Man Bulldozes Foreclosed House

Terry Hoskins Bulldoze House Mortgage Foreclosure PhotoA Moscow, Ohio man decided to bulldoze his house rather than let the bank take it.

Like many people, Terry Hoskins has had troubles with his bank. But his solution to foreclosure might be unique. Hoskins said he’s been in a struggle with RiverHills Bank over his Clermont County home for nearly a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $350,000 home.

“When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it — no, I wasn’t going to stand for that, so I took it down,” Hoskins said.

Hoskins said the Internal Revenue Service placed liens on his carpet store and commercial property on state Route 125 after his brother, a one-time business partner, sued him. The bank claimed his home as collateral, Hoskins said, and went after both his residential and commercial properties.

Hoskins said he’d gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure.

Hoskins told News 5’s Courtis Fuller that he issued the bank an ultimatum. “I’ll tear it down before I let you take it,” Hoskins told them. And that’s exactly what Hoskins did.

This story makes no sense on a number of levels.  For example, it’s just implausible that, if Hoskins only owed $160,000 that the bank would have refused a $170,000 payoff.   One, I don’t think they can legally do that.  And, two, they’d owe him the difference between what the home brought at auction and what he owed, minus transaction costs.

John Cole, though, doubts that bulldozing assets owned by others ahead of foreclosure will catch on but offers “it would be great if it did.”    He doesn’t explain why.  But it’s apparently a common sentiment, judging from the comment thread at WLWT5.

Lending institutions provide a tremendous public service, albeit for a hefty profit.  Most of us simply could not afford to buy major end items like cars, much less houses, without the availability of banks and mortgage companies to front us the cash.  In return for the ability to buy and live in a home we couldn’t otherwise afford, we agree to pay a fully-disclosed monthly payment for a fixed period of time.   Further, the lender gets a lien on the asset in question as collateral in the event of nonpayment.

There was a blog meme a couple months back as to whether it’s “immoral” for people whose houses are no longer worth what they paid for them — a phenomenon that’s been dubbed being “under water” in one’s home — to simply walk away, handing the mortgage holder the collateral in return.   My sense is that it isn’t:  Both sides have a contract and the borrower is exercising his rights under the contract.  In accepting the asset as collateral, the bank assumed the risk that its value would decline because of the vagaries of the market.   It may or may not be a smart financial decision in a given set of circumstances, but morality doesn’t enter into it.

Here, though, Hoskins’ actions are clearly immoral.  He’s committing an act of theft against an institution that lent money in good faith, expecting either payment or return on the asset.

He’s almost certainly committing a crime, too, in so doing.

FILED UNDER: General
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. John Cole says:

    I was actually just being a jackass (which should come as no surprise). If you watch the video, the guy is obviously a total clown. I can almost guarantee he is a total PITA to deal with- an obstinate hothead.

    At the same time, if more people engaged in this behavior, cramdown might become a lot more popular. Although if we look at the Bankruptcy Bill and the all the banker shortsightedness of the last decade, I doubt it.

  2. Francis says:

    I don’t see the crime. Until the bank actually foreclosed, the property was legally his. Immorality shouldn’t enter into the discussion either; corporate entities regularly argue that they’re barred (due to their fiduciary duty to their shareholders) from considering the morality of breaching a contract. Individuals have the same duty to themselves and their families.

    As to whether he actually breached a contract, we’d have to look to the terms of the mortgage. Here, there’s likely a cause of action. Virtually all mortgages have a clause prohibiting “waste” for precisely this reason — the lender wants to be able to take the asset at its full market value.

    So the bank, if it’s so inclined, can sue him.

  3. Herb says:

    “I’ll tear it down before I let you take it.”

    That seems to be a sentiment on the rise these days. Not a good thing.

  4. legion says:

    The bank may have the option of suing him, but in this general kind of situation (don’t know enough about this dude’s specific circumstances), the person seriously contemplating this sort of thing likely doesn’t have much in the way of money or seizable assets anymore… and the bank _knows_ that. Unless this guy actually violated a criminal statute with this stunt, the bank’s practical options seem limited.

    Here, though, Hoskins’ actions are clearly immoral. He’s committing an act of theft against an institution that lent money in good faith, expecting either payment or return on the asset.

    While that may be technically true, James, one of the main points of the previous discussion on walking away is that you’re assuming _both_ parties in the transaction _are_ moral – or at least have the same morals standards – and between banks and individual consumers, that is clearly _not_ a safe assumption…

  5. Steve Verdon says:

    The bank may have the option of suing him….

