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Owners Stop Paying Mortgage ... And Stop Fretting About It

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.” Written by: Monday May 31, 2010

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Comment by Deanna Norton on March 1, 2012 at 9:41am

I was forced into forclosure when my husband of 20 yrs decided, out of the blue, he wanted a divorce. He was a business owner that was making $125K a year plus benifits. I was unemployeed for 1 1/2 yrs at that time. Left with no money, no job and no way to pay the mortgage and the equity line of $250K that my husband forced me to sign, in tears, and the Loan Manager telling me we don't have to acess all the money. I knew what my husband would do, and he did, in 2 months time it was all in his company. Then 2 yrs later he left me, the company and filed bandcruptcy. The bank dismissed him from both the mortage and equity line leaveing me holding the bag! I can't put it up for sale as my husband will not sign listing papers, which I have tried to get signed for over 2 years! The banks won't take him off title even though the dismissed him from any responsibility of the loans! So what am I to do? I see the judge this month and will get to ask him to have my husband sign a quite claim deed or listing papers. But that won't help much, as its been 2 1/2 years since a payment was made and I still can't find full time work. I make $10 an hr, 15 hrs a week. I've spent all my retirement accounts on surviving and legal fees. The bank pushed the large loan! It was originally requested for $50K to do work on the house! We couldn't afford $250K on top of a $300K mortgage! These banks need to pay for what they caused! I have always paid my bills and outside of the mortgage and equityline I owe less that $5K! My husband owed over $150K plus the mortgage and equityline, none of which I knew about nor was in my name! I even found out he falseified our financials so the loan would go through and the bank accepted them! These banks don't care about the people, just getting money from us! If I had it I would pay my mortgage! The equityline should fall to my husband as there is proof all of it went into "his" company!

Comment by Rocco L. Mastrangelo "ROCKY" on January 19, 2012 at 6:48am

 If you fall on bad times that's one thing, but when you're out having a good time that's wrong. People loose their jobs, (like myself),get sick, and have a reduction in income and all. You try your best to pick yourself up and move forward, its hard, but you need to do what is right also.Taking advantage of the situation is only going to backfire on you when you really need a helping hand. No one is going to listen, and they will remember the time when you went out and bought that new car or boat.

Comment by Done Right Property Cleanup on December 1, 2010 at 11:16am
I have to agree with Steven, It was the big banks, wall street, and crooked agents that started this and now they are unhappy at the children they produce.
Comment by Joel Alfano on November 23, 2010 at 9:56am
pathetic!! you owe money and you "willfully" negate paying you're debts? it's the age of entitlements and free hand outs.It is much easier to "blame " a bank than it is to read you're loan docs before you sign them.Let the hammer fall on the free loaders.This is why foreclosures are out of control, pathetic!
Comment by Steve Redemer on September 25, 2010 at 7:58pm
I would think that would ruin it for the people who want to own a home and would rather pat their mortgage vs buying a speed boat or a new suv.
Comment by Clean your Life on September 14, 2010 at 4:14pm
excellent article.
Comment by Steven Ransom on August 6, 2010 at 5:17am
"it comes down to a self-preservation."

Nice article.

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