[mmm]

I thought I'd point out something to people who have a large mortgage and might be planning on abandoning their property when peak oil hits...

You might be under the impression that you can simply "walk away" from your property. Sorry. After the foreclosure auction dumps your property for whatever pittance can be salvaged, the bank will turn around and ask for a "deficiency judgement". That means that they will ask for all of the money from the mortgage that was not covered through the sale.

Just hope that whatever crazy politicians are in power at this point don't decide to reinstitute slave labor debtor's prisons.

[pepper2000]

Of course, there are ethical issues to keep in mind there as well. We know there will be economic dislocations in the future. By accumulating debt and abandoning financial commitments, you're really making the problem worse for everyone else.

[bobaloo]

legal advice here, you might want to mention that deficiency judgments depend on state law, some states outright prohibit them, others limit them. The last time I looked, for example, California prohibited deficiency judgments, the creditor could only get the value of the property.

Another legal option is the little known Chapter 12 of the Bankruptcy code. It was intended to apply to farmers during periods of deflating land values, but what it allows you to do is write down the value of a debt to the current value of the collateral. In other words, the mortgage is reduced to the current value of the property.

I know people have different opinions about debt / bankruptcy, but my take is that part of every payment you make is for the risk associated with loaning money, it's figured into the "cost of doing business". One of the stupidest things I ever did was to NOT file bankruptcy when I should have (after my business partner stole 100K from me). If I would have gone out the next day and filed, I'd have it all behind me and out of my mind. Instead I spent years paying off the debt and have various problems related to that which may haunt me the rest of my life.

[seahorse]

I'm a lawyer, so I will add what I can. It is correct that state law will determine whether a deficiency judgment on a home mortgage can be collected against the debtor (in Arkansas it can). However, even in states where a creditor can proceed with a deficiency judgment against the debtor, bankruptcy will wipe it out. Chapter 7 wipes it out entirely, Chapter 13 is a payout (reducing the interest paid), and Chapter 12 may or may not apply, and is generally limited to farmers.

I wouldn't worry about the creditors. I'm in agreement that their playing loose with lending practices has created this mess, not the debtors, and that when creditors lend money, they undertake the known risk that a debtor may file bankruptcy. Its a planned for cost of business on the part of the creditor. So, no sympathy on my part for them.

[horsestoaster]

I read recently that 1 out of every 423 homes are now under some sort of foreclosure action.Are the McMansions costing too much for the less fortunate suburbanites?Has anyone else noticed this ghastly trend?Is it just too expensive for these poor over-credited schmucks to afford the fuel to go from home to office and back?The beginning of the end for the suburb/McMansion folks?

[Battle_Scarred_Galactico]

Yer, but remember nothing happens in isolation....

[FairMaiden]

This article on reality link national forecast on foreclosures

confirms that there have been steady increases over 2005 that were reaching "record levels"...but they also point out that it only makes up 1-5% of the overall market.

Housing has always been the "go to" indicator for how great the economy is doing.

[PolestaR]

I read something a few weeks ago saying Sydney had record numbers of foreclosures. Of course "record" numbers isn't that much yet, just comparitively it's a record.

[peaker_2005]

I read something a few weeks ago saying Sydney had record numbers of foreclosures. Of course "record" numbers isn't that much yet, just comparitively it's a record.

It was siginificant enough to get on the current affairs programs a while back... Silence since, of course...

[Leanan]

From USA Today:

The number of borrowers in trouble will rise this year and peak in 2007 and 2008 as the largest number of mortgages reset to higher rates, according to First American Real Estate Solutions, a real estate data provider.

Already, in West Virginia, Alabama, Michigan, Missouri and Tennessee, about one in five homeowners with a high-interest (subprime) ARM was at least 30 days late at the end of last year, according to the Mortgage Bankers Association. After 90 days, the foreclosure clock starts ticking.

Most of those foreclosures are related to job losses in auto and garment factories; higher mortgage payments were often the last straw.

What worries experts such as Christopher Cagan at First American Real Estate Solutions are the adjustable-rate loans made in 2004 and 2005, at the end of the housing boom. These loans were concentrated in the hottest markets, such as California, where about 60% of all loans last year were interest-only or payment-option ARMs. That's the highest such rate in the country.

Of the 7.7 million households who took out ARMs over the past two years to buy or refinance, up to 1 million could lose their homes through foreclosure over the next five years because they won't be able to afford their mortgage payments, and their homes will be worth less than they owe, according to Cagan's research.

The losses to the banking industry, he estimates, will exceed $100 billion. That's less than the damage from the savings-and-loan crisis in the 1990s, which cost the country $150 billion. "It will sting the economy, but it won't break it," he says.

And energy prices aren't helping:

The call volume jumped after January, as holiday credit card bills, higher gas bills and rising mortgage payments hit some borrowers at the same time.