    For what? Considering that many of his assets aren’t worth that much anymore, what are they going to get. A judgement on a guy who can’t pay?

    Of course, if we are taking just Hoskin’s word for it then also take it with a shovel of salt.

  6. Drew says:

    “This story makes no sense on a number of levels. For example, it’s just implausible that, if Hoskins only owed $160,000 that the bank would have refused a $170,000 payoff. One, I don’t think they can legally do that. And, two, they’d owe him the difference between what the home brought at auction and what he owed, minus transaction costs.”

    That’s correct. The bank is not owed the value of its security interest in the asset, just the amount required to extinguish the liability.

    “Lending institutions provide a tremendous public service, albeit for a hefty profit.”

    The business is extremely competitive. Apparently pricing has found its equilibrium.

    “There was a blog meme a couple months back as to whether it’s “immoral” for people whose houses are no longer worth what they paid for them — a phenomenon that’s been dubbed being “under water” in one’s home — to simply walk away, handing the mortgage holder the collateral in return. My sense is that it isn’t: Both sides have a contract and the borrower is exercising his rights under the contract. In accepting the asset as collateral, the bank assumed the risk that its value would decline because of the vagaries of the market. It may or may not be a smart financial decision in a given set of circumstances, but morality doesn’t enter into it.”

    I think that’s absolutely correct. But it works both ways. That’s why its not immoral for the bank to make the decision to foreclose either,or to refuse credit in the future.

    “Here, though, Hoskins’ actions are clearly immoral. He’s committing an act of theft against an institution that lent money in good faith, expecting either payment or return on the asset.”

    I haven’t had a mortgage in more than a decade, so I don’t know what the maintenance provisions are. But in business transactions part of the security agreement (contract) is that the borrower will maintain insurance, do routine maintenance etc to preserve the value of the collateral. I just don’t know how things stand in small time RE.

    In any event, under normal circumstances Mr. Hoskins could forget about ever being extended credit again. But these days? I expect a press conference at any moment with Obama and Barney Frank castigating lenders for not lending Hoskins money “for the American dream.” God help the banks if Hoskins is a minority.

  7. sam says:

    I don’t see the crime. Until the bank actually foreclosed, the property was legally his

    .

    He, in effect, destroyed the mutually-agreed-upon collateral for a loan he contracted to. Until the loan the was paid off, he does not have absolute control of the property. The bank has a legal interest in the property, and he destroyed that interest. The guy’s a hotheaded asshole.

    @Drew

    I expect a press conference at any moment with Obama and Barney Frank castigating lenders for not lending Hoskins money “for the American dream.” God help the banks if Hoskins is a minority.

    Tsk tsk. Never let an asshole-induced crisis go to political sniping waste, eh?

  8. JKB says:

    I’m not sure what he accomplished. He still owes the bank $160,000. They can still take the land and come after him for the balance.

    I suspect the bank was foreclosing to cover debt related to the business not the home loan.

  9. Drew says:

    My admittedly snarky analogy comes far closer to reality than I suspect you would ever care to, or would, acknowledge, Sam.

    So much of the outrage over historical lending policies (and subsequent bad debt) emerged from studies where creditworthiness was based soley on income. If income was x, and the loan was y, but it wasn’t made here, but was over there to the same income guy……..well, that’s redlining.

    There is much more too it, including net worth, loan to value considerations and: The Big Cahuna – history of actually repaying debts.

    Those are all factors smothered by the politicos/academics/”community organizers” etc for obvious reasons. Hence my point, this guy isn’t just an asshole, he has shown a, uh, “propensity” to not pay his debts – and is in fact a particularly juicy target – for the very thing that the left wanted to deny or cover up in all their railing against lenders. In fact, he’s The Poster Boy for all that was wrong with politically driven lending standards. The sort of guy Barney Frank defended.

    I know you don’t want to hear that. But its just the facts.

  10. PD Shaw says:

    I wouldn’t be surpised if what he did was criminal. He intentionally destroyed someone else’s property interest.

  11. Drew says:

    “I suspect the bank was foreclosing to cover debt related to the business not the home loan.”

    Only if they were cross-collateralized.

    Could be, if he pledged his house on the B-loan.

  12. PD Shaw says:

    Yes, if the guy lived in Illinois, this would probably be “criminal damage to property,” which is a Class 2 felony if the property is worth more than $100,000. The definition of property appears to include “an interest which the offender has no authority to defeat or impair, even though the offender may also have an interest in the building or property.”

  13. sam says:

    @Drew

    My admittedly snarky analogy comes far closer to reality than I suspect you would ever care to, or would, acknowledge, Sam.

