Forget that! Its so 2007.
For 2008, let’s try a little reverse financial engineering: Squatting in $3 million dollar waterfront mansion in Florida and paying nothing.
At least, that’s a new and growing problem we learn of via MW in South Florida. MW is a local developer, and claims this has become "very serious." (I have been able to independently verify this with a local resident, who tells me the local papers are filled with such tales).
"There is a very important phenomena that is occurring
that has only been covered in an only "glancing" manner.
Beyond the concept of "jingle mail" — which suggests that
folks who can pay their mortgages may just choose to walk away given the
dramatic loss of equity due to housing’s collapse — consider the following:
As a developer, I had stepped to the sidelines and
rented beginning in 2005, because I was sure that housing was unsustainable and
was bound to collapse; it took 2 more years for it occur.
Nonetheless, as I have
followed several of the homes that my wife and I were interested in a few years
back, they are all on the market now. What is shocking, that in each and every
case, I have been told by brokers and banks that the owners, have ceased paying
their mortgages in some cases for nearly 2 years and have continued to occupy
Now, these are homes in excess of $2,000,000 in the
very best neighborhoods in South Florida. Brokers have added that these buyers
further complicated things by putting huge home equity lines on top of their
mortgages and now have no possibility of selling their homes for amounts needed
to cover their accumulated debt.
This may not seem like news, but understand
what this means: There is currently an 8-10 month wait to get a court date to
have a foreclosure filing heard in Dade and Broward counties. The bankers have
non-performing loans on their books to the best heeled borrowers in
multi-million dollar amounts with no immediate means for recovery; with a
non-secured second mortgage in place, there is no possibility for a "short sale"
that will satisfy all of the borrower’s debt. They are reluctant to take
a haircut knowing that they have the home equity debt still around their neck
and are likely to frustrate any near-term sale.
There is no clean way to sell
the home that would guarantee "clean title" hence a foreclosure is the only
means to separate the property from the dead-beat speculator/squattor.
Banks do not want to spend the $50,000 required to take
a home through a foreclosure and clear the title — only to put the house back on
the market for a deeper loss afterwards. Most likely, they have not revealed these owner occupied defaults to
their shareholders, thanks to the sheer numbers of non-performing loans on their balance
sheets, and the daunting task of foreclosing on all of them.
This is the ultimate seizure and full stop of the
market whereby everyone is standing in a stalemate. As one broker said to me,
"these bums sitting in $3,000,000 homes overlooking the water are likely to be
left alone by the banks for 2 years before the banks even get serious about
So here is the difference between "walking away," these folks are
doing anything but walking away, they are sitting on lounge chairs sipping
martinis living cost free! (not to mention that they have ceased paying property
taxes and insurance).
I can only imagine what this market will look like in
the coming years . . ."
All I can say is wow.
"MW" has been hearing this for the past six
months. He believes both the local and national lenders are in a state of
disbelief with no understanding on how to proceed.
If anyone has any local newspaper stories on this, please post in comments.