Jose Canseco walks away from his mortgage
Back in January, I noted the troubling trend of home borrowers in California simply walking away from their mortgages–abandoning their promise to pay their loans and undermining the stigma of default. As I wrote then, political rhetoric absolving borrowers of their responsibilities — and encouraging them to spend, spend, spend even more — has made it possible. And so has federal legislation intended to “help.” The omnibus spending bill passed last year prevents the IRS from taxing mortgage forgiveness as income up to $1 million for a two-year period. Some people are bailing because they’ve lost equity and value in their properties; some are bailing for cheaper homes in the same neighborhoods. There’s even a term that’s become popular over the last couple of years — “Jingle Mail” — that describes when homeowners cut loose and mail in the keys to the bank. Ho, ho, ho. The true victims in this “crisis” are those who paid for homes within their means and those who waited to enter the housing market.
As California goes, so goes the nation. The trend continues.
Now comes word from Los Angeles that beleaguered baseball player Jose Canseco has walked away from his mortgage. L.A. Land reports:
Former major league baseball player Jose Canseco…”said on Thursday he had lost his California mansion to foreclosure — one of the first celebrities to publicly admit being a statistic in the U.S. housing crisis,” the Associated Press said.
In comments to the TV show “Inside Edition,” Canseco says, “It didn’t make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else.”
More from the Associated Press: “Canseco, 43, one of the most flamboyant U.S. baseball players until his retirement from the major leagues in 2001, told the celebrity TV show ‘Inside Edition’ that it did not make financial sense to keep his 7,300-square-foot home in the Los Angeles suburb of Encino. ‘Inside Edition’ said it had foreclosure documents showing Canseco owed a bank more than $2.5 million on the house.
Note that he wasn’t forced to foreclose. He chose to foreclose. And many more will follow in his foosteps.
Commenter Patrick at L.A. Land sums it up well:
Steroids and stardom aside, Canseco is not unlike the rest of America: Chronically overspending, knee-deep in debt, lived beyond ample means, relative to the rest of the world. The mortgage mess is a symptom of this very same mindset. There will be more.
This is also right on:
In a Roman orgy, and no mistake abou[t] it, it has been one disgusting, wanton, gluttonous binge, rich folk take off their pants just like the the plebeians.
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Trackbacks
- Right Voices » Blog Archive » About Those Foreclosure Statistics
- Jose Canseco Demotivator » Pursuing Holiness
- Moonbattery
- joelmaxwell.com » Responsibility
- Michelle Malkin » Teachers’ Unions and the Housing Crisis
- Michelle Malkin » Teachers’ Unions and the Housing Crisis
- Michelle Malkin » A Democrat congresswoman bails on her half-million-dollar-plus, second-home mortgage
- May, 2008 Archive « Right Minded Online
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I appreciate your good intentions in providing this explanation, however, I have a few comments.
Um, we know he’s not alone. This is why many of us are concerned.
Also, did these people have excellent credit because they felt that it was in their best interest to have excellent credit? Or did these people have excellent credit because they felt compelled to repay their creditors as they’ve promised?
I remember when people had too much pride NOT to repay a debt. They didn’t need a legal or credit rating reason to do it.
Who’s waiting? Can you provide a specific example? All the big banks I know are “marking to market” the mortgage bonds they are holding. In other words, as these bonds are traded at 40% of their stated value (for example), the banks are declaring the appropriate loss.
There are many that think this approach is too conservative. Such critics claim that the bonds are worth more than 40% which means that the banks should be forced to declare such a large loss.
However, the critics can’t back-up these claims because nobody knows what these bonds are worth. In order to estimate their value, one would need to look at 1,000 different mortgages (for example), gather the information about each mortgage, analyze each mortgage, assign a value to each mortgage, and tally up the values. This process would need to be repeated for each bond held. If the bank holds 1,000 different bonds, then this implies the need to collect the data and analyze 1 million different mortgages. This would be difficult to do even if the information on mortgages could be trusted (which it can’t).
This is simply not true. These aren’t portfolios of equity interests – it’s debt.
