Everyone’s Waiting For The Bottom
The Hackensack Record reports from New Jersey. “What do you do if you’re a single mother who can’t afford your mortgage payments of more than $3,700 a month, but you can’t sell your house for anywhere near the amount you owe on the mortgage? That’s the dilemma facing Anna, a Bergenfield, N.J., woman who bought her Cape Cod-style house, with no money down, for $445,000 two years ago. Now, in a much slower market, her real-estate agent says she’d be lucky to get $380,000.”
“‘The values of a lot of these houses were inflated as a result of the real-estate boom. Now we’re in a bust. The values aren’t there. It’s all starting to catch up with everyone,’ said Frank Ciambrone, a Rochelle Park, N.J., real-estate lawyer.”
“The solution for Anna is the one being used by an increasing number of distressed homeowners: a short sale. She reluctantly decided to give up the house and move in with relatives in the Bronx.”
“‘It’s painful,’ Anna said. ‘My children are not really happy, but we had to make this change.’ She recalled her renovations to the house but decided a short sale was the right choice because at least she’s not ‘just waiting for a foreclosure.’”
“Another short-seller, a Lodi, N.J., woman who asked not to be identified, owes $620,000 on her two-family house, which she bought in 2006. She works on commission and got a so-called stated-income mortgage. She said the mortgage broker encouraged her to overstate her income to qualify for the loan.”
“But when her commissions slowed, she could not afford the monthly payments of $6,100. She found a buyer willing to pay $525,000, but in the long wait for approval from her lender, the buyer gave up on the deal. Now she is looking for a new buyer.”
“‘I’m partly to blame,’ the homeowner said. ‘I should have known better.’ But she thinks the lender should have known better, too: ‘I should never have been able to get that loan, and I’m sorry I did.’”
“Sal Poliandro of Re/Max Properties in Ridgewood tells of a Hackensack short sale in which the homeowner owed $650,000 because he refinanced to pull out equity at the peak of the boom market. But the monthly payments were impossible. The house ultimately sold for $430,000 — $230,000 less than the amount owed on the mortgage.”
“‘The seller’s goal was to stop making payments without ruining his credit and his life,’ Poliandro said.”
The News Journal from Delaware. “Debbie Chase never imagined she would find herself in foreclosure. After moving into a bigger house but failing to sell the old one, Chase and her husband now find themselves with two mortgages — and they can’t pay both. The family has since moved back into the smaller house and has completely stopped making payments on the big one.”
“We really don’t want to go through a foreclosure, but in this market we know we won’t get what we need to pay off the house,’ said Chase, who is still trying to sell.”
“For Chase and a growing number of the 938,000-plus Americans in foreclosure, the next step is coming into focus: just walk away.”
“‘A homeowner with a mortgage that exceeds the value of his house has a strong incentive to default,’ Martin Feldstein, a Harvard professor, wrote in a Wall Street Journal editorial. ‘Optimists note that homeowners with negative equity have generally been reluctant to default in past years. That was sensible when house prices were rising. But with house prices falling, defaulting on the mortgage is the rational thing to do.’”
“In January, Chase stopped making payments on the new home in January. ‘Our plan was to start getting the new one back on track,’ she says. ‘Now we’re just trying to unload it. If the first house had sold, we never would have been in this position.’”
The News Post from Maryland. “Outspoken local appraiser Wayne Six addressed a packed room of more than 100 real estate professionals at Dutch’s Daughter Restaurant, saying ‘there is a ray of sunshine in the storm.’ Six was referring to the current housing market where prices are falling, and foreclosures are rising along with expenses.”
“He noted there were only 375 houses on the market in Frederick County on June 2005. That was the turning point for the housing market.”
“‘We knew it was coming. For several years we had prices going up 20 percent a year. Did anyone’s income go up 20 percent a year?,’ Six said. ‘A normal market for Frederick County is 1,000 to 1,200 houses. Having 375 was bad, it meant people bidding on properties and a lot of unhappy people.’”
“Inventory as of March 3 was 1,900 homes, he said, down from 2,500 in September. ‘It might level off quicker than we thought,’ Six said of the inventory of unsold homes. ‘But I’m also worried that everyone and his brother is waiting to put their house on the market.’”
“‘The cows are out of the barn and (Realtors) are getting blamed for letting the door open,’ he said referring to foreclosures.”
“Many property owners Six called ‘big hat, no cattle.’ ‘They have a big house, big car, swimming pool, but no equity’ and are constantly refinancing to keep afloat.”
