“The Trend Is Accelerating”
The Republican reports from Massachusetts. “Indicators of delinquent mortgage payments that could lead to foreclosure rose dramatically in Massachusetts in February, according to a report issued yesterday. The first step taken by a lender against a delinquent borrower, petitions to foreclose filed in state Land Court, rose 92.1 percent to 2,242 across the state compared to the number of petitions filed in February last year, according to The Warren Group.”
“Advertisements for foreclosure auctions, the last step before a property is actually sold at auction, rose an alarming 199 percent to 1,005 statewide compared to the year before, according to the report.”
“Terence Egan, editor at The Warren Group, said the ‘trend is accelerating.’ Month-over-month comparisons throughout 2006 and into 2007 have shown steady increases, he said. ‘It’s likely to get worse before it gets better,’ he said.”
“Petitions to foreclose in Hampshire County rose 177.8 percent, from 9 to 25; in Franklin County, petitions were up 122.2 percent, from 9 to 20; and in Hampden County, petitions were up 101 percent, from 99 to 199.”
“Egan said ‘what’s really interesting’ is that foreclosure petitions in the Pioneer Valley are tracking the increases across the state, but the increase in auction announcements is ‘dramatically lower’ than the rest of the state. That may be because housing prices are lower in Western Massachusetts and did not spike as high as eastern Massachusetts housing prices during the boom years.”
“Also, he said, homeowners may find it easier to sell their homes than eastern Massachusetts homeowners, who have watched housing values slide. ‘There’s not a lot of wiggle room when you owe more on your home than you can sell it for,’ Egan said.”
From News Center 5. “NewsCenter 5’s Amalia Barreda reported that the numbers mean that in just about any neighborhood in any Massachusetts town, homeowners could be on the brink of losing their most important financial investment. Mortgage broker Don Larsen had to break the bad news to his client on Wednesday. New Century Mortgage, a wholesale lender, did not have the cash for a promised $417,000 loan.”
“‘They’ve always said everything was fine. Keep sending loans in, everything will fund. Unfortunately, this one didn’t fund, and it makes me look bad and makes my borrower unhappy,’ Larsen said.”
“Foreclosure loomed for Barbara Gosselin and her husband recently. A risky zero percent down payment loan helped them become first time buyers of a property in New Hampshire. But tight finances got tighter when her husband had unexpected business problems.”
“‘The stress has been unbelievable. I’ve had days where I’ve cried. At work I’ve cried trying to do my job and just worrying about the stress of losing the home,’ Gosselin said.”
From CNN Money. “Jemima and Ricardo Sanon saw the possibility of trouble before they ever signed their mortgage documents in 2004. The Sanons had diligently saved $5,000 in preparation to buy their first home, but the sum was just enough to cover the closing costs. So to finance the $290,000 purchase price of a Waltham, Mass home, they took one loan for $232,000 and also a piggyback loan for $58,000, both from New Century Financial, a subprime lender.”
“‘I worried about how we would make payments when they increased,’ said Jemima. ‘The mortgage broker [at New Century] told us we could refinance.’”
“Fast forward a couple of years, and the Sanons, like so many other subprime borrowers today, are struggling to keep their heads above water. As the housing market boomed, refinancing or selling your home was a simple solution for borrowers who had trouble making the mortgage payment. Now that the housing market has stalled, subprime borrowers are stuck with loans they really couldn’t afford in the first place.”
“Defaults and foreclosures are rising, and the industry is roiling as lenders face the consequences after years of handing out money irresponsibly. Says Bruce Marks, CEO of a non-profit that is trying to help the Sanons and other subprime borrowers refinance into sensible mortgages: ‘Lenders knew these loans were structured to fail.’”
“For the Sanons, the initial monthly payment on the larger loan was some $1,300. Two years later, that payment jumped to over $1,800. As a result of the sticker shock, the couple fell behind on their credit cards and student loans.”
“In November, Jemima had to leave her job for several months because of a difficult pregnancy, which put them even further behind on the bills. She recently returned to work. But not in time to stay current with the mortgage; in February, the Sanons paid late. Now the March payments are due, and the latest adjustment has pushed the sum on the larger loan to over $2,000.”
“After the first adjustment, Ricardo called Litton Loan Servicing (the company currently servicing the mortgage) to try to work something out. ‘They threatened us,’ he says. ‘They said, ‘If you don’t make your payment, we’ll foreclose.’”
“Ricardo’s working with Marks’ organization to try to get into a loan that makes sense. In the meantime, he has been logging seven days a week at the drug store where he is employed as an assistant manager to keep up with the house payment. With their newly blemished credit record, the couple hasn’t yet been able to refinance out.”
“‘We want to keep our house,’ says Jemima. ‘But we can’t do it with the mortgage we have right now.’”
From AFP Press in New York. “In the heady days of the US real estate boom, it seemed like a safe bet to use her house as collateral for a loan. Today, Sharon Edwardsen risks losing her Staten Island, New York home, trapped by spiraling payments.”
“Edwardsen was tempted to take out a special high-risk loan targeted at people with low credit ratings. Today her monthly repayments have soared to 2,800 dollars, yet she only takes home 1,600 dollars.”
“‘I’m panicking every day. I’m not sleeping because I’m worrying. This house has been in my family forever and I don’t want to lose it. But I can’t make the payments they are asking me for,’ she told AFP.”
“During the boom years, when the repayments got too high, home owners could even refinance their loans borrowing against the increased value of their house. That’s exactly what Edwardsen did, remortgaging her home three times between 2002 and 2006.”
“Each time she got into difficulties, her mortgage broker would offer a new deal. From an original loan of 103,000 dollars, she now owes the credit company some 285,000 dollars even though her monthly income has remained the same.”
“‘They took advantage of the fact that I was so desperate that I needed it. I told her (the broker) I had trouble with it. So she said in three months ‘we’re going to do this again. We’re going refinance you again and the money you take out, you going to use it for your mortgage payments,’ Edwardsen said.”
The Star Ledger from New Jersey. “A property appraisal Michael Meehan conducted in Chester Township more than two years ago noted improvements such as a new kitchen, two new bathrooms, new plumbing and 17 new exterior windows.”
