22 NODs were recorded in Washoe County today, sort of a “normal” day sadly. One was for a time share, the rest were all homes or condos. What I find interesting and disturbing is how long it has taken the banks to issue NODs on many of these properties.
APN Loan Date Loan Amount Default Date
504-591-02 8/10/2005 224,000 5/1/2008
87-503-09 8/24/2005 253,800 9/1/2008
36-442-06 7/25/2005 197,200 11/1/2008
222-142-04 3/16/2007 650,000 12/1/2008
31-381-28 5/8/2006 215,100 2/1/2009
402-301-21 3/5/2004 333,700 5/1/2009
13-182-26 8/17/2006 304,000 9/1/2009
530-372-11 9/18/2006 332,000 10/1/2009
208-682-48 2/22/2006 497,900 1/1/2010
140-393-14 2/10/2005 235,200 3/1/2010
21-217-13 9/7/2004 192,000 12/1/2010
142-241-11 6/15/2007 624,000 12/1/2010
77-110-22 3/18/2003 169,996 1/1/2011
10-181-49 9/12/2005 272,000 3/1/2011
23-612-23 12/2/2004 230,000 5/1/2011
538-067-06 1/1/2006 607,200 5/1/2011
27-402-11 10/17/2005 180,000 5/1/2011
524-131-29 5/31/2007 233,000 5/1/2011
524-082-12 6/10/2005 388,000 5/1/2011
550-113-04 7/30/2003 155,800 5/5/2011
If things are working correctly, the NOD can be filed 3 months after a missed payment. What’s with the 2008 and 2009 missed payments just now getting a NOD? This post is also up at REreno where the chart reads more clearly.
Reno Ignoramus
Mike, this is old news to readers of this blog. There have been probably dozens of posts over the past 3 years about this. I have said before that there are no doubt thousands of people in Reno living in houses they stopped paying the mortgage on 1,2, or even 3 years ago. And then there is the equally perplexing situation of the bank recording a NOD and then no NOS for 1, 2 or 3 years. And then there is the situation of the NOS being recorded and then…..nothing. No cancellation, no sale, nothing. All up and down the foreclosure trail there is a huge amount of deadweight bearing on the market. And as I have been saying for about 4 years now…….this market is not going to get healthy until the foreclosures abate and are resolved.
Tom Joad
One of the hobbies on real estate blogs is to make fun of the banks as stupid and inept and incompetent and evil. Well, maybe evil I agree with. But the banks are not nearly as stupid and incompetent as many like to make them out to be. The banks fully understand that if they bring all of the foreclosed houses of defaulted borrowers to market at once, the market will totally collapse. Try to imagine what this market would be like if the banks brought 10,000 foreclosures to market at the same time. It would make the 60% decline in the median we have had look good. The banks are managing their staggering inventory of defaulting borrowers pretty well. This is a long, long pipeline. We are YEARS away from the end of the “foreclosure crisis” in Nevada and in Reno. Remember, Las Vegas had the biggest bubble in America, and little ol’ Reno was right behind it.
Carl
I have to agree with RI. I am personally acquainted with 3 people who have stopped paying their mortgage. The most recent stopped about 6 months ago. The longest stopped paying in 2009. The one who stopped in 2009 recieved a NOD last July, but no NOS yet. The other two have not even received a NOD.
This is a slow moving train wreck that is going to take a long time to finish.
Kathy
Ok, so I own a house that is now worth about $150,000 less than I paid for it. Am I a Fool to keep paying the mortgage?
Hudson
Sadly, I’d probably say yes.
Zen
I agree with Tom regarding the banks making a concerted effort not to bring all the properties on the market at once. I am sure they have been hoping for a turn around in the market, which has yet to come to fruition. I also think that having someone live in the home, even for free, is preferable to the banks, rather than having the home just be abandoned by its owner to sit empty. I think the bank would rather have someone watering and mowing the lawn, and heating the house so that the water lines don’t freeze, rather than leaving the property unoccupied over a long period of time, which leaves the house vulnerable to all kinds of problems. It’s sort of a symbiotic relationship that has developed between the disgruntled underwater home owner and the detested bank. Neither one of them wants to be in the position they are in, but both of them get by for a while and benefit somewhat by their strange relationship.
inclinejj
http://en.wikipedia.org/wiki/Promissory_note
Which means in simple turns. I promise to pay. Not only pay when the property goes up in value but regardless if the value goes up or down.