“Someone moving from a townhouse to a single family home can find a bargain, he said, because townhouse prices fell less than those for single family dwellings. He gave an example of a house in Clover Ridge, built in 2005 and sold then for $600,000. It just sold for less than $400,000.”
“Another bad sign is that more unfinished houses are coming on the market, Six said, prompting him to offer the following advice to the Realtors: ‘When you try to sell that, you need to knock off more than just the cost of finishing the house,’ he said.”
The Washington Post. “The four-bedroom, 1950s rambler on Hanover Avenue in Springfield was an illegal boardinghouse, neighbors complained in February 2007. County inspectors…cited the owner, Elsa DeLeon, for a series of code violations and ordered her to bring the property into compliance.”
“DeLeon, a Honduran immigrant, told The Washington Post at the time that only eight people lived there, all family members who were needed to help make the mortgage on the house she bought for $550,000 in 2006.”
“By May, it was in foreclosure, sold to Deutsche Bank National Trust of Kansas City for $120,600, according to county records. The house has been vacant for months; DeLeon could not be located to comment.”
“It will go up for auction today, along with hundreds of other foreclosed properties areawide, at the Washington Convention Center. The starting price is $169,000 — less than half the value of surrounding homes.”
“This situation is not what Fairfax County officials had in mind when they started cracking down on overcrowding. The goal was to restore stability in older neighborhoods.”
“‘It’s mixed feelings,’ said Supervisor Jeff C. McKay. ‘You hate to be the keeper of a neighborhood with a lot of foreclosures, but a lot of these are due to our systematic strike-team efforts. When you can’t rent rooms in a boardinghouse, you’re going to go out of business.’”
“Asked whether they prefer living near an empty, foreclosed house to one that is overcrowded, some Springfield residents have mixed feelings.”
“‘Do you want me to shoot you or stab you? Neither choice is good,’ said Harry Gault, who lives in the 6300 block of Dana Avenue in Springfield, where two of the three houses targeted by the strike team are in foreclosure.”
“Gault said that he supports the county’s toughened enforcement stance but that it might have been more effective had it started before the subprime market collapsed. ‘They should have cracked down a long time ago,’ he said.”
The Free Lance Star from Virginia. “Looking for more peace and quiet at work? If so, you might be jealous of John LaFratta. LaFratta runs a law office in Richmond. He handles home foreclosure legal work across central Virginia for law firms in Bethesda, Md., and Virginia Beach.”
“What that means is that LaFratta spends a good deal of time these days traveling from courthouse to courthouse auctioning off foreclosed properties.”
“Problem is, nowadays banks are often owed more on the homes than what the houses are fetching on the open market. So the minimum bid required to buy the house at auction is typically too high for most.”
“But LaFratta and other attorneys handling foreclosure auctions are required to go through the motions even if no buyers show up. He reads the notice from the newspaper–’frequently to myself,’ he says–before opening the bidding. When nobody bids, the bank adds another home to its growing real-estate portfolio.”
“‘People just aren’t real comfortable investing money right now,’ said Rich Donaldson, a member of the Fredericksburg firm TLC Property LLC, which buys foreclosed properties. ‘Everyone’s waiting for the bottom.’”
“LaFratta had two public auctions scheduled Wednesday in front of King George County Circuit Court. LaFratta told an audience of one what was needed to buy the two-story home in the Oakland Park subdivision off Fletchers Chapel Road in King George.”
“The original principal amount from March 2005 was $330,600, according to the ad. The opening bid was $299,000. Donaldson, the lone attendee, shook his head as he heard the figure. ‘$299,000, going once, going twice, sold,’ LaFratta said.”
“The winner? HSBC Mortgages Services Inc., which would likely put the home on the market soon. LaFratta said the four auctions he did earlier that day in Spotsylvania had similar results. He’s starting to get some bidders in the Richmond area, but buyers remain scarce farther north.”
“But the show must go on. LaFratta’s Wednesday had started in Goochland County at 8 a.m. Before returning to Richmond for criminal court that afternoon, he had one more auction at 12:30 p.m. in Westmoreland County.”
“I should never have gotten that loan.”
So when you did get it, did you consider it, like, a stroke of good luck or something?
There is a large portion of the population that will borrow every cent that a bank, retailer or auto lot will give them in credit. They have very little clue as to how or if they will pay the money back. They assume that if their budget couldn’t handle the payments, they wouldn’t have been offered the credit in the first place.
Remember people are smart, just not too smart.
