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(LoanSafe.org) – This is why homeowners are screwed. You can either read this with an open mind or continue to believe in loan modification fairy dust. There are also a few bad words here and there to emphasize the vulgarity of this subject.
It has been three years since I started preaching the loan modification gospel from my blogging pulpit here on LoanSafe.org and over on my other blog, LoanWorkout.org. I have come to the conclusion recently that the vast majority of struggling homeowners who cannot maintain their current mortgage contracts are up the foreclosure creek without a loan modification paddle.
They are simply and 100% unequivocally screwed. There is no other way to put it. I am not going to sugar coat these shitty mortgages any longer. If it tastes like shit, looks like shit, feels like shit and smells like shit, then by golly, it’s shit.
I am asking the media, Congress, banks, Obama and anyone else who will listen to please just be honest with the people who are losing their homes. Inform them they are up foreclosure creek without a paddle. So, let’s stop the loan mod chit chat. There is no reason to reason to put lipstick on the mortgage pig for any longer.
So why such loan modification doom and gloom from Moe?
Hell, I have researched and blogged about loan mods more than anyone on earth. YES, more than any living soul on planet earth. I have seen and or counseled thousands of homeowners in the last three plus years. I guess you can call me somewhat of an expert on this subject. So, I tend to know what is “really” going on out there with people who are attempting to save their homes.
What is really NOT going on are loan modifications. They never have been, nor will they ever be.
So, why aren’t banks saving homes and or the government making laws mandating it?
Simple, a mortgage is a legally binding contract, loan modifications are considered a privilege and they do not stimulate the economy. Hence, there are really no economic advantages for the banks or governments to intervene in legally binding contracts by helping people save their homes. The United States Legal System was set up to enforce legal contracts, not to help people who break them. So, don’t expect big government to come in and save your ass anytime soon. If your foreclosure is not a security or economic threat to our nation, then it will be allowed to happen.
25% of the American economy revolves around the buying and selling of real estate. What will create jobs for our system are new home loans, refinances and home buying. For example, just off one new real estate transaction, hundreds of people will be stimulated and with a loan modification, not so much.
This is really simple economics when you think about it.
- Real estate agent gets paid on the buying side
- Buying broker gets paid
- Brokers employees get paid
- Selling agent gets paid
- Selling broker gets paid
- Selling broker employees get paid
- Old lender gets paid off
- Old lender employees get paid
- New lender get s new loan
- New lender employees get paid
- New lender sells to another new lender and is paid
- Escrow officer gets paid
- Escrow office gets paid
- Loan gets sliced and diced on Wall Street into credit default swaps and mortgage backed securities
- Slicer and dicers get paid
- Wall Street salesman now sell this sliced and diced mortgage all over the world
- Government gets paid off taxes and get money on every ounce of profit that is made in this never ending chain
- New homeowner buys stuff at home depot
- Home Depot now has to hire more employees to deal with the homeowner demand
- I can go on and on
So what does a homeowner with a loan modification stimulate?
- Apple Bees a couple times a month
- Premium Red Baron Pizza every Saturday instead of $5 cardboard pizza Little Ceasers
- Instead of Keystone budget beer, you stimulate yourself with a Corona and lime
- Instead of Wall Mart wardrobe, you venture to Ross
- Instead of the $1 old movies, you now go for the $3.99 new releases
Yes, I am being a little sarcastic, but I am doing this to make my mortgage point and help struggling homeowners see the loan modification light. Unfortunately, with a loan mod, really only the homeowner who may or may not be able to keep making their payments will be stimulated.
The sooner we all come to terms with this, the better off we will all be. Loan mods are obviously not in the grand plan and they never have been. Is this the way I want things to be? NO! But it is what it is and I cannot lie for the sake of making you or anyone feel better.
Let’s take a look back at the various programs, plans, guidelines, press releases and propaganda over the last three long years to prove my theory here:
From Hope Now we were left a little hopeless, so we instituted the Hope Line that really made us frustrated, so we switched things up in order to give more Hope for Homeowners. Then we realized we had to leave No Homeowners Left Behind, so we had to make them feel FHA Secure through a more modern program like the FHA Modernization Act . But we could not do that unless we instituted the the Emergency Loan Modification ACT of 2007 , so we could provide them yet another act via the Emergency Economic Stabilization Act of 2008 in order to make the Making Home Affordable. But then we realized we had to change foreclosure course because things were not working , so we started the Home Affordable Modification Program that turned out to be another failure. Thus, we decided to finish it off with a foreclosure bang with the Hardest Hit Fund because hell, we need money for all this shit, don’t we?