“NJ Affordable Homes then used that appraisal to help one of its investors obtain a $375,000 mortgage. But there were at least two problems with Meehan’s work, federal prosecutors said: He never went to Chester to visit the property, and the land was vacant.”
“Meehan pleaded guilty to conspiracy to commit wire fraud yesterday during a hearing before U.S. District Judge Jose Linares in federal court in Newark. ‘He’s not a bad guy,’ defense attorney Thomas Harley said. ‘He just got caught up in something common sense tells you you shouldn’t get caught up in.’”
“His contact at the company gave Meehan sales contracts with prices far exceeding properties’ values and Meehan appraised the homes to generally match that price, according to charging documents. The unnamed employee also provided Meehan with a list of improvements purportedly made to the property.”
“‘It became easier to just do what they wanted to do,’ said Harey, who noted Meehan appraised about 100 properties.”
From New Jersey. “Call it Retail 101: Low prices attract shoppers. Increasingly, real estate agents are coaching home sellers to list their homes at an asking price that clearly undercuts the competition. Agents have taken to calling it ‘drama pricing.’ Others, the ‘eBay effect.’ Either way, the logic is simple: In a housing market with a glut of properties for sale, an unusually low price is a surefire way to make your home stand out and attract more prospective buyers.”
“One homeowner who recently adopted this strategy said her real estate agent referred to it as ‘the bungee jump.’”
“‘You go down and then you get sprung back up,’ said the seller, who did not want to be identified because the deal has yet to be completed. ‘You would rather have that effect than overpricing your home and getting no bids at all.’”
“Realtors said many sellers are reluctant to take ‘the bungee jump’ for fear the offers will come in lower, not higher, than the asking price. Still, with the housing market slack, more and more sellers are willing to give it a try, Realtors say, particularly those with homes priced between $500,000 and $1.5 million.”
“‘When buyers see good value, they will come and they will buy with a sense of urgency,’ said Cara Moxley, a Realtor in Summit. ‘Ultimately those underpriced homes bring more, even beyond most sellers’ expectations.’”
“‘I take pains to help clients understand that the rationale behind a lower list price is to maintain a position of negotiating strength as a seller,’ (realtor) Howard Bunn said. ‘A low price pits the buyers against one another. They must compete or lose the house. A higher list price pits the potential buyer against the seller and the seller is then playing defense, negotiating with a buyer who knows he’s operating alone and not concerned with the actions of excited other buyers.’”
“Still, Bunn said he always cautions sellers never to list their home at a price they would be sorry to sell at. As with any real estate deal, a seller is under no obligation to accept an offer. But once the asking price has been set, there’s no going back: It won’t help sell a house to later raise the asking price.”
“‘That kind of pricing is the devil’s workshop and will lead at best to a severe loss of credibility,’ he said.”
“There’s also some risk for a buyer in this situation, Realtors say. Make sure you’re not the winner who ends up feeling like a loser in the morning because you overpaid for a property, said Lorrie Cohen, a broker in West Orange.”
“‘People always want what they can’t have, and they get caught up in the frenzy of this bidding war and they get the house, but the next day they wake up and they say, ‘What did I do?’ Cohen said.”
“Terence Egan, editor at The Warren Group, said the ‘trend is accelerating.’ Month-over-month comparisons throughout 2006 and into 2007 have shown steady increases, he said. ‘It’s likely to get worse before it gets better,’ he said.”
That’s disturbing. Since MA started its housing recession earlier than the rest of the country, I thought the outlook might be better not worse.
I agree, things must be getting bad in Mass.
I picked MA for the worst ,but FL seem to be in thelead for price drops
can we get a local observation just on % DROP so the rest of Wall STreet will know
tia
Things are indeed horrible here. You can see the effects of the housing crisis in the bags under everyone’s eyes. Anybody who bought in the last 2-3 years is in a bad state, no pun intended.
On the somewhat bright side, what’s interesting is that the abundance of vacant houses is not obviously the result of speculators buying investment properties, but of old people passing away. Most likely, the estates own the homes, so it should not cause major financial hardship for the families to price the property to move. On the other hand, it undercuts those dupes who bought Mass property in the recent past.
Short NE!
“You can see the effects of the housing crisis in the bags under everyone’s eyes.”
bubble bags?
(Things must be getting bad in Mass. )
Or good, for buyers hoping to own a house with the same financial ratios sellers had when they bought years ago.
Mass, Boston specifically, lead the decline during the early part of the 90s. I’ve often called Boston the “canary in the coal mine” for the NY/NJ metro area. The decline is following a pattern very similar to what we saw during the last RE bust.
jb
cape cod , the true canary
off 1987 then 2004 in the Fall
James,
I agree. It partly might be b/c the northeast has used far less ARMS, etc. as a % of loans. They stick to the 30yr fixed. This fact could contribute to NE going down earlier.
“They stick to the 30yr fixed. This fact could contribute to NE going down earlier.”
I was wondering if you could expand on this, JA. I’d have thought having a greater proportion of 30 year fixed would have slowed the downturn down .
In someways I agree. I think the downturn in Boston will be less than other places b/c we will have fewer ARMs kicking in over the next two years. Just to make a distinction, IMO, the use if 30yr fixed would bring the slowdown earlier, not make it worse.
When interest rates started to rise again, the 30yr fixed immediately got more expensive. So things in the NE would slow first. In other cities prices might start to rise b/c buyers are more prone to use ARMs, there-by keeping their monthly payments low.
I think we see that when you look at the Shiller-Case index for Boston. The Boston area sees a distinct downturn before any other city. The downturn approximately coincides with the rise in the 30yr fixed rate give or take a few months.
I hope that makes any sense…
Ahhh…you’re saying affordability issues are clicking in earlier rather than a propensity of bad loans being made to people.
JA, earlier but softer. Heck, Mass is alarmed at a mere doubling of foreclosures in a year, but San Diego County foreclosures rose eightfold in 9 months and already exceed those in the entire state of Massachusetts.
When you read the comments from Dodd, and you read the articles describing the borrowers as poor “victims” you can see how this debacle has the capability to bring about some massive bailout.
