(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.
LoanWorkout.org: FHA Secure
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
LoanWorkout.org: Will Project Lifeline be Another Foreclosure Flop?
My name is Maurice “Moe” Bedard. I am the founder of America’s #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.