Personal Finance For the Publicly Employed: Quit Paying Your Mortgage Because Your Overtime's Been Reduced

San Jose Merc surveys the default-no-foreclosure demographic, and turns up the story of one brave bus driver:

S.J. man fights back

San Jose homeowner and Santa Clara Valley Transportation Authority bus driver Darrell Thomas stopped paying his mortgage in late 2008 after he lost overtime pay and while he was seeking a loan modification. He was offered a trial modification in April last year, but as he was about to start making the new payments, he learned he'd been foreclosed on. With help from an attorney, he successfully sued to get back his triplex, where he lives and has tenants.

But he's still pursuing legal action against his lender, Wells Fargo, because he feels he was improperly denied a loan modification under the Home Affordable Modification Program. In May he began making mortgage payments for the first time in almost a year and a half, as part of an agreement with Wells Fargo to ensure the bank would not foreclose on him during litigation.

While some might find relief in walking away from their homes after prolonged struggle, "I don't look at it that way," said Thomas, 46. "That's home. I'm established, that's where my family's at, and it's hard to start over."

Don't you have to start the first time before you can start over? The article doesn't say when Thomas closed. But if the loss of overtime pay is enough to render you unable to pay your mortgage, you are by definition a "reach" borrower. If Thomas has one penny of equity in this property, I'll switch to non-alcoholic beer.

If anybody should be suing Wells Fargo, it is Thomas' tenants, for not foreclosing on him while he's running a completely fraudulent business: living free and collecting rents. 

Comments

[Abdul]

But if the loss of overtime pay is enough to render you unable to pay your mortgage, you are by definition a "reach" borrower. If Thomas has one penny of equity in this property, I'll switch to non-alcoholic beer.

Geez, Tim, what kind of society would this be if we had to have accountability and responsiblity for our actions? Where would journalists turn to for local color if they had to look obejctively at every sad sack loser who could give sympathetic quotes?

that's no world I want to live in. More bailouts please!

[Irresponsible Hater]

Riddle me stupid, but would he have any legal standing if "his" tenants stopped paying rent and he wanted to evict them?

[heller]

Because he lost his overtime, dammit!

[Byron]

As long as he is the legal property owner and the lessor by signed contract, I suspect so.

[Rich]

if the loss of overtime pay is enough to render you unable to pay your mortgage, you are by definition a "reach" borrower.

So, if the *gain* of overtime pay is enough to render you *able* to pay your mortgage, you are by definition a "legitimate" borrower.

[PapayaSF]

Um, no.

[Tomcat1066]

Uh, no. Overtime pay is "extra" pay, not at all a standard part of your wage. While a bank may not look at it that way, you're an idiot if you bank on overtime pay to cover your expenses.

[AlmightyJB]

Why does Reason hate bus drivers?

[coarsetad]

racism

[Episiarch]

Because Ralph Kramden was a misogynistic wife-beater who worked a lot of overtime?

[capitol l]

"One of these days, Epi, I am going to beat you to death!"

*laughter*

[Episiarch]

You misanthropic overtiming bastard. And stop calling me Norton.

[Ed Norton]

Uh, Ralphie-boy, are you sure you're s'posedta put that in there...

[Ralph Kramden]

Oh, I know that you know that I know that want me to fuck you in the ass, Norton! Hommina hommina hommina!

[Almanian]

Cause they like rail transit better? No, that can't be it...

[Jeffersonian]

Are you saying that defaulting on one's debt obligations hasn't been elevated to the level of a civil right yet? What the hell has Obama been doing, fercrissakes?

[CE]

Not a very good example of the current mortgage crisis. The rich are now defaulting at a higher rate than the subprime borrowers, because they realize they are underwater and want either a loan modification or a year or so of free rent before their credit rating is destroyed.

A government employed bus driver isn't rich.... oh wait.

[PapayaSF]

The internet says that his employer pays drivers up to $28.86 an hour, the second highest in the country.

[Pablo]

Yeah the most typical example is a middle or upper middle class or even wealthy homeowner who is $100K or more underwater and is realizing he/she is a fool not to walk away because they will never develop any equity in the home, and the costs of walking away are less than the costs of staying put.

[[e-mail]]

He found out afterward they had foreclosed on him? He doesn't check his mail very often does he.

Also, really? 2/3 of the mortgage is being paid for by other people, and he can't afford his third? What a nozzle.

[TallDave]

I actually witnessed two lefties arguing that tax incentives creating higher unemployment were good because it gave parents more time with their kids.

[CoyoteBlue]

Clearly, they haven't spent enough time with my children.

[Chad]

It is certainly a positive benefit, TallDave.

