Owners Stop Paying Their Mortgage Intentionally
A growing number of the people whose homes are upside down are intentionally stop paying their mortgage. It’s what has been termed “strategic default”. People who are in foreclosure are also not ashamed of it any more. “Walk away” block parties where whole streets are deciding it’s not worth it to be upside down anymore are the new fad.
Homeowners are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by. It’s a Force me out if you can attitude. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads. “I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer.
Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages. The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics. While there are no firm figures on how many households are on their way to passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise. More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Kyle Lundstedt, managing director of Lender Processing Service’s analytics group.
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