Have you heard
the one about the guy who bought a house he couldn't afford as being the cause for the real estate meltdown? You know that deadbeat and bum who deserved what he got because he was
so greedy?
Compare that bum to the rich guy who bought a house he couldn't afford who stopped making payments even though he could afford to- but is still waiting to hear from the banks while squatting in his lush surroundings, living the high life as he shovels money into his slush fund each and every month.
This guy isn't greedy-this guy isn't a deadbeat-this guy is a
"strategic defaulter," a savvy businessman who knows it's dumb to throw good money after bad.
The rich default with flourish.
The rich are foreclosing in spectacular fashion via the
strategic default.
Strategic defaults are becoming the new financial recovery instrument of underwater luxury buyers. No morality issue here, this is pure business.
Currently one in seven homeowners with loans over a million are seriously delinquent. Compared to 1 in 12 for the general population. So while
Joe Ordinary gets kicked out of his home-
Joe Luxury isn't even bothered by the bank because the banks can't afford to take back that high end house because it will not square with their books.
So what's a bank to do?
If they take back that million dollar house now worth $700,000 they have to take a loss on their books that still says that $700,000 dollar house is worth a million. Or they can keep that cool million looking nice and sharp on those books and just let the deadbeat stay-let him maintain the property until the miracle happens and housing values do a turn around.
Its a waiting game and Joe Luxury knows it so he's going to stay in that house as long as he can. He doesn't want a loan modification-he is using the house as way to regain his down payment and other expenses required to get into the house.He may even buy a new car or two- with all that free money burning a hole in his pocket.
Joe Ordinary on the other just wants a place to live-wants that modification to which the banks say
"sorry loser we can make more money letting you drown-modifications don't benefit us they just benefit you." And while Joe Ordinary struggles the banksters string him along squeezing as much out of him with empty promises, and uses the media to bash him in the process.
Though
Joe Ordinarys' home is worth less-it wasn't worth that much in the first place and the bank has a better chance to sell it down the road.There are more people like
Joe Ordinary out there buying homes in his price range.
Mr. Luxury on the other had is sitting on a property that has few buyers.Until real estate values rise Joe Luxury can sit tight keeping all that cash for himself. Remember this; when
Mr. Luxury does it it is considered a
business matter, but when
Joe Ordinary does it he is vilified as a
deadbeat. The reason behind this is
volume-there are millions of average Joe's out there. and a banksters' worst nightmare is all of those regular folks going the way of
Joe Luxury. The thought sends chills up their spines.
So they use social pressure to demonize Joe as being a greedy deadbeat who thinks he's going to get a free house. This is a lie of course- because the average buyer just wants a loan modification. This Joe isn't trying to
game the system like Joe Luxury.
Banks before the crash..
Before the financial crisis- a bank with a million dollar loan counted it on its balance sheet as an asset, when
"mark to market" was suspended during the crisis the loan that was non performing (payments not being made) meant it became a liability on the books-but now that
liability is allowed to remain on the books as an
asset. Yes, an
asset.
So as long as the bank hangs onto the property (letting deadbeats stay) they can keep looking good on paper-but in reality they are living in a fantasy world-where these
assets are actually
liabilities.
These pretend assets are the only thing keeping the government from seizing the banks-and everybody simply looks the other way trying to ignore the fact that banks are insolvent. As long as the Federal Reserve keeps them afloat with 0% interest rate loans- this fairy tale could go on until we become
Never Never Land.
Do as I say, don't do as I do....So say the banks.
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| Morality Versus Business |
Since rich
deadbeats see these properties more as investments rather than
"home sweet home," they can make the decision to cut their losses without getting mired down in all that
morality business.
They don't see themselves as deadbeats and will make the best of a bad situation-cutting losses and walking away. It isn't about right or wrong-that morality thing, that issue belongs to the
little people- who will fight tooth and nail to do
"the right thing" even when it means
financial Armageddon.
Now more than ever before... more
Joe Ordinarys' are catching on and following the path of the
strategic default. Support groups are popping up in every state helping one another shake off the shame and give a little of that shabby treatment back to the banks.After all it wasn't the buyers who designed those
"liar loans" making those who really couldn't afford a home
believe they could. And it wasn't the buyer who created the fictional underwriting or securitized loans, in violation of mortgage laws.
Most of all it wasn't the
Joe Ordinarys' of the world who created the moral ha
zard of mistrust and down right thievery. The banks did it all without the question of morality getting in the way-it's just business you see- "don't take it personally."
Just remember the old bible quote that says,
"do unto others as they do unto you."
Do unto banksters what they have done unto everyone.
ickenittle