Neighbor Planning to Strip Home Before Foreclosure - My Rights/Responsibilities? (Howe: foreclosures, rent)

[Big G]

This should be a good topic for discussion.

There's a guy who lives down the street from me. Good guy, nice family, chat him up every once in a while. This week, he catches me out walking and flags me down. He then tells me, "I just want you to know before rumors start - we're moving and letting the house go into foreclosure." He then talks a bit about how he's upside down to the tune of 6 figures, and he can't keep up with the mortgage payments - certainly not when they aren't getting him any equity.

Frankly, this is a very smart move on his part. I've seen him and his family struggle to maintain their lifestyle in this house. They pulled their kids out of private school a few years back, and the exterior maintenance on this house and yard has been right around zero since at least 2009. Yes, he's going to shaft the lender, but he is honestly in an untenable position. I'm glad he's coming to terms with that, instead of continuing on in denial.

So far, so good.

But then, he goes on to tell me that he's thinking about stripping the house of EVERYTHING. Not just appliances, but drapes, light fixtures, cabinets, even toilets and water faucets. He then went on about how was shafted by the builder, the finance company, the mortgage broker, the HOA, yadda yadda yadda - justifying his planned course of action to "take my equity out the front door".

You can see why I think this would be a bad thing. He's not a next-door neighbor, but he's close enough that having a completely trashed and unsellable foreclosure in the neighborhood would tank property values. (For reference, the neighborhood was built in the $750K range a couple of years before the peak, and is now selling at least $100K below that.)

I'm of two minds on this.

On the one hand:
1) I should just MYOB and let him do what he's going to do. It's none of my concern. Until the house is actually foreclosed on, it's his to do with as he pleases. Anyway, he hasn't done anything objectionable yet. Plus, I really WANT him to be foreclosed on and be done with the house. I like the guy and think he'll be better off not having to put 90% (or whatever) of his paycheck towards his mortgage payment. I think the neighborhood will also be better off, in the long run, by not having a guy hanging on by the skin of his teeth.

On the other hand:
2) I should let the mortgage company know what's up before he has a chance to trash the joint. (I'm pretty sure that I could find his lender using online county records.) What he proposes is at least unethical, and very possibly illegal. Plus, he's basically giving a middle finger to the entire neighborhood by leaving an uninhabitable disaster in the middle of our very nice homes.

So, what do y'all think I can and/or should do in this situation?

[skids929]

My advice, which means nothing. Get on with your own life and forget about this guy, sounds like someone to distance yourself from anyway.

Whether you say something or not it makes little difference to the lender, although I think he's probably breaking some laws potentially. And not that I am advocating this behavior, the banks created this disaster they can clean it up. Although in reality you know it will be us left holding the bag because they won't lose $$. Personally speaking, every time I hear a bank went under I chuckle a little bit for allowing people to leverage the sh*t out of themselves.

If you plan on staying don't worry, this guy will be long gone before you try to sell anyway and his house is only a comp for a year or so anyway.

Just rejoice in the fact it's not you!!

[biafra4life]

Agree with skids. Plus consider this; if the lending company intercepts him before or while he's in the act of stripping the house, unless he is monumentally stupid, it wont take long for him to realize who ratted him out...plus he knows where you live and possibly more about you. Do you really want that headache? I would MYOB, if your neighborhood costs as much as you say it does, one house is not going to trash the values of the entire area. Just my two cents...

[coregis]

I think there's enough people out there like me that don't want to deal with hauling out someone else's drapes and aging fixtures anyway. A blank slate would be appreciated provided he leaves the copper. Though the neighbors may be jealous of the kitchen and bath I put in with the money from the price differential.

[Big G]

Originally Posted by skids929

Whether you say something or not it makes little difference to the lender, although I think he's probably breaking some laws potentially.

You're probably correct there. The thought is to give the lender a heads-up that a "cash for keys" offer would be a good idea in this case. But I doubt there's an "asset preservation department". Even if I called up the lender, I doubt they'd do anything until he actually guts the place.

Given the timing (he plans to leave at the end of the school year, and I got the impression that he just now decided to stop making payments in April, making foreclosure several months away), this house could sit trashed for months before the bank realizes it.

Originally Posted by biafra4life

Plus consider this; if the lending company intercepts him before or while he's in the act of stripping the house, unless he is monumentally stupid, it wont take long for him to realize who ratted him out...plus he knows where you live and possibly more about you. Do you really want that headache? ...

No, I don't want that headache. Believe me, that thought is front and center in my mind. However, I agree with skids929 that he's probably breaking some laws here.

Like I said, I like this guy - I'm not looking to "bust" him. I just don't want him trashing his house on the way out.