It really makes my blood boil, and we should organize. Meaning if this looks like it will happen we post the contact information for all Senators involved on the committee that Dodd heads and we start to write letters.
No one forced these people to borrow. Also, no reporters yet are asking these people just what the hell they did with all the money that they refinanced out of their homes like the woman in Staten Isl. Those are the articles I really want to see.
“[W]hat the hell they did with all the money that they refinanced out of their homes.”
My theory is a lot of these people were in over their heads to begin. As a result, they were charging living expenses on credit cards and simply rolling these costs onto their mortgages. Wash, rinse, repeat. Unfortunately, the washer is now broken.
This Staten Island woman said it was a “family home” in the article. That tells me GREED, GREED and than some more GREED with her THREE refinancings.
Where is the reporter to say to her…um…miss, just why in the world did you refinance your family home 3 times in the past few years?
What sickens me is the lack of sense of personal responsibility on the part of the debtors. Refi has become a new form of entitlement program for these people. Now they are crying for being victimized by those subprime wellfare workers. Remember, what you got is a “loan”?!
That struck me too about her comment “the house has been in my family for ages” which tells me the house was probably owned free-and-clear at one point. So we’re supposed to feel sorry for her $285K debt but how are we supposed to feel about the fun she had while overspending her income by $285K. This woman is the poster child for what’s wrong with a large part of this pathetic country - the “I want it now” philosophy coupled with the “Someone will bail me out later” philosophy.
It’s too friggin’ big to bail out, and Dodd is a lame ass for not seeing it. When it finally dawns on him how collosal this beast is, he’ll put his tail between his legs and bolt. This thing is like the fire that has become too big to put out. You just let it burn and hope the casualties are limited.
I hope you are right NNVM, I really hope you are. But, as we have seen our politicians, who all suck, have a propensity to NEVER miss a chance to pander to a stricken section of the population.
They are trying to buy vote with our (taxpayer) money. I say:
No Freak’in Way!
“…our politicians, who all suck…”
Wow, that is quite possibly the most truthful statement ever made on this blog! I too hope NNMV is right when he/she says its too big for a bail out, but your statement leaves me wondering. I’ve already written both of my senators, basically telling them why we are in this bubble and how there should NEVER EVER be a bailout for any FB. The market is starting to make the necessary corrections, as it should be. btw, I did not use the term FB in my letters!
You put that perfectly, dukes. My sentiments exactly.
“It’s too friggin’ big to bail out”
LOL. Wow! I just posted that exact question in the bits thread in response to Lou M. — Too Big to Bail.
I agree with you but that is not the point of Dodd’s proposal. Most folks in the hole a 100K will see a multi-billion dollar bailout as the answer to their problems because THEY don’t have any idea of the scope of this debacle. Dodd’s proposal is like spitting at a forest fire but the average dolt that couldn’t even take the time to figure out how much he would be paying upon the reset of his I/O certainly isn’t going to be able to figure out that his “share” of a multi-billion dollar bailout amounts to pennies. Plain old vote pandering is all this is.
The government is going to regulate the bejesus out of the real estate market after this disaster, and the industry only has itself to blame. When 2.2 million people lose their home to foreclosure, that causes a political storm that forces politicians to act. I think that it will become almost impossible to evict someone in a foreclosure - congress will give the borrowers a million rights and let them stay in the home for 60+ months after they stop paying. Congress IS going to act, you can’t stop it.
I think that it will become almost impossible to evict someone in a foreclosure - congress will give the borrowers a million rights and let them stay in the home for 60+ months after they stop paying. Congress IS going to act, you can’t stop it.
This will just force mortgage companies further in the red. The people that can’t pay their mortgage NEED to be kicked out. Then auction the property off and get a person that can pay into it. Why is this simple concept so freaking hard to understand?
I’m not worried. I believe that the financial mafia will turn the screws on congress.
It’s a question of who get’s screwed, the one holding the note, or the deliquent borrower. Or do they both get bailed out?…..I don’t think so.
We’ll be safe as a society when we learn to behave in such a way as to not stir the politicians from their basic thievery.
Why is the term “when people lose their home” used over and over. It isn’t their home to lose, especially if they are 100% financed. They should have never been allowed to “borrow” the home if they couldn’t make the payments. How do you loose something that isn’t really yours in the first place? This is more of a situation like being repossesed. NO BAILOUT…let the chips fall for all the idiots…idiot buyers, idot lenders, shady mortgage brokers, etc.
Most things accelerate when they fall off a cliff.
“As the housing market boomed, refinancing or selling your home was a simple solution for borrowers who had trouble making the mortgage payment.”
I discussed this at the end of last week. Those are the borrowers who are most screwed. The ones who were promised a re-fi into another ARM…never realizing they’d never actually own a house.
Why didn’t these people think these things through? If you have to re-fi every 3 years you couldn’t afford the house in the first place!!!
These people CHOSE to suspend belief in order to get on the Property Ladder and get rich. I have no sympathy for them.
Many of us saw what the hell was happening and we didn’t bite, it was obvious to anyone with a god damn brain in their heads.
I can’t have any sympathy for them, for the banks, for the investors who bought the loans…No one!
If the true bagholder in the end is the taxpayer, that’s who I have sympathy for.
Yeah. Natural selection in real time.
Many of us saw what the hell was happening and we didn’t bite, it was obvious to anyone with a god damn brain in their heads.
Watched a bit of “are you smarter than a fifth grader” last night. Its “who wants to be a millioniar” dumbed down so that the average person can play along.
so the whole point of it being obvious to anyone with a brain in their heads, is why we’re in this state. A lot of people don’t have any brains in they’re head.
Sheep do what ever they’re told because they’re too stupid to do anything else
do these guys still get 1/2 % ?
3 to 4 clicks and why do you need them ?
this one didn’t fund, and it makes me look bad and makes my borrower unhappy,’ Larsen said.”
‘They threatened us,’ he says. ‘They said, ‘If you don’t make your payment, we’ll foreclose.’”
That’s not a threat, that’s a promise…..
“‘They threatened us,’ he says. ‘They said, ‘If you don’t make your payment, we’ll foreclose.’”
Captain Obvious returns!!!