A lot of people who are milking their two years of UI are doing so precisely BECAUSE they have kids to take care of. UI, for them, is better than wages less child-care costs. However, since ten other qualified people are willing and able to take any job that such slackers may shirk, they have no impact economically.

[The Libertarian Guy]

You are one fucked-up dude, Chad.

[Chad]

It's the government's responsibility to foot the bill for the bus driver. And it's another good reason to have universal child daycare. Quit whining and suck it up.

[Jeffersonian]

Haven't we run out of other people's money yet?

[Chad]

Money is fungible. And printable.

[Bronwyn]

they have no impact economically

Who the hell do you think PAYS for UI?!? Giving handouts to non-producers absolutely does have an economic impact.

Please tell me you're not so stupid as to believe the shit that comes off your fingers.

[Yonemoto]

Hm. I actually make this argument, but instead of "tax incentives", I substitute "deflation".

[laura]

Sure. That makes sense. Kick a fellow man while he's down. Meanwhile, the fat cat banksters and politicians have so destroyed the economy that everything will crash and fail. No, but I advocate that every Joe citizen take as much advantage of the system as they can to stay afloat for the next two years. The bottom-line is this, the dollar will no longer exist nor will this present government. The corporate raider have raided. The iceberg has already hit the titanic. And people who try to guilt those who survive instead of giving their lifeboats to rich people who want to leave them to drown -- well, they don't see the big picture.

Way to go, Joe!! You hang on and do whatever it takes to screw the banks and the government and survive. They hate you and are out to get you and this is economic warfare, baby.

It's "us" against the elites... because the elites are absolutely out to DESTROY AMERICA to "get us".

[Admiral Ackbar]

Might I steer you and your rhetoric towards, HuffPo or Daily Kos?

Just a thought, might do you some good. More...receptive audience.

Seriously, please spare me having to be a dick and point out how stupid your rhetoric is.

[Admiral Ackbar]

Might I steer you and your rhetoric towards, HuffPo or Daily Kos?

Just a thought, might do you some good. More...receptive audience.

Seriously, please spare me having to be a dick and point out how stupid your rhetoric is.

[hmm]

You are a metaphor machine.

I thought the elites were out to get me. But it just turned out my wife wanted me to take out the trash.

[You Bore Me]

Common.........really.........

Economic war-fare baby?

Sounds like theft, pure and simple.

[d]

Cavanaugh, FYI: the name+' form of the possessive is reserved for important historical figures (e.g., Moses' commandments; Jesus' words; Cassius' betrayal of Brutus; etc.).

I'm pretty sure that Thomas' (sic.) life and achievements (read: lack thereof) don't warrant such treatment.

Hence, "Thomas'" => "Thomas's".

Yes, I'm a pedant, but this dickhead deserves the full force of my pedantry. (Piece of shit bastard, that one.)

[West Texas Boy]

+1

I'm a pedant, too, grammar being a big area of concern for me.

And formal wear, too. (It's called BLACK tie for a reason, people!)

Go ahead, call me racist.

[Shirley Sherrod]

It's called BLACK tie for a reason, people!

We prefer "ties of color." Cracker.

[West Texas Boy]

See, multiple colors, plaids, prints, all that shit is NOT FORMALWEAR! That's what you call a costume.

So sometimes, "black" is the proper term. You racist.

[name your style guide]

d and West Texas Boy,

where is the source of this brand of pedantry? Because I am not familiar with the "historical figure" possessive exemption.

AP Guide generally just adds the apostrophe to any name ending in s: Jesus', Thomas', Williams', Burns', Flowers'.

Chicago Manual of Style's general rule, which is similar to Strunk and White, states: The possessive of most singular nouns is formed by adding an apostrophe and an s, and the possessive of plural nouns by adding an apostrophe only. So, Jesus's, Thomas's, Williams's, Burns's, Flowers's. CMOS does list a number of exceptions and options; none, though, having to do with the historical importance of the person. Then there's 7.23 an alternative practice: Those uncomfortable with the rules, exceptions, and options outlined above may prefer the system, formerly more common, of simply omitting the posessive s on all words ending in s?hence "Dylan Thomas' poetry," "Maria Callas' singing," and that business' main concern...."

[Byron]

+1

That was some pretty shaky pedantry.

[name your style guide]

I found the problem, it's Stunk & White prescriptivism. As all good readers of Language Log know, Strunk & White is crap.

[West Texas Boy]

Yes, my mom is an English teacher and I was brought up on Strunk and White, so that's what I go with.

You gotta draw a line somewhere and that's where I draw mine. LOL

[name your style guide]

Fine, just recognize this isn't about grammar being correct or incorrect. It's you calling out other people for not conforming to your pet peeves.

[Clich? Bandit]

I like Grammar Girl, ohh and the hot nerdy chick that was on TED.

