Hat tip to SM for sending this along, from the Seattle Times:

The 8,000-square-foot mansion was dark and in foreclosure for years. So last weekend when the for-sale signs came down and the lights lit up, neighbors were relieved.  “We were like — ‘finally, somebody’s going to make that place a home,’ ” says one.  But then some new signs went up.

“No trespassing,” the signs say. “Privately owned property. Not for sale.”

That’s odd, neighbors thought. The West of Market neighborhood in Kirkland is friendly, easygoing. So one of them called the real-estate agent to ask what was up.  What he said floored them. The house is still for sale for $3.3 million. Whoever is living there had broken in. They’re squatters.

“It’s blown everybody away around here,” said another neighbor, who asked me not to print her name.  “It takes some real guts to just waltz into a house like that, I’ll give them that.”

We were standing across the street from the six-bedroom, six-and-a-half bath house, dubbed in the ads as “Mediterranean Natural.” With its rock exterior and terraces, it looks like a miniature hotel.

“Elevator to the theater, wine cellar & tasting room, game room, recreation room, nanny’s quarters, den/library, culinary artist’s kitchen, bonus room and the lavish master suite & bath,” reads a listing from 2008, when the house was for sale for $5.8 million.

If you’re going to squat, might as well do it in style.

Kirkland police say it’s true — someone just showed up and changed the locks a week ago. They now claim they own the place. Police don’t believe that, but also don’t tend to get involved in landownership disputes and so haven’t done anything, yet, to remove them.

The house’s history is like a recap of the economic meltdown.

A modest house was torn down to make way for this behemoth, but the builder defaulted on it in 2008 and the mansion went into foreclosure.

It ended up in the hands of Venture Bank, in Lacey, Thurston County. Then that bank failed — too many defaulted loans — and was seized by the feds. So the house went to another bank, called First Citizens, which, according to legal documents on file at King County, now owns it.

Or so they think they own it.

A form posted on the door of the house by its new “tenants” says “all rights, interest and title in said property” has been transferred to something called the “Priority Rose Children’s Outreach” in Bothell.

That’s a charity that was incorporated only two weeks ago, according to the state Secretary of State’s Office. Its purpose is listed as “spiritual training for adults and children in a religious safe environment for the development of all mankind.”

That sounds nice. But the phone number for the charity is also the number for a Bothell company called NW Note Elimination that specializes in “eliminating mortgages.” It does this by finding flaws with loans or titles and exploiting them to stake outright claims to property.

One of its strategies, according to a primer it posted on Craigslist, is to create a land trust and claim title to a piece of property, then try to challenge the existing mortgages as flawed in hopes the banks eventually will just go away.

“The idea is that with this economy, people are looking for any kind of real-estate loophole they can find,” said Sgt. Robert Saloum of the Kirkland Police.

But squatting? In somebody else’s home?

I called the charity to ask how moving into a house you don’t own promotes the religious and spiritual development of all mankind. Nobody called me back.

Saloum said when Kirkland police went to the house, the woman who answered the door showed a form claiming she owned the house.  “It’s up to a court to sort that out,” he said.  The actual owner, First Citizens Bank, is now trying to get them evicted — a civil-court process that can take months.

Needless to say, neighbors are confused. Someone can show up to your house, change the locks and there’s nothing that can be immediately done about it?  “We are getting calls from neighbors out there wondering if they can safely leave their houses vacant while they go on vacation,” Saloum said.

Real-estate experts say you’re not likely to return from a trip to find strangers living in your house. Squatting usually happens in foreclosed or completely abandoned homes. Dan Sytman of the state Attorney General’s Office said they have seen cases of phony landlords moving renters into foreclosed houses, collecting rent for a few months and then leaving the duped renters to deal with the rightful owners.

But staking claim to a multimillion-dollar mansion? “That’s a new one for us,” he said.  Who is in the house? The police wouldn’t say. I went and knocked on the door, but no one answered.

The real-estate agent had $80,000 worth of staging furniture inside, but last week he managed to get in and cart it away. So the rooms are empty. There were a few signs of life — a cat, and shoes lined up inside the back door.  A neighbor told me she sees people coming and going. A woman, sometimes a man. Plus a couple of children, wheeling bikes into the garage.

“It’s crazy,” she said. “It’s unnerving. But it’s the biggest gossip to hit West of Market in a long, long time.”

Standing there, it occurred to me that maybe mansion-squatting was inevitable. We did easy living with loose credit and turned houses into cash machines. Wall Street leveraged that frenzy into a black-box casino. Then to bail everyone out the government rains down dollars we don’t have.

What’s happening in Kirkland is just the most naked expression yet of what the crash was about. The lure of something for nothing.

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