It’s in the bank’s best interest to try to work something out. I think the biggest bagholders in the end will be the banks.
I like “MOTO” in lieu of Captain Obvious.
“Master Of The Obvious”
No doubt, the lenders must try to work something out. Can’t even count the number of times I’ve recalculated amortization for some poor slob who called up asking to skip a couple of payments because of some other financial problem. I am missus Nice Guy, even now. However, when people are actually underwater, I have grabbed property ASAP to turn it over in a hurry. No such cases since 2003, just holding my breath now.
HERE HERE CAN I ASK A STOOOOPID QUESTION?????
UH DUH…. you know your payments are going up a lot….. SO WHY DID YOU GET PREGNANT????
=================================
“In November, Jemima had to leave her job for several months because of a difficult pregnancy, which put them even further behind on the bills. She recently returned to work. But not in time to stay current with the mortgage; in February, the Sanons paid late. Now the March payments are due, and the latest adjustment has pushed the sum on the larger loan to over $2,000.”
Somebody actually named their kid “Jemima”? Bet she caught hell for her name in school!
I’ll bet she ghettoized it to Jah-MEE-mah
Believe it or not, Jemima was my great, great, great, great, grandmother’s name. Her dad (my great, great, great, great, great, grandfather) was named Zephaniah. I think these are biblical names that seemed quite common in this country when it was first settled. Maybe they’re making a comeback. Then again, maybe her mom had pancakes that morning for breakfast.
I like Jemima. Mmmmmm makes me think of pancakes dripping in syrup! MMmmmmm what’s not to like!
Her pregnancy was an IMMACULATE CONCEPTION….
There was no DNA evidence on the sheets…Just money under the mattress…from the last JOHN!!!!
“Foreclosure loomed for Barbara Gosselin and her husband recently. A risky zero percent down payment loan helped them become first time buyers of a property in New Hampshire. But tight finances got tighter when her husband had unexpected business problems.”
Anyone who doesn’t expect business problems deserves to go out of business.
I’m getting a whiff of divorce with more and more of these personal stories.
This is a tough road for any young couple.
Hey, I’ve been in business for 15 years. Business is nothing BUT a set of problems, expected or not!
“For the Sanons, the initial monthly payment on the larger loan was some $1,300. Two years later, that payment jumped to over $1,800. As a result of the sticker shock, the couple fell behind on their credit cards and student loans.”
The story of the century. As a result of tighter regulations (cough) and poor personal financial planning, the reset date equals the checkout date for some borrowers. This behavior is not limited to subprime, however.
No it’s not - even in traditional loans - mortgage brokers really pulled out most of the stops. There are a lot of people with 30-year FHA loans were allowed to push their finances to the max. Most people thought “If I can hang on for a couple of years, this place will be worth so much more.”
But in the mean time, things happen - car accidents, a new baby, unemployment, and the mortgage become a noose. It’s tough because so many people are told over and over again that they need to buy a house ASAP. And not just any house, the most they can afford.
“But in the mean time, things happen - car accidents, a new baby, unemployment, and the mortgage become a noose.”
This is why banks used to not let you buy at more than 3x gross income. Shit happens.
“And not just any house, the most they can afford. ”
Yep, that’s an investment strategy called using leverage. It works great when the price of the underlying asset is increasing. Of course the leverage works the other way if the price of the asset declines. Most sheeple never thought about that flip side to their housing-wealth strategy.
No, it certainly is NOT limited to subprime. These people have a child and school loans, the prudent thing was NOT to buy, to rent and save up their money.
But, no, they HAD to have a house. Again, this whole “ownership society” bull$hit gets me angry. I am tiring of the sob stories already, I don’t buy any of it.
“Student loans” should be redefined as oxymoronic, because the first lesson in life should be: don’t borrow.
Have you seen the cost of an education today? Student loans are a fact, unless the cheap-ass anti-tax whiners on this board and alot of others want to pony up to actually fund what education costs.
Josh
I’ll fund any amount for scientists, and engineers but I wouldn’t give one cent to a freaking literature or social science program. I’d fund a historian at 50% and dig open pit graves for every econ major in the country.
Hah! We call higher education an “industry” now. Indoctrination or education? What is it these days, or has it always been this way? The most important thing I learned in college was how to write a grant proposal. Nothing else mattered.
Umm, wanna put your money where your mouth is? I have about 20k left over from my original 60k of student loans. I’ve always felt on the fence about if I got my moneys worth out of a private education, but when I was 18, all I saw was : good school, Go For It! But, since I’ve been able to pay off 65% of my debt with the jobs I’ve had (5 years), I guess I can call it a good enough value, if not the BEST value. OTOH, I got a degree in computer science, which could possibly have given me the same job prospects for about 1/10th the price from SDSU, or a similar state school. Too late to change the past though. At least I don’t owe half a million bux for a $hitbox condo in PB!
Im am your poster child, CS degree from San Marcos. I graduated with zero debt though. Partly through cheap tuition, partly through parental help, partly through military service.
As far as not wanting to pay for education, thats just stupid. With very few exceptions, education pays for itself. Yes liberal arts are often the exception but most degrees allow the recipient to earn more money and pay more taxes.
That is an interesting observation. The credit card companies will get hit before the mortgage companies. Student loan folks don’t have to worry, there is no statute of limitations and they have about the same collection power as bail bonds places.
“Each time she got into difficulties, her mortgage broker would offer a new deal. From an original loan of 103,000 dollars, she now owes the credit company some 285,000 dollars even though her monthly income has remained the same.”
Reads like the relationship between a crackhead and a drug dealer. She needs credit rehab and a head shaving for losing the family home.
I picture people with their mortgage brokers’s number on their speed dialer.
“I picture people with their mortgage brokers’s number on their speed dialer.”
Right next to their drug dealer’s number.
maybe they are the same person…
I suppose the MSM intends for all these sob stories to elicit sympathy for these poor “victims.” Perhaps I’m just heartless but all it elicits from me is scorn. Greedy, stupid people. If my tax money is used to bail them out I’m going to puke.
AGREED!!!!!
103,00 to 285000 in three years….what the hell did she do with $182,000?! IN THREE YEARS!!!
Excuse me while I whip out my violin. Boo Hoo.
