One of the cartoons I post when appropriate is called the National Squatters Entitlement. It speaks to a truth about people’s attitudes toward home ownership. People convince themselves they own property even if they have no equity claim. Their names may be on title, but all they really own is their loan. I discussed this at length in Money rentership: housing and the new American dream:
The mortgage encumbrance gets to the core of the unnoticed change in people’s concept of property ownership; people who have little or no equity stake in a property have no ownership despite what legal documents may say. What they have is money rentership and the illusion of home ownership. Emotionally, they still feel like homeowners; they still behave and believe like homeowners, but they’re not home owners. They own a loan; they’re loan owners.
The couple featured in today’s post are an extreme example of how people with no real claim to property come to feel like they own it. Like the cartoon jokes, “Once a lender enables us to occupy property, the new national squatter’s entitlement means we own in no matter what happens.”
A lender gave this couple 100% of the money required to take possession. These people failed to make even a single payment. No money has gone from the “owners” to the lender either up front or while they had possession. Basically, the bank bought this property, let these people move in, and now these people believe they “own” it. They own nothing. Try telling them that.
By Annys Shin, Published: March 3
The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington.
In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.
The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s laws designed to help delinquent homeowners avoid foreclosure.
When a loan owner files for bankruptcy, they are given an automatic stay from foreclosure. The lender must petition to have the property removed from the bankruptcy. When they succeed, the borrower can cancel the bankruptcy and refile. The lender must then go through the process again. After two or three times, the lender can petition the court to prevent the borrower from repeatedly filing bankruptcy and putting the property into the estate, but this all takes time. I spent a year trying to get a similar deadbeat couple out of a property in Las Vegas. It is abuse of the bankruptcy system, but savvy and unethical borrowers do this all the time. At this point, it’s just considered part of the process. Borrowers don’t question the ethics or morality of what they do.
… “How is it people can stay in a house for five years without ever making a mortgage payment?” said Thomas A. Lawler, a former senior vice president at Fannie Mae who now runs his own consulting firm in Loudoun County. “That’s a screwed-up process. It’s an example of how the process is broken.”
These people are the poster children for everything wrong with the foreclosure system. They are deadbeats gaming the system. In the end, when they finally lose their home, the worst that will happen to them is they might have to declare bankruptcy. In the meantime, they get to live in a mansion with no payments or rent. Not a bad tradeoff from their point of view.
The Ritters, who bought their house for $1.29 million with almost no money down, are hardly representative of the vast majority of Maryland’s distressed homeowners.
During the boom, they set out to become mini real estate moguls, buying properties and flipping them for a profit. In the process, Keith Ritter, 54, went from being on probation for bankruptcy fraud and making minimum wage to being a successful real estate investor and landlord with a six-figure income. Then, when the housing market tanked five years ago, the couple found themselves facing multiple foreclosures.
The Ritters have tried to negotiate different payment arrangements with their lender to save their posh home near National Harbor, they said, but to no avail.
“It was never our intention to get here and never make a mortgage payment,” Keith Ritter said. “We don’t believe in living for free.”
WTF? He doesn’t believe in living for free, but it hasn’t bothered him enough to actually pay for his housing over the last five years. The hypocrisy and cognitive dissonance is astounding. He genuinely sees nothing wrong with what he is doing. Not just does he feel completely justified in his theft, he believes himself a hero — a David versus Goliath.
But he and Janet, a 51-year-old real estate agent, make no apology for using every tactic available to them to stay in their house, including challenging the foreclosure sale in court, requesting mediation and claiming they had a tenant living with them. Their adversaries, they argued, are giant financial institutions with armies of lawyers that are out to make as much money as possible at the expense of homeowners.
There it is, the evil banker justification. Of course banks are trying to make as much money as possible at the expense of homeowners. That’s their business model. How is it that if someone is trying to make money, that makes stealing from them okay?
“When a bank does all it can to save itself, that’s good business,” Keith said. “When a homeowner does the same thing, he’s called a deadbeat.”
It’s not him being a deadbeat that’s the problem here. If he wanted to quit paying the mortgage and move out of the house, that’s fine. It’s the gaming the system to continue to squat in the house that is so bothersome. Move on already. Make room for someone who is willing to pay for the property. Loser.
Reprieve after reprieve
For a guy who has lost much of his wealth and is on the verge of getting booted from his home, Keith Ritter is oddly calm. He says things such as, “No matter what happens, we are at peace” and likes to quote Scripture.
He and Janet pray daily, read the Bible, attend Pentecostal services and are reliable tithers. Their faith fuels their hope that they can somehow stave off eviction.