Humans are not really as smart as we want to believe. All of us grew up believing the nice man in a suit at the bank was our friend, and the nice lawyer was there to help us. It’s shocking to some people to find out that the nice man or woman at the bank would ruin their lives in a heartbeat to make a fat commission for themselves. I see this every day with the local real estate hawkers and their pasted on smiles.
I think that nice man at the bank down the block is the nice, trustworthy guy that people thought he was. But borrowers didn’t go to him. They went to the little jerk mortgage sharks that the last 10 years have bred in alarming numbers. They went to the scumbag assembly line operations that would rubber-stamp their applications. That nice man had the best interest of the bank and of his fellow citizens in mind when lending in the past. The multi-national debt machine doesn’t give a sh*t about anything except that fat commission.
That’s the difference.
True. When you go to open houses and they ask if they can help you, just smile back and say “I doubt it, I’m educated.”
Shouldn’t you say: “No, you already opened the lockbox.”
My fav example are the countless financial planning commercials - especially the ones where the advisor plays the role of a substitute family member. Everyone’s seen those I’m sure. I wonder if people really believe that a stranger would care about their well being and their future when money is involved? I kind of think so based on the behavior we’re seeing.
“I wonder if people really believe that a stranger would care about their well being and their future when money is involved?”
Bingo, edgewaterjohn. In the past you didn’t go to anonymous strangers. You went to your local bank. It may have been difficult to get a loan but it was much more of a partnership than anything we have now. Bankers didn’t give money to people that couldn’t pay it back and people didn’t just skip out on loans at the first hint of inconvenience.
I believe people foolishly thought that corporations held the same values as their local bank. Boy, were they wrong. The mess we have now is a by-product of financial globalization.
It amazes me that people dont understand that if someone has any money, they have no incentive to let you in on a deal they find unless the deal is that you are getting screwed. Trust no one, know your cht, watch your back, and always know your exit stategy when doing business. Otherwise, you will be taken advantage of and it really is your own fault.
What’s the golden rule? Nowadays it’s, “Do unto others before they do unto you.”
“If we could all pause for a moment in this current “I ‘ve got mine, I don’t give a d*** about yours” mentality”
Cracker Jim, I couldn’t agree more. I said this somewhere else already, but every time someone cheats the system, they are cheating everyone. I would like to see that become a popular notion again. We’re in this together, like it or not…
Nobody can be blamed for trying to make a living.. Let he who never pasted on a fake smile, tried to get every last dime out of a deal or sold something to an ignorant buyer tell me different.
Tis true. On the other hand, it’s never a good idea to bankrupt your customer. Or as a german businessman put it once, ‘These people need to learn they can cheat somebody once, or do business with them for the rest of their lives’. He was talking about the eastern europeans.
Next up, America.
These people need to learn they can cheat somebody once
who said anything about cheating.. cheating is either against the law (as in crime) or is perfectly legal. If it’s legal there’s nothing wrong with it.. which goes to my previous point.
joeyinCalif;
I’m telling you different! I am 62 years old, owner of a very successsful 25 year old engineering business and I have never conducted my life or business with your “pasted on a fake smile, tried to get every last dime out of a deal or sold something to an ignorant buyer” as guidelines.
Comment by joeyinCalif
2008-03-09 09:22:19
These people need to learn they can cheat somebody once
who said anything about cheating.. cheating is either against the law (as in crime) or is perfectly legal. If it’s legal there’s nothing wrong with it.. which goes to my previous point.
____________
You need to get thee to an ethics class. Just because something is ‘legal’ does not mean it is ‘moral.’
There were decreasing subsets in what I permitted clients to do. I always said there was what the client wanted, then there was what the law would allow (less than the client wanted) and then there was I would allow less than the law allowed) - and any client who didn’t accept my rules, could find themselves other legal counsel. Never had a signle one walk out the door - did throw a few out for disobeying me and they begged to stay all the way to the door.
You have a nasty, vicious attitude towards dealings with your fellow man. It is called ‘walking the line’ and ‘having no conscience.’ I wouldn’t hire you to mow the lawn.
Perhaps that’s the rule in financial industries these days. When your work actually creates something tangible, like engineering, you have to deliver “the goods.” Its not like you can push around numbers and take a cut.
Senior age bloggers, meet Joey, he is your future.
annscott
I recommend that you petition your reps in Congress to pass laws against ‘walking the line’ and ‘having no conscience’ (that last one may already be covered under thought-crime legislation).
