Ryan Lochte’s Parents Face Foreclosure

Despite being a world class, gold medal Olympic swimmer Ryan Lochte still has to deal with the reality that many Americans face:  Foreclosure

As the Associated Press tells us in a story that broke today, the swimmer’s parents are facing the foreclosure of their Volusia County home.

While foreclosure is all to real of a problem for millions of Americans, the idea of someone seemingly super-natural to be facing it is hard to believe; however according to a lawsuit filed in May the credibility of this situation is unquestionable!

Their lender, CitiMortgage, is effectively calling the note upon which their property is hypothecated due.  The outstanding balance is roughly $250,000.00.

Divorced a year ago, Ryan’s parents have both sought legal counsel in an effort to avoid foreclosure, but their plan of how to rectify the situation has yet to be made public.

Modification, Bankruptcy, Reinstating, or Short Sale are all viable options to the Lochtes; however only one seems appropriate.

In a State where the housing market is as deflated as it is in Florida, how would any option other than a short sale make sense from a investment stand point?  IF (and this is a big if because it rarely ever happens) they were approved for a loan modification their payment would be lowered according to the new interest rate, yet they would still owe more on their property than it is worth.  If they file bankruptcy they will be put on a five year repayment plan with interest and a trustee payment built in; which in five years would leave them with a property that is still not worth what they owe on it.  If they reinstate they will immediately by a lot less cash rich, and still be underwater on their property the next day…  Therefore the only real option is a short sale.

By selling the property short they will be able to avoid foreclosure, and the repercussions that come with it, and  at the same time get rid of this over-encumbered toxic asset (their house).  Furthermore the fact that they are divorced tells me that they this property is probably even more of a liability for them then an asset (as their attachment to the house is probably not strong as a family who is still living together under it’s roof).

Why anyone would continue to make payments on an underwater property, when they have a legal remedy to the situation (short sale), is beyond me (and frankly can only be explained by one thing irrational emotional behavior).

Best of luck to the Lochtes, and if you need a referral for an agent in Florida shoot me an email!

-JJM

About John Maseredjian

John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals. He is also one of our main contributors on the Gazette, and a licensed real estate agent. (please see his agent page on the main site for more information.)

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