Some people use religion to justify heinous actions with scripture. I’m not sure which Bible passage justifies the way these people have gamed the system to occupy a house the bank bought for them, but they have no problem with it. Perhaps they simply ignore the sections of the Bible which are inconvenient. One of the functions of religion is to educate people in proper conduct. Apparently, the lessons aren’t taking hold with these people.
… “I saw real estate as the way to wealth,” Ritter said.
By the 1990s, he was buying up properties in Northern Virginia, and he quickly learned that making money in real estate can be harder than it looks.
“I made a lot of mistakes,” he said.
According to federal prosecutors and court records, Ritter bought real estate and then put the properties in the names of family members. When he fell behind on mortgage payments, he filed for bankruptcy protection in his relatives’ names in various jurisdictions to stop foreclosure proceedings. Then he tried to get the bankruptcy filings dismissed without telling the mortgage lenders. He pleaded guilty in 2000 to bankruptcy fraud and was sentenced to 15 months in federal prison in Petersburg, Va., where he wrote the first of three books about his deepening faith, “Life From the Inside.
“I’ve always loved God,” Ritter said. “I haven’t always obeyed God, but I’ve always loved him.”
The Dalai Lama noted that “Faith without moral values is not faith.” Mr. Ritter is a clear example of the truth of those words.
When he got out of prison, he spent two years on probation, working at a Sears to pay $10,000 in court-ordered restitution.
By the time his probation ended in 2004, the housing boom was underway. ..
At one point, they owned seven properties. In 2004, the run-up in prices was so steep that the Ritters grossed more than $200,000 in six months, off two deals. In 2006, they made close to that amount with a single sale.
The couple, who have no children, began driving Mercedes-Benz sedans and taking trips to Europe and the Middle East. They also donated $6,000 to a church in Springfield, court records show.
They may have made a lot of money, but apparently, they didn’t save any of it. They couldn’t find a dime for the down payment on the $1.3M house they bought.
Ritter said he began to worry in 2006, when a few deals started falling through because the buyers could not get financing. He started looking into buying a restaurant, where he could showcase his wife’s cooking. Then a real estate agent friend came by, saying, “I’ve got a house for you.”
The custom-built property, on three-quarters of an acre on Riverview Road, was a showstopper, with Palladian windows, high ceilings and a gabled roof. Inside, French patio doors led to a magnificent sunroom. The dining room had red walls, a tray ceiling and a chandelier the original owner had brought back from Prague. Upstairs, the master bedroom had a sitting area and a three-way fireplace. The windows surrounding the tub in the master bath offered incredible views of the Potomac. And the house next door had sold for $1.7 million.
The Ritters were not sure they could afford the million-dollar-plus price tag until they were approved by Realty Mortgage Corp., a now-defunct Mississippi lender, for $1 million. Another lender covered the down payment.
The couple called their new residence “God’s house” because, as Keith Ritter put it, “that’s the only way we could have been approved for a loan.”
… For the Ritters, the housing crash was a catastrophe. The couple still owned five properties, four of which they had rented out.But falling home values meant they could not refinance the mortgages, some of which carried adjustable rates. Pretty soon the rents they were charging were not covering the mortgages. Janet Ritter’s sales commissions started to dry up, along with other sources of income. By the time the first mortgage payment of almost $7,600 on the Riverview Road house was due in January 2007, they faced a decision: which properties to save.
“Do we put the money we had left in this one? Or is it better to spread it to the others?” Keith Ritter recalled wondering.
They chose the latter course, expecting to be able to catch up on the Riverview Road payments later. But that didn’t happen.
Take a moment to contemplate the timing of events. They are in such severe financial distress that they are unable to make the mortgage payments on their Ponzi empire, yet they just closed on a $1.3M house? If they were so strapped for cash, why buy the house? They obviously knew they were in trouble because they missed the very first payment.
The first foreclosure against the Riverview Road house was filed in 2007. By that time, Realty Mortgage no longer owned their loan, which would change hands at least two more times. The foreclosure case was brought by lawyers representing Mortgage Electronic Registration Systems, or MERS, the controversial electronic mortgage registry that some lenders used as a proxy to initiate foreclosures. But the proceedings ground to a halt the next year after Janet Ritter filed for bankruptcy protection. The bankruptcy case was later dismissed at her request. …
Ritter defended his tactics.
“Anytime anyone tries to take your home,” he said, “you are going to use the legal system to save it.”
… The Ritters initially agreed to a short sale, with a starting sales price of $1 million that was later dropped to $799,000. The house did not get any takers…. The Ritters then asked for a remedy that had just been approved by Maryland lawmakers to help distressed homeowners: mediation.
