I know two people (family members of a friend) who have no known means of support (e.g. jobs; they didn’t lose jobs, they just don’t work) and who bought several houses they hoped to flip at high prices in a “hot” state. In other words, they were delusional. Can I believe that they might go spend the kitty at an expensive restaurant (not Olive Garden)? Yes. Yes, I can. If they’re willing to risk their own family’s welfare, what the hell would Uncle Sam, or the neighborhood that will be blighted, matter to them?

  16. Verucalise (Est.February2008) says:

    If you are trying in good faith to come to an agreement with the mortgage company to stay in your home and work out a different payment plan and the bank F’s you, I guess I could see why people would do this.

    Although I do not agree with throwing the spare money around, that’s just ridiculous. Cash your paycheck, get a lock box and stow the dough until you need it jerks.

  17. ParingKnife ("That's a kniwfe.") says:

    People are complaining that they’re spending the money elsewhere. Guess what? A car may be a short term investment you can afford, while it makes better financial sense just to walk away from the mortgage.

    What? You think it’s going to end differently because of the delay? Nope. These homeowners know exactly where they’re going after they get kicked out.

    Don’t worry though, electing someone this month is going to solve this mess. That’s what I keep hearing anyway. Why? No one can seem to say.

  18. NickelMD says:

    Epically awesome!

  19. ElleAnn says:

    It sucks to be the person renting out a house which is in foreclosure. Really sucks.

  20. Awesome McAwesomeness says:

    Very nice. Rent homes that are being foreclosed on to people who are ignorant of the fact until someone shows up one day to boot them out with no notice. How scummy can people be?

  21. mob3000 says:

    My mom and dad moved out of their home they payed on for 20 years when both of them lost their jobs 2 years ago. They could barely make their new rent payments after they moved out of my place after they got jobs 9 months later. They just got a notice Friday that their home is FINALLY being auctioned. Thats two years before the bank even got around to setting a date to auction it. Who cares if people live in the house in that time??? If anything, you would be doing the mortgage company a favor by staying there, keeping the pipes from freezing, mowing the lawn, and ensuring the vacant house doesnt turn into a crack house.

  22. ap0 says:

    I don’t care about people living in homes going through foreclosure, but to rent a home in foreclosure to tenants puts the tenants at risk of eviction, which costs both money and time when they’ve likely done nothing wrong. It’s wrong. Yes, banks are evil, whatever, but that is no excuse to rent out a home you aren’t even making payments on and living off of that.

    (I found out yesterday my apartment building which I moved into in September has been in foreclosure since May, and was put into a receivership and is now under new management, so my rent money has been going to line the pockets of the developer and his minion manager while he owed over a million dollars on this place).

    • u1itn0w2day says:

      Good point. What rights does a tenant have renting a property in question.

      And would the foreclosee be sub leasing their foreclosing property for the bank. Can the bank ask for a piece of the action since basically their property was rented.

      But if a foreclosure isn’t official until all the i’s are dotted and t’s crossed I guess it’s the foreclosees property to do what ever no matter how unethical or slimy it may seem.

  23. FrankReality says:

    I’m sorry, I just can’t feel sorry for the mortgage companies, the banks and MERS not properly handling the paperwork.

    Signing/filing false affidavits is a felony. Deliberately losing paperwork to cover up mortgage fraud by the originators is also a felony.

    If you don’t get it yet, mortgage sellers were selling mortgages with falsified applications, some had a profit model where they’d sell short-term mortgages that required refinancing with exorbitant fees. banks, Fannie Mae and Freddie Mac bought the mortgages and fraudulently repackaged them into investments, misrepresenting the risk.

    Check out this link:

    http://market-ticker.org/akcs-www?post=170841

  24. CountryJustice says:

    I find it all a little exciting. The savings aren’t all for the homeowners. If you do your due diligence, you might learn that the cute house with a white picket fence and a “FOR RENT” sign is facing foreclosure. And if you can and/or feel like haggling worth a damn, why not take a shot at getting some cheap rent and/or a waiver on the security deposit?