[FoxV]

"It will sting the economy, but it won't break it," he says.

but the losses of jobs in Real Estate, Construction, and mortgage financing definately will.

And the shutdown of the home ATM will be final kick while its down

Should be fun to watch the idiots fall

(I just hope I keep my job )

[ClassicSpiderman]

Poor guy--I think I'll send him a nickel to help him out

This is the type of people that have caused the housing market to become overinflated, and now we're expected to feel sorry for him or to "congratulate" him for at least taking a risk???

Perhaps, I should be more patient and understanding and realize that house flippers are victims of society. Ha ha. I am told by my wife that "schadenfreude" is my middle name But in my defense, I only laugh at those who really deserve it.

I look forward to more and more sheeples losing their shirts over their stupidity. I hope guys like this are forced into debt repayment slave labor camps for the rest of their lives. I may even hire one of these losers as my butler when my mortgage is paid off.

[benzoil]

"24 year old self-admitted fraudulent loan obtainer to lose shirt as speculative psychosis ends" might be a good subtitle for this topic.

As someone who sold at the very top of the wave I should thank people like this for driving price appreciation past 250% since 1994 in my old neighborhood. As someone who will watch the nation suffer the grueling economic readjustment in home valuation over the next several years I don't know that "thanks" is the word I'm looking for.

[Fergus]

Thats funny. Good find. I love seeing pple get what they deserve. But he probably has mom and dad to fall back on and this wont hurt him I am sure. Probably wont even learn the grand lesson. Just learn enough to stay out of trouble in the future.

[kevincarter]

Oh man, thanks for posting this, yeah, there must be cosmic justice or something. I could not stop grinning while reading his site... MOAHAHAHHA I hope he has to sell both his kidneys to get out of the mess he's gotten into.

And do not miss the comments, "I am praying for you" yeah.... I'm praying for him too, and for all the people like him....

I mean, the whole thing could be just a fake site, but I really hope from the bottom of my heart that it is not.

Warning! Explicit Link

{edited by SPG}

[mekrob]

I did NOT have a solid exit strategy.

Who knew that would be such a bad idea?

[Kingcoal]

Nice picture of Christina Aguilera.

Most business strategies require some unique advantage. For instance, I have a relative that is a landlord and has done some house flipping. His background was in construction and he is a very hard worker. He would buy fixer uppers also, but do the work himself and that which he couldn't do was done by old business partners. He doesn't venture out of Philadelphia and has nitched himself out in the student housing market. People told him he was crazy renting to college students (remember the parties?) But he quickly learned that he could generally get the parents to cosign the lease and then go after them if there were damages. Last I talked to him, he had a net worth in the millions. The funny thing is that he has nothing more than a high school diploma. His brother is a lawyer and makes far less then him.

The moral of the story is that you need some kind of built in advantage and above all, you need to understand the business. He was in construction and that's basically what the business of buying fixer uppers is.

[benzoil]

Kingcoal-
Your post should be printed out and stapled to the forehead of every business student, wannabe entreprenuer, day trader and house flipper in America.

Also, I'll bet your brother in law didn't tackle 6 houses at once his first time out.

[aflurry]

It's entirely predictable that people like this will end up screwing themselves in the end, and because it is at the expense of people who would otherwise have been looking at buying a house to live in, for crissakes, yes, i would like to see some sort of permanent financial scar left on these people so they are unable to fuck anyone else over again and are forced to (gasp) work for a living and maybe even make something useful.

they are like a plague of rats in the pantry, eventually they run out of food to scavenge and end up eating each other.

i love san francisco, where i grew up and live now. the .com explosion was obnoxious and changed the city in ways i didn't care for but at least it was interesting and quirky and kind of fun to watch happen... people flailing around trying to invent a new business culture... i heard so many conversations on the street with people descibing how they were about to become millionaires by selling their greeting card website or something absurd like that. san francisco has always been an eccentric boom-bust town, and the .com bubble fit that profile well.

however, this real estate boom has none of the charm of that .com craze. there is no cuture attached to it, no interesting ideas, no identity at all, it's just an invisible plague that weakens the body of the city. schools are at 40% capacity because no one can afford to raise kids here. latino families from the mission are packing up and leaving. people who can't afford a house (which is everyone these days) are buying paltry chopped up TIC's that I would feel compromised if i had to even rent.

I'm still not letting the lenders off the hook though. I know caveat emptor and blah blah blah. this thing is the result of collusion between both parties. and as said above, i know that at least some population of borrowers will eventually get theirs. the lenders on the other hand may walk away scott free. because of that i reserve more of my ire for them.

[TommyJefferson]

You without sin cast the first stone.

He's a stupid kid who got caught up in the mania. He's hurting right now and will for many years. He deserves punishment. He is being punished. It is just.

That being said, it is a low and hateful thing to revel in watching a stupid person experience punishment.