Tuesday, May 4, 2010

Strategic defaulters talking...

There is always a bunch of great threads going on over at loansafe.org. The tactics for delaying foreclosure, stalling short sales and just overall lengthening out the process so they live rent free.

I was enjoying this thread tonight. The protagonist in question has three non-recourse CalHFA loans and has decided to strategically default (they can still pay but see no reason to do so) and is trying to keep the process going as long as possible. When the bank calls he asked for a loan mod packet and when they call back he asks if he got his loan mod paperwork... which he hasn't sent. He also is apparently agreeable to a short sale even though he has no plans to actually cooperate for a short sale.

This persons experience isn't unique as other people are jumping into the thread with their CalHFA default experiences. The forum in question is filled with strategic default threads.

The kid glove approach by servicers (forced upon them by the administration) has help spawn this activity. It makes even more sense to strategically default the longer the timeline is for foreclosure. People have figured this out en masse and the people not smart enough to figure it out for themselves are just a click away from figuring it out.

The gaming of the system is massive and the losses are going to borne by the honest taxpayers who pay their rent or mortgage and their taxes. The reason the servicers took a hard line on borrowers over mods and forbearance is to reduce the loss severity and prevent gaming of the system. But Uncle Sugar knows better and is making it much worse in the belief they will keep home prices high. I think at the end of it all we will have the massive losses distributed to the taxpayers and lower home prices after years of market stagnation. But the politicians keep telling us this is better. Apparently they don't use google and open their eyes to what is going on.

1 comment:

djviking21 said...

Right on schedule ED here's a news piece