Suck…It…Up…
I agree! Read my post above. If this bailout nonsense takes wing because of these sob stories the prudent among the population…people like us…have to take some action and write out politicians.
“what the hell did she do with $182,000?! IN THREE YEARS!!!”
$150K in lender’s fees.
$30,000 in mortgage payments.
$2,000 in hard liquor.
Just my educated guess.
Good guess, Andy!
“If my tax money is used to bail them out I’m going to puke.”
I’m going to follow Txchick’s lead here and try to make some money out of the darn bail-out if there is one. It’s one way to hedge against the political class.
What’s more, from reading political commentary it seems they are all far removed from the reality of this debacle and did not see it coming. They are simply trying to profit politically from the debacle OR sweep it under the rug.
If you followed or are following the Katrina bailout, you get my drift. There are people in their attics as we speak trying to claw their way through the shingles and some are saying, “it’s contained.”
“Increasingly, real estate agents are coaching home sellers to list their homes at an asking price that clearly undercuts the competition.”
Early 06 I told someone trying to unload a house to do exactly this. Lower his price drastically and let the buyers bid it back up. The realtor in the deal looked at me like I had two heads and talked the guy into the “little reductions” plan.
Eventually the house sold for the price I told him to start at with the difference being 6 months extra holding costs.
We sold and bought in July 2003. The first mortgage broker was “educating” me on why we should take out an interest-only adjustable mortgage because that would allow us to use our money most efficiently and have more for investment purposes.
First of all, we had 50% down. Also, I was just out of college in 1981 and I remember hearing of 18% interest rate mortgages. It baffled me why anyone would take on the risk of an adjustable mortgage when low 5% mortgages were available (fixed rate) with no points.
It’s all very sad that a lot of people are going to lose their homes, but you just shouldn’t buy something you can’t afford. What were these people thinking?
[quote] It baffled me why anyone would take on the risk of an adjustable mortgage when low 5% mortgages were available (fixed rate) with no points.[/quote]
Because many people don’t understand finances and also don’t understand that their mortgage broker is out to make himself the most money in commissions. What too many people don’t want to believe is that the number one thing that is on the mind of someone selling you something is how to get the most money and that money is going to come out of the buyers pocket.
The salesman is not your friend and that applies to things even far outside of RE and no matter how “professional” sounding their title is.
There is another side to your broker’s wonderful advice. He gets paid different amounts based on what type of mortgage you select. He was probably steering you to an interest only mortgage b/c he can sell it on the secondary market for a larger profit than a conventional loan.
cause the broker would make more commision by confusing the issue
During the housing boom/mania the practice of under listing the price of a house in order to get a bidding war was starting to become popular ,especially with flippers .I am not in favor of a practice like this .IMO just put the property on the market for what you want . I guess I just don’t like the game playing .
“Meehan pleaded guilty to conspiracy to commit wire fraud yesterday during a hearing before U.S. District Judge Jose Linares in federal court in Newark….”
All this fraud would make Kindleberger blush at his own description of mania.
and I loved the really comical story about the vacant land where the kitchen and bathrooms and windows had been redone. Maybe they can beat the fraud charge if they can prove that a new fire-hole was dug, and two new s**t-pits, and 17 tree-limbs trimmed (the “17 exterior windows”).
“After the first adjustment, Ricardo called Litton Loan Servicing (the company currently servicing the mortgage) to try to work something out. ‘They threatened us,’ he says. ‘They said, ‘If you don’t make your payment, we’ll foreclose.’”
Check out the complaints on Litton, http://www.consumeraffairs.com/finance/litton_loan.html
Ricardo needs to pile it on a little more like the one here that is blaming Litton for divorce, diabetes, kids can’t play sports…Dobbs shall provide
moqui…good find…Litton sounds like it really sucks…here is a posting from one guy on that site…another sob story.
Ivan of Winthrop MA (01/16/07)
South Star lending sold our loan in April of 06 litton has been scamming us since the recently put a false late charge which has dripped my credit score to the mid500 when I bought my score was mid 600 after 1 year of on time payments I should be in the mis 700 we can not re-fi we may lose our home we have 3 children in school they have put us in a horrible position and should be brought to justice!!
I work 2 jobs to make the payments we had to re-fi to afford to fix the property we now have to possible sell these companies MUST be stopped,it is not fair lower income people suffer .. PLEASE HELP ME>.. Because of the mental stress my family is falling apart,
I may be losing my home. My wife is filing for seperation, her diabetes is getting hard to control from the stress, my children can no longer play sports we had to go to the salvation army for christmas we can not afford food only the MTG.
If they can’t refi it’s not because of a false late charge. Any legitimate bank can be shown documents proving otherwise and they will take this into account. My guess is that the house is worth less than they paid now, they have more in loans then equity, and their income does not qualify. Their income probably didn’t qualify the first time they took out a loan.
After reading all the posts on that link, Litton does sound predatory; holding the payment to post it as late, not taking payment from an account when they are notified funds are available; not talking to anyone when called.
My mortgage has been sold twice since we bought the house 5 years ago. The Litton Stories were terrifying. I have been feeling pretty good about owing less than $80k on the home. Lately after reading some of the info on the links here including NYCityBoy’s “The Money Masters” movie, I’m wondering if I haven’t turned myself into a big target.
This is not predatory lending, it’s a mortgage servicing scam. I’m not saying these folks are victims though.
My daughter bought her home in 2003 and her loan was sold 3 times in less than 6 months. Each time her loan was sold the new loan servicer would demand payment although the payment had already been made. Trying to get them to properly credit her payments was a nightmare.
The last couple of years of our morgage we finally wised up and started sending our payments Fed-ex so we had a reciept.
The servicers love to rack up the late fees with their little “hold the payment” trick.
“Advertisements for foreclosure auctions, the last step before a property is actually sold at auction,
- rose an alarming 199 percent to 1,005 statewide …
Gee, no one was alarmed when artifical sales rose 199%.
“‘People always want what they can’t have…an unusually low price is a surefire way to make your home stand out and attract more prospective buyers.”
You can’t always get what you want,
But if you try sometimes, you just might find
You just might find
You get what you need (can)…
Got 10% down?
