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Meet The Squatters: Here Are The Millions Of Americans Who Live Mortgage-Free For Up To 5 Years And Counting
The topic of Americans living mortgage-free in foreclosed homes on which banks do not have proper titles is nothing new - in fact we are surprised that there isn't a robosignature app for that...yet. Neither is the fact that this ongoing reverse capital transfer provides as much as $50 billion in "rental" income for those same squatters. And while the ethical arguments for strategically defaulting on one's mortgage can get very heated on both sides, one thing is certain: the ongoing foreclosure crisis is creating a new subclass of "entitled" people, who certainly enjoy living on the back of the banks, while not paying one cent, and not vacating the premises. According to a new article by CNNMoney, some of the excesses observed within this latest demonstration of unearned entitlement are truly staggering. To wit: "Charles and Jill Segal have not made a mortgage payment in nearly five years -- but they continue to live in their five-bedroom West Palm Beach, Fla. home....Lynn, from St. Petersburg, Fla., has been living without paying for three years....In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home...." In other words, what were once isolated incidents are becoming an epidemic, and like it or not, are creating a massive capital shortfall in bank balance sheets (after all "assets" are supposed to generate cash in most cases), which will likely involve yet another broad taxpayer bailout of these same banks that now have no recourse to do much if anything to evict these same squatters who instead of paying their mortgage (or rent), prefer to purchase trinkets and gizmos. "Some 4.2 million mortgage borrowers are either seriously delinquent or
have had their cases referred to lawyers to pursue foreclosure auctions,
according to LPS Applied Analytics. Of those, two-thirds have made no
payments at all for at least a year, and nearly one-third have gone more
than two years."
The specifics, to anyone who has been following this festering issue which threatens to create even further class resentment, are well known:
These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the "robo-signing" issue is particularly combative, it's 807.
If they want to fight evictions hard, borrowers can remain in their homes even longer while their cases are being worked through.
The Segals have been doing that -- in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was cratering.
The Segals want the bank to modify the mortgage so payments are affordable, and they think the court will agree that their lender put them into a toxic loan.
Surely, the Segals signed the dotted line under the gun:
"The evidence will show that we were defrauded," said Jill Segal.
Well, with no downside, and just an already worthless credit rating as the opportunity cost, everyone is rapidly realizing that strategic defaults are the way to go:
If they lose, of course, they'll finally have to leave. And, unfortunately, more than 50 months of missed mortgage payments hasn't translated into big savings.
"It's very hard to save," said Jill Segal. "Our company's billing is 90% off and my husband is only working about four days a week."
Lynn, who didn't want her last name used, purchased a two-bedroom on Tampa Bay in 1998 for $135,000.
As the waterfront property's value skyrocketed, eventually reaching $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.
Living in this foreclosure limbo is "Hell," Lynn said. "I feel like I'm locked in a box. I work for a financial organization and if this came out, it could cost me my job."
And why not? With banks not having to face the consequences of massive failure, why should deadbeats? Especially when there are such sensitive issues to consider as whether the next place one lives, the one where one will actually have to pay for a roof, has a favorable pet policy:
She's still hoping to negotiate the loan. In the meantime, small things
bother her. "A couple years ago, I lost my dog and I can't decide on
getting a new one," she said. If she has to move, she can't be sure
she'll go somewhere that allows pets.
In the meantime stories such as this one are rapidly becoming the new morality drama:
Ruben Martinez, a Staten Island, N.Y., man trapped in a particularly bad adjustable rate mortgage, stopped paying more than three years ago. His attorney, Robert Brown, has managed to stave off one foreclosure.
Martinez, still struggling to find work, has little in savings despite the missed payments. He's earning some income as a pastor and consulting for a non-profit family counseling organization.
"There's pressure on me every day," he said. "I have a wife, three daughters and two grandchildren. Where are we going to live?" To top of page
For now there has not been much dissent with this type of behavior. However, when banks openly turn the tables and make it all too clear that they have absolutely underreserved for this kind of behavior and will very soon need a TARP 2.0, funded by everyone else, but certainly not the squatters, according to whom they dont' have two nickels to rub together, the question will be: will the general population, and here we reference the increasingly more endangered middle class, blame the banks again... or will it turn on itself?
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That's not entirely accurate... the parties that homeowners had privity of contract with may have done nothing wrong... think of the local bank as opposed to the mortgage factory... both know they're just going to sell the loans, but the former has often times been vastly better at ensuring rules and regulations are followed. This is the last time the homeowner has privity with anyone...