I have not seen anyone who had a gun to their heads to buy. You could have gone back and studied the real estate cycles and saw this has happened before. This is a bad down cycle maybe 10 years from now we can say one of the worst down cycles we may all see in our lifetimes.
People and Wall Street have very short memories. Banks included. They put profit in front of good common sense lending.
Should these stated loans have been made. F*ck no! Wage earner stated income, you are killing me.
Is it smart to throw good money after bad, normally not. But if you can afford the payment and love the house you are in. Maybe you should be trying to work something out with the bank to cut the balance.
Banks are not as stupid as the non lending or non banking person sees it, but they are greedy by nature. After all Banks, Insurance Companies, Wall Street, Mutual Funds, Venture Fund Companies all have the biggest and tallest buildings downtown. Why? Cause they love making money off the little borrowers.
BanteringBear
“Ok, so I own a house that is now worth about $150,000 less than I paid for it. Am I a Fool to keep paying the mortgage?”
Sweetie, you don’t own it, the bank does. Now, get to packin’…
inclinejj
When values where going up month after month. I did not hear anyone whine hey my house has too much equity. Maybe I should stop making payments.
MikeZ
http://en.wikipedia.org/wiki/Promissory_note
Which means in simple turns. I promise to pay.
It also means: if I don’t pay, the collateral that secures the loan is yours. Forget morality, lenders operate in their best interests, not according to some mythical moral code, and so should borrowers.
Michael Helton
The 5 years still blows my mind.
If you think about it, (putting the ethical question to the side) letting a home foreclose on you was the best investment possible. These people were earning over a thousand dollars a month risk-free with no capital investment. 60 months at somewhere around $1200 a month means $70,000+. At the same time most other investment avenues have dwindled.
Pretty crazy.
Zen
People are not just living in their homes while the bank stalls on foreclosing, but they are renting their properties out too. I recently met someone who had quit paying the mortgage on a rental property of theirs because it was upside down. They continued to rent it out for years, collecting the rent every month, before the bank finally foreclosed. When it went into foreclosure, the owner just gave the renter their 30 day notice and let the bank take it. I don’t know how much money they had in the rental, but if they had a small down payment, this may have turned out to be a pretty lucrative investment for them.
Raymond
Yep. Just like RI says, these stories are happening all over town. I know a guy who inherited from his mother a small house at Tahoe that was free and clear. He moved up there almost 3 years ago. When he did he rented out his (underwater) house in Reno and stopped paying the mortgage. It took the bank a year to get around to recording the NOD. It has now been almost two years since the NOD and no NOS yet. In the meantime, for 3 years now, this guy has been receiving $1100 a month in rent that he uses to pay the fairly nominal expenses of his small place in Tahoe.
There may be thousands of similar cases right now all over Reno-Sparks.
Probably the smart thing for Kathy to do is to stop paying. But don’t leave. Yes, maybe the bank gets right on it and she has to be gone in 4 months or so. But maybe the bank takes 4 years to get around to it.
It is absolutely astounding to me how this bubble has changed everything. Can you imagine, 6 years ago, people talking on a blog about how the smart thing to do is to stop paying the mortgage and maybe you can live mortgage free for 3-4 years?
Steve Herschbach
Let’s pretend the mortgage payment on a given house is the same as what it would cost to rent the house. You may as well make the mortgage payment as sooner or later, even if you are underwater, you are going to pay off that loan. You can pay the landlord for the rest of your life and all you are doing is making his payments.
The caveat of course if you have a mortgage you eventually have to fix the roof and replace the boiler. If you rent the landlord foots those bills.
My daughter is well underwater on her house in Reno. But she loves the house. So she will just plug away until she pays it off. She is young. And you tell me, what will housing values be in 10 years? In 20? In 30? Eventually demographics alone if nothing else will cure this problem. In the next 20 years we will add over 50 million people to the population of the US. They have to live somewhere.
Steve Herschbach
I like a proposal I heard recently. Immediately change immigration rules so that the only way to immigrate into this country for the time being is to buy a house with cash.
inclinejj
Didn’t Nevada, make it illegal to rent out a primary residence that has a recorded NOD?
