Two thieves and their dog
If you sign a document saying that you agree to pay a debt, and the bank agrees to give you the money in order to pay that debt while using your home as collateral, and then you suddenly walk away from that obligation and refuse to pay, who is in the wrong?
Well, according to the people profiled in this article, the bank is in the wrong. Why? Well because people have a right to eat out, gamble, and take their boat out for a spin.
For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.
Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.
“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”
It is amazing to me how some people have such a deep sense of entitlement. Who signed those mortgage papers? Who applied for the loan? Alex Pemberton’s mother did the same thing. Like mother, like son.
“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself 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. “They’re all crooks.”
So let me get this right–YOU stopped paying on your mortgage, and YOU have the gall to point the finger at your lender? And you wonder why mortgage banks are so hesitant about lending money these days. It’s because people are dishonest. If this thief’s house value had gone up, I’m sure she’d still be happy making money by selling her house or refi’ing to pull out more money. But because it’s down, she shirks her responsibility and makes the bank pay. And make no mistake–it’s not just the bank that’s paying for her crime, it’s us, the American taxpayers and American homeowners. She’s stolen from us.
I understand that people fall on hard times sometimes. Sometimes people want to pay but simply can’t because of bad circumstances. But lung cancer or not, this doesn’t look like one of those times. She’s stealing from the banks, and then she accuses the banks of stealing from her. That, to me, is entitlement. Houston, we have a (moral) problem.
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Eh…when in Rome. I’m not any more digusted with individual consumers reneging than with Wallstreet. It’s not fair to hold individual consumers to a higher standard than we would hold a bunch of supergenius MBA’s to. Do the Chinese know they’re not getting their money back, yet?
I am also a proponent of people owning up to take responsibility for their actions. This post is in tow with the previous one about empathy. The underlying gear generating both problems is the \me, me, me\ mentality. I’M feeling trapped. I’M not able to afford the luxuries I want. I’M not able to make my mortgage payments because I blew my money on an iPhone, iPad, BMW, and a vente cup of Starbucks every morning because I don’t have 3 minutes to brew my own joe before work. I’VE been too busy watching TV shows on how the other (richer) half lives, and now for some dumb reason I feel entitled to those amenities too, even though I bring home less than 50 grand a year. And now I’M going to scorch the earth. If I’m suffering, everybody else should suffer too.
It’s this rampant mentality that’s putting America in the hole.
This kind of throws water on the “predatory lending” claims the media have been shouting about, right?
As a dad, if you gave your kid college money, he probably wouldn’t spend it playing poker. Only bad, bailout-friendly dads create kids like that. Bailout-friendly states do this with creditors. If I were a dad, I’d remove the bailout to encourage prudence, and I’m sure you would too. Then you don’t have to keep making NEW spending rules and NEW regulations for your 35-year-old son who’s still living on the couch.
Let em eat their losses, and suddenly they become prudent, and you stop having catastrophes. A non-progressive idea, but isn’t this basic parenting?
I agree that people should pay their bills and certainly their mortgages. The system itself will collapse if people can not be relied upon to keep their end of the contract. Mortgage investment has long been considered a bedrock of stability, simply because the average, middle class, Joe was so diligent in paying on his mortgage.
However, banks and corporations aren’t helping the growing climate of irresponsibility either–
For example, if I buy a house (as an individual) and then stop making payments, because I like playing the ponies or something, most people will agree that I’m a lowdown cheat. And if I default on my mortgage, my credit rating is going to take a substantial beating. However, if I incorporate with 10 other people, and we collectively buy 3 properties (as an investment) then decide that the we’re”taking a bath” in this economy, we can simply bankrupt and dissolve the corporation. None of our personal credit ratings are effected, and we might even be applauded for our savvy in knowing when to “cut our losses” It would be seen as a business decision, not a personal failing.
And do I even need to mention that some major financial institutions are not making payments on properties that they own. They are defaulting on skyscrapers and office parks at the same time that their collection agencies are calling people on late mortgage payments
I still think that people should pay their mortgages, I’m just saying that the high end crookery isn’t helping things any.
This one hits close to home for me. We’ve fortunately had a good track record on lending to people who pay, but every time someone does refuse to pay, it threatens our company’s livelihood. Buybacks are a real threat to any mortgage company. Look what happened to American Home Mortgage–they were huge, but they couldn’t deal with the buybacks triggered by people who wouldn’t pay. I can understand people who run into difficult circumstances, but people who just don’t pay because they want to drive their boat or head to the casino?