If someone owes me $100,000 on a $200,000 house, I won’t write down the value of that mortgage just because the house loses 20% of its value (even if the borrow stopped making payments). I should still be able to sell the home for $160,000 (or liquidate it for $140,000) and have plenty left over to cover the costs. I may even be able to return some of the proceeds of the sale to the borrower.
Foreclosure listings are only a minor reason for the real estate price declines.
Thanks Soap, I had to run an errand.
Wish I could shed a tear for him, but it ain’t happening. Nor will it for the rest of the beautiful people, their wannabe’s, and the dead beats who thought they were cashing in on a great deal when they knew they couldn’t afford the houses regardless of the conditions.
Bail them out? Screw that…
yeah I have one of those as well. Too bad Beckett’s says its worth exactly….squat!
My Michael Jordan rookie card is doing good though
Hmmm… forgot this was California, and he had been through a divorce there.
Pretty standard (happened to my brother) was when the family home is given to ONE spouse to live in, but when it sells, they split the money… bet thats the “judgement” against the house he’s talking about…
He was paying for the house… and was living there, but only really had half ownership even AFTER the mortgage… add in a value drop? (average Calif home has decreases 29% in the past year)… he would have paid almost THREE TIMES what he could realize from selling the home…
Got your back spo!
I live in California. I’m saving mine to pay the tax hike we’re going to get to pay off the $20 billion the Democrats ran up with no money to pay for it.
It is that kind of “conventional” thinking that contributed to this mess in the first place.
Yes, they are debt portfolios. But that debt represents a portion of the equity in the value of the property secured by the debt. These are sevured, not unsecured loans. The underlying value of the security has a direct impact on the value of teh debt.
Youe example of a $100,000 loan securing a $200,000 debt is really a red herring here. There are few 50% LTV loans out there, and in my example a 20% decline in real estate values would still leave a borrower with 30% in equity; ample reason to protect their interests.
Most of the loans on the market today are 80% LTV and above.
You are also seriously understaimating what is costs for a bank to foreclose, maintain and resell a piece of property. An analysis we did several years ago showed the average all in costs were over 30% of the property value on a conventional loan. Any otehr figure thrown out there does not include ALL costs and expenses. Plus, you’re in a declining market, where values keep dropping. Inventory is at al all time high, and the holding periods for foreclosures are now well beyond the traditional norms.
Finally, while I have seen subprime bonds written over 20%, I have not yet seen anything close to those figures on conventional loans. A 40% write down would surprise me because (1) the SEC rules don’t allow you to be “conservative” and (2) any independent public accountant will force you to base your work on data from prior quarters and not will allow you to take a write down that cannot be justified by historical figures. Unless of course, you are dealing with a financial institution that has a 40% loss experience, which I would expect to not be long for this world and likely have a “going concern” disclaimer in its public financial statements.
Even a stopped clock is right twice a day.
Too bad, the bank should be able to make a profit since they put up the money. Though in reality the borrower would have sold, not let the bank foreclose.
The whole argument between dakine and corkie show the difference between the moral and immoral. Just becuase it’s legal doesn’t mean it’s moral.
Scientology rejects the moral so that if you can twist the law your way, you’ve done nothing wrong. I can see why that would appeal to the Hollywood set.
Moral people were brought up to believe that how you fulfill a promise reflects on your character. Failure despite your best efforts is no disgrace. Walking away because it’s hard shows low character.
In the past there were dire consequences to breaking a deal. Liberal policy takes away consequences so the only thing keeping people honest is their own conscience. Conscience comes from morality; Morality comes from God.
KaosKlerik, you articulated this perfectly. Thanks for picking up my slack.
I’m with KaosKlerik. Well stated.
Funny… I learned morality from my Parents… and the society which raised me.
/looks around quickly…
Nope… no bushes on fire at my house… (of course, we still have global warming on the ground from yesterday…).
On May 2nd, 2008 at 4:44 pm, KaosKlerik said: #108
Bravo!
Give lgm a break. It took alot out of him to get one thing right!
No it’s not. It was the layering of leverage applied on top of the mortgages.
