Agree. If you're gonna foreclose, fine, move out and rent something else but don't stay living in it. Complete lack of integrity and a police officer at that. It's called an investment, sometimes you win and sometimes you lose. Sometimes you gotta bite the bullet and take a loss.
The banks don't want the deadbeats to move out because the property falls into worse disrepair than if someone is living in it.
Welcome to Moral Hazard. If someone doesn't pay their side of a contract and the leinholder has a significant reason not to make them pay, the system is completely unable to deal with it.
The bank doesn't want to move the distressed property to the negative side of their balance sheet. They also don't want it losing more value by being vacant and vandalized.
The fix, is of course, to tighten up requirements for payments as the same as foreclosure on the bank's books. They shouldn't be allowed to carry it with no payments made for multiple years on the (maybe someday we hope) positive side of their balance sheet.
The government will not force that upon their favorite banks who not only were required to take some of these deadbeat mortgages from failed institutions, but also get special favors at the Fed to remain solvent.
If they had to mark these properties to their market value on their balance sheets, a large number of U.S. banks would be insolvent and required to be taken over by FDIC and parted out. Government would end up with the bad debt and the banks would effectively go through the cream of the crop and cherry pick the profitable mortgages to buy for pennies on the dollar.
The banks will whine and scream in the current situation that they're not required to foreclose.
It's a ****-sandwich for those of us who've never over-bought on housing nor missed a payment on our mortgages (even with a year out of work in my case), because we played by the so-called rules (which turned out to be imaginary) and folks like this Class-A jerk don't and guess who gets government special treatment for refinancing, backing to force his lender to negotiate, etc... while the rest of us who are paying our bills get the socialized higher taxes and Fed games to drive up inflation to "fix" the problem.
They're not even close to fixing it. Anyone who believes the press that the mortgage crisis is over, isn't paying any attention at all. If there are normal folk, police officers even, who are still 50% upside down in mortgages, there isn't a fix for that until the bank forces the issue or renegotiates, neither of which is to their benefit.
There is roughly zero chance that:
A) He'll take three jobs to service his debts he signed up for. Not in small part because jobs are hard to find.
B) He'll magically increase his income by a large enough margin to start paying again any time soon.
Everyone says "the banks created this!" and they did, but there is plenty of leadership and government blame to go around. The majority of bad loans weren't loaned "naked" by the banks. They were both backed by government (Fannie and Freddie) and the insurance companies (AIG). Government was highly involved.
