There are few news reports that leave me as angry as I was last week during the 11pm news!
Understand that I seldom ever listen to the news because I am a happy person and I find that the media – for the most part – churns out half truths and airs only what sells THEIR publication or station. IF IT BLEEDS, IT LEADS! Consequently, any news will be sensational, shocking or repulsive because THIS is how they get people to read/watch.
As I was about to turn out the light, I watched in horror, as a man sat on the sidewalk, sobbing, because the Sheriff had ‘thrown’ him and his young family out on the street.
The main thrust of the story covered the high foreclosure rate in the nation and was designed to illustrate the despondency of owners who had lost their homes. A human interest story, or at least it might have been, had the truth been told. Instead, the reporter and photographer concentrated on this family as the little girl emerged from the house with her small suitcase, hugged her sobbing father and said “I love you, Daddy”.
OH, COME ON!
Look it’s truly sad when people are forced from their homes, but here’s the REAL TRUTH – that which the reporter conveniently neglected to make public:
This man, like so many unfortunate people who have lost their homes to foreclosure, fell behind in his payments! NO-ONE throws an owner out on the street, from a property that has current mortgage payments! PERIOD!
In all likelihood, this man had an exotic (predatory) loan on his property – one of those where his payments were affordable and then suddenly *hiked*, at maturity. In other words, either he didn’t read the fine print – or was not informed of the risks, that stated that his loan terms would change after a period of time. This has happened to countless thousands of people who simply did not keep their eye on the ball!
Many people saw this coming years ago! My friend told me 7 years ago that his son (a police officer) was moonlighting as a mortgage salesperson and that this was going to earn him ‘a lot of money’! I was skeptical. First and foremost, anyone selling mortgage must be licensed and qualified in the field, otherwise it IS a scam and secondly, once the mortgage salesperson got his clients to sign on the dotted line, who was legally going to process this loan, as mortgage lending is heavily regulated in this country?
The answer is that the salespeople would bring in the clients and greedy brokers would process them!
Well, not surprisingly, the police officer didn’t do this for very long, but people just like him sold a lot of exotic loans to many unsuspecting buyers.
Let’s look at this from another angle:
The buyer is told “Yes, you CAN have this house, which is WAY out of your earning comfort zone – you will be spending to the hilt to afford this home, with no cushion or safety net”. Does this sound like a good idea to you, the reader? Yet, thousands of people jumped at the opportunity to buy homes that were clearly beyond their pockets, telling themselves that by the time the period (usually five years for this type of loan) was reached, they would have a higher income and would be able to afford the additional mortgage payments.
Few of these buyers knew or were informed that their monthly mortgage payment would hike from $2,000, to $10,000 a month (as an example)! How can anyone afford $10,000 if they were at their limit, at $2,000?
Circumstances changed for some of these people ~ some of them got into their homes and immediately ran up their credit cards on new furniture and perhaps a new car that would better suit the image of the new home. Some suddenly found the need to populate the new home with a new family (thereby cutting their earning power in half, while mom stayed at home with the kids).
Still, they didn’t see the writing on the wall! They still believed that they could pull themselves out of it.
Some clever home-owners refinanced after the second year, or took out a HELOC (Home Equity Line Of Credit) to bridge their finances, never quite realizing that although they were pulling EQUITY (their own money invested in the property), that this was merely a bank loan, using the property as collateral – and because it was a loan, it would still have to be paid back! Regrettably, most HELOCs were simply maintained – in other words, payments were made only against the interest without paying DOWN the capital amount.
And so, my friends, many home-owners found themselves with both first and second mortgages!
As due date approached, many REALTORS(R) such as myself, visited (with what I can only term as ‘the victims’), in an attempt to offer help – a way to extricate themselves from certain disaster. In EVERY CASE – yes, EVERY case, the home-owner denied any difficulty or hardship and continued to live according to their same standards with no provision for what was ahead of them and we were turned away!
As REALTORS(R), we ran seminars, spent thousands of dollars on advertisements, wrote blogs and knocked on doors, but we were spurned – the home-owner truly believed that a] this could never happen to him and/or b] something miraculous was going to happen, to bale him out!
Fast forward….. who saw the recession coming? Which of these home-owners anticipated being laid off? Who anticipated the sudden hike in gas prices?
Enough blood, yet?
With no other choice, the home-owner chose (and rightly so) to feed his family and allowed the mortgage to go unpaid.
In order to understand how unpaid mortgage works, let’s say that the first unpaid month goes by – the bank calls and the first few calls are accepted, saying that the payment will be made. Then it gets embarrassing as payments are still not being made and the calls are ignored… we’re probably into month two or three by now which means that a $2,000 payment has become $6,000 or a $10,000 payment has become $30,000! If the home-owner couldn’t afford to pay $2,000, is $6,000 easier?
