July 26, 2009

Mine To Look After

-by the Mysterious Flying Miser

Quite a few readers of this blog have recently posed the question “Where the hell is Ben Jones, and what the hell is he doing all day long?” Well, I woke him up early one morning and interviewed him to find out. According to him, he’s been working on his new business. He calls it “property preservation”. He swears his job is to secure and maintain houses once the delinquent occupant vacates the house. I eyed him suspiciously and pressed on. I was sure he was only making an excuse, that there would be girls in his bed and whiskey on his breath. I forced my way through the window and looked around. No girls. I decided to leave the breath question unanswered. So, with no evidence of excessive sloth and indulgence, I decided to play along and ask him a bit about this intriguing business of repossessing houses. Here’s how the conversation went:

Miser (with eyebrow raised): What made you decide to become a property preservation contractor?

Ben: I always considered the Housing Bubble Blog to be dedicated to the economic phenomenon of the mania. So I started a foreclosure blog as a place to put various related opportunities that I came across that weren’t directly relevant to that. I found an article on this field in 2006, and thought it would be a good business to ride out the bust with.

Miser: When did you decide to do it?

Ben: When I felt there were enough defaults in northern Arizona, by late 2007, I decided to start the company. It took a long time. The insurance alone took months to put together.

Miser: Describe what you do on a day-to-day basis.

Ben (lighting up a Nat Sherman mint cigarette and looking official): A typical day might start with what is called an initial secure. This usually involves changing a lock on a secondary door, which allows the owner and realtor to continue to access the house. Once a house is secured, it is checked for damages, etc. I may bid on these damages or for removing debris. Then the house is most often mine to look after; cutting the grass and making sure it is OK. Over time this list of houses to take care of becomes the bulk of the work.

Miser (leaning forward with excitement, trying to look cool): Have the houses already been foreclosed on by the time they are assigned to you?

Ben (leaning backwards, obviously trying to suppress his whiskey breath): About 60% of the time, the initial secures I do are presale, which means it is not in foreclosure yet.

Miser: Are the houses always vacant by the time you get there?

Ben: No. It is rare for a house to be occupied, even presale, but it is the case in 5% of the houses, approximately. Usually, not only are they vacant, but they are abandoned. Utilities off, and no one is maintaining the yard. Sometimes a door or windows will be unlocked. (Ben makes note to self: Lock window to keep out Miser in future. Consider change of address.)

Miser (more friendly by now): What do you notice most about the houses you visit?

Ben: Of course, having worked with the HBB for years, I find situations of economic interest. I notice things like how long people have been living there, meaning it was probably a refinance that resulted in the default. One thing I see is the high number of foreclosures in expensive subdivisions. I see signs of anger and possibly embarrassment on the part of the owners.

Miser: Describe the most interesting things people leave behind.

Ben (pouring a bowl of some healthy cereal, making a point not to offer me any): The personal property I see isn’t very interesting, except in what people don’t find value in taking. Computers get left behind a lot. Furniture is often still present. There always seems to be some paint or chemicals. Then there is the food and other health hazards like tires. But it is surprising how often the houses are spotless, as if they have been professionally cleaned.

Miser: Do you ever talk to the neighbors? Why or why not?

Ben: Rarely. I try not to bother them, and I have constraints about what I can discuss legally. If there is some question about addresses, like in a rural area that is poorly marked, I may ask around to make sure I have the right house.

Miser: How do the neighbors usually seem to feel about the situation?

Ben: They often inquire about what is happening with the property. They are obviously concerned about their neighborhood and the values. For the most part, they aren’t pleased. Sometimes they express interest in buying the place, at a discount of course.

Miser: What’s the most interesting interaction you’ve ever had with a neighbor?

Ben (starts to say something with a mysterious little smile on his face, then suddenly stops and changes track): A few days ago, in a rural area near New Mexico, I couldn’t find a lot because the addresses weren’t in sequence. I approached one man who told me a title company rep had mistakenly put a notice of default on his door the day before, and left in a hurry. This gentleman told me he considered shooting this person. But I explained what I was there for, and he calmed down and we got along fine. He was very helpful in the end, and other neighbors inquired about buying the house for family members. All in all, the neighbors are glad someone is doing something about these vacant houses and are happy to see me show up and make sure everything is OK.

Miser: Do you ever feel sorry for the people who are losing their houses?

Ben: I’ve always believed that feeling sorry for someone is looking down on them, so no. Being a student of the housing mania, I understand the various factors that got us here and I tend to view it more as an academic education. The only part that is really unpleasant is to see that there were children involved.

Miser: Do you ever feel sorry for the banks that are taking the houses?

Ben: I have zero interaction with the lenders. But I do understand that behind these loans are bonds and bondholders, meaning that there are everyday people out there with stock losses or pension funds that have taken a hit. When I was an accountant, I never liked to see people lose money, and I still feel that way.

Miser: Are you glad you started doing this?