They are known to be very responsive to that sort of thing.
My idea would be, financial deals work fine if both sides remain happy…YES, it is possible. I keep bragging about the perfect performance of my borrowers. Part of the cause is, they think I did them a favor, even though I charge 9% and up. They liked the approach of “No Points, No Fees, No Boolsheet,” and they liked the no-doc approach. No risk in no-doc if LTV is quite low and the down payment is large. Also, they like knowing I am “easy,” i.e., they can call up and arrange to skip a payment any time, just not too often.
Kirisdad;
“Senior age bloggers, meet Joey, he is your future. ”
I don’t believe that is true.
I have a number of fine young people working for my business who exhibit the same work ethic and ethics in general as my generation. I see counterparts to them in the industries and businesses that are our customers and suppliers. Of course they listen to different music, have different past-times, wear their hair a bit differently, and partake of Starbucks (I can’t). But they still have the same goals and ideals and they are pursuing them in the world we are leaving them that is completely different and more scary than the one I grew up in.
My father, who dabbled in real estate in his later years, always believed the best in people and dealt with clients fairly and ethically. This didn’t always work out for him, some clients did indeed screw him over, but the majority reciprocated in kind. If you adopt a dog eat dog mentality, you will get bitten in the ass every time, and you will be always walking the low road, only seeing the muck, never smelling the flowers.
“You need to get thee to an ethics class. Just because something is ‘legal’ does not mean it is ‘moral.’”
Ann hits the bullseye again. And it is for this reason that strong consumer protection laws need to be written. Also, lets lay the blame for this at the doorstep of those who perpetuated this THEFT. State Banking Comissioners from across the country attempted to appeal to the federal govt. in 2003 and 2004 to STOP the insanity and they were shot down. I recall when I was castigated here on this blog for suggesting this mess was contrived. Well, show me some evidence that the housing mess was a result of fundamentals and “free markets”. It is damn well known this was induced by those we are led by.
yeah yeah.. I want the world to adhere to my idea of limits, ethics and morality.. and you want it to adhere to yours.
In the interest of social order I suggest we put all these particular issues to a vote and whatever the results, we will call it the “law”, and we will all abide by that majority decision.
oops.. i forgot.. we’ve already done that, haven’t we.. never mind
You have a nasty, vicious attitude towards dealings with your fellow man. It is called ‘walking the line’ and ‘having no conscience.’ I wouldn’t hire you to mow the lawn.
Sometimes Ann is correct. Sometimes she is wrong. The one constant is that she is always arrogant, hostile, and biased. Just ignore her Joey. Many of us do.
Ignore …
Well said
“Senior age bloggers, meet Joey, he is your future. ”
Easy there. Joey isn’t your future any more than David Lereah is my past. Every generation has it’s share of good and bad. I am not convinced that Baby Boomers have a lock on integrity, either.
For a view from the other side, read “Generation Debt”.
As a practicing attorney, I could not disagree more strongly with AnnScott.
First, I’ll deal pre-emptively with her typical credentials challenge. I have practiced for 30 years; am AV-rated; graduated with a JD and an LLM in tax from what is consistently rated now as the fourth most prestigious law school in the country (it was 8th when I was there); I am admitted in the three most prominent legal jurisdictions (CA, NY and DC); and have never been sued or had a complaint lodged against me. I’m no legal superstar, but I’m certainly not going to take credentials static from you.
AnnScott: why don’t you tell us all about YOUR education; YOUR practice; YOUR record before the bar associations;
and YOUR ability to work effectively with others (from the intemperate nature of your comments, I suspect that–whatever your record in the first three areas–you are unpleasant as heck to deal with. With typical restraint you state that your rejected clients “begged” you to continue the representation “all the way to the door”. Pray tell: did they grovel and whimper? And did you like it?)
Second: to the extent that my client’s proposed course of action is supported by the law, and my aiding it is consistent with my ethical obligations, I frankly don’t give a rip about your third subset of triage. We are far from just being hired guns, and we are not obligated ethically to take on any particular case. But once having done so, the cardinal command of our profession is to represent our client zealously within the law. Not our view of what the law, or morality should be, but what it is.
More to the point: I think it would be unethical, within the meaning of the ABA Model Rules and probably within the meaning of the rules that govern practice in whatever jurisdiction you are/were admitted in, not to advance lawful, ethical arguments on behalf of a client simply because they did not comport with the attorney’s own, more rarefied version of morality.