    Au contraire. I’ll stipulate that a lot of stuff went on that shouldn’t have. I was just amused that at the tail end of a calm, measured comment, Evil Drew jumped out.

  14. Drew says:

    “I was just amused that at the tail end of a calm, measured comment, Evil Drew jumped out.”

    4 cups of coffee, and hey, its Friday. Now put up yer dukes you sniveling, no-good worthless…………….. ;->

  15. UlyssesUnbound says:

    Those are all factors smothered by the politicos/academics/”community organizers”

    Yep. I can’t walk down the street without seeing a community organizer smothering financial factors. They learn how to smother in community organizing school. It’s all in their handbook “Your Guide to Organizing Communities. Step 1. How to smother financial factors.”

  16. just me says:

    The problem I see here is that the bank just lost $160,000. They are going to be looking to make that money up in some way, which means their customers will be taking a hit.

    And frankly I agree that it is immoral and criminal. It is one thing if a person who is being foreclosed on chooses to sell the appliances and other things in a home, but to destroy the actual home is essentially stealing.

    There are some banking practices that are legal but often seem unethical, but if it wasn’t for a bank willing to loan us the money for our home, we wouldn’t have one.

  17. Lending institutions provide a tremendous public service, albeit for a hefty profit.

    James, I would quibble quite a bit with your definition of what constitutes a hefty profit, but more importantly, for someone who rails against populism so frequently, seeing progressive-like complaints against making profits — especially damnable hefty profits — seems more than a little inconsistent. If it is so damn easy and so damn profitable, why doesn’t ACORN start its own mortgage lending institution and make home loans with only a “fair” profit, whatever that is?

  18. tom p says:

    Not even going to comment on the legality of this man’s actions, but…

    This sort of thing is not as uncommon as most would like to think (tho admittedly, this guy took it to an extreme).

    The wife and I have been looking to buy some property in this time of depressed property values and depressed interest rates (some real deals to be had). We naturally enough have gravitated towards some of these foreclosed properties. Nearly all are damaged to some extent(of the dozens we have seen, only 2 were “OK”), some in ways that boggle the imagination. I walk around the property and I think, “These were people who had a dream. I feel for them.” Then I get inside and my only thought is “HOLY F***!”

    The anger at having a dream taken away is everywhere.

  19. James Joyner says:

    James, I would quibble quite a bit with your definition of what constitutes a hefty profit, but more importantly, for someone who rails against populism so frequently, seeing progressive-like complaints against making profits — especially damnable hefty profits — seems more than a little inconsistent.

    The payback of a standard 30-year mortgage, in which virtually all the early money is interest, is pretty sweet.

    I mention the profit, though, only to note that the great public service provided isn’t done for altruistic reasons but in expectation of making a profit. That’s a fine thing — it’s win, win for both parties — and what makes Hoskins’ action so contemptible.

  20. tom p says:

    On the “morality” side of it…

    Was sitting in a bank this morn to talk about some details of the loan. I had to wait a bit so I took the time to glance through a few of the financial mags they had strewn about the coffee table in the waiting area.

    Amongst all the hyping of the latest snake oil, this line stuck out at me from a column: The banks are not responsible for the melt down, they just “facilitaed the loans” trying to give the American consumer what they wanted. (don’t even remember the rag, so no link, sorry) Say what?

    What ever happened to fiduciary responsibility? To their stockholders, if not any one else?

    They made bad loans to people who could not afford them. But, “It is not their fault.” They were just giving us what we want.

  21. Drew says:

    “If it is so damn easy and so damn profitable, why doesn’t ACORN start its own mortgage lending institution and make home loans with only a “fair” profit, whatever that is?”

    Charles, you ignorant slut!!! They have “loftier” goals.

  22. Drew says:

    “I can’t walk down the street without seeing a community organizer smothering financial factors. They learn how to smother in community organizing school. It’s all in their handbook “Your Guide to Organizing Communities. Step 1. How to smother financial factors.”

    Painfully and embarrassingly ignorant.

  23. Drew says:

    james –

    “The payback of a standard 30-year mortgage, in which virtually all the early money is interest, is pretty sweet.”

    I’d be interested in your calculations. The “early money” comment is irrelevant. A bank funds the principal amount of a loan and pays at a rate, and collects interest on the principal at a rate. Setting aside the ridiculous funding rates now (at taxpayer expense) the spread has historically been 2-4%. Sweet?

    We can get into return on equity, but sweet? How so?