No, I do not wear a tin foil mortgage hat either…..
The Troubled Asset Relief Program, commonly referred to as TARP or RCP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector which was signed into law by U.S. President George W. Bush on October 3, 2008. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis.
This has been the only true law to come out of this economic crisis. Unfortunately, it did more for Wall Street and banks than it has done to help homeowners.
Why? Well, because all the initiatives to come out of Washington like the Making Home Affordable and Home Affordable Modification Programs (HAMP) have never been, nor will they ever be “laws.” They are only a contractual agreement banks signed to get TARP funds. The ability for homeowners or the Treasury to sue for performance is now moot since no they are longer under TARP agreements since most repaid funds.
Other than the Treasury suing banks for violations of their contracts which require following HAMP directives, nothing can really be done. All the attempts by government last year like the swat teams, trying to shame servicers by required reportings and meeting with bankers on Capital Hill have done little to push loan modifications. Yes, they have helped, but not enough. Most mortgage servicers are just ignoring these guidelines because that’s all they are, just guidelines.
The facts are that we have had no less than 10 different mortgage rescue programs and none have made a true dent in this foreclosure crisis. The simple reason being is that these programs are not laws. Hence, a program or directive issued by the U.S. government that is not a law is akin to not having no speed limit laws on our freeways. Instead, we now have guidelines and directives to follow. Do you think that drivers on the freeway will abide by these non-laws that have no real consequences if these directives are broken? You guessed it, many people will drive as fast as they want to in order to get them where they want to go. That is exactly what lenders and mortgage servicers have been doing for the last 3-4 years. They are doing what is best for them.
Simply put, mortgage servicers DO NOT have to adhere or even acknowledge these government guidelines if they choose not too.
How many plans and programs do we all need to understand that homeowners are on their own?
This is not about big bad government or too big to fail banks just running amuck and making rogue decisions out of pure greed or eveilness. To be honest with you all, in the beginning, when I first started blogging about loan mods, I did have that point of view. But it was because I was uneducated about how our banking, real estate and economic systems work. I often used to constantly bash big banks and government decisions, but now I “understand” why things are the way they are. It is not perfect system, but what they do and don’t do are necessary for the greater good of our society. We might not all like what is happening, but what are the alternatives?
Personally, I think the sooner we all realize this fact, the sooner we will be on the road to recovery. Unfortunately, most people will never get this fact or they fail to recognize it because they are waist deep in their own personal great depressions. Many homeowners are making irrational decisions as they try and bail themselves out of a sinking real estate boat. I really do not blame them. I am just trying to assist them on their journeys as I try to open their eyes to their true realities. Some listen, some don’t. Some open their eyes, some refuse too. At least I can go to bed at night knowing I have tried and I have spoken the truth.
If you are listening to me, you need to understand that the real estate and mortgage markets were never designed for people to stay in their homes for 30 years and pay of their mortgages. They were never designed to offer loan modifications and stop foreclosures. It was designed and managed to perpetuate buying, selling, refinancing and speculation. Real estate and loans are Main Street’s Wall Street or legal Vegas. Unfortunately, if you are underwater and or in foreclosure, then you lost the bet.
You can cry, kick and scream at the banks or government all you want, but it is really just a waste of your energy. That energy would be better spent on improving yourself or life somehow. Maybe you can figure a way to make more income by starting a business or a new career that will fit in our new economy. I am just trying to help you “get” the fact that you may be fighting a losing battle by bailing out a boat that is going down like the Titanic.
What we all need to understand is that saving homes is not good for the economy. Yes, I want this to happen just like most of you, but it is only good for you and your family. It is not good in the “GRAND” scheme of the economy and and an overall economic recovery. Sure, its great for bank PR and your family, but that is about it folks.
Loan modifications are not going to help the U.S. recover. Foreclosures are unfortunately the answer to our nations economic woes.
Most all of you getting wiped out is a necessary evil in order to get home values down to “buying levels” again for those that have good credit and a small savings. Thus, I believe that there is a secret push to get borrowers who are violating their mortgage contracts out of their debt obligations and get new, fresh debtors in your home. This is what will revive the economy.
The key here is aligning home values and mortgage payments lower than area rents. This is a fundamental factor in housing prices and in future values. First time home buyers are only a small segment of the purchase money market. It is mostly now made up of investors looking to flip properties to first time home buyers order rent them out with a profit.
