Hat tip to Stormin Norm for sending this CBS video along – here is the printed version, which includes a bump in drama. In the video the homeowner says that his La Jolla home is worth $500,000 to $600,000 less, and in the printed version they call it “6 to $700,000 less”:
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
I’d have more respect for the guy if he weren’t continuing to live rent free in his ocean view manse.
Honestly, this is what comes of thinking of homes as an “investment” unless you are an actual experienced investor who knows what she/he is doing.
Deadbeat…no, stupid Deadbeat. Why would anyone in his position agree to be interviewed?
No mention anywhere that he bought in Seahaus, the lawsuit-plagued condo built by bankrupt Barratt American, and how that contributed to the decline in value – and his decision to default:
http://www.voiceofsandiego.org/housing/article_8a26ee30-7da9-11df-9cd4-001cc4c03286.html
Mainstream media loves to omit other contributing factors to make every story sound sexier.
MB Mike, I’d bet he thinks he is a superior businessman and a hero for “sticking it the banks.” That seems to be a common theme in every one of the these stories. Either the owner in question is a victim (and most of them aren’t when the story details unfold) or a hero for sticking it to the bank.
Right on Art. Jim pretty much pegged it. He WAY overpaid in the first place. Made a bad decision and then has the cajones to be interviewed about it. What a dope.
Can someone explain to me why “Strategic Default” is not fraud?
Because the banks do it too, so it’s allowed.
I believe it is not fraud because the contract terms are being obeyed. Either the borrower pays or the asset goes back to the lender. The lender taking two plus years to take back their asset is their own damn fault. I’m guessing the banks have run the numbers and found that the loss of a couple of years payments and a large percentage of the original value of the house is LESS than the scenario where values in the surrounding million dollar area fall even more. The more those prices fall at that level, the more strategic defaulters will make a business decision.
Limited market for expensive homes? High maintenance costs?? NOTHING PRICE WON’T FIX!
Kick’em out and price it to sell.
Hey Darren: I bought in 2006 in Carlsbad, paid over a million, and I’m down $200,000+ in value. But you know, I indeed view my debt as “an obligation that must be paid.” WE each promised to pay our lenders back everything WE borrowed, plus interest, on terms WE agreed to. For some sick reason, you now simply view your residence as a bad investment, to help ease your conscience as you intentionally stick it to the institution that worked with you on your good word. When in your twisted mind did it become the bank’s fault (or any lender) because the value of a residence drops? If you can’t make the payment, man up and say it, but don’t punish the bank for your bad faith and complete lack of character. And move out, moron.
The lender knows they’re giving out no-recourse loans, so I think it’s fair for the borrower to walk away. Those are essentially the terms everyone agreed to up front. Of course, refinances aren’t no-recourse, so that’s a different matter.
I like the freudian slip he had at the end with “Bad money after good” … mr savvy businessman’s money is probably just as dirty as the banks.
Not foreclosing because high maintenance costs BS !! Banks would have to recognize major losses when title transfers and they would much rather keep those high end REOs in the “off balance sheet” ledger. Losses like that would keep Mr. Bankster from collecting those year end bonuses….
Happy Birthday Jim!
I wonder how long it will take the processor to take the condo now that the occupant went public. That being said it is not too different of an experience (two years free rent) than someone I knew in a much cheaper in the college area condo.
The more interesting point is the higher DQ rate on $1MM plus mortgages. How much of the stability in La Jolla, Carmel Valley, etc is an illusion waiting to get pierced?
I suppose he has not paid property taxes and HOA dues… Probably a 100% financed purchase back then. My hat goes off for another smart businessman and real estate investor.
And it may be many more years his great and free life style will endure.
It was 90% financed.
The lesson? Don’t buy a condo – the rest of the community helped to tank his value.
Happy Birthday Jim!
The birthday hit a bad patch today. I went out to drive the ’66 and the battery was dead.
