July 13, 2024

California home mortgage defaults

It appears  the economy has received a boost from practices that let some homeowners stop paying their mortgages and use the ‘extra’ money elsewhere.

Almost everyone is aware of, or knows, someone living rent-free in their home for an extended period of time, having stopped paying their mortgage. Many of these free boarders are spending lavishly on non-essentials.

A San Diego example of this is an East County homeowner who was saddled with a $450,000 home she purchased almost five years ago with no down payment. One year after her purchase, she pulled out $75,000 in home equity and purchased “fun stuff,” including a boat. She recently walked away from the house that now has a $525K mortgage, purchased a new condo in the $270,000 price range (in her sister’s name) and kept all the goodies purchased from the home equity withdrawal. With the much lower mortgage payment she just bought a new car.

There are many San Diego homeowners who are enjoying the “good life” by having stopped making monthly home mortgage payments. California has made this non-payment phenomenon much more pronounced by extending the normal time it takes to process a home foreclosure by more than double!  The extended mortgage foreclosure time combined with government pressure to extend every possible wacky scheme to keep deadbeat homeowners in their homes (almost 60% of homeowners who had their mortgage modified, are back in default one year later) has laid the framework for rewarding poor financial planning.

California home foreclosures

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