Don’t even think of mounting a straw man attack. You will note that I have conditioned my comments on complete adherence to the applicable ethical standards that govern our practice. For example, I would not mount a frivolous action on behalf of a client, regardless of whether that would be “legal” in the strictest sense, because it would violate a larger duty in both the Model Rules and elsewhere, as well as a more specific duty imposed by FRCP 11.
As stated earlier, where we do have latitude is in our freedom not to take on a particular client, if we don’t feel comfortable with the client or the cause. If we don’t discover that until we are already representing the client, AND we think that it could impinge on the quality of our representation, we have a duty to sit down with our client and explain our limitation and offer to let the client fire us. Most reasonable clients would jump at the opportunity, because why on earth would you pay good money to have an attorney represent you when his/her heart is not in it?
I will be even more direct. I think that your proposed method of dealing with a client who does not rise to your third level of triage may be, under certain circumstances, affirmatively unethical (I say “very likely” because I haven’t had to look very carefully at the rules on withdrawal for some time, and I’m not going to give you the benefit of my doing further research right now). However–as you know or should know–the ethical rules governing our ability to withdraw from representation are fairly well circumscribed. We are not allowed to shitcan clients simply because we don’t like them or don’t like their position anymore.
The only possible basis in the Model Rules that I see for your position is where there is a fundamental disagreement between client and attorney on a matter essential to the engagement. Whether this extends to your third level of triage, the subjective private morality you embrace, is not clear at all. Check the ethics opinions or, perhaps I should simply urge you to “get thee to an ethics course”.
Certainly, if client Tony Soprano asks you to do something illegal–withdraw. If client ex-wife wants you to press charges of child abuse against ex-husband where you strongly suspect no such abuse occurred–withdraw. If a client insists that you write a tax shelter opinion reciting certain representations, when you know or should know that they are not true–withdraw, and don’t look back.
But unilaterally withdraw on a client who wants to advance a reverse discrimination claim, simply because you believe that such claims are “wrong” and a distraction from the serious business of remedying historical racial discrimination?–no, not ever. And it’s just not clear to me, at all, how your third level of triage operates. Maybe you would like to provide some concrete examples, instead of trashing other people for allegedly have a “nasty, vicious attitude”, “having no conscience” and being unworthy of performing yard work on what is, undoubtedly, your own capacious lawn.
I would add “Rant Off”, except that this is not a rant. I sincerely believe you are wrong and intolerant.
“I am not convinced that Baby Boomers have a lock on integrity, either.”
No generation has a “lock” on anything. I am pre-boom (born 1945) and I have lived from slide rule to PC. If we could all pause for a moment in this current “I ‘ve got mine, I don’t give a d*** about yours” mentality, we could see ways to strengthen this great country for future generations rather than dooming them to deal (without our help) with the problems we created.
“I would add “Rant Off”, except that this is not a rant. I sincerely believe you are wrong and intolerant.”
Right on, Annscott is a prime example of what she so castigates.
wine country dude
dude . . . if you ever post another comment that long I’m going to have to staple my eyelids open to get thru it.
“‘I’m partly to blame,’ the homeowner said. ‘I should have known better.’ But she thinks the lender should have known better, too: ‘I should never have been able to get that loan, and I’m sorry I did.’”
It wasn’t a stroke of luck, it was “stated income”. She lied to get the loan. NOW, who’s to blame. Well, partly her, but the LENDER SHOULD NEVER HAVE GIVEN HER THE LOAN.
Why not? You agreed to pay it, you imbecile.
Not only that, but you “inflated your income”, remember? YOU made it look like you could afford the loan! How was the lender to know you couldn’t afford it with what YOU provided the to work with? YOUR fault- end of story. Deal with it!!
Yep ,first she lied to get the loan . Does anybody think that she didn’t drink of the real estate appreciation myths and bought the story line the industry was selling at the time ?
As far as the people defaulting that have two loans because they couldn’t sell the house they came from ,this again is the byproduct of bad lending and bad-faith real estate work.
In the good old days ,lenders would not let someone carry two loans unless they could prove that the going rents would cover one of the loans ,or they proved that the prior house was in escrow ,ready to close . In this market any commissioned sales person that got a person to buy without their prior house selling or closing was just out for themselves if they knew the borrower could not really afford 2 loans .It’s really evil to set someone up for a desperate situation . I wonder why these borrowers where not concerned about what they would do if their original house didn’t sell . Also ,the fact that people were encouraged to take out equity loans from their old house to buy the new house ,is just plain wrong.