Home values have a long way to drop in many areas. The price range that we’ll see the most sales and stay pretty steady would be the $300,000k range and below homes. These are the homes that have the most demand and that many people can purchase and rent out or own where it makes sense over renting.
There will be millions of qualified borrowers once home values and mortgage payments align with local rents. This will make home buying sense for investors who have the cash and credit in order to make property investments with a monthly positive cash flow on their rents. The people losing their homes now will be their tenants. In addition, once the values on homes provide more value than renting (tax write offs + investment) to a consumer then real estate will be back in style again.
Home prices need to fall considerably to get there and they are.
Let’s stop sugar coating things to make them appear to be sweet deals and programs when they are really BS or should I say rather shitty. The sad truth is that saving homeowners is not a wise economic decision for our banks or government. Thus, I believe that American homeowners are being sacrificed to the foreclosure gods for the greater good of the U.S. economy.
Most people are not told the truth because they cannot handle the truth. However, I cannot lie.
It’s a hard pill to swallow, but gulp………
Sources:
LoanWorkout.org: FHA Secure
Forbes: Hope Now Alliance announces new guidelines to help troubled borrowers
BusinessWeek: ‘Hope Now’ Hot Line Frustrates Borrowers Needing Help Now -..
MSNBC – Hope Now hotline leaves callers frustrated; ‘more work to be done’
NPR: Federal Program To Help Homeowners Takes Effect : NPR
New York Times: MORTGAGES; FHASecure: How Much Help? – New York Times
LoanWorkout.org: FHA Secure Flop. Only 266 Borrowers Have Been Assisted!
Money CNN: Next steps for FHA bills – Dec. 17, 2007
LoanWorkout.org: Emergency Mortgage Loan Modification Act of 2007 | LoanWorkout.org
Wikipedia: Emergency Economic Stabilization Act of 2008 – Wikipedia, the free
LoanWorkout.org: Will Project Lifeline be Another Foreclosure Flop?
But there are many (although not enought) that did receive modifications.
sam(Quote) (Reply)
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Gulp…..
Yes, it is a hard pill to swallow. I have been fighting to save my home for almost 2 years and this article right here helped me make my decision to stop the madness. Yes, I am mad has hell, but I have been stupid has heel from letting them play games with me.
Tonight, my husband and I will go out on the town and enjoy ourselves and I plan to ride this free rent out until the mortgage legs fall off this foreclosure bus.
Now is the time for me and my family. Screw the banks.
Kari Mongden(Quote) (Reply)
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Moe,
Are you sure about all of that? What about how the foreclosures and short sales affect your home, and your neigbhors home. You might be a fat cat sitting happily on all your lovely equity, but what happens when that equity is gone too, because all of our houses dragged yours down the no equity creek? It will just keep snowballing.
Good for business to foreclose on all these homes?
Stimulate the economy?
How about modifying these loans, leaving the present homeowners with cash spend on luxuries like food and clothing… that will stimulate the economy too! And then all the people who still have equity can move to bigger and better homes, because their equity wasn’t washed down the big bank drain. And otherh little people will move up to their homes because their equity still exists, creating lots of work for all those realtors brokers, and title guys you are talking about.
I truly think you are missing the point. The banks and CEOs and top dogs there of are benefiting big time, with TARP money they were supposed to use to save these houses from foreclosure and stimulate the economy in a good and decent way.
We won’t even mention the emotional damage being done to a good 10% of the next generation….. come on Moe.
Alice(Quote) (Reply)
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been reading your site for a while…and it does look pretty dismal for the loan modification generation
any objection to including your comments on my new law firm website news blog?
fredd up(Quote) (Reply)
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Kari: I am sorry to hear about your 2 year struggle, but happy to see that you have finally seen the loan modification light. The sooner we all open our eyes in order to be enlightened, the better off we will all be. I am glad you have chosen to belive reality and not in loan mod fair dust or conspiracy theories.
Fredd up: Sure, thanks so much for reading and asking. Good luck with your blog.
Alice; This is something that I do not want, nor do I wish to happen. It is my common sense conclusion after 3 years of loan modification madness.
Yes, a loan modification does a little local stimulation, but it isn’t even 1/10 of 1% of what a new real estate and mortgage transaction will stimulate. They are not even on the same economic scale. Hence, the Treasury and Federal Reserve will do what is best for our economic system as a whole as opposed to helping one class segment (homeowners) of this system.
In regards to neighbors values going down, that is all part of the plan to bring values down so new buyers can afford them. Hence, buying and selling begins.