  24. tom p says:

    One last point:

    9 years ago, the wife got divorced. Her ex quit-claimed the property to her. For 4 years she gave everything she had to it (sold everything she owned, gave up all the “finer” things in life). The last year she was borrowing from her 401K to make the payments while she tried to sell it.

    At first she tried to get back the $60k she had in it. She gave up soon enuf and just tried to sell it for what she owed. Problem is, the developer was selling brand new houses in the neighbeorhood for less than what she owed. Finally, after a year, she found a buyer who could come up with all she owed minus $5K. I (foolishly) said “The bank will go for it.”

    The bank said “No.” They said, “Can’t you borrow it from somebody?”

    Well, her family is from Spain, her friends did not have that much money, and me? Yeah… I did, but we had been dating less than 6 months. I loaned her the money for the bankruptcy lawyer….

    She didn’t have any left.

    Long story short? That property was on the market for over a year after it was foreclosed.

    I hope they are bankrupt too.

    PS: Ya think the banks learned? We can still get a loan. And don’t blame it on the gov’t. I haven’t seen gun one to my loan agents head.

  25. tom p says:

    We can get into return on equity, but sweet? How so?

    Drew, quite easy: They get their profit up front. Their equity is guaranteed by the property (unless some a**hole takes a bulldozer to it.)

  26. Grewgills says:

    Doesn’t it matter what the value of the property is with the house bulldozed? If they can still get their $160K+ out of it the only one damaged is the idiot who bulldozed his home.

  27. agorabum says:

    James, you stated mortgages are a deal where “we agree to pay a fully-disclosed monthly payment for a fixed period of time.”
    And that used to be the rule. But over the last 10-15 years, its no longer the case on so many of the mortgages (especially the ones who went bad).
    First time home-owners were given balloon ARMs that would cripple their ability to keep the house if the market ever went south, and this was never explained to them. Mainly because the mortgage orginator did not care; they could sell the mortgage, which would then be securitized. These banks aren’t the Baily Savings & Loan; they’ve been up to shady tricks that would make Mr. Potter blush.
    That said, I would blame the governemnt to some extent, and our society to an even greater extent. It used to be “cavet emptor”, but now there is an expectation that a business must be “fair.” I’d bet there are a lot of people losing homes who didn’t believe that they could be swindled, that regulators would make sure everything worked right.
    Obviously, that expectation has recently declined, but there is still a strong undercurrent of feeling that the government shouldn’t let swindlers swindle (although no real desire to pay for strong enforcemnt services…).

  28. William d'Inger says:

    I am so late in entering this fray that probably nobody will read this far down the list.

    Had he done that where I live, he would be in certain and unambiguous violation of the law. Around here one may not demolish a taxable structure without a demolition permit.

  29. PD Shaw says:

    Drew, quite easy: They get their profit up front.

    No, the bank’s expenses are all up front. The bank is the one that showed up at the closing with a check for [say] $280,000. They’re hoping that someday they’ll get $280,000 back, plus profit through monthly payments, but it’s not coming for several years.

  30. Drew says:

    tom p –

    You haven’t given us all the detail……..but

    So she had $60K in it. If an 80/20 buy that was a home value of $300K and a loan of $240. If she paid it down to $235K, and you say the developer was charging about $235K, then the banks cost of carry was, say $235K x 3% plus RE taxes of maybe $4K. Let’s call it $11K. She offered a $5K haircut today, vs their $11K cost of carry.

    Personally, I might have taken it. But 9 years ago was a period of rising home prices, and you had a developer offering at a loan to value of 1. Not so stupid on the banks part.

    Concerning this:

    “Drew, quite easy: They get their profit up front. Their equity is guaranteed by the property”

    That’s just gibberish. Its a loan, with a loan to value of 80-90%, and that has proved to be a suspect assumption.

    Not a finance man, are you?

  31. tom p says:

    Drew, no, I am not a finance man and I do not have all the pertinent details, I just loaned her the money for the bankruptcy.

    So she had $60K in it. If an 80/20 buy that was a home value of $300K and a loan of $240. If she paid it down to $235K, and you say the developer was charging about $235K, then the banks cost of carry was, say $235K x 3% plus RE taxes of maybe $4K. Let’s call it $11K. She offered a $5K haircut today, vs their $11K cost of carry.

    all true enuf, but…

    Personally, I might have taken it. But 9 years ago was a period of rising home prices, and you had a developer offering at a loan to value of 1. Not so stupid on the banks part.

    I do have a problem with this last part. From a finance point of view, all this might have made sense, but from a common sense point of view (which, as a union carpenter is all I have) This was all so much gobbledygook.

