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October 22, 2010 – Comments (5)

So this is a pretty fascinating situation here:

http://www.businessweek.com/magazine/content/10_44/b4201076208349.htm?campaign_id=yhoo

In a nutshell, the guy stopped paying his mortgage due to litigation against him for securities fraud. The owners of the mortgage couldn't produce the promissory note (they lost it). So the courts ruled that they couldn't foreclose. He has dragged it on and on and almost 8 years later he is still in the house and hasn't paid a penny while these idiots try to figure it all out. There are so many takeways from this and I don't lean entirely one way or another here. But take this for instance:

"Eight years after defaulting, Lents still hasn't made a payment or been forced out of his house. DLJ, whose parent, Credit Suisse, declined to comment for this story, still hasn't proved its ownership to the satisfaction of the court. Lents' debt has grown to about $2.5 million, including unpaid taxes, interest, and penalties. As the stalemate grinds on, Lents has the comfort of knowing he's no longer alone."

So CS cannot prove ownership. Bad on them, period. I have zero sympathy for that. However this guy got in the house initially right? So he was making payments, was he not? That does not appear to be in question here though. And he knows it. So now he has rung up a debt of $2.5 million which ultimately is going to be paid for by the American taxpayer in some capacity because some idiot judge doesn't have the stones to use a "common sense" clause to make a ruling to at least produce a result from this mess? 

Here is the best part:

"The Boca Raton homeowner hasn't made a mortgage payment since 2002, but he perceives himself as a victim. "I want to expose these guys for what they're doing," Lents says. "It's personal now.""

He is now the victim. Hey, had he not been nailed for securities fraud then he probably would have never had the problem in the first place, right?

But don't think I just blame this guy. The banks are the ones who facilitated this from the get-go:

"Even if the documentation problems turn out to be manageable—as Bank of America (BAC) and others insist they will be—the economy will still suffer long-term consequences from the loose underwriting that caused the subprime housing bubble. According to an Oct. 15 report by J.P. Morgan (JPM) Securities, some $2 trillion of the $6 trillion in U.S. mortgages and home-equity loans that were securitized during the height of the bubble, from 2005 through 2007, are likely to go into default. The report says the housing bust will ultimately cause losses of $1.1 trillion on those bonds."

That $2 to $6 trillion figure is absurd. The banks deserve to go broke, and this guy deserves to be booted out of that house.

"Wall Street's unspoken strategy has been to kick mortgage losses down the road until an economic recovery reinflates the housing market. The faulty-foreclosure crisis has forced the issue back into the present tense, triggering a fight over who will bear the brunt of those losses."

This hits the nail on the head, wouldn't you say?

Jason

5 Comments – Post Your Own

#1) On October 22, 2010 at 11:13 AM, tomlongrpv (77.66) wrote:

When you say "the banks deserve to go broke" you are saying you and anyone else with a deposit anywhere deserve to go broke.  Is that really what you want?  At the end of the Great Depression most of the states did not have even one functioning bank.  We were a barter economy.  It seems people want to return to the "good old days,"  I guess there is something pretty powerful in the "tea" some are drinking lately.

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#2) On October 22, 2010 at 11:13 AM, Melaschasm (57.27) wrote:

This story is even more strange, since it seems to imply that he has not paid property taxes in 8 years.  Things may be different wehre he lives, but my local government would have seized the property after a year or two of non payment.  From the property tax angle, it does not matter who owns the property, if the taxes are not paid, the government becomes the owner.

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#3) On October 22, 2010 at 11:28 AM, alstry (36.07) wrote:

We have a receivership mechanism in place following the S&L crisis.....

but for anyone with a decent background in math....like this individual has.....you realize that essentially everything is bankrupt today but for an ability to borrow money and generate cashflow.....

So his unspoken real argument is if the banks are bankrupt, yet can still borrow and pay the executives....and the cities and counties and states are bankrupt but can still borrow and pay the executives.....why shouldn't he beable to borrow and pay himself....and his mortgage and taxes?

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#4) On October 28, 2010 at 9:45 PM, guiron (22.74) wrote:

From the property tax angle, it does not matter who owns the property, if the taxes are not paid, the government becomes the owner.

Wouldn't they have to take it from the current owner, presumably the bank? I don't think they can take it from the current occupant, as he's not the owner. There has to be a chain of ownership.

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#5) On October 28, 2010 at 9:49 PM, guiron (22.74) wrote:

So now he has rung up a debt of $2.5 million which ultimately is going to be paid for by the American taxpayer in some capacity because some idiot judge doesn't have the stones to use a "common sense" clause to make a ruling to at least produce a result from this mess?

I doubt it. How do you figure that?

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