Main Street is suffering right now from lack of jobs because the real estate market is at a virtual stand still with home values still way too high. In order to get it moving again, prices need to continue to plunge and that is why foreclosures are forging ahead with no plan or law in sight to stop them. This will get jobs flowing again.
I understand your points, but unfortunately the economic recovery and the steps needed to get there will always outweigh your emotions and feelings. It will outweigh what we “feel” is right or wrong.
Don’t you think that if loan mods truly were good for society as a whole, that they would have enacted a law or moratorium on foreclosures and banks would be offering them in an easy streamline system?
In addition, most all of you have contracts and laws that you must adhere to in regards to your mortgages and if you violate them, then you will pay whether you like it or not and whether you live in the home or not. So, the banks are covered on losses.
Come on Alice, let’s just get real and stop thinking with our emotions or about our own situations. Let’s get real with one another.
Again, I do not want this, but it is what it is. Whether we choose to accept or deny this fact is matter of personal choice. I have chosen to accept the reality of the world in which we live and learn to understand that which I do not like in order to live a good life with my family while I am still alive.
Moe Bedard(Quote) (Reply)
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As a long term reader on your site, I am perplexed by this sudden complete turn around of your usual optimistic atttitude.
For those of you who are under 50 years old it is a hard pill to swallow, but for those of us who are over 60 it is an impossible pill to swallow. There will be no recovery for us. We will be the ones who will be supported by the defunct Social Security system having lost most of our assets in the housing disintegration.
For us our home was our asset and trying to salvage our credit rating and reputation has eaten up our savings. So while you advise that we start getting real and stop thinking with our emotions and hoping for a modification, you are essentially denigrating our hope in any kind of a decent future. Not your fault of course, it is simply the way it is.
So does the economy future really depend on our financial demise? There are modifications being offered, even as you wrote this article I read of others on your site that have signed onto Modifications. So why have you become so disappointed and disillusioned that you offer no hope?
What is really going on?
Renoira(Quote) (Reply)
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I am still optimistic, just more realistic. I speak the truth here and am hoping to open your eyes, not kill your hope.
This is a very tough pill to swallow for anyone and especially for those that are over 50 as you stated. I for one, do not wish this on anyone, nor do I want this to happen, but it is and has been happening for 3 years. By all means, do not give up hope, but please do not place all your economic eggs in the loan modification basket that has a big hole in it. Make back up plans in case this does not work out.
Yes, there are still homeowners and members in our forum obtaining loan modifications. This will always happen. But the vast majority will not. This is a fact. I will still help those people who wish to be helped and offer some guidance, but I will also be real with you all in order to help you see the light. If that light is not pretty or you do not wan t to look at it, then I completely understand but it is what it is and the sooner we all see the light for what it truly is, the better off we will all be.
By all means, there is still hope for you all. Just do not recognize it too late because maybe there will not be. If you take head to my words here, then you WILL have a fighting chance. So, please keep the faith, keep fighting and most of all, keep it real!!
Moe Bedard(Quote) (Reply)
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Moe, I’ve thought the same exact sentiment for a couple of years now but never found anyone one with a public voice to say it. On the other hand if prices have to fall then why is our government trying so hard to keep prices proped up. I’ll tell you why because it’s political suicide to let home values free fall to the bottom.
They want to keep thier political jobs no matter what. We are the lambs to be slaughtered in all this mess but maybe a necessary sacrafice.
I enjoyed your point of view on the whole matter
thanx
Wizzy26(Quote) (Reply)
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Thanks man and I agree. This is a managed foreclosure crisis that is managing the slaughter so that it does not pose an economic threat to our system. However, prices are still falling and will continue to fall until buying a home, paying taxes and up keep makes sense over renting. In most areas of the country, we still have years of property to go through before that happens.
This crisis took 10 years to happen and will take 5-10 to unwind. We are only 3.5 years into this thing.
Moe Bedard(Quote) (Reply)
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Moe:
I am just starting this website for my law practice local to So. Cal. I have real estate experience and I would like to talk to you but I have no way to p.m. you.