Re; NJ “bungee jump”
So the Realtors realize that houses are way overpriced. The only way they can make sales and bring in income is to come up with some cock and bull crap about why sellers should lower the asking price. They know it won’t be “bid back up”, but just telling sellers their house is worth 30% less than they thought it was doesn’t work.
Have at it, I say. Ebay pricing for everyone!
This house has been in my family forever and I don’t want to lose it. But I can’t make the payments they are asking me for,’
That’s why you pay the house off instead of using it as an ATM. Better to say ‘my family has been renting this house forever’.
“‘They took advantage of the fact that I was so desperate that I needed it.
The many posters who guessed the FBs would assume the victim position are proved correct. There is a serious shortage of adults in America…we are overrun with overgrown and aging children, unable to shoulder personal responsibility, and lacking integrity and honor. This useless FB refinanced the family home 3 times for several hundred k which she has blown, and now it’s all about greedy lenders who forced her to take loans, because she was desperate.
FBs who want a bailout should be required to provide some public utility in return…say, letting themselves be used for drug testing or medical experiments. They should also be encouraged to sell organs to raise cash.
“There is a serious shortage of adults in America…we are overrun with overgrown and aging children, unable to shoulder personal responsibility, and lacking integrity and honor.”
Amen, Brothah! Testify! You nailed it! Awesome post!
Perhaps children would run the economy better as they are less greedy.
LOL. Unless this FB had some sort of job loss or medical bills I can’t imagine why they would pull out this sort of money from equity in their home if they could not afford the payments . I think this easy money did become a addiction for a number of borrowers like this example . Really , that’s why you can’t have easy money .I think it might be natural that peole try to take the easy way out if they have the option to do it . This loan company did act like a drug dealer .
The reality is the whole “personal responsibility” crusade of the 1990s was directed a minorities, immigrants, those living in older central cities, and (with harsher graduation and promotion requirements) children. For those out in the ‘burbs, society is to blame.
Will the light come on and connect the two, in either direction? No.
If her family home “has been in [her] family forever”, why was there even a mortgage at all?
she started with 103k… my guess a heloc
“the whole “personal responsibility” crusade”
Het WT, with respect, I have no interest in any political crusade.. the qualities of responsible adulthood are timeless; honesty, integrity, a sense of personal and civic responsibility, a willingness to work hard and a sense of humor. What could be more repulsive than the absence of those qualities in an aging and overgrown child?
> A low price pits the buyers against one another. They must compete or lose the house.
Twisted logic, but I fear it might work on some buyers. Buyers should always have more than one house lined up for purchase, to not feel “loosing” something that was never theirs. On the other hand, lower wishing prices by sellers are another statistic to turn down, especially if adopted by many sellers. With more buyers disabled by tightening lending, it might turn out all right: a fast decrease of home prices, to get over with the bubble.
In 2005 I was told by the realtor that there was another offer on a house I put a bid on . I pulled the bid and said ,”give it to the other guy .” I drove by the property about 2 months later and it was on the market . Either the deal with the other guy dropped out or the realtors were lying to me all along .
The next house I put a bid on the realtors told me that the seller decided that I could not have a “subject to” my house closing escrow (which was already sold ) in the contract . I also walked on that deal . If you have to give up good business practice to purchase a home than something is really wrong . One sided contracts are a big red flag .
All good points and the caveat that I would add is to make sure the agent presented your offer to the buyer. I’ve seen some agents who feel they make the call on whether the offer is good enough to present and thus the phantom bidder is born.
Trump Tower Wilts:
http://www.sptimes.com/2007/03/14/Business/Judge_rules_against_T.shtml
Did these investors also give up their right to have their deposits put in a escrow account verses the builder spending the money ? I don’t know ,while it’s true that a contract is a contract ,the Courts might find that some of these one-sided contracts could not in good faith be performed on .
doens’t escrow have to be at arms lenght and secured ?
I always thought that deposits had to be put in neutral escrow accounts on a pre-construction contract .Why anyone would sign a contract allowing the builder to use funds from a good faith deposit prior to even the buyer getting final loan approval is very one-sided and I wonder how many of these buyers really knew what they were signing . I would never sign a contract like that for sure .
If Litton is screwing people, they should get an attorney. Plenty out there that won’t charge you unless and until they settle. Let Litton deal with one of his own kind.
“…homeowners could be on the brink of losing their most important financial investment.”
A primary residence should not be thought of as a financial investment.
In my endless search for new sources, came across this. From a site and message board dedicated to collection “professionals” (lol)
Government May Punish Subprime Lenders
One of the downsides of a housing bubble is when that bubble bursts (which it will; of course it will; they always do; it’s the very nature of a bubble), there can be repercussions on the economy at large.
by Mike Bevel,
insideARM.com
March 15, 2007 Email This Article
The government is shocked — shocked! — that subprime loans made by subprime lenders are performing subprimely. One of the downsides of a housing bubble is when that bubble bursts (which it will; of course it will; they always do; it’s the very nature of a bubble), there can be repercussions on the economy at large.
Welcome to now.
There has been an alarming spike in in foreclosures, especially among homeowners who took out subprime loans. The government, feeling like something needs to be done, is preparing to punish some subprime mortgage lenders under investigation for discriminatory practices. “Discriminatory” in this case isn’t exclusionary. The government is alleging that subprime lenders targeted the very subbest of the subprimes, leading to the catastrophe currently underway in the mortgage sector.
In the gun-sights of the government? Fannie Mae and Freddie Mac, among others. In fact, the Housing and Urban Development Department has suggested that the largest mortgage companies consider giving strapped borrowers more time to repay their loans.
Categorizing the rights from the wrongs in this scenario is tough. On one hand, the government is right in castigating subprime lenders for aggressively targeting subprime borrowers. However, it’s not like subprime lenders were stealthy in their business model; the government was strangely silent during the bubbliest parts of the housing bubble. Some responsibility also needs to be laid at the feet of consumers who borrowed beyond their means for houses they couldn’t really afford.
