Enough is Enough – Owners Stop Paying Mortgages, and Stop Fretting

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

Dangerous Games? Who is it really, Mr Lundstedt, that is playing dangerous games?

You know, there are also processes in many states to go after criminals with substantial assets who have defrauded millions during foreclosure.

New York Times

Owners Stop Paying Mortgages, and Stop Fretting

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.

In Pinellas and Pasco counties, which include St. Petersburg and the suburbs to the north, there are 34,000 open foreclosure cases, said J. Thomas McGrady, chief judge of the Pinellas-Pasco Circuit. Ten years ago, the average was about 4,000. “The volume is killing us,” Judge McGrady said.

Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.

“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”

They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.

It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

His mother, Wendy Pemberton, who has been cutting hair at the same barber shop for 30 years, has been in default since spring 2008. Mrs. Pemberton, 68, refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees.

Even without the burden of paying $938 a month for her decaying house, Mrs. Pemberton is having a tough time. Most of her customers are senior citizens who pay only $8 for a cut, and they are spacing out their visits.

“The longer I’m in foreclosure, the better,” she said.

In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days. Defense attorneys stress they can keep this number high.

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.

“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ ”

Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up.

Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond.

“I need another year,” he said, “and I’m going to be pretty comfortable.”

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7 Responses to “Enough is Enough – Owners Stop Paying Mortgages, and Stop Fretting”
  1. Gina Holden says:


  2. George says:


    Years back the banks began to turn a mortgage into a commodity, with good paying mortgages, then they saw they were running out of this commodity, so the big banks, including Fannie & Freddie started approving loans to almost anyone and everyone, not so much to just give that person a home to have, but they were more concerned about creating more of the commodity. More securities to sell to investors. They even knew some home owners would not last several years or several months, as long as they could say to investors, “Hey, we have more mortgage backed securities to sell”.

    Now, to sell all these securities, they would have to create a mortgage assignment which is normally recorded with the county land recorders office for a fee. Physically, that would take up too much time and money, so the big banks invented and created MERS,(Mortgage Electronic Registration System). This electronic service was only created to track mortgages sold and bought in the secondary securities market. MERS legally has no invested interest in the mortgage, so they truly are not able to transfer or assign the mortgage acting as a nominee of the loan. But they are! Wrong. The chain of title of the mortgage is broken right here at this very early stage. The mortgage/note has to be assigned from one owning entity to the next owning entity. MERS never owns the loan, but they are creating and are listed on assignments at the local land recorders office. Now that the mortgage was bundled, sold and bought back and forth with investors, no continuing assignments are recorded with the county recorders office. By not recording these documents, Fannie & Freddie & and all your Big Mortgage Servicing banks are saving millions-billions on recording fees, and possible taxes, etc.

    What I have found was that the Servicer of the mortgage is listed with the county recorders office as if they own the mortgage, while Fannie & Freddie or other Big Banks are selling the bundled mortgages as securities. Kind of like a Pizza shop cooking pizza legitimately up front, and a mobster selling off investments in the back. (Racketeering). The Servicer up front really is not the owner of the loan, and they tell you this. They also admit that your loan is owned by Freddy or Fannie, or the Investors. So when the Servicer now tries to foreclose on a homeowner, they are not truly the owner of the loan, and you have to own the loan to foreclose!!! Many never even question the Servicer and walk away from their home. Now to foreclose as quick as they can, that’s where the robosigners come in. These people do not review anything in the foreclosure paperwork about the loan, but only sign a name on the affidavit page on thousands of mortgages to get the foreclosure going before any homeowners begin to catch on.

    You see, its a matter of a quick process the Servicing banks want to achieve in order to get the property in their possession, only to sell it. The crazy thing is, when the originating bank gives the loan, then sells it to the 2nd bank which mostly ends up being the servicer, they again sell it to the 2 major players (Freddie & Fannie) and they sell the mortgage back securities to investors. So the servicing bank gets paid for the mortgage and still collects payments toward the mortgage and a percentage goes to the Servicer, Fannie & Freddie and the Investor. So they are all making money. Then the Servicing bank comes to foreclose and if they are allowed to foreclose they get the home without true ownership, even though the loan is actually sold off into bits and pieces to investors. I can go on further, but to conclude, if this were a murder case, I would call this act of the banks premeditated, not an accident. This was all planned out in order to reach the highest profit they could using the mortgage backed securities as a commodity, and have total disregard, deliberately, intentionally ruining the lives of millions of homeowners.