I have other areas of expertise and I am not looking to you for business. Do you have an address I can p.m. and I can tell you a bit more.
fredd up(Quote) (Reply)
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Excess supply of properties in the market created foreclosures which lead to decline in property values. In the past decade, instead of building the countries infrastructure and investing in renewable energy , high speed rail and electric cars, people invested too much money in real estate without a corresponding demand for real estate . The has tied down a huge amount of money in real estate thus bringing the entire economy to a halt. We as a country need to move away from real estate investment and focus on technological innovation and education of the U.S citizens. By the end of 2010 the U.S will spend $360 billion on imported oil, money enough to buy 3million homes. The solution is : allow expiration of tax cut for the wealthiest citizens . Cut defense spending , eliminate tax subsidy for oil plus the saving which will come from the current health care . $500billion savings from cut in defense spending, $700billion from expiration of tax cut for wealthiest, $75billion from elimination of oil subsidy, will generate $1.5trillion. Build renewable energy factories in the sand states. This will bring high paid manufacturing jobs to the areas which will increase the demand for real estate. The Fed needs to continue the tax credit for new home buyers. for instance , half of the tax subsidies given to wealthiest people can subsidize the purchase of 6million homes at $7500 per property. Since we spend 360 billion on imported oil , we can spur demand for electric cars , renewable energy, natural gas vehicle and high speed rails. Double the credit for electric cars from $7500 to $15000. The will bring the price of chevy volt from $40000 to $25000 and bring the price of a nissan leaf from $32000 to $17000. As the demand for electric cars increase, consumption of renewable energy and natural gas will increase and the demand for electric car batteries will increase. This will put millions of people back to work and stabilize consequently stabilize property value.
Solomon(Quote) (Reply)
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Moe,
Thank you for being realistic! Someone with more of a voice than the typical homeowner has the balls to tell the truth. I cannot count how many people have told me to just hang on because real estate will come back, or just keep fighting for the loan mod and it will happen. Seriously, whatever these people are smoking, I’d like to have some. Yes some people will get loan mods. A small percent need to so every so often the media can run a story on how the banks are working with people to pacify the masses. The overwhelming majority will not get loan mods, plain and simple.
In reality does a loan mod actually help you in the long run? Most of the time late fees, interest, are added to the end of the loan. That’s great that you’ll have a lower payment, but you’ll still owe the same while houses around you continue to go down in value. That’s fine if you want to stay in the house for the next 15-20 years, but there is no way in hell that you are going to be able to sell the house or even break even for a long time. IMO the only real solution for home owners is principle reduction, but as you stated in your article that will benefit the banks and government zero.
Truth be told I have been dealing with this loan mod fiasco for 2 years now. I’ve spent countless hours on the phone and tried my best to do the right thing and it has gotten me no where. As a result I am walking away from my house. If I get sued, so be it. Worst case scenario I declare bankruptcy and have to start over. I’ll still be much better financially 7 years from now even if I would have got a loan mod. There is no way my house will be worth what I owe in that time. My only regret is that I didn’t walk sooner.
SDUtah(Quote) (Reply)
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SOLOMAN – OK, I agree, but good luck at getting big oil to go along with that plan. They have kept the electric car from coming to the markets for years. Why would they let it slip through now? In addition, an electric car may create lots of jobs, but the buying and selling of real estate will create A LOT more.
SDUtah – You are most welcome and I am very happy that you have seen the loan modification light. Yes, many will choose to fight and stick it out for their loan modifications and many like you, will move on to more productive and less insane ventures.
In counseling thousands of homeowners over the last few years, I realized that most didn’t have mortgage issues, but employment and money issues. Yet, many feel it is the mortgage that is causing the problems, when in fact it was a lack of money due to a job loss or 50% cut in pay that was causing most the problems. I think the entire middle and upper middle class took a 50% pay cut over the last few years and that is if they are lucky to be employed. Couple that with a 20-50% drop in real estate values, pensions and 401ks and we now have the Great Depression 2 for Main Street only. Wall Street averted it via TARP AKA our tax dollars.
The key here is to focus A LOT more energy on finding work or starting your own business to increase your income, then bailing out a sinking ship all day. If you do not do this, you will simply have to get used to a simpler and lower class of living then before. The sooner we all get used to it, the better off we will all be and your family on the road to recovery.
Moe Bedard(Quote) (Reply)
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fredd up – Sure, please email me at moe (@) loansafe.org. I look forward to your email.
Moe Bedard(Quote) (Reply)
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Hi Moe, as a real estate agent in rural northern Arizona, and I totally agree with you!
Using advice on this web site I actually obtained a loan modification in April, which is now totally screwed up by B of A due to not handling my account payments correctly. No need to go into the whole story, as it is moot.
Here is my last advice to my fellow mortgage holders who are fighting bravely on the battlefield: Do what I am doing. To stave off the inevitable and to buy myself several more months in our home, I am today sending of a qualified written request to the Bank, which I assume they will ignore, and perhaps I can get some money out of them someday. This may buy us several months extra until we make our move. My wife and I have already made the decision to move back to our home state in the upper midwest in a few months. We are fortunate as we own half of my wife’s father’s house, and will buy out her brother’s half and live in it. We already have partnered with a friend to start a new small business, and are seeking jobs in our home state to get us through. We have told all of our friends and family back there, and one friend already offered us use of sign making equipment and his snow plow. So do the same, somebody may have an idea for you. Go cut firewood and sell it if you have to.