“Defendant(s), humbly prays that the Honorable Judge, will recognize that this process, written into law by Governor O’Malley was to prevent just this situation, whereby the note holder can . . . trample on the rights of the homeowner,” Keith Ritter wrote in a December 2010 mediation request.
When the mediation day arrived in April, however, the Ritters were not there. They later said that, because of a mailing address mix-up, they never got the necessary paperwork. They complained that they were denied mediation, but Prince George’s Circuit Court Judge Thomas P. Smith ordered the house sold.
They didn’t show up for their mediation, gave a laughably lame excuse (their dog ate it, right?), then they have the nerve to complain about being denied remediation. They never intended to resolve anything through remediation. What they are pissed about is that they missed an opportunity to game the system for several months while they dragged out the remediation.
Janet Ritter filed for bankruptcy, this time in Georgia, where the couple owned another house that was later lost to foreclosure. The foreclosure on the Riverview Road house was stopped again until that bankruptcy was dismissed, too. …
Serial bankruptcy filings to delay legal procedures is abuse of the system. These losers have convinced themselves otherwise.
The Ritters immediately challenged the sale in court. Judge Smith ratified the sale. The couple then said they had a tenant living with them, potentially triggering recently passed state and federal laws that prohibit tenants from being tossed out when their landlords are foreclosed on. Kondaur’s attorneys again demanded possession of the house, usually the last step before eviction. A hearing was set for mid-December.
The day of the hearing, the hallway outside the courtroom buzzed with speculation that the couple in the million-dollar home had finally reached the end of the road.
Hillman, the Kondaur attorney, arrived first. … The Ritters arrived soon after to represent themselves. The tenant, whom the judge had ordered to appear, was a no-show.
Janet Ritter argued that Kondaur had no right to foreclose, because it could not prove it owned the note on the house. She said some of the paperwork documenting the mortgage’s many transfers from one pool of mortgages to another was fraudulent because it had been “robosigned,” …
In response to Janet Ritter’s argument, Hillman held up an original copy of the note, with Keith Ritter’s signature in blue ink.
Judge Smith awarded Kondaur possession of the property. Two days later, Kondaur filed for eviction. The Ritters knew it was only a matter of time before the sheriff showed up at their door to deliver it.
… “People think, because you haven’t paid, you must be a bad person. But not everything is black and white,” Ritter said. “A lot of things happen between the lines.”
Ritter still thinks he can work something out to save his house. He is trying to persuade an investor to buy the house from Kondaur and then sell it back to them. It’s a long shot, and Ritter said he has been praying a lot. In January, he fasted for 30 days “for spiritual cleansing and guidance,” he said.
Let me provide some guidance: GET THE HELL OUT OF THAT HOUSE, SQUATTERS!!!
He has found solace in his Bible, especially a passage from Matthew that he has bracketed in black ink from the parable of the unforgiving servant.
“At this the servant fell on his knees before him,” the passage reads. “ ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ ”
Median home price is $380,000. Based on a rental parity value of $513,658, this market is under valued.
Monthly payment affordability has been improving over the last 1 month(s). Momentum suggests unchanging affordability.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Resale prices that are falling generally causes payment affordability to increase.
Rents have been rising for 12 month(s). Price momentum suggests rising rents over the next three months.
Rents that are rising generally causes payment affordability to decrease.
$529,000 …….. Asking Price
$304,000 ………. Purchase Price
8/13/1999 ………. Purchase Date
$225,000 ………. Gross Gain (Loss)
($24,320) ………… Commissions and Costs at 8%
$200,680 ………. Net Gain (Loss)
74.0% ………. Gross Percent Change
66.0% ………. Net Percent Change
4.4% ………… Annual Appreciation
Cost of Home Ownership
$529,000 …….. Asking Price
$105,800 ………… 20% Down Conventional
3.93% …………. Mortgage Interest Rate
30 ……………… Number of Years
$423,200 …….. Mortgage
$100,417 ………. Income Requirement
$2,003 ………… Monthly Mortgage Payment
$458 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$132 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$2,594 ………. Monthly Cash Outlays
($323) ………. Tax Savings
($617) ………. Equity Hidden in Payment
$143 ………….. Lost Income to Down Payment
$152 ………….. Maintenance and Replacement Reserves
$1,949 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,790 ………… Furnishing and Move In at 1% + $1,500
$6,790 ………… Closing Costs at 1% + $1,500
$4,232 ………… Interest Points
$105,800 ………… Down Payment
$123,612 ………. Total Cash Costs
$29,800 ………. Emergency Cash Reserves
$153,412 ………. Total Savings Needed
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
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