I'll Be Watching (And Chasing) You

When strategic defaulters are considering walking away from their homes, they'd be advised to make certain that if they have an outstanding second lien loan on their home, they either plan to pay it or otherwise hide their assets in a remote location and leave the country. You never can tell when the junior lender might retain a guy like Leo Stawiarski Jr. to track you down, sue your hindquarters, stew your pet rabbit "Alf," and then start getting nasty. Actually, Leo sounds like a calm, rational, patient, and persistent lawyer, who understands how to analyze the situation and deal with the "walk-aways" in ways that results in many of them discovering that they didn't walk away far enough. In an interview posted yesterday on Housing Wire, Leo lays out the options. First, you work with a borrower to see if you can't get a sale, a short sale, or a repayment plan worked out, based on the financial condition of the borrower and the value of the equity in the collateral. If you can't work it out, you beat the borrower over the head with a club and keep beating him or her until they pay up pursue your contractual rights under the loan documents and applicable law. You sue the borrower, obtain a judgment, and then execute the borrower on the judgment, pursuing the ever-popular garnishment of wages and/or bank accounts. He doesn't discuss other tactics, such as filing the judgment lien in the real estate records, where it clouds title to any real estate you may buy or sell in the foreseeable future (or for a few years, at any rate), and, of course, the ever popular remedy of "kneecapping," used to great effect by the IRA to discipline miscreants in Northern Ireland yet sometimes frowned upon by law enforcement authorities in this country. Leo isn't heartless, although since we're describing an attorney, that might mean he's got a heart the size of the judgment center of Charlie Sheen's prefrontal lobes or of Kirstie Alley's hips. It's difficult to be certain. Regardless, he understands that borrowers may be in dire straights, but ultimately, that's not his problem. While we understand that borrowers may find themselves in difficult financial circumstances, as a lawyer representing the second mortgage holder, my primary focus is to enforce the terms of the binding contract between the lender and the borrower. At LCS Financial, our objective is to ensure that the borrower meets their contractual obligations to our clients, taking into account the borrower's ability and willingness to repay the indebtedness. As I said last week, that's a lawyer who's just doing his job. Don't like it? Change the system. I happen to agree with his comments about strategic defaulters. I especially appreciate an observation that isn't made often enough. Ultimately, strategic defaulters screw a lot more people than lenders. These defaults adversely affect neighborhood property values because they lead to excess inventory and property deterioration. Moreover, strategic defaults generally impact taxpayers. Most loans are now government owned, insured, or guaranteed which means taxpayers are essentially funding strategic defaults. The key is to create an environment of responsible homeownership where financially capable borrowers honor their obligations because they know there will be consequences if they simply walk away. One of the clearest ways to create such an environment is for servicers and lenders to pursue their remedies when faced with strategic defaults. Low-key, rational, and relentless. The perfect temperament for a "collector" . *********************************************************************************************************************** I'm off to the annual Texas Bankers Association Legal Conference. See you next week, or if you'll be there, see you tomorrow..

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