We all have to choose our battles in life, and in some battles you have to retreat in order to regroup. For me, in this war, I have made the command decision to do a controlled retreat, while still appearing to fight, that will buy some time for us to escape the battle zone and go to our new life back home close to relatives and friends. People need to accept reality and get ready for the next phase of their lives, which will also be a battle. Learn a new skill, find a need and fill it. Write down all of your skills, and brainstorm what other jobs you can do with those skills. Keep in mind that any business would make the same decision to cut and run in the face of overwhelming odds. Your family is a business also, and you now need to make a tough decision. May God bless all of you and I pray for you all to make the right decision before it is made for you. Thanks Moe!
Rick(Quote) (Reply)
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Thanks so much for the kind words Rick! This is somewhat of a war and your plan to do a controlled retreat is marvelous. I wish you the best in your fight!
Moe Bedard(Quote) (Reply)
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Because of negative equity, millions of potential home buyers are “locked-out” of today’s housing market and are ineligible for re-financing their present mortgage.
Proposal- 1) The underwater homeowner could–without bank approval–put their home on the market and accept any reasonable offer. To cover the loan payoff shortage, an Equity Warrant (e.g. IOU) would be issued granting the holder a 2nd lien against the future equity of any home the issuer subsequently owns (within the next 5, 10, or perhaps 20 years). When the term of the warrant expires, and is called, the holder of the warrant would convert the warrant to a traditional 2nd mortgage. If at the expiration of the warrant, the warrant issuer still doesn’t have enough equity to settle the debt, a promissory note could fill the gap.
2) Likewise, in a refinancing scenario, the negative equity could be reconciled with an Equity Warrant.
>For the bank it’s an even exchange of a “less than” fully collateralized mortgage for an un-collateralized IOU. The positive benefit is the elimination of a potential default which would likely cost substantially more than excepting the warrant, even if it expires worthless.
>For the homeowner it’s an escape, trading a bad situation for a potentially better situation.
>For the housing market it’s a potential new buyer.
>No taxpayer money needed.
Steve Cox(Quote) (Reply)
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Moe,
I read your article again, and I really do love the first part. It’s dead on accurate. But I still say you are missing something really big.
If foreclosures continue like they are, the downturn of the market will be disasterous for present homeowners who have equity right now. These people will lose everything, This has nothing to do with MY emotions. Its a reality. It is not going to stimulate the ecomony but cause the ecomomy to crash. I disagree that if it were good for the economy then the government would do it. Come on Moe, that’s just silly.
I think they ARE going to end up doing Mods, but maybe not in my homeownership lifetime, it may take a while before they realize the tremendous ramifications of letting the rest of these loans foreclose. It won’t stimulate the ecomomy, it may just be the straw that makes Russia look like the land of milk and honey.
Alice(Quote) (Reply)
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Hello Alice,
Thanks for the comment on this article that means a lot to me because it is from my heart and soul. The words you have read are from 3 years of experience, tears, helping, fighting, researching and living this loan modification life every singe day. I am not some beat reporter going from one unrelated story to another claiming to write about things I understand. This is one area of loans, business and life that I feel I know better than most anyone who walks this earth. Yes, a bold statement, but I have made it many of time before and have yet to find someone with 1/100 the knowledge I have on loan modifications and how our economy truly operates.
I have a couple simple questions for you, What is equity when it cannot be tapped or realized? My answer is that it is nothing but imagined money that you truly never owned that is vanishing into thin air by the second. In addition, what does homeowner equity have to do with the economy and stimulation in a lending environment that doesn’t not allow these consumers to tap that equity? It’s an illusion Alice. It is akin to having a stock worth something or a car, but now one will buy it or take it off your hands.
Why would homeowners losing equity cause the economy to crash?
Moe Bedard(Quote) (Reply)
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So what are we to do…. Is there really anyone truly helpins us homeowners?
Stacey(Quote) (Reply)
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Moe I love your site and the tone and approach of this article in general.
However, as one who has studied this financial crisis carefully, I am not convinced that the foreclosures and the general approach to the whole crisis is actually driven by what is best for society as a whole.
