Monday, February 04, 2008

gotta go

I did this screen-grab (click to enlarge) for your edification (McLovin provided the link on a couple of local blogs). It's beautiful, and coming soon to a neighbourhood near you.

If you are facing or considering foreclosure, you're not alone.

Are you stressed out about your mortgage payments?
Do you have little or no equity in your home?
Have you had trouble trying to sell your house?
Is your home sinking under the waves of the real estate crash?
What if you could live payment free for up to 8 months or more and walk away without owing a penny?

Unshackle yourself today from a losing investment and use our proven method to Walk Away.
Then there is this:
Can't Pay Your Mortgage? Trash Your House and Leave

Wachovia's current losses in California are originating not from subprime buyers fallen on financial hardship, but from homeowners who can pay their cleverly structured loans but are just choosing a different fate. "They've been from people that have otherwise had the capacity to pay," a Wachovia spokesperson said on the call, "but have basically just decided not to because they feel like they've lost equity, value in their properties. It's hard to know right now, but we may have seen somewhat of an acceleration problem…as people have reached that conclusion."

But that is what things usually do when you drive them off a cliff: Accelerate, ever faster. The open secret about the current housing crisis is that it is almost wholly built upon debt, which is to say the opposite of money. Everyone owes everyone: American banks borrow money from overseas, structure bizarre loans at home for Americans, which are then sliced and diced into securities and sold back to the international debt markets. The whole thing is a feedback loop made of bills needing to be paid. The best-kept secret of the crisis, however, is that homeowners at the mercy of those greedy banks and lenders -- including Countrywide CEO Angelo Mozilo, who sold off his stock before the crisis to net a cool $290 million while the company's value shrank to practically nothing -- are bailing out and leaving the banks and lenders to sort out the mess of past-due notices themselves.
There is a lot more to the article, and links to stories from the people who make good money cleaning up the abandoned houses, which often are stripped of anything of value, and the contempt of the owners is evident in the feces left on carpets, in pools, etc.

I don't know that we will see that kind of behaviour here, but ya gotta wonder.


mohican said...

It is morally questionable to disregard a contract that one knowingly signed but I don't shed a tear for the mortgage lenders out there. They were co-conspirators in this mess.

patriotz said...

In many US states, including California, mortgage loans are "non-recourse". This means that the borrower does not in fact have an unconditional obligation to repay the loan, but can simply choose to give the house back.That fulfills their contractual obligations. Sort of like taking something to the pawn shop. You can pay them back or they keep the property.

Before anyone asks, no, this is not the case in BC. Many people in the 80's and 90's ended up going into bankruptcy due to underwater mortgages and there will be far more this time around.

solipsist said...

I wonder if mortgages here are "recourse" by statute, or by practice. Either way, I suppose it takes care of people trashing houses. There is always the gas can and match though.

While we may not see a lot of the trashing, we will see a lot of foreclosures and concomitant bankruptcies.

In a sense, bankruptcy is "just walking away" too.

jesse said...

"In many US states, including California, mortgage loans are 'non-recourse'."

It's what Calculated Risk's Tanta calls the "mortgage put option". It's nice (in a way) to think the little guy knew EXACTLY what he was doing in this whole mess.

"I wonder if mortgages here are 'recourse' by statute, or by practice."

Good question. Chipman had a thread (buried in the comments) going last week on this subject. The standard bank mortgage contracts are recourse from what I can tell. I don't know of anyone with a non-recourse contract. I thought it would be a great topic for a guest poster who actually knows.

"In a sense, bankruptcy is 'just walking away' too."

In a sense but with the non-recourse stuff all that is affected is your credit rating and your other assets are not touchable (in its purest form anyways). Bankruptcy is a whole different beast. It means you have virtually no assets and that can set you back decades, depending upon how many assets you had built up. It's why banks ask for a list of your assets when making a mortgage application: recourse.

patriotz said...

There is nothing in BC law that prohibits someone from issuing a non-recourse mortgage. You'd just have to have rocks in your head to do it.

I think it's a dead certainty that CMHC will not insure non-recourse mortgages, because if they are going to be holding the bag, they want to be holding the borrower by the b@lls too.