I don’t think that it is right for the real estate community to simply set up bad financial deals ,just because they knew the lenders were making any loan to anyone and would cram that borrower into a time-bomb toxic loan .
Now, why the public allowed themselves to be lead around by the nose by the self-serving REIC is the question . In late 2002 the borrowers should of rebelled and said “No thanks ” as far as the toxic loans and the inflated price trends .If the borrowers refused to commit fraud to get loans on the premise they could just refinance after they made a killing or refused to buy product they could not afford ,the bubble could not of gained any legs either .
So, in the final analysis I blame the borrowers as well as the REIC that apparently did everything they could to promote a mania along with faulty or fraudulent lending to keep the bubble going .
The lending was absurd ,crazy ,not rational at all, and in many cases criminal. I’m suppose to be forgiving to borrowers and real estate/loan agents that inflated the market by their greedy ponzi scheme. Where do these borrowers or agents get off the hook thinking that their little loan crimes didn’t affect the greater society that we live in .
Its just like when all those people that bought stocks on margin in the 20’s that they could not really afford to pay for the margin call on and the TSHIF.
Yes, I am pissed at all these FB’s . If the sheep are saying that they are so dumb and amoral that any mass advertising program can come along and get them to commit fraud or buy more than they can debt service ,than the sheep/REIC are saying they can’t be trusted .
In the past ,lenders knew that borrowers could not be trusted to know what they could handle . I just don’t know why all of a sudden the market allowed borrowers to determine how much money they would get by lack of underwriting by the lenders .The lenders were giving people like the famous 26 year old Casey thousands and eventually over a million dollars of funds ,just because the guy had a good credit rating at one time.The industry should of know that the speculators were timing multi- purchases at the same time so they could get more than one loan . No excuse ,no excuse ,no excuse .Borrowers and lenders ,partners in crime ,not victims ,unless you excuse someone from loan crimes because you think they were brainwashed and their “fraud for perceived gain” is not a crime (in spite of the current laws saying these are crimes ).
Hey Wiz,
Whew! This is a long one for you!
Just messing with ya. I really just wanted to jump in tell you that I’ve always appreciated your commentary since I joined the blog back in ‘05. My comments are fewer these days, but I still read as much as I can. We need more RE folks like you and ex-nnvmtgbrkr.
BayQT~
Thanks …I enjoy your comments also . I’m sorry everybody if I get a little long-winded at times and I will try to watch it . I feel that it is important sometimes for people to know how the lenders use to process loans and the reasons to get a perspective on just how crazy this last round of lending was .
Wizard,
A balanced perspective always takes longer to write out than a snap judgement.
James Scurlock, who directed Maxed Out, made a really interesting point about generational attitudes about debt. He felt that older people were more gullible in a way, because they had been raised in an era when bankers were much more conservative. And so, if a banker offered, say, a big line of credit on a home, the older borrower might be more inclined to believe they really could pay it back, even if the numbers didn’t add up. People are ultimately responsible for their decisions, but I thought it was an interesting point.
The impression I have from younger borrowers (my peers) is that debt is a just a part of life, something you will always have.
‘I’m sorry everybody if I get a little long-winded at times and I will try to watch it .’
Don’t be silly, man. I wish you would talk more, not less.
Stated income monkeying around….GRRRRRRR.
I work for myself and may someday actually need one of those. Through savings, investments and mini loans (which I immediately pay back), I am trying to develop relationships with several banks for the future, partly because I am bracing for a backlash against stated income.
When people who abuse lenders and think they are just cheating “the man”, they are really cheating all of us, in so many ways!
Also , I just want to mention that there are people who were victims during this housing boom and not everybody was a liar loan speculator or a creepy greedy real estate agent or loan officer .Many people are losing money because they were victimized by some sort of fraud on another parties part when they themselves did everything in good faith . One problem some people had is they didn’t have the time to research what the professionals were telling them and they assumed that people were telling them the truth .It’s kinda like Little Red Riding Hood thinking that the wolf was a lamb .
What about borrowers that put money down and submitted a truthful loan application and trusted that the appraisals were sound and didn’t know that the market prices were not stable due to faulty and fraudulent lending . How could those borrowers know what was going on behind closed doors ,or that the competition for homes were from unqualified buyers and speculators ? Had those poor good faith borrowers of only known. The good faith borrowers are going to lose the money they saved for a down payment, while these other no down liar loan borrowers or equity extractors , just walk.The powers don’t seem to want to determine the true victims from the BS and maybe only a court of law can determine it .