I am going to put my dangling participle in your dipthong

[cy99]

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[Chinny Chin Chin]

Interesting.

Have you met Privacy Lou? He should be along presently...

[hmm]

That's racist.

[Phil]

Why is it fraudlent to collect rent while you're being foreclosed on? Why should the renters care? They're getting what they contracted for at the price they agreed to.

[Ken Shultz]

Surely you see the irony of paying rent to someone who wouldn't own the property if he'd been foreclosed on.

If you rent an apartment from me, and I don't really own the building...

That's a little odd isn't it?

Think of it like a car. I sell you a car under the condition that you make monthly payments to me--what if you find out I don't really have the title and I've been keeping all the money you send me for the payments.

...but I haven't been making the car payments to the bank?

Is that car stolen property? Are you in car limbo?

I don't want to rent an apartment in a situation like that.

[Phil]

It doesn't matter that you own the building. I could be subletting it from you if you're a renter. Or not. All I care about is that I got to live in the apartment at the price I agreed to.

Again: why should I care if you're behind on your payments or not? That's between you and the bank.

[Tulpa]

I don't want to rent an apartment in a situation like that.

That's the same situation you'd be in if a landlord who had full ownership of the property sold it out from under you. The new owner could kick you out before the original lease was up (though I believe most states have a set transition period). It's not remotely "fraudulent" as Cavanaugh calls it.

[Ken Shultz]

I don't think he called it fraudulent.

Jesus Christ, y'all...you're lookin' so hard to call somebody out for some detail, you're missin' the forest for the trees.

If you're not gonna use my rent to pay the mortgage, you might as well let me keep it--surely somebody here can see that renters not paying their rent is a lot like an owner not paying his mortgage!

If a landlord is suing the bank because they made him pay his mortgage, surely a renter can use the same logic to sue the landlord because the landlord made them pay rent.

One's as bad as the other. That's the point. ...except that the landlord is playing it both ways. Why can't two play at that game?

That's the comparison. Sheesh.

[Tulpa]

RTFA.

If anybody should be suing Wells Fargo, it is Thomas' tenants, for not foreclosing on him while he's running a completely fraudulent business: living free and collecting rents.

As for your larger point, a lease and a mortgage are very different types of arrangements.

[Tulpa]

In fact, below you actually quoted the part where Cavanaugh said he was being fraudulent, so it's a bit bizarre you forgot that fact here.

[Ken Shultz]

I guess I didn't read it as the legal definition of fraud.

Surely you the comparison though?

Not everything has to be defined legally.

And comparisons are apt, even if they're not alike in every single way.

[Ken Shultz]

"If anybody should be suing Wells Fargo, it is Thomas' tenants, for not foreclosing on him while he's running a completely fraudulent business: living free and collecting rents."

That's the part that's tough to understand.

And a lot of the benefit of owning rentable property is in the depreciation. Far be it from me to fault someone for not paying enough in taxes, but you can bet your Bass he isn't paying taxes on 100% of that rent like it's ordinary income either.

If it's rented at market, he's probably makin' out like a bandit.

[Paul]

But if the loss of overtime pay is enough to render you unable to pay your mortgage, you are by definition a "reach" borrower.

This entire blogpost should have been condensed to this sentence. Nothing more need be said.

[Tulpa]

I have to take issue with that part. A lot of city bus drivers are working like 60 hours a week, in which case overtime pay is over 40% of their salary.

I would think that most even "legitimate borrowers" are going to be driven to default by that level of a pay cut. That said, the guy sounds like a douche and he should have been foreclosed on.

[Paul]

Well, yeah, but still.

I mean, here's the thing. I've been salaried... well... most of my life. And I'm in the private sector so maybe my view of 'earning' is a little more, shall we say, conservative.

Having said that, I've never worked for years under a regime of 'mandatory overtime' with big phat pay and bennies tied to it. If I worked overtime, you got a pat on the back and you went home with the same paycheck. Which is why I consider overtime pay to be something that shouldn't be reasonably counted on, like the regular 40 hour pay level.

I stand by the concept, if you're buying houses betting on overtime, you're a reach borrower. No one is going to fault a full time employee for getting forclosed when he gets cut to part time. But when you get cut to full time? Please.

[Rhywun]

Well, the word "overtime" has been overloaded by unions to mean just another perk they get for hanging around longer than anyone else. It's therefore entirely believable that this guy planned his budget without considering what "overtime" means in the real world.

[Tulpa]

If he had been getting overtime every week for years, then there's nothing wrong with planning his budget around it. That's as true in the private sector as in the public sector.

I mean, if you're working an hourly job where you normally get 40 hours a week, and then due to the recession your employer cuts everyone to 30 hours a week, does that mean you are guilty of not planning your budget for the lower number of hours?