In order for down stream assignments to be void, they have to fail to comply with prerequisites in the law for execution... and they may not merely be voidable... if voidable, then you need someone to assert their right to void the transaction (not the homeowner).
Further, in general, the contracts signed by borrowers expressly state that it is expected the loan will be assigned... whether or not this assignment is valid does not render the contract void ab initio... what you're saying is that an act AFTER the creation of the note causes it to be void from the beginning... clearly, something is awry. The acts of assignment do not in any way shape or form invalidate the debt nor the liens... but, what they may do is make it practically very difficult, if not impossible, to determine the real holder... that is the issue we're facing.
If your lender sells your loan for a fraudulent reason, that is a dispute between your lender and the third party... it has nothing to do with you as borrower... your debt (and lien) still remain and it's for the court to decide whether your lender or the third party owns it.
Remember, unrecorded or unrecordable mortgages are still valid as against the mortgagor (just not afforded priority). This does not mean they're unsecured...
"If your lender sells your loan for a fraudulent reason"
Chances are they sold the original loan fraudulently to the home owner. There are just too many stories of people who were qualified for prime loans who got sub-prime loans, teaser payments that was under the rent they were paying with assurances from the bankers they could refinance when the house doubled in value in a year. Way too many stories of appraisers who had to "bring the number in" to the bankers to the point where honest appraisers could no longer get work. There was Manuals for mortgage brokers on how to get loan applications through the computer. Unsophisticated to sophisticated people got taken advantage of. You cannot make generalizations about the people that are not paying.
There has been discussion that banks didn't want people to leave as it became obvious that homes would be on the market for years In the meantime the drag on liquidity for the bank to keep the outside up to code, pay the property taxes, keep the utilities on and pay for insurance.
You didn't discuss any of that. Most of you assholes talked about how the iPad , which came out in 2010 , was singularly responsible for the meltdown around the world along with the vaunted cable bill. Anecdotal bad examples are dug up and held up as evidence that ALL the "squatters" were just like these people. One thing I have noticed about right wingers who are full of faux outrage is they never bring data, hard data to back up their preposterous arguments. Instead we get the same talking points repeated one after another as if an original idea was beyond the scope of people here and everywhere else that repeat that same tired and mostly dis-proven accusations as if somehow we are hearing it for the first time.
It's ideologues and the stupidity that they bring with them that ultimately serves the bankers interests. The idealogues tell us the way things should be and are outraged that they had to pay and other people are living for free. Yet we don't know how old they are or if they ever really owned a home. If they had or have a job and the timeline of when they paid for their house. So even the anecdotal pounding chest "me is Moral" has no back-up. I'm willing to bet that half or more of those who expressed outrage at squatters aren't even what some people would call successful by any standard. That's why an original thought is beyond you fuckers.
"The sanctity of the contract" is frequently brought up along with "they signed it" . Plenty of contracts are signed everyday which find the two parties back in court when one screws another. This time the lie is so big that you fucks would have us believe that millions of people conspired to stop paying their bullshit mortgage even if they had the money which is the same as you expecting people to come up with money to make margin calls on a stock one had bought for $400 that had sunk to $20.00 on accounting fraud.Good God the Bullshit and Hypocrisy meter is pegged hard in the red zone.
People who have the money to pay for the bullshit investment and aren't, are probably the smartest ones. They know they will need a large cushion of cash for whatever comes next. It's the people that are guilted into paying by assholes here that empty their retirement accounts sell of all their assets and still lose the house. They have no money for a car or to go mobile to get a job while they see adds for shitty jobs with
"Unemployed Need Not Apply"
"YouAreFucked.com is an Equal opportunity employer"
unless you are under 30 or over 50 , non-mobile, overqualified, too fat, not politically acceptable, too short or have too much knowledge with too high of an IQ that would make your boss look like an idiot, won't take a drug test,won't give permission to check credit unless they can get the last three years audited financial statements of the company with auditors working papers along with their tax returns. Add that with the unmitigated audacity of being unwilling to accept wages that don't allow for the lowest standard of living and there is your $9.00 an hour job that no one can seem to find that does only one thing, it makes assholes richer.
So fuck a bunch of you and your outrage too. You have been wrong for too long and it's time to get it right, like tonight.
In order for fraud to occur, the debtor must have reasonably relied upon the representations... e.g. if a reasonable person would have understood that they did not have the wherewithal to repay the loan or that the stated loan rate was dramatically different than what would actually repay the loan after 30 years, then there is no fraud. Simply put, if I make $50k a year and borrow $600k and my expected payments are to be $1,000/mo. at 6% interest, then I'm obviously going to be in store for a helluva balloon or a higher montly payment later on... it's just basic math.