    • George says:

      First of all, the Servicer (Wells Fargo, Bank of New York, Bank of America, Citi, Chase..etc) 1) wrongfully filed the foreclosure by not being the true owner of the loan/mortgage, 2) not having the original promissory note, 3) not filing assignments with the local county land recorders office each time the loan is sold and bought as a mortgage backed security it is changing hands meaning there is new ownership and an assignment is to be filed by law for change of ownership – not doing this breaks the chain of title of ownership of the mortgage, 4) using MERS (Mortgage Electronic Registration System) to assign mortgages on Wall Street electronically, which by passes the local recorders office and the banks avoid paying assignment fees, taxes, etc. MERS can not assign anything since they have absolutely no vested financial interest in the loan. Tell me when to stop! Oh, 5) the Robo-Signing which is perjury and fraud in legal documentation which is presented to the Courts by the servicing banks and their attorneys..! This now includes their attorneys office as presenting fraudulent documentation as well. / So, if a homeowner owes $200,000.oo on a defaulted home, I believe the 5 items above are enough to sue for at least the remaining amount of the loan due, and more then possibly sue for a greater amount for punitive damages.

      In a nut shell, the servicing banks remain as the existing owner of the mortgage at the land recorders office as if nothing is going on, while they actually sold the loan/mortgage to Freddie Mac & Fannie Mae which are in return selling the mortgage off into bits and pieces to investors. So the homeowner makes the mortgage payment to the servicer, which already sold the loan, then they keep a percentage of that, they send a percentage of that mortgage payment to Freddie & Fannie and they keep a percentage of that, and they give the investor a percentage for buying a mortgage backed security. So they are all making money along the chain. It’s like a Mob controlled Pizza shop, the servicing banks are up front selling the pizza while the mob is in the back selling MBS deals. Hello… Racketeering! The servicing Banks, Freddie and Fannie, deliberately, intentionally, and with total disregard, are committing Fraud and Racketeering against homeowners and the courts. This all didn’t happen by accident. This started years ago when the banks needed more mortgages to sell as a security, so they began to write up and approve mortgages just to create more commodity (mortgage-MBS) to sell to investors, whether the homeowner would be able to make payments or not they didn’t care, as long as they had more product to sell.. They always just knew they would be able to foreclose and try to foreclose quickly. But they are finding out they can’t.

      ***If this were a murder case, it would be classified as premeditated.

      • George says:

        After reading and researching the whole MERS situation, I came up with an analogy that might be of some use if arguing in court;

        So the banks developed MERS and use it as a bridge to bypass the county recorders office which streamlines the process of buying and selling MBS, saving them from paying county recording fees also!
        Lets say the Big Automobile Companies were to do the same thing for all the auto dealerships. Create a company called “Automobile Electronic Registration System” (AERS) Now the dealer registers the new car with motor vehicle just once at the very 1st sale of the car, and when the car is returned at the end of a lease or traded in back to the dealer, the dealer bypasses motor vehicle and just simply makes all the transactions of buying and selling the car go through “AERS”. With that said, would motor vehicle be able to keep track of who the owner of the car is? Cars can be bought and sold many times over. This also would create the same loss of revenue for motor vehicle, no Registration Fees, etc. Would motor vehicle like losing Fees? How accurate would AERS records be?

        Why not let any type of business that has to register something on a continual basis with our government, develop there own registration system…? Why would the government even, ever, allow MERS to be developed? Oh, that’s right, the banks needed a quick way to process transfers, assignments etc. to gain the huge profits they’ve received. (I’m not saying kickback to the Gov. ? – maybe that’s why Banks are bailed out and not consumers?)

        Win / Win / Win / Win – for the Banks

        * Banks are receiving money from consumers paying a mortgage, even with good payers or bad payers, cash is coming in. Paid$$$$win

        * Banks are turning around and selling that mortgage to Fannie & Freddie and they sell it as a product to investors… Receiving Investments, Fees….etc. (avoiding assignment fees and transfer taxes to local counties) Paid$$$$win

        * Banks have taken Bail Out Money from the government, (tax dollars) paid again! For Loses! Paid$$$$win

        * Banks finally are reluctant to greatly help with modifications or to adjust loans to seriously help the consumer, so they foreclose on your home and get paid again selling the home…! Paid$$$$win

        If you know of a “product” to sell in a business where we can get paid 4 times from the same product, let me know, I’ll open up shop tomorrow!

  3. LPS has some room to talk huh??

  4. lisamarie says:

    Every single homeowner in America should demand to see wher and how their loan is being managed. If tax dollars have already paid these homes off who do you think is getting a free house people??? The BANK, thats who! Why on earth should the folks that were swindled into having their homes thrown into some loan pool care about paying the money back ? Who’s fault is it? Did the homeowners cook up this crap? No! The great and mighty bankers did. and they should not get rewarded for it by taking anybodys home. Not one house should they get!

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