Then comes the Notice Of Default – a document stating that if the past due amount is not brought up to date, the bank will proceed with foreclosure. Because of the laws in this country, lenders have to wait a specified amount of time before proceeding and depending on the volume of NOD’s (Notices of Default), the bank can take several months before that letter is sent, advising the home-owner that the bank will be foreclosing.
At this stage, the home-owner can still make good, IF he can bring the payments up to date which for reasons already stated, is highly unlikely.
In the absence of settlement of the outstanding amount, a notice of foreclosure is posted and the process begins – again, this could take months, depending upon how many foreclosures the bank is processing. Some home-owners have been able to stay in their homes for up to a YEAR before being locked out – that’s a YEAR of NO MORTGAGE PAYMENTS! Where can you live without paying for the roof over your head for that long, and yet, when the Sheriff arrives, the home-owner looks surprised?
Banks don’t want to own residential property however, what recourse do they have when a home-owner has basically defrauded them out of (in excess of) $24,000, that they promised to pay? That was the deal… the house is yours to live in AS LONG AS payments are being made.
As a REALTOR(R), I have pretty much seen it all during the last few years! The creative ways in which home-owners get out of paying the mortgage and still make the system work for them. Take the condo owner, who not only stopped paying the mortgage but also neglected to pay the HOA dues (in this case, the HoA dues mounted to a whopping $18,000)! In addition, when the writing was on the wall, the condo-owner rented out the property to unsuspecting tenants….. POCKETED THE RENT MONEY and allowed the property to go into foreclosure, resulting in the tenant being thrown out on the street!
Where’s the fairness in that?
I have more than once, seen a home-owner rip out kitchen cabinets and appliances, rip up carpeting and remove hot water heaters (selling them to friends or on Craigslist), before disappearing into the night, leaving the bank to recover funds from a home now almost impossible to sell at market value!
There is no fairness to any of this – it’s a lose/lose situation where everyone loses and people are left embittered. Where did it all start? With the greedy mortgage brokers? Perhaps. Or did it start with the buyers wanting to live beyond their means? This is the American Dream, where the government encourages spending and banks encourage the use of credit cards with extortionate interest rates. Read our Constitution again – that is NOT the American Dream!
Gone are the days where we spent according to our earnings and only spent what ACTUAL money we had – now America spends the banks money and the cost of this is called high interest! We live in an age where we rob Peter to pay Paul and pay credit cards with credit cards and this can only last SO long before the day of reckoning arrives.
And so, dear readers, perhaps now you can see why I became so agitated at that news report that reflected only PART of the truth. Part of the truth is always misleading and open to conjecture. If we are to clean up this unholy mess that has been created from greed, we need ALL of the facts in order to work together towards a better future. Your children don’t deserve to leave your home holding their worldly posessions in a small suitcase, nor do they need to see you sobbing on the sidewalk. They deserve better and everyone knows that you want better for them.
It all starts with responsible spending and in order to spend responsibly everyone needs to know how to budget – Economics 101. Turn off the TV with all those shopping channels… delete those Spammed e-mails that promise to make you rich overnight or thin in 30 days… stay away from the sales where you spend twice as much because it’s cheaper. Sit down with your family and ascertain their NEEDS – not their WANTS and above all, always make sure that you have a cushion of savings in your bank account to cover contingencies and emergencies.
If you, or someone you know, is facing hardship and is/are unable to meet those mortgage payments, contact me. As a certified Foreclosure Prevention Counselor, I will be more than happy to offer you a FREE consultation to discuss ways that you might negotiate with your lender.
Let’s look to a brighter future – a better economy in 2009….. spend responsibly!
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Althea Garner
Executive Real Estate
House Of Homes Online
http://www.HouseOfHomesOnline.com
The House Of Homes Online 
Althea- you make a number of excellent points. The media sensationalizes news, and of course foreclosure does not happen overnight. The provocative image of the man sobbing on the sidewalk fails to represent all (any?) that has led up to that humiliating moment.
That particular individual may have made no effort whatsoever to avoid his fate. BUT, what of the homeowner who fully realized back in late 2005 that their decision re-fi in order to pull out equity to advance a cottage business had been a giant miscalculation as the “bubble burst” all around them? I have just such a client. She immediately put her home up for sale-by-owner to try to remedy the situation. (FSBO attempts to be discussed at another time )
Unsuccessful in finding a buyer to bail her out, she contacted her lender…may I name names??? CARRINGTON MORTGAGE SERVICES …. requesting a deed- -in-lieu of foreclosure. That was September 2007. They sent her the packet of papers required to essentially give ones house back to a bank, and advised her to, in the interim, list the house with an Realtor; explaining that their stack of NODS would prevent them from getting to her file anytime soon. Their hope being that it would sell before they would have to incur any loss in a short sale or foreclosure.