That might be the current average loan profile at the time of origination, but it’s certainly not the average mortgage being held.
I’m not underestimating anything. I’m very up to date on foreclosure costs.
Did you mean, written DOWN over 20%?
First, I didn’t limit my example to conventional loans. Secondly, yes, I have first hand knowledge of mortgage backed bonds trading at 40% of face value. This is due to the layering of leverage that I commented on above.
1. I didn’t state 40% write down, I stated 40% of value (a 60% write down).
2. Um, most auditors force you to base your bond valuations on market prices (you know, like publicly traded stock prices).
In other words, if I hold 100 shares of GE stock, which happens to trade down to $4 at the close on June 30th, I can’t convince my auditor that my book should be worth more than $400 even if the shares are undervalued. However, I have seen auditors sign off on special valuation methods for nuanced situations.
3. The critics are arguing for a rule change to this. The federal government has already forged new ground with respect to this crisis. While I disagree with the proposal, it wouldn’t be unreasonable for someone to lobby in favor of a few additional changes or allowances (with respect to GAAP in this case).
1. Um, a financial institution might lose 60% of its value in one assets class without losing 40% overall. Most have diversified holdings. A blended loss might only result in a few percentage points.
2. Would you like to know the number of publicly traded companies received a “going concern” this year????
3. Why wouldn’t they be long for this world? Just because they took a one-time write down? That doesn’t make any sense – especially if they still have a healthy balance sheet and cash-flowing business. Think about it.
4. You do realize that most of us don’t care what auditors think, right? Sure their opinion matters – so does the video store guy that assesses a late fee on your returned video. Sure, the unsophisticated supplier or investor might worry about an auditor’s statement.
corkie
It would be helpful if you stuck to what I wrote rather than what you are reading into what I wrote.
No sense arguing with you about it, though, since anything else I write will be twisted around to suit whatever point you are tyring to make here.
I’m sorry if I missed any of your points. It certainly wasn’t intentional. And I didn’t mean to twist anything. My regrets if I did.
“As California goes, so goes the nation.”
What!?
The law should allow the bank to go after every cent owed in a blatant case like this – a few of those and folks would start to accept responsibility for their actions.
Two words: debtor’s prison. That’d solve it.
Just thought I’d add that it is these deadbeats who are losing their homes and moving into the rental market who drove my rent up $50 a month the last time I renewed my lease.
I’m saving up and when I build my house it’s going to be a bungalow with two bedrooms, a bathroom, and a kitchen/living room/dining room. Small. Convenient. Affordable.
But you know…I’m single.
…and I’m going to pay cash.
What a jerk.
#48 Here are the details of the judgments against him:
The house already had at least one lien placed on it, from the Internal Revenue Service, and a judgment stemming from a 2005 court ruling in which Mr. Canseco and his brother Ozzie were found liable for a 2001 brawl in a Miami Beach nightclub. Together, the liens and judgment totaled some $1.3 million, according to Mr. Emerson and Tina Cameron, Mr. Canseco’s real-estate agent.
Source: http://online.wsj.com/article/SB120969849943061691.html?mod=googlenews_wsj
Does not justify the move just puts it in context with his quote.
So now, not only is the bank screwed, because of the liens and judgement against the value of the house, but the IRS, the plaintiff from the brawl lawsuit, and possibly even his ex-Hooters ex-wife are all out in the cold on this. Jose is essentially saying “Everyone, go screw yourself because I ain’t payin’!”
There isn’t a hole deep enough he could be dropped in which would mask the odor he gives off.
On a bright note, my hometown Cincinnati Reds stomped the Oakland A($$holes) into the ground in the World Series back when Canseco was actually a threat to hit something other than a drunk in a Miami Beach bar.
Poetic justice? Karma? Who really knows.
“Inside Edition” treats this guy like a celebrity? Ha! My nearly 4-yo daughter has more celebrity potential than this cad! He’s a has-been trainwreck of personal and professional poor judgement, capped off with an ego the sized of a Peterbuilt!
Not someone worthy of TV-time… I knew there was a reason it’s called “the boob tube”!