Mortgages for Nothing and a House for Free

A few years ago, two houses on my street sold for prices that astounded even those of us who are used to skyrocketing California real estate prices. But then, both houses had been extensively remodelled and staged. What was unusual was the people who bought the homes. I wouldn’t have thought a guy who washed cars at the local car dealership would have been able to buy a $740K house, or that the proprietor of a mobile food van would be snatching up a $860K house. Furthermore, the adults in both houses struggled with English, and even in California, the better jobs require English fluency.

They were nice, though, and their kids were sociable and fun-loving. Hey, obviously the parents were hardworking people, and it’s possible they’d bootstrapped themselves up bit by bit into our neighborhood’s most luxurious homes. For all I knew, I was witnessing the Great American Dream, or a Horatio Alger story in front of me. Personally, I vowed to learn Spanish before our next neighborhood barbecue so I could invite the new families and ask them about their success.

Alas, this was not the Great American Dream. It was more like Mr. Happy Happy Lender Man and his Magic Money Pen. Last November, the family in the $740K house abruptly disappeared. Just recently, the bank which now owns it, has a company repairing extensive water damage inside, after which they’ll try to sell it for $600K. The people in the $860K house had a for sale sign put in their front yard. My neighbor asked why they were selling it, and they said they weren’t: the bank was selling it because they hadn’t paid the mortgage in months. It turns out the loans that financed those home purchases were quite the deal. The buyers had to put nothing down, so while getting an apartment means paying a deposit, getting a house meant little more than signing a paper saying, yeah, sure, you’d pay some money every month on time.

Six months on beyond foreclosure and sale in progress, my neighbors are still staying put. Heck, it’s still a good deal. Until and unless the bank forces its hand, they have housing for free. The bank doesn’t want to cause a ruckus by forcing an eviction, especially since in the process the house may very well be vandalized. The bank may hope the defaulters find the money they need to stay in the house, and they’ll be more motivated to do that while they’re there. And, hey, if someone else buys they house, maybe they can be stuck with the nasty dirty job of eviction. Better yet, maybe the government will bail everyone out, and the bank can have its money, and my neighbors can live in their free house forever!

Despite the bank’s delusional hopes, I believe I’ll be keeping my new neighbors for quite a while, with or without government aid. I know I wouldn’t want to buy a house with the defaulters still in it. As the saying goes, possession is 9/10th of the law, and if I own that house, if and when the people who were in it leave, they have no reason not to take everything that’s in it with them, and trash the rest. Even so, Peter and I encountered one brave couple who was checking out our neighborhood, and thinking about offering $620K for the formerly $860K showcase house. They said the house had been trashed inside already, but they also thought the bank wouldn’t take their offer. A few days later, they were looking at the water damaged house, so I think they either opted against a defaulter-occupied house, or the bank wanted more money, which I can’t imagine it getting. As far as I know, they’re the only people who’ve made an offer on either house in 7  months.

The other neighbors and I just wish we‘d been hip to Mr. Happy Happy Lender Man. If I’d known how easy it was to “buy” a house, and how nearly impossible it would be to get me out, I’d be bunking up in a Los Gatos or Palo Alto mansion right now. It’d be no trouble to keep it unmaintained in unsaleable condition, or to gum up the realtor access box. I could even do a crazy lady routine for prospective buyers. I’m sure realtor lady would find another foreclosure to sell in the wake of the Magic Money Pen. But sadly, I didn’t know about so now I can only marvel at the bank’s free housing program.

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