The New York Times posted an article today about the rising number of Americans who have gone in to foreclosure, stopped paying their mortgages and just keep living in their homes until the banks finally kick them out.
While some states like California and Texas allow lenders to go after borrowers outside of the court system, many states rely on their judicial systems to process the mounds of foreclosures now piling up. And the sheer volume of such cases means that homeowners can sometimes stay in their homes for a year or more, payment-free, before the courts start eviction proceedings. In fact, the Times piece claims that properties in New York spend an average of 561 days in foreclosure – more than a year and a half! – and Florida’s average is the second longest at 518 days.
The Times quotes an Alex Pemberton from Florida who stopped paying his mortgage a year ago after his business starting faililng, and has still been living in his house.
“Instead of the house dragging us down, it’s become a life raft,” said Pemberton. “It’s really been a blessing.”
His house is now worth less than half of what they owe, a very common occurrence today with the burst of the housing bubble, but in this case Pemberton also took out a cash-out refinance loan at the height of the market to buy a truck to be used as a contest prize for his business’ employees. And interestingly enough, that was not a stupid move on his part, but on the lender’s.
“They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”
Wow. Well, I guess the lenders are the ones who truly did shoot themselves in the foot if there are enough people out there like this who don’t care enough about their house or their credit to even try to make good on their debt obligations.
There are currently 1.7 million U.S. households in some part of the foreclosure. And I can see how that could end up being a big burden on the housing market for years to come if the pace of actually foreclosing continues to move so slowly.