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Strategic Defaulter Walks Back To His Mortgage

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STRATEGIC DEFAULT MORTGAGE
Martin Poole

Ernie Soto and his wife are moving back into their house in Alamogordo, N.M., the same house they abandoned at the beginning of 2010 after Soto lost financing for his fledgling mechanic business.

Soto, 47, said that when they moved into a nearby trailer that January, they didn't expect their house would just sit there, vacant, for a year and a half. They didn't know that at that time that it was taking banks 410 days on average to actually seize a home after its owner quit making payments, according to data from Lender Processing Services. (It now takes 580 days.)

So when Soto heard of a new program that helps struggling borrowers -- but only ones who are still in their homes -- he decided he should move back into the still vacant home and give it a shot.

Soto said he told himself, "Okay, I'll move my ass back in there." He and his wife brought most of their belongings back to the house this week.

He told the company that services the mortgage, Ocwen, that he wanted to work something out. He said Ocwen turned him down for a mortgage modification on Thursday. Now he's going to try to get into the federal Emergency Homeowners' Loan Program, which would pay his arrears -- the money that should have already been paid -- with a forgivable loan that would also subsidize mortgage payments for two years. The $1 billion temporary program is part of the 2010 Wall Street reform bill.

Earlier this year Soto landed a job at a furniture rental store, to which he said he commutes more than 200 miles a day. He'd been totally unemployed since April 2010, when he lost his job as a manager at a car dealership.

He said he's going to have to fork over $1,100 to get the electricity and gas reconnected. "We're hoping we can get it all fixed," Soto said. "I didn't expect this kind of expense. A few years back I could have told you it was nothing, I had it in my front pocket."

HuffPost reported Soto's decision to ditch his mortgage in a February story that probed the financial and psychological consequences of strategic default. Borrowers who owe more than their homes are worth are more likely to stop making payments even if they can afford to, but most borrowers in this situation, known as being "underwater," keep paying even though it may not be in their financial best interest. (That's why it's called "strategic default" and not "stupid default.")

Soto gave up on his mortgage after draining his savings to stay current, going through both a bankruptcy and a thoroughly frustrating time trying to get a modification. The indignity of it really got to him. The low point came when he had to put down his sick dog, which he said he remembers vividly. He'd arrived at the Ark Animal Hospital, a one-story building off a four-lane road in Alamagordo in August 2009.

"I pulled up in the truck. He knew, the dog knew, 'I don’t recognize this place. Something's gonna happen and I don't wanna go in.' I had him outside, he wouldn't go in with me.”

As Soto tried to coax nine-year-old Petey, named for the Little Rascals’ Pete the Pup pit bull, a tow truck pulled into the lot. Its driver recognized Soto and his 2000 Ford Ranger.

"He's like, 'Are you Ernie?' He's like, 'I'm here to pick up the truck.' I says, 'Can this wait?' He's like, 'It really can't.' He gets on the phone. He sees what’s happening.”

Soto said the repo guy got on the phone with his superior and tried to explain what was going on to see if he could get out of the assignment, but the superior had no sympathy for Soto.

'He told me, 'Man, I gotta stay. I got to take the truck. I'll let you gather your things.' " Soto said. "I got the dog on one side, I got people going in and out. So I called my wife and said, 'You know, I'm sorry, you're going to have to come and get me.' "

"My wife finally shows up, we both walked in with the dog and they put him down. Of course they did what they did and the guy hauled the truck off. I went back to work."

Soto said he wouldn't have left his house when he stopped making payments if it hadn't been for that experience. "I was in unfamiliar territory. I don't lose houses every so often," he said. "I was thinking it'd be like the car, they'd come throw me out in three months."

Now that he's back in his house, Soto sounds much more hopeful. "I'm still upset but I've learned to deal with it a little differently," he said. He wants to tell his story so other people know they're not alone. "They just need to keep trying," he said.