By this time she had relocated out-of-state, leaving the house vacant and untended. When I came on board I listed the property and priced it appropriately, which was far below what she had tried to sell it for, as well as below what she owed.
Offers began immediately! Each one was presented to CARRINGTON MORTGAGE SERVICES with all the ancillary forms and proof-of-funds banks now insist accompany a buyer’s offer. Yet there was no response from the lender. No communication whatsoever. No rejections, no counter offers, nothing. Buyers sat impatiently on the sidelines unable to even obtain confirmation their offer had been reviewed! It doesn’t take long for most buyers, and their agents, to get disgusted and rescind their offers. Which is exactly what is happening, time and again with this property! I could have had it sold in 30 days, yet it remains on the market today, declining in value, depreciating even farther from deferred maintenance and causing a blight to the neighborhood.
WHY? Seriously, I want to know why? How can lenders get away with ignoring qualified offers? They aren’t allowing the asset to be sold, they aren’t proceeding with the foreclosure process. They ARE however leaving a lot of encumbered sellers, capable agents and hopeful buyers in limbo.
I’m disgusted with our current market…and BTW, don’t watch the news either! Happy New Year!
Oh, very true Lee Ann!
I, too, have a co-listing ( a Short Sale) from January 27, 2008 that has attracted numerous Offers, only to have those buyers ‘walk’ because the lenders simply never got around to reviewing the file! At one stage, the bank threw the letter of hardship away because it was in Spanish and the person reviewing the file, didn’t understand its content!
I agree that much of the current problem lies with the lenders who appear in no hurry to review files and yet, in the next breath, they tell us how much every foreclosure is costing them (and it’s a TON)! One would think that banks (lenders) would employ additional staff (the hope here would be for them to employ QUALIFIED staff and not those who throw key documents away!!) to take up the slack in times like these but it is obvious that they have found themselves in a catch 22 situation – throw money away on an unsalable property or spend extra to employ additional staff! Whichever way one rehashes it, someone is going to lose money!
I am sad to hear about your client, but puzzled that he/she did not apply to the FHA for assistance. My certification (through the FHA), allows me to contact the Loss Mitigator at the clients bank, in order to apply for loan modification (now this might have been amongst the paperwork that your client was given, so I apologize in advance). If good cause is found and hardship proven, a loan can be modified in such a way as to allow (say) 6 months or a year of no payments – these payments being tacked onto the back of the loan. So rather than avoiding payment for 6 months, the FHA councilors can fight for that legal reprieve on their behalf.
Make no mistake, not everyone gets a loan modification. Not everyone qualifies for a loan modification. If you consider a client that I consulted with (actually, there have been several like this) where hardship was claimed and yet there were two luxury vehicles in the garage, totalling in excess of $1500/month, that they absolutely refused to be without! This is not hardship! Hardship is NOT, not having Tivo, or not taking that vacation in Fiji… hardship is when the bread-winner has lost their job and necessary funds went to either feeding the family or to medical expenses, which resulted in the non-payment of the mortgage.
In many cases, ‘victims’ can be helped by just knowing who to call and you know yourself, that getting through to a Loss Mitigator is extremely difficult and often takes 20 or 30 attempts everyday for several weeks. Even when one gets through to a ‘real person’, bank staff are schooled to place the caller on hold for an inordinate amount of time, in the hopes that they will give up! They are able to do this with mortgage holders, but they CAN NOT do this with representatives of the FHA and therefore FHA calls are taken.
BTW. There are MANY companies out there charging for foreclosure counseling. Be advised that only THREE have been authorized to do so, by the Department of Real Estate – all others are fraudulent, so I advise mortgage holders to exercise extreme caution when obtaining assistance. Always ask for credentials if you are told that you have to pay for foreclosure counseling.
Thank you for your valuable comments, Lee Ann – you are an accomplished REALTOR(R) and your words carry weight! I am sorry that you like me are not happy with the current state of affirs, but y’know…. today is the first day of 2009 – it’s going to be a GREAT year!
Althea
Unfortunately, you’re bucking the sympathetic side of this issue. I see both sides, and on one hand, people ended up with property they really couldn’t afford, but on the other side I believe that it’s as much the fault of realtors as it is the buyers.
