Mortgage Industry

In today's New York Times, Gretchen Morgenson has an interesting column that validates one of the key points I made in my post from several days ago about why the owners of mortgages are not foreclosing more often on homeowners who aren't making their monthly payments.  The answer: Foreclosing would require that the mortgage owners re-estimate downward the value of the second liens to what Morgenson calls "fantasy levels."  That, in turn, would require them to admit that the loans had gone bad and, therefore, require that they repurchase the loans from Fannie Mae and Freddie Mac.

It's hard not to be both amused and angry after reading this story by David Streitfeld in yesterday's New York Times about homeowners who are intentionally not paying their mortgages but are not facing foreclosure because...well...their mortgage servicer isn't foreclosing on them.

You can't call this a "movement" because it doesn't appear to be organized.  As the Times story notes, this is happening with increasing frequency because individual homeowners are realizing that the foreclosure process isn't automatic and are taking advantage of the situation by deciding not to pay. 

Stories like this almost certainly will encourage others to stop making payments, and, as the story also notes, a new business/industry/profession seems to be developing in mortgage payment avoidance counseling.  So, the number of homeowners who simply stop making payments and dare their servicer to do something about it may well continue to grow.