Think about bank robbers who use guns. How many of them walk into a bank and walk out with $280,000? That’s basically what the guy in the article did, and his mother did it too. That’s a whole lot of money with two thieves alone.
Oh and P.S. my previous comment may be confusing because none of the formatting showed up. Oops.
King,
I think in general, people have to sign a personal guarantee when they purchase a property. For example, even when we close a loan in the name of a trust or a corporation, we still have to have approve an individual with income, assets, credit, etc. If your business leases, say, a fitness club, usually they require an individual to sign a personal guarantee as well. If you don’t pay, it affects at least one person’s credit, and they come after you.
I’m not sure about commercial finance, although I’m guessing/hoping that the guidelines are even more stringent. Does anyone know? I know Trump’s company declared bankruptcy, but I think he made payments on the properties themselves to avoid foreclosure.
Does anyone know? Now I’m kind of curious…
Yes, true. But I was told that in some cases, this was being waved… at least it was back in 2007, 2008.
Was that incorrect info?
I don’t know all of the loan products that were done way back when, but it didn’t happen in the residential market. Some of the lenders waived a lot of stuff regarding credit, assets, and income, but we always had a person behind it.
I’m pretty sure it’s similar in business lending and commercial real estate.
Did you ever see Shark Tank?
http://www.bigwowo.com/2009/09/shark-tank/
I remember Kevin yelling at one guy who declared bankruptcy, saying that at some point, a bank would have to be involved and that he would NEVER get a loan because of that. I’m pretty sure all loans required a person behind them, even if the banks were lenient on the credentials of that person. If I lent money, I’d want to have someone I could go after in case of default!
“However, if I incorporate with 10 other people, and we collectively buy 3 properties (as an investment) then decide that the we’re”taking a bath” in this economy, we can simply bankrupt and dissolve the corporation.”
That’s the fault of a bad bankruptcy program and individuals/sole proprietors take advantage of this all the time. Blame the parents for this one too. Dubai’s got a nice alternative: you go to jail if you can’t pay your creditors. Why are you blaming the banks for taking advantage of a bankruptcy protection system? It’s like handing a steak to a crocodile and being upset when he takes your arm too.
I don’t really blame these people. It’s all a game – mostly stacked against the little guys, and these guys just refused to play. More power to them. I wish I hadn’t put down so much down payment for my house, so I could walk away from it and hand back the keys. Sigh… the consequences of being a prudent saver.
The banks deserve the pain they get because they were willful creators of the bubble and crash. They banks should be punished, but “it’s us, the American taxpayers and American homeowners” who are liable only because our stupid government chose to bail out the banks. You can assign that blame to Bush, congress, the corporatocracy/kleptocracy, Geithner, GS, Paulson, Obama, Pelosi, etc, etc. The original villian though is Reagan, who started american down this path.
It’s a game they refused to play? Paying your mortgage is a game? Cool!!
People should just pay what they owe. It doesn’t matter they were ignorant and taken advantage of. We all make mistakes and bad decisions all the time. We have to live with it, so why shouldn’t they? This whole, “everybody is doing it” is no excuse. It’s this total lack of responsibility that got this country into this mess in the first place. If you don’t practice any personal integrity, then you have no right to accuse someone else of cheating you.
It’s not about responsibility. Do you think those bankers feel ANY responsibility to anyone? If you play the good responsible party, you will be preyed upon and taken advantaged of by those who have much more power at their disposal and who MAKE THE RULES in their favor. If you play by those rules, their rules, you will 100% get fleeced.
The problem is much deeper, starting with government being bought by corporate/money-ed interests, and then gov’t changing the rules in favor of those interests. Why is it that new laws are put in place to make individual bankruptcy more difficult, but make corporations less and less liable for their mistakes? Cap on lawsuits? Cap on environmental damage payments? The CEO’s, bankers,and crooked politicians (ie all of them) are laughing all the way to the bank – at your expense.
Wake up. People need to stop playing by the rules, and use every loophole available tho them to fight back. To do any less is to play the sheeps ready for slaughter.
To be Frank, which I am, you have this completely wrong. Siding with the banks who had a responsibility for fair practices and failed completely throughout the housing bubble is what the banks want you to do. You know who has even more taxpayer money? The banks. Want to know who really walked away Scott-free? The banks.
Foreclosure is many cases isn’t as simple as people spending freely or parading about in some lavish lifestyle. There are many extenuating circumstances (in this case medical bills) all of which you did not take into account during this rant. The sense of entitlement is clearly from the other side where predatory practices, gambling in free markets and unethical treatment of clients led to the greatest Recession in our modern times. And in case you missed it, http://www.reuters.com/article/idUSTRE63F3JX20100416 the banks still thieve and parade about with no sense of wrong doing.