    Drew, I have only simple math, so let me tell you what I saw at that time: My wife owed 100x dollars on the house (she owed 100x + 60k). The developer was selling houses at 100x-20k for a brand new building built to spec. At this point, her house was “under water”. She found a buyer to take it for 100x -5k…

    and the bank thought they were smarter than the market. Stupid.

    no, I am not a finance man, but even I can do that kind of math.

    as to:

    That’s just gibberish. Its a loan, with a loan to value of 80-90%, and that has proved to be a suspect assumption.

    Drew, on who’s part was that a suspect assumption? A whole lot of these loans where to 110%… Talk about suspect assumptions… Who made them? The people who assumed land prices would rise forever?

    One last point: It was 9 years ago when she got divorced. 5 years ago when she gave up on selling. Again, I am just a dumb ass carpenter, but if I could see the writing on the wall (and I did), and they could not…

    I think some people wasted a whole lot of money on an education.

  32. tom p says:

    “Drew, quite easy: They get their profit up front. Their equity is guaranteed by the property”

    That’s just gibberish. Its a loan, with a loan to value of 80-90%, and that has proved to be a suspect assumption.

    And I should say, if they have a loan with a value of 80-90% of the value of the property…

    That is not gibberish. It is good business. Very little of which we have seen these past few years.

  33. grampagravy says:

    I love the references to “morality” in this case. After all, “morality” is a big concern when determining bank policies…right?
    Hoskins may well be wrong, but please spare us the double standard bullshit.

  34. Jorge A says:

    Who cares if its criminal?? Personally, I wish more home owners were like him.

    I have a cousin who took out a business loan. He had 5 properties which were used as collateral. A year or 2 later he was in a car accident. While he’s lying in bed, fighting for his life, the bank decided to collect. He had after all missed a payment. I suppose when you are dying things like bills slip your mind.

    When he got out of the hospital, he sold property to satisfy his past due on the loan. After the payment was made, the bank continued to apply all kinds of fees, penalties etc. They foreclosed on all 5 properties. He has gone to court a hundred times and the court has ruled in his favor that the banks were erroneous in foreclosing on his properties. As part of the judgment, he was to receive the proceeds of the sales. But guess what? The bank appeals every single time.

    Now he has been fighting the bank in court for nearly 10 years. He is on the verge of being homeless, and I am sure eventually he will give up the fight- that’s what happens when you run out of money -they win by default.

    Bravo to my friend in Ohio.

  35. Michael Reynolds says:

    I think we should apply one of the two Republican cure-alls:

    1) Cut his taxes.
    2) Torture him.

    Any problem that cannot be solved by tax cuts should be solved by torture. Although I guess you could reverse the order, torture then cut taxes.

  36. anjin-san says:

    A home is, after all, an investment as well as a place to live. No one bitches if they sell the home they got with a bank loan at a handsome profit.

    I have never been a great investor, but when we sold our place in 2005 and made a few bucks I only needed to be a perspective buyer for about a week before I bailed and rented to wait out what was an obvious bubble. I could not help laughing in at the crap mortgage brokers were peddling back then, I just ended up walking out on the meetings I was having with them.

    I feel bad for people who are underwater, but my sympathy is limited. 5 years ago Realtors were showing me 600k fixer uppers in so-so neighborhoods. Sorry, but it was pretty obvious the whole thing was a bad joke. Next week we are moving into a house we love that we got for 250K less than it would have sold for a few years ago. We can make the payment even if one of use gets laid off or sick. I can only feel so sorry for people who bought wildly overpriced property or pumped all the equity out of their homes to buy boats, install 20k BBQ rigs in the back yard and go to Tuscany.

  37. PD Shaw says:

    Who cares if its criminal?? Personally, I wish more home owners were like him.

    I could try to write a sonnet, explaining the answer, but it would be difficult to rhyme the last line:

    non-dischargeable in bankruptcy

    The guy couldn’t afford to keep his home; he needs a fresh start; he may never get it.

  38. Just American says:

    A plane hits the IRS building and a hard working man looses his life in frustration of the Government excesses- the cabal media plays it down.
    A man bulldozes his own house making his family homeless in frustration of the financial terrorists and the cabal media plays it down.
    Texans wants to leave the union so does Vermont….Russians are now predicting the break-up of US in 6 countries of which Canada will grab a handful of NE states.
    No wonder Afghanistan is called the graveyard of empires…..do you see it coming.

  39. Larry Ferdni says:

    Listen to Joyner sound like a mayrter because someone decides to tell the bailed out banks to get screwed – what, you afraid you and your buddies are not going to get your zillion dollar bonuses this year?