If the originators screwed up on the original loan docs, then there are plenty of remedies available to the abused parties... whether it's truth in lending or some other avenue. If (it's hard to differentiate between selling and predation) predatory lending occurred, then the homeowners may have recourse elsewhere... Now, I'm not sure they're continuing to pay the pre-hike amount (because that's what they "thought" they were going to have to pay per the contract) into an escrow or court registry while they dispute the contract's terms... *snicker*
Further, how is it you plan to bring a cause of action against an appraiser when that appraisal is based upon numerous founded comps and is discretionary with the appraiser? Do you think that if an appraiser came through with a ridiculous appraisal, that the borrower would be put on notice of the discrepancy with market value? Why was it that borrowers ignored inflated appraisals, presuming they were inflated?
The fact is, while the boom occurs, everyone is all too happy to ignore all the patently obvious warnings... they're all too happy to take out HELOCS up to their eyeballs because they've found a perpetual money machine... they can't believe how a bank could be so stupid as to loan them money at a fixed rate when the value of homes are going up so quickly... until the bust. Needless to say, this is completely inconsistent and will help bar recovery for a significant amount of debtors...
All persons are vested with knowledge of the contents of their contracts, to a reasonable level... fine print buried in the 50th page of a contract may draw a little more scrutiny than the bolded print on the front page. But I'm not sure that's really what we're talking about here... In the end, the refusal to hold anyone (debtors and creditors alike) accountable for their speculative endeavors (yes, buying a house is a speculative endeavor; renting is an option) is exactly the maternal and contemptuous view of humans that leads to the nanny state ninnies and our present predicament. Once you take away the safety net, auto pilot (zombie walking) gets more difficult and, gasp, people develop the tools to thrive... we're not talking about intricate financial matters here... we're talking about basic math, literally as basic as it gets... loan of X amount at I interest rate over Y years... common sense stuff... when you try and keep people from being harmed by common sense, you've crossed the boundary into tyranny.
My comments on the wealth gap and fire industry are too voluminous to recap... I strongly suspect we're on the same side of that argument... but the fact remains that both debtors and creditors need to take a bath.
Macho Man, I agree with you, there is nothing that happens after the "origination" that can make the contract void or voidable. What can be asserted is standing to foreclose, as in who has the hot potato and how did they get it and do they own it. That is a very sticky situation and has been tried hard in Judicial foreclosure states and the BK courts. Rulings have gone from "so what?" a couple years ago to, "let's take a closer look", which is good for just the law itself. In most cases a year ago or further back, if a borrower was late, 2 mos or 20, the judge would just go to that default and barely look at the standing issue, that has changed, as it should. But you are right, the mortgage itself is not "void or voidable" at that stage.
Where it is potentially, and what I asserted, was that if the "Lender" who originated the deal had no pecuniary interest (no funds, no money in the deal, only collecting fees), and that they were found as such, THEN the deed of trust or mortgage is void or voidable. It's my suspicion that there are a buttload of these types of transactions. Why so many? For two reasons. One operations like Countrywide and others (who were really not banks), didn't have the "retail" operations in place to secure as many loans as their SPV's/MBS Trusts, et al demanded, so, they told "Brokers" to do the deals and opened up "warehouse" lines of credit. These lines of credit were not your usual lines. They did not hit the balance sheets of these brokers and were not any credit that the broker was personally or corporately liable for or to. Therefore, the "broker" acting as lender had no pecuniary interest in the deal. Big problem if that "broker" is named as lender in your mortgage.
Second reason, just plain greed. The money was on the table and they took it any way they could and in most cases, "pretender" lenders had no buyback or recourse language where the "banks" could force them to take anything back if the loans were crap. Open season, and that's what it was for a few years.
As to DBurn, i tend to agree that a lot of the posts here (on this topic) tend to be at times either uninformed or inflamatory. Not all of them. I find (per Macho Man and others) thoughtful and reasoned thinking about this issue and a true desire to clearly understand it and call it for what it is. Don't let the iPad haters and others to keep you from looking hard at this issue (or any other) for the meat and bones of it.
I've also found that in many cases, the more weighty matters get addressed near the end of a string than in the beginning or middle, after jokers get their shit off.
The biggest problem and reason why it has taken so long to surface is that we have an adversarial judicial system. This means that the judge is not going to step in the shoes of a defaulting party and make his arguments for him. Rather, if you do not appear in court and challenge the other party's allegations, then they'll be presumed to be true. We don't need to get into the intracacies of the system, but it's by far the best devised by humans...