But keeping fighting for the “little guy.” I am sure he will show his appreciation when he finds a way to raise the rates on your mortgage, credit card or slide in some banks fees when you are faced with your own hardship.
I might have to side with Frank on this one, B.
My parents’ place is getting foreclosed (just got the notice in the mail last month to do a short sale or foreclosure) because BOA won’t denied us twice for a loan modification. When both my parents still had a job, they applied for a loan mod. Kind of hits right at home, but these guys, the big banks, too big to fail, are just plain crooks.
They want us to leave so they can cash in. They don’t want to refinance or modify. They want money from the government. They locked my parents into an ARM four years ago without my knowing, enticing them with cash up front (they don’t speak English that well), and now they are ready to kick us to the curb. The rates have been going up the last three years and it’s beyond payable to any working family.
Fuck them and fuck every motherfuckin’ big corporation in this country that preys on people who just have good intentions but have no idea what they are getting into. It’s a crime, man.
Hey Minority, sorry to hear about your folks place. Did your folks go through a mortgage negotiation company, or did they try to talk to B of A mano a mano?
Mano a Mano. They might just file for Chapter 7 soon because neither of them have a job now.
Yeah, I have a friend who did a Chapter 7 (her condo was killing her) and she’s much better off now. Her credit rating is gone, (of course) but at least she can breathe now. I wish for your parents the very best of luck.
I’m sorry to hear about your parents, TMM. Give them my regards. Your dad is the original militant, and he’ll always have my respect.
I think I may have told you all this before, but I do mortgages for a living. I’ve been doing it for seven years. I’ve seen the best of times, and I’ve seen the worst of times. Right now is not as bad as 2008, but we always worry these days whether the worse is over or whether we’re just experiencing a temporary bounce.
I think we need to look at individual cases. Business, like many kinds of exchanges, depends on the players involved. Most of my clients go over every line and make sure that they understand everything, and I prefer that they understand everything. However, I’ve also had clients who say, “Byron, I trust you, so shut up and just tell me how much money to bring, how much the monthly payment will be, and where I gotta sign.” I usually STILL explain it to them until they understand, but I can understand how some brokers may not, and when the broker abuses that trust, he’s in the wrong. That may have been what happened to your parents, TMM. To sell a cash-out ARM to someone who isn’t going to be moving is hard to justify. Especially since it seems they didn’t understand the terms.
That being said, I think the media has blatantly ignored what the industry is going through–those who aren’t in the industry aren’t getting the whole story. As an insider, I’d say that most brokers were for the most part ethical. I think a few bad apples spoiled the bunch. You don’t usually hear stories about the good ones unless you’re in the industry.
When people game the system–as the people profiled in the article are doing–they cheat innocent people in our industry. People think we all rake it in like Angelo Mozilo from Countrywide or the leader of Goldman Sachs–that’s not the case for 99.999% of people who work in this industry. This industry employs processors, secretaries, account reps, funders, and brokers–most of us don’t own large companies like Countrywide or Washington Mutual. It’s like any other business. When business falls apart, these people get hit. Check this out:
http://www.cnn.com/2009/LIVING/worklife/01/15/job.mob/index.html
Keep in mind that the only reason CNN covered this story is because it’s riches to rags, and because this woman did so well before, ain’t no one going to feel sorry for her. Had it been about someone making an average salary and then getting dumped, it probably wouldn’t have hit the wire. I know people who have lost their jobs in this industry. They were just doing what they do, but because of the cumulative effect of dishonest businesspeople and dishonest customers, they lost their jobs. They’re hurting too, and yet the media only tells one side of the story.
Thanks, King,
I understand, B. When I read this, I hesitated to comment for a sec cause I didn’t wanna air my laundry. But sometimes it’s hard not to talk about. It’s very personal.
No problem, TMM! I think we learn by talking about our experiences. (That’s what I was doing too, right?)
A person signs papers for a loan with the understanding that if he/she does not pay then the bank gets the home. If a person does not pay, for instance in a down market, the bank gets the home; the contact has NOT been broken.
Not exactly. In most cases, the house is just collateral to discourage breaking the contract, not part of the contract itself. Sometimes state laws override the ability of a bank to go after a homeowner past the value of the home (or so I’ve heard), and in most cases the former homeowners may not have other significant assets anyway, but the contract uses the home to discourage breaking the contract, not as a means of fulfilling a contract.