Real estate 'deadbeats' stay but don't pay

My wife's sister's husband's family lives in a condominium on Florida's Gold Coast in which they are no longer making any mortgage payments.

"How does that happen," my wife asked me.

As always, I turned to experts to find out.

I'll begin by saying my brother-in-law's brother, sister and mother, as a group, are not the most financially astute people in the world.

Their story begins with my brother-in-law's mother who owned free and clear a Florida condominium, but the unit needed considerable repair after being pounded into submission by a series of hurricanes that hit the state a few years back. Instead of getting the condo immediately fixed and ready for occupancy, her children decided instead to move in with her and buy a new, bigger condo with one of those cheap, specious mortgages offered to folks with little or no credit, which neither my brother-in-law's sister nor her brother had.

Now, it's a few years later and they can't afford to pay the ever-increasing mortgage payments so they opted to just not hand over any more dollars to their lender.

The word from the my sister-in-law is that they intend to move back to the original condominium that was harmed by the hurricanes, but in fact they are not doing anything -- just sitting in the newer condo and not making payments.

For expert advice on this matter, I called Jon Maddux, who operates a company called You Walk Away LLC in Carlsbad, Calif. The irony about the name Maddux decided to call his company is that Maddux doesn't really advise people who are in difficult financial straights to just up and leave their current abode, but to not pay anymore on the mortgage and to stay put as long as they can.

Why? As a result of the devastating mortgage crisis, the banks are simply flooded with bad loans and their processes to handle so many foreclosures are overwhelmed. Lenders simply can't get to it all. Even if people stop paying on their mortgage, the banks just can't seem to react fast enough.

Also, because the banks are so overwhelmed they are making conscious decisions to delay evictions to a later point in time.

"Sometimes the banks simply won't file a foreclosure notice," says Maddux. "Or, the lender makes a decision to cancel an auction sale and reserve the right to foreclose due to other circumstances, such as a big tax lien or no property taxes being paid. That's happened many times with our clients who stayed in their home a year or more."

Maddux has also found lenders are not eager to foreclose in jumbo loan situations. "One of our clients had a $2 million loan and had been in their house a year and a half without making a payment," he says. "The loan could have slipped through the cracks, but more than likely in the big picture, the bank probably had multiple loans in that ZIP code and if they foreclosed they would have had to take a write-down on a lot of the assets." ...CONTINUED

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