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June 2nd, 2010

Living Rent Free: Milking the Process or Self Preservation?



“The longer I’m in foreclosure, the better.”
-Wendy Pemberton, Floridian Homeowner

In an article that has created a lot of buzz across the web, the New York Times examines the actions of a few American homeowners who, almost by happenstance, have found pleasure and even financial comfort by being in foreclosure.

The glut of foreclosures across this country — especially in markets hardest hit by the housing crisis and even more so in states where the foreclosure process must first pass through the court system — has slowed down the foreclosure process to a crawl:

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.

In Pinellas and Pasco counties, which include St. Petersburg [Florida] 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.

A growing number of borrowers are using these delays to live happy and “rent free.” Some have even referred to their foreclosure as “a blessing.”

But is it fair? Are these borrowers milking the foreclosure process or is it merely a matter of self preservation? I guess it all depends on who you ask:

“We could pay the mortgage company way more than the house is worth and starve to death,” said [Alex] 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.”

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.

I guess part of the reason why this article generated a good deal of buzz, and in fact probably one of the reasons behind me asking if this “rent free” living is “fair,” is partly due to the wide range of benefits these borrowers (in the NYT article) have recently been able to enjoy now that they’re debt free:

Foreclosure has allowed [Alex Pemberton and Susan Reboyras] 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.

I’m not saying that people don’t deserve to treat themselves and have a good time, but it is unlikely to find a sympathetic ear among the millions who have to sacrifice in order to stay current on their mortgage.

Opinion time: Is living rent free milking the foreclosure process or is it solely about self preservation? Leave us a comment; let us know how you feel.

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2 Responses to “Living Rent Free: Milking the Process or Self Preservation?”

  1. Dominick Says: June 3rd, 2010 at 9:24 am

    This article is one way of looking at things. I think there is a lot more to falling behind on your mortgage payment.

  2. Tim Manni Says: June 3rd, 2010 at 9:51 am

    Hey Dominick,

    Thanks for commenting. I agree, there are a slew of factors that can contribute to falling behind on your mortgage, but this article focused on people who chose to stop paying. Unemployment or injury didn’t cause their bills to fall out of reach. They decided they could live much more comfortably rent free.

    That being said, we don’t know every instance of their particular circumstance, and the Times article only examines a few borrowers.

    Thanks for commenting, hope to hear from you again soon,

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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