It may be possible to argue, as I believe you are, that it was necessary for the real estate market to crash. But what I see is that the approach that has been taken for ‘recovery’ is what is best for current bankers and wall street. There are many many experts who believe that loan cramdowns of one kind or another, and allowing the banks to go into receivership, would have been far better with a faster recovery for the economy and society as a whole.
The crashed real estate market is not simply normal supply and demand market effects. Demand has dropped in part because of the crashed economy and unemployment. I am not arguing right and wrong here, but reality. A good economy would save countless foreclosures.
And the reality is that the way this crisis is being handled is determined not by concern for the good of society as a whole, but out of concern about _who_ benefits and _who_ is rescued. If the banks had been broken up and the fraud punished all around, we would likely already be enjoying a booming recovery with countless foreclosures averted.
Don’t believe the fairy tale of TARP repayment, it’s a fraction of the bailouts anyway. The cost to society of bailing out the banks and propping up the teetering oligarchy, will be measured in decades, trillions of dollars, and who knows what other chaos, eventually.
It’s true it’s not possible to prop up housing values, other than with low interest rates and full employment, beyond a market price and the supply and demand equation. But debt crashes can be and have been resolved by writing down loans to terms that make sense to both parties in the transaction. It would have been much cheaper for society as a whole to bankrupt the banks, force bond holders a haircut and cramdown the loans to realistic market terms. _Then_ you would be seeing a robust recovery.
In fact the approach to this crisis has been a political decision, not based on what is best for society as a whole. That, I believe, is reality.
FDR_JR(Quote) (Reply)
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Thanks for sharing your thoughts FDR JR. You make some great points.
The approach now is more of a socialist approach. Many of these homeowners would be out on the streets or empty houses by the millions if they went by the foreclosure book. Essentially, I would guesstimate that there are about 3-5 million households not paying their mortgage. Another 5 million who are 30 days delinquent plus. Many a mortgage and a home they can truly no longer afford anyways. These same people are losing their jobs and it is only getting worse. The boat is going down. Yet, everyone has their pales trying to bail out the U.S. Titanic. Unfortunately, the bubble was so large and the hole so gigantic, that the efforts to the bail out an already sunk ship are a waste of energy.
I am here at Ground Zero daily. My numbers would tell me that about 7-8 out of 10 people I help are truly helpless. Meaning, they can’t afford the home or do not have a job. In the beginning, this was maybe 1-2 out of 10. When the crisis first began, it wasn’t looking this bad. But now, it is much worse and getting more gloomy by the day. The problem now is no jobs and no money. None, zip, nada. The people that do get jobs are at 50% or less income than before. America has changed and will never be the same.
Loan modifications do not create jobs and do not stimulate the economy. Yes, I want them for everyone who deserves one. But it if I was a government man or in charge of looking after society as a whole, I would have to say let the laws of the land prevail and let the free markets unwind without government intervention. That appears to be exactly what they have been doing for years and are doing now (except for Wall Street). However, just coming out and telling the struggling Americans the truth is not wise for Politicians because most Americans cannot simply handle the truth.
Hence, it is best to just let the loan modification conspiracy to continue and let foreclosures role for the greater good of man kind. Unfortunately, the mankind losing his or her home is the one being sacrificed. Many refuse to see the light in their new dark realities.
Moe Bedard(Quote) (Reply)
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Moe, love the site and have been frequenting it after the 6-8 hrs a day (for the last 20+ months) of home saving that i am dealing with.
i just found this and have been doing my own research over the years and the data does show what you have stated. not a pretty picture but reality sometimes isn’t.
the wife and i started this going into it with the attitude of not being attached. (best way to deal with the reality of big business and how financial institutions are run)
we are some of the few that if a mod was put into place we would be right there with payments in hand on time just like how we started.
but the process is again not for helping but keeping the status qoe.
if it was to help, business as a whole would change in a big way and that is not what the ‘above the line’ are looking to accomplish.
long story short: we have dealt with b of a for the last 20+ months (not paying for more than half that). your “Bank of America Mailing Address, Contact Info, Emails” really helped recently and we got everything that was asked for to the underwriter. unfortunately the underwriter & b of a did not follow MHA protocols on the very last day that our 7th postponement was to go through and they auctioned off the property last week. (bank of america even helped along with our lawyers to make sure that 14 day postponement was properly put into the necessary personnel (just like it was every other time since dec 7 2010)). the property did not sell at the auction but went back into the ‘fannie mae’ name (ones who owned the loan to begin with).
we are thinking of pursuing it legally in court if need be (out of court would be great for both parties i suspect (small media attention, but media attention none the less)). just on principal alone.
we have time and time again showed that we are willing to pay much more for the property then what is worth. (we did a lot of building that is not to code and they would have to take a small hit to rectify that. unless they keep it under the wire and sell it as is)
we really want to stay (dream home situation (750sq ft of dream). so i just wanted to know if you have dealt with or seen positive or negative dealings with pursuing illegal foreclosure because of not following MHA guidelines.
thanks again for creating a place for people to help one another try to keep the hope alive in pursuing these small avenues of possibility by the financial institutions.
cheers
geoff r(Quote) (Reply)
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Thanks so much for the comment and kind words Geoff!
