Another guest post by Dana
According to a recent article in the New York Times, Owners Stop Paying Mortgage ... and Stop Fretting About It, foreclosure is becoming a way of life for some folks.
We've all heard the stories of the increase in foreclosures throughout the U.S. due to a combination of the housing market crash, poor lending practices and poor borrowing practices. Usually those stories end discussing the impact of those vacant - often vandalized homes - on the the homeowners who remain in the neighborhood.
But for a growing number of people whose homes are in foreclosure, rather than loading up the moving truck in the middle of the night, they are opting for their own mortgage modification - one that brings their payments all the way down to zero.
Of course, this modification is not one worked on with the lender, but one that is delivered as an ultimatum: Force me out if you can. Homeowners justify their position by claiming the banks created the crises by duping borrowers into taking loans that put them in debt over their heads.
The numbers? Foreclosure procedures have been initiated against 1.7 million homeowners. Resolving these defaulted loans is a slow process, and getting slower due to legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with the sheer number of mortgages gone bad.
The average borrower in foreclosure has been delinquent for 438 days before actually being evicted. More than 650,000 households have not paid on their mortgage in 18 months. In 19 percent of those homes, the lender had not even begun to take action to repossess the property. In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days.
In states that require judicial proceedings to finalize foreclosure, defense attorneys are keeping this number high. According to the New York Times article, one local Florida attorney claims he now has 350 clients in foreclosure (10 new clients each week), each of whom pays $1,500 a year for a maximum of six hours of attorney time to “... just do as much as needs to be done to force the bank to prove its case.”
Lenders claim 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.”
What do you think? Are banks and other lenders getting what they deserve for poor lending practices? Is there a moral obligation of borrowers to make good faith efforts to resolve their bad debt?