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Thread: Broke ? You May Now Be Entitled to a 'Free' Home

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    Banned Melonie's Avatar
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    Default Broke ? You May Now Be Entitled to a 'Free' Home

    You can't make this stuff up, folks !!!

    from

    (snip)you can actually get a house for free by simply not making your mortgage payments. Here’s more via NY Times:

    She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.

    Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.

    The reason, lawyers for homeowners argue, is that the cases have dragged on too long.

    There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.

    However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.


    It should come as no surprise that the free house legal loophole comes courtesy of the always dangerous and extraordinarily unpredictable combination of government ineptitude and TBTF inefficiency, and thanks to the fact that the Fed-sponsored, investment bank securitization-fee-fueled real estate bubble was allowed to inflate to the point where it swallowed the entire US economy, tens of thousands of borrowers may ultimately become owners by virtue of remaining resolute when it comes to not making payments:

    It is difficult to know for sure how many foreclosure cases are still grinding through the court systems since the financial crisis. It is even harder to say how many of those borrowers are still living in their homes.

    Bank of America, for example, has initiated the foreclosure process on roughly 20,000 mortgages that have not been paid in at least five years. The bank estimates that 90 percent of those homes are still occupied.

    The courts are not the only source of delay. Over the years, the federal government has made 69 changes to its mortgage modification programs, forcing lenders repeatedly to scrap previous offers to homeowners and extend new terms.

    Of course, the banks have also dragged out this reckoning through shoddy paperwork, botched modifications and general dysfunction as they struggled to cope with a flood of soured mortgages. Many cases were passed among lawyers like hot potatoes and lay dormant on court dockets.


    This arrangement works out particularly well if the property you now own (because it’s cheaper to pay a lawyer than it is to pay the mortgage) can be used to generate rental income:

    [Rudolfi’s] working-class neighborhood is a short drive from Coconut Grove, a wealthy waterfront enclave of Miami. Her bedroom opens up onto a pool, shaded by palm trees. Outside her house, she parks a small motorboat she named Mermaid. The property includes an adjoining house that she rents out…

    In November 2009, her mortgage servicer at the time, Aurora Loan Services, a unit of the now-defunct Lehman Brothers, filed to foreclose on her house.

    Instead of making her roughly $1,300 monthly mortgage payment, she pays her lawyer $500 a month to represent her in court.


    * * *
    So a bit of poetic justice we suppose for an investment banking community and a complicit Federal Reserve who facilitated the creation of a modern day tulip mania which lined Wall Street’s pockets even as it put Main Street (which was itself all too eager to finance a McMansion and a Hummer) on a path to ruin. But in the end, the Susan Rudolfis of the world ask: "What are you gonna do?"...

    “I screwed up and they screwed up, so now what?” she said.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Wellll due to the hit on the credit report and/or bankruptcy.....this is not some "too good to be true" scenario

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    Banned Melonie's Avatar
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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    ^^^ true enough. However, like dancers being busted multiple times, the additional 'damage' resulting from delinquent mortgage debt may be marginal if the person already has delinquent student loan debt etc. After all, the Federal Reserve just reported that 'only 37% of total students loan balances are currently in repayment and not delinquent'. And 'time cures all' i.e. the same statute of limitations which theoretically makes 'free' homes possible also eventually 'erases' the real world negative effects of a bankruptcy filing.

    So in very cynical terms, this comes down to a simple equation ... is ( further ) ruining your credit for the next 7 years ( or whatever ) worth winding up owning a $250,000 ( or whatever ) home for 'free' ? On a pre-tax basis, over 7 years that's equivalent to an extra $40,000+ per year of income ( in the form of 'free' home equity ). Of course, as the article points out, you might have to subtract $6,000 per year worth of legal fees to keep postponing foreclosure attempts until the state's statute of limitations removes the threat of foreclosure. But, as the article also points out, not only does the delinquent homeowner get to live in the home for those 7 years without making rent / mortgage payments, but the property can also be rented out thus potentially producing ~$10-15-20,000 per year of additional rental income for the delinquent homeowner on top of the ~$40,000 per year in 'free' home equity.

    How much effort is required on the part of a dancer / camgirl to generate ( an additional ) $50-60,000 worth of annual pre-tax income ???

    Please understand that I'm not condoning ( and certainly not encouraging ) that the course of action described above be followed. But it would appear that 'the system' now makes this course of action both legal and profitable !!!
    Last edited by Melonie; 03-31-2015 at 12:17 AM.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    A friend of mine told me about how his mom lost her home during the early to mid 1980s mortgage crisis. I'm sure this event of "squatting" in a foreclosed home isnt new. But honestly most people wouldn't opt for this kind of unideal situation.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    The tell tale in the validity of this story is that there is no second opinion. Basically her lawyer is telling her that the statute of limitations will save her. I think not. As long as they filed in time, they can recover. People are not stupid, if they could have delayed for 7 years and avoid paying, they would have been doing it for years

    Add to that, a legal debt obligation does not disappear. You signed for it, you owe the money. They may not be able to chase you for any kind of legal penalty, but you still owe the money, you still do not have title to the house.