4
inclinejj
damn it I wish we had an edit button
41 NOD’s the other day but then again who is counting?
bob_c
A local professional I know strategically walked away from his deeply underwater McMansion and then secured a new home using a third party relative as the ‘figure head’ owner. Why would anyone grant a no recourse loan? But those are the times. The honest are left behind. Scam the system. My nephew knows several people pulling the same thing.
Steve, have your daughter walk and then buy her the house accross the street in your name. Sadly, this is what is prevelantly ‘going on’. Those who put little down on their house are being generously rewarded by our system.
Steve Herschbach
If I told my daughter she should give the bank the keys to her house she would look at me like I am nuts. She loves her house, and has no interest in the one down the street.
Cornell
When was it that Mike put up the thread about the people in Somersett who bought a second house that was even nicer the first one they bought but for about 40% less than the first? They applied for and received the loan to purchase the second, and then strategically defaulted on the first house. They ended up with a nicer house for 40% less than the first and stuck the bank (and the taxpayers) with the bill. The thread was not up very long as I suspect Mike heard from the lawyers. But it was an example of what has been going on all over Reno for the past 3 years.
I applaud Steve’s daughter resolve to stay in her house that she loves. But as long as there are still thousands of defaults being recorded every year, it is going to be long long road back for this market.
Quandree
More and more people are making a different decision than Steve’s daughter. They are walking. And until it stops, people like Steve’s daughter are going to get farther and farther behind. How much has the market declined in just the last 12 months? Almost 18%?
MikeZ
A local professional I know strategically walked away from his deeply underwater McMansion and then secured a new home using a third party relative as the ‘figure head’ owner. Why would anyone grant a no recourse loan? But those are the times. The honest are left behind.
The “honest?” You’re fabricating a false dichotomy, bob, it’s neither dishonest nor a “scam” to take advantage of your legal options.
MikeZ
They ended up with a nicer house for 40% less than the first and stuck the bank (and the taxpayers) with the bill.
If the taxpayers got the bill that’s only because our elected representatives decided to either buy the bad loans at face value or as part of some other bailout package. Don’t blame the borrower for that, blame Washington and the banking lobbyists.
There was a time, not long ago, when banks and their investors paid the prices for poor decisions, bad investments and overleveraging, but since the S&L crisis that penalty’s been replaced with a virtually bottomless government bailout.
Steve Herschbach
So you loan me money so I can buy a used truck. I wreck the truck. Total it in fact. It is now worth nothing. You do not mind if I do not pay you back, right? After all, that would be financially stupid of me.
Steve Herschbach
The truck was collateral for the loan. Take it, here are the keys. Hope you can get something for the parts.
Mike McGonagle
The used truck discussion reminded me of this new listing from yesterday! http://www.freenevadamove.com/idx/residential/110011677/details.html
How many people are making lateral moves? It’s impossible to tell and I run into them purely by accident. I could list at least 20, and you can guess what industry most of them are from!
Steve Herschbach
The government is currently subsidizing strategic default. Normally the IRS treats the amount of the hit the bank takes as taxable income for the defaulter but that has been temporarily set aside until the end of 2012. From http://www.bukisa.com/articles/406353_strategic-default-your-window-of-opportunity-is-closing-fast
“The foreclosure timeline varies widely depending upon the state you live in and the type of foreclosure sought, whether judicial or non judicial. In some states it may take more than 2 years to foreclosure upon a mortgage. Here is where the problem lies. If you decide to seek a strategic default and stop making your payment January 2011, you have only 24 months for the bank to complete the foreclosure process. January 1, 2013 the Mortgage Forgiveness Debt Relief Act of 2007 expires and any debt forgiven after this debt will once again become taxable income.
The banks and other financial institutions are well aware of this date, and starting in January 2012 the banks will stretch out foreclosures. Nearing December 2012, the banks will try and push all foreclosure into 2013, knowing that bank can then 1099 the homeowners and make the homeowner pay taxes on the difference between what the home finally sells for and the actual mortgage balance. The banks will view the tax consequences as leverage against the defaulting homeowner, to cure the default.”