Ben: It’s a business like any other, with risks and rewards. It certainly isn’t some jackpot industry; it is very competitive and the deadlines never seem to end. That said, it is exciting to be in field that is growing. But that is the nature of a counter-cyclical industry, and this is no ordinary cycle, as folks at the HBB know.

Miser: For how long do you plan to do this?

Ben (leading Miser out the front door with a gentle push behind the shoulders): It’s hard to say. In northern Arizona, our market is behind others like Phoenix and Las Vegas by a couple years. I’m guessing 2 or 3 years and then it could become just like any other business. There is an ongoing body of work, but I can’t say if this will continue indefinitely or not.

Miser: Is there anything else you’d like to say?

Ben: Hi Mom!




Easier To Have Bad News Rather Than No News

-by the Mysterious Flying Miser

Kermit Arnold, a 47-year-old business consultant from McLean, Virginia, has been living in his condo for 8 months without making a single mortgage payment, but his lender has yet to kick him out. He purchased the condo in 2004, but couldn’t keep up with the $2400 monthly payments when unexpected health problems arose. “In the midst of funding my business expansion in 2008, I developed some severe health problems, which then necessitated long term chemotherapy, which is still ongoing. For about eight months I had no income, was still paying business expenses, and had many large medical bills. Even with good insurance, the costs mount quickly. I even appealed to my church for financial assistance and received some,” says Arnold.

Arnold thinks he will be forced to move in about 2 more months, but he can’t get a straight answer from his loan servicer. He tried to restructure his loan, but the restructuring was put off while waiting for new legislation to take effect. Since then, he has gotten conflicting information about the status of his loan, and his attorney has not been able to clarify the matter any further. Kermit hopes his problems may be solved, saying “I’m sure part of the issue is the sheer volume of this problem nationwide, although I was not one of those who took out a loan I couldn’t afford or was speculating. I may yet learn that I made it through the pipeline and now have a restructured loan with a lower payment and no arrears. In some ways, it would be easier to have bad news rather than no news.”

Elizabeth Lake, on the other hand, has always paid her bills, but her neighbors haven’t. A 30-year-old public relations representative, she questions her neighbors’ integrity. She says the couple (in their late 50s or early 60s) moved to Reno from out of state in spring of 2006, and were initially upset to find rented homes in the neighborhood. They complained of the cars parked on the street, for instance. Since then, they have moved out, stopped paying the mortgage, and are now collecting rent from their new tenants (a couple in their early 30s with two kids).

Lake believes her neighbors haven’t paid their mortgage for about 6 months. The tenants told her they received notices via certified mail that the payments are behind and there is a possibility of foreclosure. When asked why the delinquent couple stopped paying the bill, Lake says “My observation is that they stopped paying because the husband took a job out of state, and the wife eventually ended up moving to be with him, and now they are paying rent on top of having their mortgage – they (like the rest of us who bought during that horrible time) are aware of how much the value has decreased in their home, and my guess is that they figured the easiest/best way out is to just let the house go. Better for them to deal with a little bad credit than be stuck with a house they weren’t ever planning on living in again.” She says the tenants are considering buying the house in a short sale.

Says Lake: “I’m frankly disturbed by the situation. I think it’s really shady for someone (in this situation) to be taking money from a renter and not put it toward the mortgage. Every month, they have been taking that money knowing they are not using it to make their house payments. I just think it’s wrong and puts the renters in a bad position. The renters basically will get kicked out of the home, unless of course the short sale option works out. It also bothers me because I feel it has an impact on my home and the rest of the neighborhood – the renters made a comment about how they’re continuing to let the yard go (looks horrible, weeds, dead grass, etc.) so that, when the house is appraised, they can get the lowest price possible on the short sale. I can see why they would want to do this to help themselves, but again, it’s affecting the whole neighborhood.

“As far as how I feel personally/morally about the whole situation (and the fact that this is happening all over America) is that people really disappoint me. I guess it bothers me that I am in a home that is now worth ½ of what we paid for it, but I’m not just jumping on the bandwagon and taking the easy way out. I think people need to be more responsible and follow through with the actions they initiated when purchasing a home for such a price. Don’t get me wrong, I do sympathize with those who are truly having a hard time and cannot make their payments (those that got caught up in the greed from the banks/lenders), but I know several instances (even friends of mine) who are just walking away like it’s no big deal. I think it’s wrong and irresponsible. I think it’s eventually going to affect those of us who are continuing to be responsible and dealing with the mess we got ourselves into. We can’t even refinance our home because its value is so low compared to what we owe on it.

“I found it interesting that the home owners never even gave the renters a heads up that they were not paying the mortgage (but I guess that was the whole point – take the money and run!). I think they could have at least gone to them and told them their situation was bad and that they couldn’t pay, and maybe tried to work out some kind of sale deal (or at least let them know they could be evicted). I believe the renters actually had to contact the owners when they got the notices to get them to fess up to it.”




Bits Bucket For July 26, 2009

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.