For now, the subprime industry can expect further for-the-public scrutiny from the government. Democratic Rep. Carolyn Maloney of New York, is proposing legislation that would impose restrictions on banks and other mortgage lenders. They would be required, for example, to evaluate a borrower’s ability to repay an adjustable-rate mortgage over the entire term of the loan, not just at the start, when much lower rates are in effect.
Sen. Christopher Dodd, D-Conn., who heads the Senate Banking, Housing and Urban Affairs Committee, has said he is considering several options to protect consumers.
The rest of us should prepare our faces for more unsurprising shocks.
The real problem is that they didn’t discriminate. The job of a lender is to discriminate between a good candidate for the loan and one who isn’t suitable. The problem is that the government wants lenders to give money to everyone, and foreclose on no one.
“The problem is that the government wants lenders to give money to everyone, and foreclose on no one.”
See, I knew welfare went somewhere after 1996 - now I know where. Knowing this I will do everything possible not to ever pay another cent of interest to a bank again. The renters around here had it right all along.
There’s about 39 billion in equity here:
http://finance.google.com/finance?q=fnm
Fannie should be the first place government looks for money, not taxpayers.
House not far from me listed at $605K a month ago, in an area where 2 years ago it would have received multiple bids, just reduced to $597K. It’s taking time, but the buyers seem to be learning; the sellers and their realtors, well, they don’t seem to be getting it yet.
As for the low-ball pricing strategy: who was it who said that nobody ever went broke underestimating the intelligence of the American public? I’ve seen it work; it’s pathetic.
Watch an hour of prime time TV if you’re not convinced.
A copy of the email I sent Senator Dodd:
Honorable Senator Dodd,
It is with great concern that I write regarding your recent stance concerning a federal “bailout” of the subprime mortgage industry and people affected by these loans.
My wife and I are college educated professionals living in California. We make approximately $125,000 per year and have outstanding credit. We save as much money as we can every year by maxing out 401(k) contributions and Roth contributions and also set aside a substantial amount of money to one day purchase a house of our own. Of course, recent housing price inflation has left us unwilling and unable to purchase a house for a reasonable sum of money. With housing prices declining, we look forward to the day when we will once again be able to purchase a house for a reasonable sum, not at a price inflated by the mass speculation and lax lending standards of the past five years.
There is currently an irrational assessment in this country that everyone, regardless of credit history and income, deserves to own a house. This is ridiculous. If a person can not pay off their credit cards or had recent bankruptcies, why should they be entrused with a several hundred thousand dollar loan in the first place? Why should people be allowed to state their income without proving it? Why should anyone be able to buy a house with little or no downpayment, which makes it easy for them to walk away from the debt obligation with little or no future impact? Subprime is what it is…risk has been underestimated the past several years as lenders were willing to provide loans to huge credit risks. The result was an inflation in housing prices that could not be sustained and was largely the result of greed, both by lenders and those utilizing stated income, subprime loans to finance purchases they could not afford. This proved profitable, at least initially, for both: subprime lenders enjoyed record amounts of profit until recently, while subprime and other borrowers were able to extract home equity with little regard to ever paying it off. This irresponsibility, among both borrowers and lenders alike, is what is causing the current housing meltdown.
I do not think it is fair to support a taxpayer bailout of greedy and irresponsible borrowers and lenders while those with high income and credit who are conscientious and responsible can not afford to own homes at the current prices, and are saving diligently for the future so that one day they can make a reasonable decision. I pay my fair share of taxes, and I expect no handouts for my financial decisions: be it good ones or bad ones. There is currently a lack of moral and social responsibility among people in this country (i.e., playing the blame game or asserting that financial irresponsibility is always someone else’s fault). I should not be forced to pay for others’ greed, financial miscalculation, and unwise decisions. I know the majority of high-income, credit-worthy, and educated Americans feel similarly to me. To this, I urge you to reconsider your proposed stance on using federal (taxpayers) money to bail out the socially and financially irresponsible.
Thank you,
Mark Burger
Dodd knows his constituency, and they’re not like you. He doesn’t care about fair, it’s all about power, and if he can legally take your money and buy votes he’s all for it.
Nice letter, though.
Excellent letter, Mark. I hope he reads it.
also the people at the top should think about those whom actually vote instead of those whom do not.
Tell Sen. Dodd that you are a registered Democrat, that you don’t take too kindly to bailing out fiscally imprudent homebuyers and their lenders, and that you will take all of this under consideration when it comes time to vote in your state’s Democratic Presidential primary.
Do this even if you aren’t a Democrat, since I believe that this is as much about grandstanding for Dodd’s Presidential candidacy as it is about anything else.
Great letter. Funny that CT is one of the wealthiest per capita states IIRC.
“Nobody ever went broke underestimating the intelligence of the American public”
H.L. Mencken (who would have loved what is going on now)
Bonus Mencken:
“The men the American public admire most extravagantly are the most daring liars; the men they detest most violently are those who try to tell them the truth.”
Thank you. Bowie fan?
Huge
Bowie bonds! HA.
“Edwardsen was tempted to take out a special high-risk loan targeted at people with low credit ratings. Today her monthly repayments have soared to 2,800 dollars, yet she only takes home 1,600 dollars.”
Hey lady, how were you “tempted”? Did Lucca hold a gun to your head to sign the loan docs?
with respect to a potential bailout by the U.S. taxpayer (i am not suggesting this to piss anyone off):
some people suggest contacting your senator regarding the matter. i would also like to add another person to that list. you can e-mail him at oreilly@foxnews.com. this is an issure i could defintately see bill oreilly taking the right side on. even if you hate him two things are certain:
1. bill oreilly is watched by a buttload of U.S. taxpayers.
2. he would take the U.S. taxpayers’ side in this situation.
what do yall think? worth a shot? maybe we could get ben on his show.
Appearing on his show is a credibility wrecker already…
why?
Fallafel!!!
Bill’s looking out for me? Holy #^!!, I think you are right.
scary times
Just wrote to my US Senators in Pennsylvania. Didn’t save the text, but it fairly short and sweet saying that the Federal Government should not be bailing out either the lenders or the borrowers; that people and the government both need to become more responsible with their money; and that bailing out behaviors based on greed or ignorance only reinforces bad behavior. Also mentioned that I’ll be happy to cast a vote for a Republican in the next election if that’s what it takes to get this country back on a fiscally responsible path. On to my House rep….