Stated income is fine, stated assets is fine.
Stated income *with* stated assets was the problem.
“For Chase and a growing number of the 938,000-plus Americans in foreclosure, the next step is coming into focus: just walk away.”
This is a theme we keep seeing ,in reporting, more often. The “walk away” option is really gaining traction. It’s becoming a sensible thing to do. Have miserable life trying to make a $4,000 a month interest payment, or rent a place for $2,000 a month and have money left over.
People are figuring its payback time. But here is maybe a new area for lawsuits.
If you can be denied a job for bad credit, can you also be fired for walking away from your mortgage obligations?
If you happen to work at the bank where you got your mortgage…probably.
I would think you can be fired from any job for letting your credit take a huge hit. If you were running a company in the financial industry would you want people with a bankruptcy or a foreclosure to work for you? You would be asking, “how did this happen to them if they are making a good income here?” I am assuming the person is earning a decent income which many people in finance still do. A person’s financial integrity is very important for people with access to sensitive financial information.
Gamblers, boozers and drug takers scare the heck out of financial companies. Why wouldn’t people that go bankrupt or get foreclosed? If they are irresponsible with their own money they may be tempted to find ways to get additional funds. That’s gotta be frightening for companies.
I agree, but the burning question is how long that bad mark stays on their record.
First, we are a consumer economy and it would take much hard work, investment, time, and yes pain to transition to something else.
Following that assumption for a minute, it is likely that at some future point this society/gov’t will balk on making those painful but prudent changes and opt for a mutation of the consumer economy.
At that point the FBs will be needed again and past infractions will be “forgiven” after X number of years. That’s when the real tough decision comes - do we repeat this - and merely allow the simple passage of time to substitute for real penance? Much a like a “born again” televangelist caught at the local motel?
You can be fired from my work for walking away. However, its a non-attribution system. If they come in as they’re losing their home, declare a financial issue, and work with the company, its ok. Its if they lose they home and surprise HR… But its a good company that will work with anyone who plays within the rules.
Got Popcorn?
Neil
I bet a lot depends on the HR Depts experience with bad debtors. maybe Betty in HR has a sister in banking that lost her job over too many losses by speculators to cover. maybe Roger in HR also got burned by a Realtor/Broker and has a chip on his shoulder for anyone who took part in the real estate industry scam.
I think it;s getting personal on a lot of fronts in ways that are seperated by 6 degrees of connection we will never realize.
If you work for the Federal government, or a defense contractor, or a homeland security contractor you can lose your security clearance because of a bankruptcy. Government security specialists look at the reason for the bankruptcy. Was it hard luck such as family medical problem or arrest of a child (big legal fees) or was it due to overspending or gambling? If the bankruptcy was due to reckless personal behavior you will be deemed a security risk and lose your clearance. Lose the clearance and you lose your job.
I have no idea how government security people will view a bankruptcy that arose from an unaffordable residence or a failed speculative real estate venture. If, however; they discover that you lied on a loan application I suspect they would yank your clearance.
I find it hard to believe a foreclosure or short sale would ever become a fireable offense, if nothing else, just because of the sheer magnitude of people in trouble. The prudent savers of the nation who watch their savings evaporate in a storm of inflation may say put all the bums in jail, but debtor prisons won’t be making a comeback and neither will unemployment for foreclosures. Besides, it isn’t just the worker bees who got over their heads in RE.
Actually I hope it does, it will open up jobs for people like me unemployable, but still good credit.
———
I find it hard to believe a foreclosure or short sale would ever become a fireable offense,
The “walk away” option is really gaining traction.
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After so many borrowers exercise their “walk away option”, it will be sweet justice when the lenders start pressing the mortgage fraud option on all these same borrowers who lied on their loan documents.
Post lost in the abyss. Try again:
The “walk away” option is really gaining traction.
—————————————————————-
After so many borrowers exercise their “walk away option”, it will be sweet justice when the lenders start pressing the mortgage fraud option on all these same borrowers who lied on their loan documents.
“Many property owners Six called ‘big hat, no cattle.’ ‘They have a big house, big car, swimming pool, but no equity’ and are constantly refinancing to keep afloat.”
That quote covers 75% of the homeowners I know, and I would guess that it would apply to about the same percentage in the bubble markets.
Ain’t it fun to keep up with the Joneses.
