Welcome To The ‘Squatter’ Mortgage

People are talking about the Walk Away Mortgage, how it’s mad to be paying $3000 a month on a property worth less than the loan secured on it, when you can rent similar for half. All you do is walk, and apart from your deposit if you made one, the losses all belong the lender. It has been estimated that as house prices plummet maybe 10 million households might just walk.

Now the story gets worse.

The documentation of the mortgages has been so poorly done that when lenders go to court to foreclose, they find that they cannot prove ownership of the mortgages. So many mortgages have been transferred between lenders, some several times, as part of the repackaging of risk exercise, that they are literally unprovable. There appears to have been a compete collapse of standards in basic paperwork, worthy of the most corrupt and incompetent countries of the world.

People are finding they don’t need to walk away from their mortgages. As the mortgages are unprovable, the lenders cannot foreclose and they can carry on living in their houses untroubled by making any payments at all. The scenario is described in the Wall Street Journal HERE

From the March 6th article in th WSJ –
That’s essentially what some people are doing, according to a recent post on the Big Picture blog.

The blog shares the observation of one South Florida developer, MW, who says that in “the very best neighborhoods of Florida,” owners of houses valued in excess of $2 million have ceased making mortgage payments and are essentially squatting in their luxury homes. And thanks to a backlog of foreclosure cases in the local courts, they may be able to live in their home for months, maybe even years, before the banks can take action (many have also quit paying property taxes and insurance, the post notes).

The post reminds us of a December Journal article written by Amir Efrati about a family in Cleveland who fought off foreclosure in the courts and continued to live in their home for 11 years without forking over a single mortgage payment. Ultimately, the bank foreclosed on the house, the family was evicted and the house was sold to another family, Mr. Efrati says.

There’s a similar tale on Bloomberg.com of a Boca Raton, Fla., resident who hasn’t paid his $1.5 million mortgage since 2002, but still has ownership of his home because the bank can’t prove that it owns the mortgage note. The article says that homeowners across the U.S. have seen foreclosure cases against them dismissed because of lenders’ inability to prove ownership of mortgages that have been pooled into securities and have changed hands multiple times, sometimes with poor documentation.

If this situation continues, the sub-prime losses could be so great that no action by any government will be able to contain them. The greatest economy in human history could be about to descend into oblivion, as a nation of walk-aways and squatters find that no bank will ever be willing to lend anything to any of them again, if indeed there are any banks left to be able to lend.

After so many years living in cloudcuckooland, the arrival of reality into the USA will be harsh in the extreme….and at the same time, hopefully extremely good for the memory and modesty of those who live through it. If it’s Barack Obama for President, he will be just in time to rebuild right from the very bottom.

It’s frightening what a mess the US has got itself into. No wonder investment banks like Bear Stearns are collapsing, if banks are losing the totality of loans in this way.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.

One Response to “Welcome To The ‘Squatter’ Mortgage”

  1. tapestry says:

    This is not an iffy site, referrer from the USA!

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