[Butts Wagner]

I mean, if you're working an hourly job where you normally get 40 hours a week, and then due to the recession your employer cuts everyone to 30 hours a week, does that mean you are guilty of not planning your budget for the lower number of hours?

Yes

[Paul]

does that mean you are guilty of not planning your budget for the lower number of hours?

Tulpa, there are some people who claim that you're guilty if you fail to plan your budget for losing your job. I'm not anywhere that much of a hardass because under my current earning regimen (I've got an earning problem, not a spending problem) if I lose my job, I'm right fucked.

But when you put permanent spending items in your budget based on a 'perk'? That's concerning.

[Joshua Corning]

Yeah well this guy is a crook and bla bla bla.

But recently in my neck of the woods and in my business i was looking at some distressed properties owned by a particular developer. In my due diligence i was looking at some recorded loan documents i got from the County and found that in one development the bank (not Wells Fagro) had a first on 16 divided and developed lots...and here is the kicker...the developer giving not one dime to the bank somehow convinced the bank to move its position off 14 of those lots and put it all on 2 of the lots.

In essence giving the delinquent developer 14 lots free and clear.

The point being that many of these fucked up situations are not just about the evil borrowers but also about the really really stupid bank officers who let this shit slide.

It would not surprise me in the least to find a really stupid loan officer was also involved in this.

[Butts Wagner]

I like this story from the article:

Pinole resident Charles Rinne, 63, is no longer employed, but the retired postal worker says he could keep paying the $1,300-a-month mortgage on his two-bedroom condominium. Instead, in February, he stopped.

He considers defaulting a way to live more affordably after years of racking up debt.

Rinne purchased his condo for $26,500 in 1973 and over the years refinanced it several times. He said he ran up credit card debt and had some dental surgery that was not fully covered by insurance.

[designer handbags]

Why don't they just put through some sort of legislation that makes the person they elect from 2011-2017 able to serve an extra 2

months in this one instance? Or is it a US Constitutional issue?

[Lost_In_Translation]

I'm not familiar with the mortgage refinancing process but is it possible this man instead of defrauding the bank, really is just trying to reach a lower monthly payment and has been saving all of his extra income for a lump sum payment when an agreement is reached? Better to hold on to that money until an agreement is reached than lose all of it plus the property with the same consequences.

[R C Dean]

The new owner could kick you out before the original lease was up (though I believe most states have a set transition period).

It probably varies by state, but I believe that this is not the case. The new owner takes subject to the lease. He can still kick you out, just like the original owner can, of course, but doing so is a breach of the lease.

[Tulpa]

In PA, they can kick you out after 90 days of taking ownership (though I suspect they would rather have you sign a new lease). Then again, PA is notorious for having landlord-tenant laws that are stacked in favor of the landlord (for instance, the landlord can enter the premises with no notice to the tenant at any time to conduct "housekeeping inspections" and the like).

[David Perry]

"Then again, PA is notorious for having landlord-tenant laws that are stacked in favor of the landlord"

However, having worked for a PA landlord and having presented cases in landlord-tenant court, I can tell you that this bias is generally cancelled out by the leniency of the courts toward tenants. For instance, if you signed or renewed a lease for a year, then moved out after the first month, technically you were on the hook for the rent until the end of the year or until the apartment was re-rented, whichever came first. However, in practice the courts would never require the tenant to pay more than two months' rent. This actually created a perverse incentive similar to those who abandon mortgages; it made more sense to skip out than to stay in the apartment and get three or four months behind, which the courts often would require the tenant to pay (although actually *getting* the money was of course a different matter.)

"(for instance, the landlord can enter the premises with no notice to the tenant at any time to conduct "housekeeping inspections" and the like)."

I don't know what the law is, but the standard lease created by the PA Assoc. of Realtors (which I've now had in three different apartments) requires 24 hours notice for the landlord to enter the apartment unless in emergency (or, of course, if the tenant waives notice, which one would normally do if you're calling in a maintenance problem.)

[TRO]

I'm trying to figure out why his being a public employee legitimately figures into the headline of your post.

Are their no scamming private sector home owners doing this same thing? Is it a unique thing to government workers?

The answers are yes and no respectively, but hey, any chance to slam public employees is all good here in Reason-land.

[Rich]

Sorry, many people buy a place that has tenants so the rent will pay for them to live free. Not illegal and actually good business sense. As to not paying the mortgage - typical, never should have gotten the mortgage in the first place but hey he is an union employee

[misha]

I used to process mortgages for a bank just before the crisis occurred. I couldn't believe the number of applications for 3% down loans. I have no idea how many went through, but considering their volume, there was probably no disincentive not to apply at that ratio.

[Cash today]

Its gud that personal finance has been available for the people easily and they can use this assitance of them for their benefit