The bank agreed to enter in a contract. They knew what they were doing and they knew their obligations if he didn’t make his payments.
Sure, what he did is bad. But you said it yourself Jim, in the video of Del Mar Mesa/Space Station owned by the Cardiologist. “I’s sure it’s just smart. Just business, that $4,000,000 loan has to be hurting.”
I find it interesting that mortages and current values remain totally out of sync ready to plunge to the down side. The upside was too high in ’06, and the downside will be too low when we look back and chart it. So we all need to learn how to catch the falling knife even when its at terminal velocity! I am just another idiot making a guess in this market, but I am buying hard assets, including houses, before the US dollar is at 1 to 1 parity with the Mexican peso.
Inflation will help those with homes just like it did in the 70s. Problem is that interest rates will go up just as fast…
It’s amazing to me that people trying to survive can be criticized when the wisest business decision tells them to go for the strategic default. I was talking to a bunch of Mortgage Bankers one day who were telling me how wrong it was for homeowners to even consider walking away. Then I reminded them that their own association, the MBAA did the same thing, they walked away from their overvalued headquarters building in DC. They all gave me a funny look – hypocrites! Now here is the story told in by funny video, worth watching at: http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default
I liked the last comment, where the CBS reporter suggests that rich homeowners can afford to be as ruthless as the banks. The strategic default game is being played at all income levels. For every one of these guys, there are many more poor people doing the same thing. It doesn’t take money to play this game with the banks. They are actually doing the bank a favor tax-wise, so long as the Fed keeps pumping them full of money. And sharing the strategic default statistic with the $1M breakpoint was especially clever: it lumps wealthy, $417k-$1M low-foreclosure-rate jumbo loan recipients with a whole raft of low-income loan recipients. Therefore I call shenanigans on this whole story.
“Can someone explain to me why “Strategic Default” is not fraud?”
_________________
It’s not fraud because the guy isn’t lying or make misrepresentations about anything. He just stopped paying his mortgage. Nothing fraudulent or illegal about that at all.
I was reading the comments and I have to say most of you are absolutely stupid… instead of attacking the rich you should learn from them. This guy made a mistake in buying an overpriced house, but he is right in not allowing the mistake to perpetuate and sink him.
Some of you are actually defending the banks and have no idea of the reality.
1) most banks sold your mortgages to other investors
2) as such they do not hold the note, the only service it
3) the banks have insurance on your mortgages, even if you do not pay they still walk away unscathed
4) because of #3 they made bad loans because they knew they would be bailed out regardless
5) the banks are now double-dipping because of the insurance they have on the notes AND the additional funds given through government bail-outs (this is why they are recording record profits)
6) when some banks collapsed and the government forced the takeovers banks such BofA got Countrywide’s assets for often less than 10% of the value!
7) our government did not offer the people, those enslaved by debt the same options. Is that fair?
8) why not? because they need to keep everyone enslaved by debt so people go to work and are productive to support the non-working rich that suck money from your labor
9) Don’t believe me… if everyone were wealthy who would be left to do the real work?
This rich guy undertands all of this and refuses to be a sucker like the average joes making ignorant comments on this board. He’ll stay rich and most of you will reamin enslaved like sheep.
Welcome newcomer, grab and drink and stay a while. And tip the waitresses!
I totally agree with ST. The banks are and were protected. The consumer is not. The toxic loans from 5 and 6 years ago are now coming to roost. I can not afford to spend my retirement on a home that will not get right side up and gain equity for at least 15 years. You dummies are talking morals while paying for the purposeful and deliberate actions of bankers that should be in jail. Instead they are bailed out, making more money than ever and thinking about what to do with their next bonus. Wake up America!!! We are being fleeced. The government wants us to stay afraid enough to be good little consumer/ producers so that big money. An continue to financially rape and pillage the middle class. We need to rise up and wise up. I am amazed at the posts in this page. We are all left holding the bag due to the immorality of others.