Why Would We Want to Bail Out This Homeowner?

by Eric Ames

I was reading through some blog posts yesterday morning and came across one on housingdoom.com that just reaffirms my anti-bailout position. The blog post is simply a rental listing that was posted on Craigslist in Tampa, and while a rental listing in itself is nothing to rant about, you really need to read this particular one.

Here it is:

I HAVE A 3 BEDROOM HOUSE THAT I AM LETTING GO, IT SHOULD BE AT LEAST ANOTHER YEAR BEFORE THE COURT WANTS THE KEYS, SO I AM RENTING OUT THIS HOUSE WITH NO CREDIT CHECK AND ON A MONTH TO MONTH TERM, SO NO ONE IS LOCKED IN, IT IS A CHEAP WAY FOR YOU TO SAVE MONEY. THE HOUSE HAS NO APPLIANCES BUT YOU CAN GO TO CRAIGS LIST AND GET FREE ONES UNDER THE FREE STUFF. CHECK OUT THE LINKS BELOW. IF YOU ARE INTRESTED PLEASE E-MAIL ME. ALSO THERE IS NO SECURITY DEPOSIT AND THE HOUSE IS ON A 1/4 ARCE. YOU CAN E-MAIL ME DIRECTLY AT JOEYCARLO@******** FIRST COME FIRST SERVE.

THANKS JOE

The actual listing can be found here:

This guy Joe is asking $499 a month for this house, which is ridiculously low, so I’m sure that he won’t have a problem finding a tenant to take him up on his offer. Obviously he has no intention of using the rental proceeds to pay his mortgage, and is planning to take full advantage of the system for as long as he can.

This is one of the reasons why I am so adamant that a foreclosure moratorium is a bad idea. Sure a lot of homeowners really want to stay in their homes. However, many have no intention of staying in a house that is thousands underwater, and a majority of those homeowners who do want to stay in their homes probably can’t afford it, so they would just be delaying the inevitable. Then you have guys like this, who plan to milk the system for every dime they can get. He already stole the appliances, and now he plans to take advantage of the lenders some more. Since taxpayers are basically on the hook for many of these lenders, he is also taking advantage of taxpayers.

If we can figure out a way to limit the bailout to only those homeowners who actually want to stay in their homes and who can afford to do so, I might be more inclined to support it. But any bailout, or other measure, that supports guys like this, will never get my backing. This guy may be an extreme example of the potential problems at hand, but I can’t help thinking that there are tens of thousands of people out there doing this exact same thing. They probably just aren’t disclosing the situation outright like Joe here. Just reading this listing makes me angry. If Joe isn’t going to live in the house or at least try to make the payment, then he needs to return the keys to the lender. Anything short of that should be illegal, especially when taxpayers are ultimately on the hook for the bill.

Comments

[tinscale:]

Joey the Renter has figured out a way to profit from the foreclosure moratorium.

2008 Dec 17 05:49 AM

[sstro:]

That guy is a vampire and should have a wooden stake driven through his heart. If this story gets media legs then we better call in Van Helsing.

2008 Dec 17 07:44 AM

[nobull:]

And they want empower courts to halt foreclosures for people like this. As long as people like Sheila Bair and Barney Frank are around to throw around our taxpayer money for their own self-glory, we will have leeches like these exploiting the system. Meanwhile, nothing for the guy who does right.

2008 Dec 17 09:04 AM

[Smalltownba...:]

This story is merely one small example of what is going on more and more everyday around the Nation. We have become a nation of parasites sucking the life out of everything we can. (generally speaking that is) I read a story in USA Today the other day about a guy who put $70k down on a $200k home in Arizona then quit paying his mortgage and went back to another State when the value dropped to $80,000.

In some markets we are experiencing an over correction in home prices however if these people will hold on some of their value will come back. If I tried to sell my home today it would be down about $200k compared to 2 years ago. My value will return when the private mortgage backed securities market stabilizes and the lenders once again open offer legitimate credit opportunities for higher priced homes. This does not relieve me of my obligation to pay my loan and for those who can afford to pay but simply stop paying we should build a whole bunch of debtor prisons. If this guy would have just stayed where he was he could have recovered a sizeable portion of his investment in a few short years.