Yes, I have seen a “few” successful suits, but countless unsuccessful MHA lawsuits. The reason being is that the MHA or HAMP are not laws. Hence, there are no laws they are breaking to sue over. UNLESS, your lawyer can prove breach of contract under contract law since they often promise these loan mods verbally and make homeowners like you jump through hoops to only deny them after months of hoops.
Good luck to you and keep up the fight!
Moe Bedard(Quote) (Reply)
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Just got off the phone with Bank of America. After 19 months of trial payments plus loan modification offer in which I complied with all the terms of the agreement B of A has told me that investor denied loan mod offer due to LTV % ratio. They advised me that I must start over from scratch inc. documentation submission and trial payments.
After reading this article I understand that this is an exercise in futility. A way for B of A to get more of my money with ultimately no permanent loan modification forthcoming. I like my house but reality is it would be foolish to give B of A another dime.
Thanks for the reality check.
Susan Hall(Quote) (Reply)
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Moe: I read your article with great interest. You are being logical. No question about it.
“If you are listening to me, you need to understand that the real estate and mortgage markets were never designed for people to stay in their homes for 30 years and pay of their mortgages. They were never designed to offer loan modifications and stop foreclosures. It was designed and managed to perpetuate buying, selling, refinancing and speculation. Real estate and loans are Main Street’s Wall Street or legal Vegas. Unfortunately, if you are underwater and or in foreclosure, then you lost the bet.”
I will agree with above too. Though as long as the home value rises and someone manages to sell it and cash on the equity, those lucky few come out ahead too. Most homeowners don’t, because the real estate market place sooner or later corrects itself (perhaps multiple times in 30 years). People borrow against their equity and then lose when the equity disappears. Only people really making money most of the time are lenders, brokers, real estate agents, homedepot, etc. It keeps money flowing through the system. Which creates economy.
Thus, I believe that there is a secret push to get borrowers who are violating their mortgage contracts out of their debt obligations and get new, fresh debtors in your home. This is what will revive the economy.
Now when a big correction like in this economic crisis takes place everyone loses. The lender as well as homeowner. Both are left holding a depreciated asset. Lender less so because most of his portfolio is net positive. How much would bad loans drag down a lender ? Not much if the taxpayer/govt is underwriting his bad loans. Which is what has happened. Little guy is the one who suffers.
So assuming supply-demand were normal, your article’s logical conclusions would be valid. We do need to look at the underlying assumptions and see if the logic still works.
I came across this : http://bit.ly/lKcQWP
If the numbers in this article are to be believed:
1. Most of those who are foreclosed, are locked out for real estate market for at least 4-7 years. May be good for rental market.
2. People aren’t foreclosed but whose homes are upside down are unlikely to be able trade up and buy new place till real estate prices rise. That too might take another 5-6 years.
3. Bottom line is there are not enough potential debtors (i.e. new buyers) to put in the shoes of all those who are/will be locked out of the home buying market for next few years.
And all these foreclosures decreases the valuation of rest of the homes too. What we then have is:
1. More home foreclosures means lower home value in the over all market = net reduce equity (wealth?) which means people have less means to spend. Significant impact on economy if people can spend.
2. Even less number of buyers (i.e. demand) to buy these properties which have reduced in the value.
Hence Loan Modification in fact does provide the band aid to somewhat slow this pain on the larger society. Letting foreclosure happen is not in interests of larger good! Letting people stay in their home will put a floor on how much the property value will sink.
All bets are off if enough investors enter the market to buy these properties at low price and hold them till prices rise and average person can can afford to buy again. There are only two classes of investors who can do that – foreign investors making cash buys or companies sitting on fat pile of cash not knowing where to put it. Companies/corporations are unlikely to invest in homes spread the country. Unless some smart ass financial engineering can take that money and invest it in entities (REIT?) that will go around scooping these properties and holding them for healthy returns 7-10 years down the line!
Ankur(Quote) (Reply)
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