    Of course, you have to contend with the notion that you might not live there more than 6 months, but then again, it could be two years or more before you’re given the boot.

  25. Reiko says:

    That’s radical. Hearing these guys are making a fast buck by renting out their houses disgusts me. The irony is that interest rates are so low that these guys shouldn’t be in trouble at all. Why o why can’t we penalise the criminals who sold all these sub prime mortgages.

  26. bluline says:

    I know a couple who haven’t paid on their mortgage in nearly two years and the bank has yet to take action. Perhaps the bank is so overwhelmed with such mortgages that they haven’t gotten around to this one. Meantime, the couple is living in the home for free while they wait to see what the bank will do. They consider the ball to be in the bank’s court, not theirs.

  27. erratapage says:

    Judge much, guys? So, here’s the scoop: A few years ago, I bought a house for my stepdaughter who was going through a very hard time. The house worked out for a couple years, but then my stepdaughter became disabled and was not able to handle the stairs. She moved out. I spent $12,000 repairing the home to make it rentable, because by then, the house was worth 75% of what I owed. I rented the place to a very nice family.

    Then, my business went all to heck, and it looked like I would have to do a bankruptcy. Investment properties are not protected in bankruptcies, so no matter what I did, the place would be lost in the bankruptcy. We looked at the situation, and decided to let the property go. Before things got too bad, we contacted our renter, and did everything we could to make sure they got a good recommendation. We let them live out their security deposit.

    Yes, we got a few months’ extra rent out of the deal. It probably kept us from losing our business and our primary home.

    • Verdant Pine Trees says:

      I don’t see anything here to indicate that you behaved badly, or that anyone here would judge you harshly.

      You were responsible, filed bankruptcy, and most importantly, you informed your renter. Your renter had plenty of time to make alternative plans and negotiate with you.

      Unfortunately there are creeps out there who don’t say a thing to the people who are renting. ap0′s got plenty of reason to judge.

  28. Nigerian prince looking for business partner says:

    Does anyone if legally, there is anything stopping me (or anyone else) from refinancing our mostly paid off houses for 80% their full appraised value, then taking the $50,000 check and just walking away from it all?

  29. Juliedr says:

    This really makes me angry. A neighbor of mine has had his house foreclosed but he has been living there almost two years, not paying any mortgage! This same thing is going on with a relative of mine, she and her family have lived in their house just over a year, mortgage free… The thing is, none of them have lost their jobs, they just bought homes they couldn’t afford. They still go on vacations, drive newer cars and but stuff… How can this be allowed to happen?!

    Meanwhile, my other neighbors and I continue jugging along and paying our bills. We are SO stupid!!

    • erratapage says:

      Who knows if they actually own those cars, or if they’re leasing them, because they can’t afford to pay cash for an older car? Or maybe the cars are just as underwater as the houses?

      Maybe they won the vacations in a sweepstakes or are visiting family?

      These are not easy times. But you can’t stop living just because you owe money.

  30. gafpromise says:

    There’s no way it can be legal to rent out a foreclosed home. The best deal a renter can expect to get is a month-to-month arrangement, then suddenly the foreclosure happens and the bank tosses you out on your ear.

  31. SlyPhox says:

    “Some homeowners who have defaulted on their mortgage payments are cashing in by renting out their homes.”

    That line makes me ill. Sure, the homeowners are able to profit by not paying but you’re just screwing over your renters when the bank finally does foreclose. Then, you have the renters, who believed they were current on their payments get evicted.

    This exact scenario happened to a friend of mine. Unless you fully disclose to whomever is renting from you that “hey, you can pay me some to live here but just as a warning, I told the bank to take a hike.” but I’m sure none of these homeowners are doing that as no one in their right mind would rent a place that is going through foreclosure.

  32. You hate your job but you're still working there? says:

    This works out great for homeowners…Until their tenants can no longer pay rent, won’t move out of the home and that additional income the homeowners came to rely on is no longer there to support the homeowners.