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.
Somebody needs to go to jail.
California gold nuggets