Interestingly those who took home equity loans for any reason but to buy or remodel a house are not covered by this temporary act. They may be in for a nasty surprise if they get audited by the IRS.
I think the idea of the act was to allow borrowers and lenders to negotiate lower loan balances without incurring the tax hit. I doubt congress realized the side effect of giving those who strategically default a tax break.
bob_c
mike z—
things are not black and white……….emotion and morals are involved………it isnt all just money……………..but those who put the least of their own money into their home can benefit the most financially by walking
funny thing is when i asked this professional person why the title on his new property had not recorded with the assessor he concocted the biggest line of bull shit to cover up his shame
bob_c
seems he know the owner of the property very well and they probably drafted a private contract
their is just something seemy about a person making 200K/year doing this shit
bob_c
mike z —-
its legal in a few counties to beat your wife……so should i do it?
Steve Herschbach
Call me naive, foolish, or just plain stupid. I still believe a man’s word is his bond. When I bought my first house I borrowed money to do it with the promise to pay it back. I did not add a clause that I would only do so as long as the house was worth more than I owed. As long as I am able I will always pay my debts, irregardless of whether or not I made a wise decision on how to deploy those borrowed funds. But that is just me.
http://www.downyonderantiques.com/Reflections/Reflections003.htm
inclinejj
Hey Mikey, could they be Real Estate Professionals?
Just a guess?
MikeZ
So you loan me money so I can buy a used truck. I wreck the truck.
The borrower did not wreck the house.
MikeZ
but those who put the least of their own money into their home can benefit the most financially by walking
? No one’s disputing that, bob. My problem is your characterization of people who choose a perfectly legal option as “dishonest.”
MikeZ
Call me naive, foolish, or just plain stupid. I still believe a man’s word is his bond. When I bought my first house I borrowed money to do it with the promise to pay it back. I did not add a clause that I would only do so as long as the house was worth more than I owed.
The clause was already there, Steve. Look at your mortgage contract, under non-payment, surrender of collateral or similar words.
I’ll call you naive. 😉
inclinejj
A promissory note is a negotiable instrument, wherein one party (the maker or issuer) makes an unconditional promise in writing to pay a determinate sum of money to the other (the payee), either at a fixed or determinable future time or on demand of the payee, under specific terms.
http://en.wikipedia.org/wiki/Promissory_note
Steve Herschbach
Mike, I borrow money with the intent of paying it back. That is all that matters to me. It may be legal and you can justify it all you want but defaulting on a loan obviously means something different to me than it dies to you. I am doing fine and it is in large part because my signature and my word carry weight. I take it very seriously. As long as I have the means I do not consider being underwater on a house to be an issue of consequence. But then I seem to have longer term thinking than most people.
I paid cash for my place in Reno a year and a half ago. It is now worth less than I paid for it on paper. So what. My truck is worth less than a tenth what I paid for it. I never bought into the house as piggy bank fairy tale. My houses are money pits. What they are worth on paper at any given moment just does not matter to me. It all goes to the kids eventually anyway.
And yes Mike, in very many cases these people are wrecking their houses. Many seem to take great glee in actively destroying a property before walking away. I don’t buy the poor little borrower who was forced by evil bank to borrow more than they could afford line. We are talking people who piss on walls and crap on floors before walking away.
There are good, decent people who have lost their homes due to job loss and other unfortunate circumstances. They did all they could and it no doubt hurt to lose their home. I sympathize greatly with their situations.
But for people of means who renege on obligations due to inconvenience? And that is all it is Mike. My world does not end if my house ends up being worth $200,000 less than I paid for it. It just means I have to work a little harder to make more money somewhere else.
So when a person who lives in my neighborhood and who has the means decides to strategically default and add to the on going mess rather than sucking it up and sticking it out, I have not a bit of sympathy for them. They are allowing their self-interest to outweigh the interests of the community. I wish the banks could chase them down and take their nice car and their motorhome, their cabin on the lake, and anything else they bought with that home equity loan that they are walking away from. All loans should be full recourse loans. That would put a stop to this nonsense.
inclinejj
Steve
What you are saying is good old fashioned common sense.
Too bad the lenders, wall street, banks, borrowers, and lenders did not use good old fashioned common sense.