Why do I believe this? Because when my wife and I first went looking at houses, we had this realtor take a look at our credit and tell us that we could afford to buy a house as high as $195,000. That was more than double what we made together at the time. Now, if the skeptic in me didn’t say “this guy’s nuts”, I might have started looking at those types of houses. However, I had the benefit of age (I was almost 40 at the time) and my general mistrust of certain things, whereas someone younger would have gone along with it.
This is why the law enforcement that’s going to look good to America is that one that refuses to just up and kick people out of their houses en masse without some kind of review of what these families are going through, and why those who aren’t in your profession might see things differently.
This is really a very big issue, with multiple sides to it. The press will do what they do, and if the other side feels they’re in the right, then it shouldn’t matter what the press does.
By the way, you are right in a major way; just like in health care, people do get multiple notices for payment before being sent to collection, and if they’d only contact someone and try to find help some of these issues might be averted. Banks don’t want all these houses either, especially since there are fewer buyers right now.
Mitch, thank you for chiming in on this contentious issue!
Like so many others, you also see this as being the fault of the REALTOR(R) and certainly in your case, it may have been.
There are REALTORS(R) and there are Mortgage Brokers. We both have to take similar examinations, but the individual experience gained by each profession, dictates that each should do their own job. (What the heck is she talking about???????) Let me elaborate:
You wrote:
“Because when my wife and I first went looking at houses, we had this realtor take a look at our credit and tell us that we could afford to buy a house as high as $195,000.”
In my opinion, if a REALTOR(R) has not taken their Brokers license (ie is a property sales agent), they have NO RIGHT to be calculating mortgage costs or running credit investigations! This is not their field and not their qualification! When a prospective buyer shows interest in signing an Offer, I ALWAYS bring in a qualified mortgage professional – a person who calculates loans on a daily basis and is closer to the changing mortgage laws and new mortgage plans than I am. Another reason that I do this is that because every single client I have ever had, has become a friend of mine – a lasting relationship….. do they REALLY want me to KNOW all their private financial stuff?
As a REALTOR(R), it is my job to know the mortgage side – but I am not qualified to discuss payments, any more than I am qualified to answer legal questions – I am not a lawyer! Any REALTOR(R) that does, must have a Mortgage Brokers license or (in the second case) a law degree or they can be sued!
I believe that the media very much guides the minds of those who are not qualified in a particular area – how can we all be experts in every field? They plant little seeds and those who don’t know any better believe them and before you know it, we have an epidemic of people behaving in a certain way.
My mind goes back to 1965, when a reporter came to Zimbabwe to photograph the political situation. In Harare, there was a very large and beautiful public park in the center of the city where laborers would go to rest on their lunch breaks. They’d eat their sandwiches and then stretch out in the shade on the cool fresh grass. The 3″ headline that hit the British newspaper was “Zimbabwe does not bury its dead!”
There were a whole LOT of people who believed that one, simply because they didn’t know any different – couldn’t be expected to. The media deliberately slanted the report, to sell more newspapers!
Personally, I don’t read the newspaper anymore – like I said, I am a happy person, but if I happen across something that makes me go ‘Whoa!’, you must KNOW that I will research it before I act upon it.
That is just one of the many freedoms that we have in this country: the freedom to choose what to believe.
Hopefully you and Robyn bought the home that you could afford and that it is a place where you can feel safe and secure.
Looking forward to your future comments!
Althea Garner
REALTOR (R) MBA, MCI, e-Pro
Executive Real Estate – House Of Homes Online
http://www/HouseOfHomesOnline.com
Althea- thanks for your offer of attempting a loan mod for my sellers. The reality with this particular listing is the owners have abandoned the property, left the state and divorced themselves from any sense of responsibility to pay property taxes, mortgage or maintenance. Basically all they do at this stage of the game is sign purchase offers as they come in, so that I can then forward them to the unresponsive lender.
It is truly an unsalable property with plenty of location location location, walking distance to CSULB. Some parent could/should buy it for their college-age student and if the market hasn’t improved by the time their son or daughter graduates, they could rent to other students until the market improves enough to see a profit.
READERS OF ALTHEA’S BLOG: Does anyone in Blogville know whom to go to in order to MAKE a lender respond to viable offers???? There has to be a higher authority out there somewhere…
Two things, Miss Althea. One, you need to add something to your blog so people can subscribe to comments; I would have never seen this response if I hadn’t thought to come back to check again.
Two, We do have a house we can afford, and it’s worth more now than when we bought it, which is a good thing. But if we’d fallen into this trap that the first realtor had told us, you can bet that we’d be with many other people in not being able to make the payments on a house we really couldn’t afford in the first place. Thing is, I got to know the essence of that particular realtor years later, and he was a good guy before he passed away last year. So, as you said, either he wasn’t qualified to tell us what he did, or that’s how the industry was; no other choices in this regard.