Every program announced to "fix this mess" is exacerbating the problems we have and creating new ones. This guy in Florida should be charged with debt avoidance. The courts should be expediting these foreclosures, not delaying them. Thank God I live in Georgia where we can kick deadbeats like this guy out in as few as 4-8 weeks after they default. That also gives us the flexibility to work with families who are legitimate owners and are trying to stay in and pay for their homes.

I too have simpathy for individuals who are placed into difficult circumstances due to loss of employment, illness and other unavoidable situations but have no sympathy for the ones who signed liar loans saying the made twice as much money as they actually earn. This is why the modification programs have been an abysmal failure seeing more than 50% return to default status within 6 months or less.

It is time to end the bailouts
It is time for Americans to accept full responsibility for the bad investment decisions they made
It is time for the courts to expedite the inevitable
It is also time to totally dismantle our current mortgage securitization model and rebuild it in a way that is transparent, true and easy to evaluate.

2008 Dec 17 09:27 AM

[Jon Smirl:]

I know a builder that took in almost $4M in rent before losing all of his properties. During the two years of court proceedings around the foreclosures he gave nothing to the banks. He legally fought foreclosure every step of the way.

He took another $5M out by shrewdly refinancing his unsold houses for cash out as the homes escalated during the bubble. For example one house sold for $1.6M recently and it had a $2.5M loan on it. It cost him $1.7M to build but it appraised at $2.7M at the peak.

Bottom line he extracted $9M minus some court costs and never sold half of the homes he built. His corporation is bankrupt but he'll just create a new one. He thinks he did great as a builder.

Note that he didn't plan for any of this to happen. He just sort of fell into it. Initially he didn't know he could keep the rent and not send it onto the banks. Once he figured that out he used the courts to delay the foreclosures while collecting as much rent as he could.

2008 Dec 17 09:59 AM

[panocha man:]

ACCORDING TO SOME BUSHIES HE IS A GREAT PRESIDENT THESE BUSHIES SHOULD BE THE ONLY ONES PENALIZED FOR HIS PERSONALLY ORCHESTRATED DEPRESSION .. PAULSON IS BAILING OUT HIS AND BUSH'S FRIENDS .HE WANTS TO BE BIGGER THAN HOOVER. HOW DO WE DEPORT THESE TWO IRAQIS .

2008 Dec 17 10:21 AM

[sabbadoo32:]

What I'd like to see happen is a synthesis of Jon's and tcorn's comments. I would like to see people who signed liar loans and the like prosecuted. I also want to see laws that allow the builder to keep rents without paying for the properties changed.

What I am curious about is, to what extent did the industry prey on people? I've seen the ads for "solving all your problems with a HELOC", or "finding the home of your dreams no matter your credit." The people who responded weren't graduates of Rocket Science Academy. And the regulators were...well the Bushies replaced the regulators with yes men.

NPR's "Big Pool of Money" does a good job of summing up predatory lending.

So I want to see everyone pay. But I want to see the predators pay more.

2008 Dec 17 10:22 AM

[dunk01:]

There is also the possibility that this "landlord" does not own the property at all. The tenant gets in, gets settled, pays the rent, and the bank evicts him because the "landlord" was a crook just renting out empty houses. The guy skips with the cash and the tenant is evicted.

2008 Dec 17 10:42 AM

[rm:]

Okay, I don't have a dog in this fight... I see depravity on all sides of this "crisis."

I'd like to look at a few points...
[He already stole the appliances, and now he plans to take advantage of the lenders some more.]

Did he steal them? How do you know? There are plenty of cases where the renters have their own appliances in a SFH situation.

And, what evidence do we have that he didn't try to work things out with his lender?

[Since taxpayers are basically on the hook for many of these lenders, he is also taking advantage of taxpayers.]

Yeah, and so is AIG, and most of Wall Street, and all these other firms that are now posing as bank holding companies.