    You know what else doesn't go away? Property tax. Bank usually pays the taxes escrowed in the payment. No payment, no taxes. Towns usually wait for the house to sell to collect back taxes, as it is the law that they are settled at close, so they are patient.

    So the bank owns the house, until the town does. Debtor is last in line

    There are many problems in the foreclosure business, among them banks not able to prove they hold the mortgage, but passing title on a house will prove impossible without both mortgage and taxes paid off.

    Just a ballsy lawyer conning both his client and the public

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    This is called Adverse Possession in the legal community and the owner can claim a deed to the property through adverse possession, leaving the bank holding the bag and unable to foreclose since the deed/title is now owned by the occupants.

    The amount of time a person has to be in possession of the property varies by state, but it looks like a lot of people will have some grounds for regaining title to their foreclosed/ delinquent properties.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    adverse possession is very limited, I would struggle to find the number of times a person has won title to a house in this fashion.

    Generally it involves a piece of property, say a driveway or fenced in back yard where the person has been using it 'open and notoriously' for a number of years and the rightful owner suddenly realizes it. It happens in un surveyed lots and cheap subdivisions.

    The other key is that you have to not have permission. Basically being having a mortgage gives you an agreement to be there, so I would think to win by adverse possession, you would have to live in the house for a number of years without the banks permission, and without the bank notifying you that you are not welcome.

    It could happen, but it seems unlikely

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    ^^^ also, where title to the home is concerned, there are now 'first time' questions regarding the legitimacy of 'robo-signed' title transfer documents filed on the part of mortgage holding financial institutions. And, as pointed out in the linked story, this situation applies to delinquent home buyers who have NOT been served with a foreclosure notice by the mortgage holder ... despite the fact that they haven't made monthly mortgage payments for many years.

    It will be interesting to see how this pans out in any case ...

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    I've heard of "adverse possessors" going without utilities and running water to live in a "squat home".....Frankly most normal people will shell out rent to live comfortably.

    Frankly the banks are HOPING people will try to resolve/reverse foreclosures. They don't want to be holding the bag of unwanted houses...

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Frankly the banks are HOPING people will try to resolve/reverse foreclosures. They don't want to be holding the bag of unwanted houses...
    ^^^ according to my business acquaintances, there may be some truth to this claim. With a foreclosed home, odds are that the mortgage holder bank will need to invest many thousands of additional dollars to make the property competitive on the local real estate market ... or alternatively the bank will need to allow the property to be sold for pennies on the dollar. And either way the bank will face additional legal costs, plus being forced to book a loan loss. Arguably, the bank experiencing an 'Adverse Possession' court decision allows the loss to fall into a different category, with the bank also being able to get the non-performing loan off its books ... and the non-salable property off its hands ... without spending any additional money.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    I did hear this story on NPR last ngt!!!!

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    They could live in the house, pass it on to their heirs. But they can't sell the house unless they pay off the loan.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    and again, while a novel legal theory, I don't see it happening. Much like the adverse possession, free rent for a while, but not much more

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Quote Originally Posted by oldster View Post
    and again, while a novel legal theory, I don't see it happening. Much like the adverse possession, free rent for a while, but not much more
    It really is happening!! This isn't just a funny, little story!

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Quote Originally Posted by oldster View Post
    and again, while a novel legal theory, I don't see it happening. Much like the adverse possession, free rent for a while, but not much more
    It really is happening!! This isn't just a funny, little story!

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Quote Originally Posted by oldster View Post
    and again, while a novel legal theory, i don't see it happening. Much like the adverse possession, free rent for a while, but not much more
    the story was on npr last ngt.!!!!!!!!!!!

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    A person can claim adverse possession in California in as little as 5 years. In most states it is at least 10 years, and some states have done away with the practice entirely. I know people who have lived in a home w/o paying a mortgage payment since 2007 in Riverside County. They've maintained the home, and have had utility service the entire time. I'm not sure what their property tax situation is like, but if they've continued to pay the taxes, chances are pretty good they have a case for adverse possession and can apply for a release of lien.

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    Default Re: Broke ? You May Now Be Entitled to a 'Free' Home

    Quote Originally Posted by Tourdefranzia View Post
    A person can claim adverse possession in California in as little as 5 years. In most states it is at least 10 years, and some states have done away with the practice entirely. I know people who have lived in a home w/o paying a mortgage payment since 2007 in Riverside County. They've maintained the home, and have had utility service the entire time. I'm not sure what their property tax situation is like, but if they've continued to pay the taxes, chances are pretty good they have a case for adverse possession and can apply for a release of lien.

    Whooaaa that's crazy!! Riverside is a bit of a craphole btw. I can kind of see where the bank "forgot" about those homes : (

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