Anonymous Coward
What inclinejj & Steve H. said.
Michael Helton
Steve, I agree with you on principal. If you agree to do something, then do it.
However, there is nothing legally “wrong” with walking away from a home. If a homeowner walks away from a property the bank gets that property (and the Mortgage Insurance). Companies and corporations walk away from their obligations all the time with restructuring. Look at Kmart’s bankruptcy/restructure or Nevada Power who came in and just tossed the pension program.
The practice that is ethically questionable to me is to stop payment on a property and then to essentially make a profit by staying in the home rent-free or even worse; renting it out to others. I think of this as stealing and in my opinion the people doing it should be prosecuted.
bob_c
this dude making 200k/year can’t even look me in the face because he knows i know
what he did– (i’m talking 8 years education professional)
write off that 100K-200K loss and move on to a bigger and better property and
don’t even skip a beat of 4 cars and exotic trips and stepford wife
is this legal? the banks have NO recourse????????????
inclinejj
Or PG&E’s bankruptcy.
Corporate Bankruptcy is just a way to get out of debt.
Or the newest form of Chapter 9 Municipal Bankruptcies’ like Vallejo
Norton
Except it won’t to put a stop to the nonsense, Steve. Every home equity loan is recourse today and always has been.
Until 10/01/09, every first mortgage was recourse. The banks have never pursued residential borrowers for deficiency judgments. The nonsense lies with the banks never pursuing their lawful remedies.
It is not a question of the banks being hamstrung by the law.
inclinejj
Norton
Could you see how clogged up the courts would be in every state if they did this?
Mike McGonagle
Is there a business model in identifying the obvious defaulters with recourse loans who have assets, buying the notes from the banks at $.02 on the dollar (since the banks apparently not interested in pursuing their contractually rights on their own), and going after the borrowers for at least partial payment to release their obligations?
Steve Herschbach
Hi Norton,
OK amend that to read I wish Bakst would pursue their full legal recourse in pursuing these people. But wish in one hand and defecate in the other and see which one fills first.
Mike, sounds like a collection model there to me.
Steve Herschbach
I hate my iPad auto correct. I meant banks.
F D I See
Interesting concept Mike. But who owns the note and the ability to sell it? For notes originated prior to 2008, you’ve got the problem of 10% of the note was packaged into a mezzanine tranch of a CDO that was sold to a Singapore hedge fund. The other 90% was sliced into various pieces that perhaps nobody can account for now.
After 2008, the notes have been sold to Freddie and Fannie. (They are the only game in town now and thus the reason why they cannot be eliminated no matter how much everybody loves to hate them. Without them there would be no real estate market.) You are not going to get Freddie or Fannie to sell you their notes for $02.
It really is not so much that the banks are not pursuing deficiency judgments. The originating banks sell their notes into the secondary market and then lose interest in them. It is the GSEs who have no interest in pursuing deficiency judgments. And the GSEs have now effectivley been nationalized. So if want to see more deficiency actions, call your Congressman.
Fenestrelle
Limitation on Deficiency Judgment Awards
Note assignees are affected by the new cap on deficiency judgment awards.Specifically,
for an assignee of a note, any deficiency judgment awarded to the note assignee on or
after June 10, 2011, against a borrower, loan guarantor, or other surety may not exceed,among other variables, the greater of either the amount by which the note purchaseprice (not the full amount due on the note) exceeds (i) the property’s fair market value at thetime of the trustee’s sale or (ii) the trustee’s sale price, plus, in either case, interest from the date of sale and reasonable costs.
inclinejj
How many people come out and say. I fked up and bought at the top of the market and let the bank take it back and admit to making a mistake.
This isn’t the first boom/bust cycle we have seen.
It’s almost always a lame excuse. The bank screwed me, The mortgage broker screwed me, the economy screwed me, the politicans screwed me.
13% of the American Public have a monthly budget drawn up. The oldest lending rule in the book 30% of your income 40% total for all bills.
People where spending every dime they made, blowing thru equity line cash, living like the Real Housewives of Washoe County.
I have seen people in the Bay Area who made $250k-$1,000,000 blow every dollar they made and max out the credit cards and tap out the equity line.
Now that the house and cars are gone..and possibly the spouse..How are they liking the lifestyle now??