[If we can figure out a way to limit the bailout to only those homeowners who actually want to stay in their homes and who can afford to do so, I might be more inclined to support it. But any bailout, or other measure, that supports guys like this, will never get my backing.]

Apparently you haven't noticed that most workout activity, as well as most legislation have excluded all but owner-occupied properties.

... which is a possible reason why he's not trying to save the property.

Just as it's been mentioned that there are no atheists in foxholes, or libertarians in financial crises, there are few idealists in foreclosure.

Futhermore, depending on the location of the subject property, he may well be doing the investors a favor. Abandoned properties are a bit of a problem.

The mention that it may be a year before they foreclose has less to do with a moratorium than the fact that the servicers are backlogged, and the investors (judging by their spirit-of-the-season, self-imposed foreclosure delays seem to indicate that they're expecting Uncle Sam to shoulder some of these losses.

After working on the front line of this situation for some time now, I'm fairly critical of most of the players in this scenario. The short-sightedness, the stepping over dollars to save pennies, the sheer size and scale of denial (ALL parties on board)... is astounding.

However, things are much improved when compared to 18 months ago. I'm neither defending nor condemning this man for his actions. It's just that I'm now much less of those acting in their own best interest.

2008 Dec 17 11:14 AM

[xmplary:]

This is a sad story of how the corruption is rampant from top to bottom. Everybody wants to milk the system for all they got while those who have lived a responsible and ethical life gets screwed by the crooks. As for the "landlord' that is trying to find a "tenant" for his un-owned home, I hope he finds a "like minded" tenant that will pay the first months rent and realizes that the "landlord" has leased him a house without authority and thus stop making the payments!

2008 Dec 17 11:38 AM

[lodgegoat:]

Joe the landlord deleted his listing.

2008 Dec 17 12:05 PM

[Gtarras:]

he will pay for it down the road... with low credit scores etc.. while in no way i am advocating Joe's behavior (i dont think he is that smart anyway), pls dont make it sound like he is getting off the hook jack free... jezzz...

2008 Dec 17 02:00 PM

[troglodyte:]

Here's a partial list of the "Bushies" who fomented the housing bubble:

Barney Frank
Shelia Blair
Harry Pelosi
Nancy Reid
Jamie Gorelik
Maxine Waters
Franklin Raines
Gregory Meeks
Lary Clay
James Earl Carter
William Jefferson Clinton

But wait! Something is wrong here. These Bushies are all Democrats!

2008 Dec 17 02:11 PM

[cadoggy:]

tcorn said: "This does not relieve me of my obligation to pay my loan"

The obligation is not to pay the loan... the obligation is to live up to the contract (aka mortgage) which clearly spells out the consequences for stopping payments.

If it's a good business decision for someone to walk away then they should read their contract (mortgage) carefully and see what power they have and what power they don't have.

Do you think the banks feel 'obligated' to help anyone but themselves?

2008 Dec 17 03:01 PM

[ngwun:]

i don't understand "non-recourse loans"? It's a part of gross debt, against all a person's assets. How can wun "walk away"?

i suppose if 1 considered "that the peasants are @ war with the vampires", it would be OK, but some peasants are also vampires, & perhaps some vampires are not.

The circus of good & evil.

2008 Dec 17 03:59 PM

[D-D:]

Can somebody please show this wonderful article to the Congress? Apparently they have no idea how some people are unethically taking full advantage of the economic crisis.

2008 Dec 17 04:14 PM

[Say What?:]

ahh, let's see? Was you key criteria they are Democrats?


On Dec 17 02:11 PM troglodyte wrote:

> Here's a partial list of the "Bushies" who fomented the housing bubble:
>
>
> Barney Frank
> Shelia Blair
> Harry Pelosi
> Nancy Reid
> Jamie Gorelik
> Maxine Waters
> Franklin Raines
> Gregory Meeks
> Lary Clay
> James Earl Carter
> William Jefferson Clinton
>
> But wait! Something is wrong here. These Bushies are all Democrats!

2008 Dec 17 05:46 PM