It is my opinion that the credit bubble is too big to truly bail-out. However, I also believe that there will be many attempts to bail it out over the next 10 years. It will be wise to stay informed and prepare for such possible bail-out attempts. Here is an example of a type of bail-out which you might see: About 2 years ago, I talked with a Banker in Argentina regarding their financial crisis and what exactly was happening. He told me that one of the things that the government was doing (particularly the Courts) was not allowing creditors to foreclose on their real estate collateral. In essence, there was a freeze on the abillity of creditors to foreclose. There was little if anything officially written in the law allowing this stoppage, it was just that the Courts were sitting on these cases. I think that it was to allow the debtors time to let inflation eat away enough of the principal so that eventually they would be able to afford and keep their homes. I keep track of stories coming out of Argentina and no where have I read this. FYI
Has it occurred to anyone that if there were a freeze on the right of lenders to foreclose, nobody in his right mind would be willing to loan money to a house buyer? A foreclosure freeze would lead to a complete halt in lending and a total collapse of the RE market, much worse than letting foreclosures go ahead.
As far as I’m concerned the sub-prime borrowers only defense is the “MANIA DEFENSE “, because most of these FB’s couldn’t hold up in a court of law on their claims of “victim “.You might say that the posters on this blog were a victim of the RE mania because they got priced out of the market .
The only thing most these unqualified borrowers can say is that they got caught by the RE mania and they believed it was a sure bet profit or they acted on a belief that they would be priced out forever. People don’t go on loans they can’t qualify for unless they have a belief that they can’t lose .
Is a ‘Mania Defense” possible in a Court of Law ? Is a Mania Defense possible for grounds for a tax bail-out ? It seems to me that these people have no other grounds for relief . To me ,the idea that people want relief because they were stupid in the belief that real estate will always go up is not good enough .
Recovering lawyer here. I recall in PA that people who are breaking the speed limit are not relieved of any culpability they might otherwise have if everybody else on the road was speeding with him. Forget how they referred to that doctrine, but one might draw the conclusion that if enough people do anything in spite of the law, or out of stupidity, or whatever, it’s considered defensible (sp?) behavior. Yeah, I could see a lawyer taking that one.
Correction on above - people who break the speed limit ARE relieved of culpability….
Right, Mikey(2) ….As I see it ,at some point a Lawyer is going to approach the sub-prime mess from the standpoint of the “Mania Defense “. Thanks for your opinion .
I feel no sympathy for any of the FB’s out there. . none. Not the 85 year old lady who refi’ed 3 times in the last five years, not the pregnant lady, not the mexicans in LA, etc. . .none.
Reading their sob stories is like hearing my 8 year old explain why she didn’t get her home work done. Always someone to blame, the teacher didn’t explain it to her, etc. . .Adults complaining years later that they didn’t know what they were signing? Don’t sign it.
This all comes down very simply to greed - wanting more than you can afford. From the suburban couple refinancing to get the Hummer to the first time buyer wanting something out of their reach.
While these people were out living the high life most of us were working, saving, investing and delaying gratification until we could AFFORD it.
My store is like this- we bought in 2001 in DFW for $420K. Put 20% down (15 year 5% mtg) and have been steadily paying extra principal and our house will be paid off at the end of this month (yeah!). I think I make a great living ($250k), credit score of 820, substantive savings and probably could have upgraded to $2M house but it never occurred to us to stretch ourselves and open ourselves up to such a high degree of risk.
We certainly have friends that have gone crazy and refinanced or upgraded and enjoyed lavish toys and vacations. We also have friends that share our conservative view of life and finances and we are much happier!
So now as housing returns to the mean so will their lifestyles.
Can I have my wife call you? Our story is the preety much the same up to the $2M house part - my wife want to buy a 900K house right now.
The taxes on a $2M house in Texas would be enough to stop me. My daughter pays nearly $4 thousand a year for a house valued at only $156k.
Nearly $4K, that’s a pretty good deal. Within San Antonio city limits (which encompass a large area), property taxes are a shade over 3%, which would put her taxes over $4.5K. It’s even higher in other areas of the state that I have researched. And don’t forget…no state income tax.
Bungee pricing, it is like a bungee jump ………………………….except with a noose instead of a bungee cord. This trick is more likely to bite the sellers as there will be a severe shortage of GFs as credit restriction tighten.
I think we will soon see that, those who know wont pay, and those who dont know cant pay.
I can’t help but thing that behind the signing of any refi, heloc, or sub-prime loan, there was always that same dirty motivating idea: worse comes to worst, I can cover this loan by selling my overpriced house to the next greater fool and leave them holding the bag. What HELOC wasn’t in some part a greedy cash-in on ‘found’ wealth? What FB wasn’t talked into their toxic loan without at some point hearing or thinking “don’t worry, when it resets in 2 years your home will be worth x% more than you paid for it”? The screw-you price being paid would be more than offset by the screw-them price being charged a couple years down the road.
FB’s will be foreclosed on and will wind up having to rent - how is that the end of the world, if it’s exactly what I’VE had to do these past couple of years thanks to arriving a little too late to this thing (which wouldn’t have existed without those people overstretching themselves to begin with)? This thing can only unwind with tighter lending - foreclosures/dwindling buyer pool driving down prices - lower comps/appraisal values- lower property taxes - rinse/repeat - til things are back to normal. Anything that prolongs that inevitable process sticks me with having to rent for another year….
Always someone to blame, the teacher didn’t explain it to her, etc. . .Adults complaining years later that they didn’t know what they were signing? Don’t sign it.
True, but there are also plenty of people out there who just wanted a home and trusted and or relied on their mortgage brokers/Realtors that everything is going to be fine.
“‘They took advantage of the fact that I was so desperate that I needed it. I told her (the broker) I had trouble with it. So she said in three months ‘we’re going to do this again. We’re going refinance you again and the money you take out, you going to use it for your mortgage payments,’ Edwardsen said.”
Does this even make sense??? That’s like a cash advance of your credit card to pay the credit card bill. I was really holding out hope for the intelligence of my fellow americans - but this is truly scraping the bottom of the barrel.