Let me play Devil's Advocate for a minute. If the neighbor had instead told me, "I'm thinking about engaging in insider trading to make my mortgage payments," would it still be appropriate for me to MYOB?

[elan]

I don't know if they could get him if he does it before the foreclosure, or could they? You mentioned HOA, huh that could be your answer to the problem. Oh lawdy, let them catch wind if it. All hell will break loose.

[nsumner]

Many have tried warning banks before but the banks never did any anything so you'll be wasting your time. Lots of foreclosures are stripped and some are stripped AFTER they get foreclosed on by the neighbors.

The house will eventually sell, the bank will take that into consideration when pricing it. You should tell him that if his loan is with Bank of America, they have halted foreclosures for the next 2 years, so he can live practically rent free until then. Not that I am proponent of that practice, They are trying mods and other programs though.

Don't let the HOA into the loop, they will mess things up. They'll foreclosure and then it will take much longer for the home to come back on the market.

Naima

[TexasVines]

1. the guy is a total and complete idiot.....if he is as big a loser as he is acting he should just stay in the house and not pay anything at all for a mortgage......it will probably be two + years before they get him out of the house if at all

2. there will be ZERO value in all the crap he is taking with him.....no one on earth wants some a-holes old used drapes.....not even goodwill unless they are making rags that week.......he would get more of "his equity" out of the situation by offering to spend his time mowing the neighbors lawns for cash while following the concept of being a deadbeat outlined in number 1

3. if the bank actually cares enough.....and more importantly has the paperwork properly perfected to be able to evict him anytime in the next decade......then they will also hold him accountable for the damage he does to the property.....I am sure he would say who cares my credit is ruined so I will be renting anyway......but that will not stop the court case against him....the expenses for that......and the amount of the settlement that he WILL pay for the WILLFUL DAMAGE that he does to the property.......if he just walks away he is a deadbeat like so many others.....if he willfully destroys the place the bank will get a judgment on him and eventually he will pay that or possibly even face jail time or additional confiscation of assets beyond the home and property

4. you can tell the bank all you wish......there is really nothing they can do about it at this point and probably not until they have taken control of the property and then decide of the damage was a large enough amount and willful enough to go through the courts to get a judgment

5. the home owners association may well be able to do something about it based on the idea that most HOAs these days probably have some type of "livability" language in the deed that prevents people from having no utilities or working bathrooms or kitchens ect.

6. depending on when he does this and who is actually in "legal possession" of the property (just because you still live there does not mean you still own it) there is a better than decent chance that if he damages the property or steals from it after the bank has take legal ownership and verified the condition of the property at that time that he would be charged with theft and vandalism in addition to some of the above issues.....and again this will not go away in 7 years like a credit report

7. there is a lot better than 50/50 chance that he could go for a year or two paying nothing and still living in the house.....there is a decent chance it could go longer than that......it depends on who he has his mortgage with......if they split that mortgage into various parts and packaged them and sold them to others.....who they sold them too.....how many times they have been sold and resold since then.....at the same time if he does enough damage.....if the bank owner of the mortgage thinks the property will appreciate in any decent time frame.......and depending on who his mortgage is with.....that he could be opening himself up to being made an example of........instead of doing like most "smart" deadbeats and living in there like he owns the place until the sheriff shows up and tells him to get out and walking away with damaged credit

8. I would tell the HOA and let them discuss it with the legal people they should have access to......especially if the neighborhood has few if any other foreclosures because that would mean the neighborhood will probably hold together through things......if you were in california where people are paying 750K for homes that are at best worth 200K and the banks don't want them back then I would be packing and moving myself......because nothing will ever be done with that house even if the bank does take it back.....in your case with only a 100K downside from a buy at the very peak if the neighborhood is holding together then the bank will eventually get that property and the sooner it is back on the market the better......his destruction will not help that and will probably hold up the transfer of the property until the court caseS are over......and from the sounds of this guy he will waste thousands to get a lawyer to try and fight the bank over paper work inconsistencies even when he flat knows he was in the wrong and can't afford the property.....the other good news is since this is in Texas there is little chance of any type of actual enforceable second or third mortgage to get involved.....it is a straight up owner of the mortgage gets the property and everyone else has the equivalent of an unsecured personal loan

[BigDGeek]

I'm with the others; you'd be wasting your time at best and making the situation worse for yourself at worst. MYOB.

[loves2read]

what they are saying about the long time line for actually removing homeowners from foreclosed property is true--and your "friend" is obviously not paying any attention to what is going on in the mortgage industry which sounds strange if he is behind in his mortgage as you say