When people get notified of a foreclosure, they often times simply do not have the wherewithal to defend (nor any legal defense)... no attorney in his right mind (unless desperate) would take on a defense case like that without a retainer... as a result, you get rocket dockets of defaulting debtors... and I honestly see no problem with cramming through foreclosures like this, presuming that the plaintiff can prove service. As we have found in recent cases, these foreclosures can be done away with in the event fraud is found... so we're just executing already existing safeguards... (the system wasn't built yesterday). [and it's not like the debtor wasn't in default of a depreciating asset, so why the hell would they wan't it back anyway... better to take the money methinks].
Can you please explain, legally, how a mortgage or deed of trust is void or voidable in any material amount of transactions? It seems to me the only way this could be possible (presuming non disclosure of an agency relationship is grounds to void the mortgage) is if an agreement exists for a particular mortgage between originator and asignee... It seems to me that there needed to be no such agreement: (a) for practical purposes given the number of transactions; but, more importantly, (b) the asignees were buying up anything and everything they could get their hands on (GSEs, TBTF, etc.).
The note and mortgage virtually universally include language that they can be assigned at any time and that the borrower has no grounds to contest the same, but for notice of the assignment/who to send checks to. If anyone conducted any matters with any liability that could render the transaction void, then, as drafting party, they likely took care of such contingencies...
You also have to deal with the issue of waiver... If X entity originated the loan, but as soon as it occurred, debtor started paying Y every month, then I can't fathom waiver hasn't occurred. What might have been voidable a long time ago seems to me to be ratified or waived at this juncture... remember, it looks like shit to a court of equity for you to love the boom on the way up and then cry of sour grapes when it goes bust... can't eat your cake and have it too.
As to your P.3 question: First if fraud is found at inducement, then the contract(s) are void or voidable. But more to your question is the fact of the true parties to the contract and the "meeting of the minds..." threshold. If Broker X, not a licensed lender and not a private lender assumes the position of and "acts" as lender, but the true lender is Lender Z, not named in the documents, then the real parties in interest have not been properly named. Further, if Broker X has done this and violated TILA or related state or fed law, that is your fraud right there (good faith & fair dealing, fiduciary duty, etc., to boot). Cal. case law stands on this in Jackson v. Grant (9th Cir. 1989). Now that case involved blatant fraud and I think elder abuse, but the legal theory holds.
If Lender Z allows Broker X to act as "lender", when they only have a warehouse line of credit, but NOT credit that Broker X is personally or corporately liable for, then Lender Z has made a legal mistake that is critcal. My point is that the "lenders", who in fact were basically intermediaries themselves for SPV's and their Trusts, were under the gun to produce paper by SPV/Trust cutoffs and because so, looked past law and let Broker X entities play a different role (and not disclose Lender Z) in order so that Broker X could grab the spread fee (YSP) and not have to report it. Pure incentive.
The upshot is the borrower rarely if ever finds out about this relationship that by law must be disclosed. I see that this has happened a lot.
Void is a matter of law... voidable is discretionary with the affected person and can be ratified/waived after a period of time (possibly even a single act). Further, the remedy of rescission can be barred depending on how the parties have become situated...
I'm having a hard time understanding how a debtor could reasonably believe that the person selling them a mortgage (broker) was their fiduciary, when they understood the person to be in an adversarial position (from your example). You're stretching an awful lot to get to your legal conclusion... This is the stuff for law school exams... in the real world, you get penalized and discredited for taking such positions.
The meeting of the minds is not a difficult standard... only the core aspects of the contract need be met... and you have the issue of materiality. I cannot fathom that who you pay each month is a material aspect of your contract... the fact is, you asked to borrow money and repay it according to a contract and you got the money, now you repay... it's pretty simple. All the basic terms are there.
The real parties in interest is a term of art... typically used to defend against lawsuits that are initiated by the incorrect parties... (warranting dismissal in certain circumstances).
If you break the law, you do not necessarily commit fraud... you simply break the law... In other words, you could be perfectly honest about the loan terms, but breach some portion of truth in lending... no fraud, just breaking the law, subjecting you to civil (criminal?) penalty. Maybe it would be evidence of negligence per se (typically only available when bodily injury occurs, however some jurisdictions are a little more liberal), but not necessarily fraud. Further, you might even be better off alleging violation of a statute depending on the remedies available...
I don't see any breach of contract... I don't see any breach of fiduciary duty... I don't see any fraud... but you may have plenty of truth in lending actions... (it was made to bridge the gap from the common law because it was simply gamed to death).
Imagine if these squatters were smart enough to put their HELOC cash into physical gold and silver back in 2004, 2005!
http://www.silverdoctors.com/