Especially if it’s Star Jones we’re talkin’ about…
“That’s the dilemma facing Anna, a Bergenfield, N.J., woman who bought her Cape Cod-style house, with no money down, for $445,000 two years ago. Now, in a much slower market, her real-estate agent says she’d be lucky to get $380,000.”
You know, I see these listings all the time and it really opens up the question of why or how can such a house be put on the market when the seller can’t afford to pay the negative equity and the home can’t possibly obtain an honest appraisal for the sales price. What kind of agent would list such a property?
That leaves only a fraudulent appraisal to sell the house…
You simply wouldn’t believe the number of listings I see where the agent’s and seller’s add the sales commission onto their 2006/2005 purchase price and put the thing on the market. Again, if values have declined, how can this stuff possible appraise for these amounts?
Even funnier are the listings that say “appraised for XXX dollars.” If the listing has been saying that for a year or more, how true can it be?
yep, appraised values right now are still in bubble dollars!
I would not buy anything for more then 50% below appraised value.
If I were buying……………Maybe in a couple of years……
“DeLeon, a Honduran immigrant, told The Washington Post at the time that only eight people lived there, all family members who were needed to help make the mortgage on the house she bought for $550,000 in 2006.”
“By May, it was in foreclosure, sold to Deutsche Bank National Trust of Kansas City for $120,600, according to county records. The house has been vacant for months; DeLeon could not be located to comment.”
Wow. Just, wow. First of all, DeLeon is a freaking liar. A shining example of an influx of idiots “stabilizing” communities. Secondly, check out the decrease in the price. Awesome. Eat it, Deutsche Bank. Third, what do you want to bet DeLeon is back in her “homeland”, laughing up her sleeve at the US?
Once again, we see, as predicted, that these McMansions would become rooming houses for illegal aliens. It’s the only way someone can keep up with the payments on a 1/2 million dollar house if they are not independently wealthy. It’s ridiculous.
All the “Latinos” that moved into my parents neighborhood ALL have new cars, “renovated” houses and lots of toys. They usually have 3 or 4 cars at each house. Nice “family”.
I’m not getting what is wrong with multi family members living together or pooling resources to buy a house.
If zoning allows, there’s nothing wrong with it. But that’s not the point, if I’m reading diogenes’ post correctly. Many of the immigrants, legal and illegal, seem to be running rooming houses, in violation of the law. I’m seeing a little of this in my part of Hillsborough County, Florida.
The elephant in the room on these situations is usually in addition to having a money problem, whereas the only way they can afford to live there is by packing in a bunch of people, these multi-family situations often have a “citizenship” problem as well…
Are you OK with that?
I’m not…
I’m certainly not OK with it. The massive influx of illegals during the housing bubble has been one of the more unfortunate aspects of the whole phenomenon. I might be less bothered by it if I wasn’t acutely aware that I and my fellow citizens are subsidizing many of these parasites and the anchor babies they produce, through our tax dollars. Again, the developers have managed to pay these people cheap $$ to put up cheap, substandard housing, but it is the additional benefits, like health care, education and SS payments for the anchor babies that make it a pretty good racket for some of the illegals around here.
Great comment, I think a lot of us who have accepted traditional norms for our entire lifetime may be in for some paradigm shifting very soon.
I am in a SFH n’hood with a strong HOA, and there was recently a complaint about a new family (asian, which is irrelevant) with 8-10 people living in the house, from 3 generations. They are quiet, no trouble to anyone, the kids are watched by the grandparents after school instead of in expensive corporate/stranger childcare, they pay their dues on time, etc. It would be illegal to say they can’t live like this.
Could it just be that many traditional American families would not be able to STAND living with their relatives this closely?
The Hmoung and Vietnamese draw a lot of strength from this arrangement, and quickly moved up to buy acreage and do actual farming here. They provide much of the fresh produce at our farmers market, and their kids go to university and get into all sorts of lucrative professions. When I see foreigners come here and accomplish so much in a single generation, I confess I don’t have much sympathy for our own home-grown losers.
I have a hard time believing they are actually related. We have two of these boarding house situations on my street in VA and it really stinks. By coincindence they are all “cousins” and students. Wink Wink.
One has has 6 adults and 2 infants…all different nationalities. The other has about 8 young turkish men all the same age. They make great college students as none of them speak english or carry books.
ATC,
It depends on how many are living there.
In my youth, I always had at least two other roommates, usually in a SFH, but it was mostly one person per bedroom.
With many of these high-density living arrangements, you can see well over 10 people living in a 3/2.
While you might not mind that, many of your neighbors will. It crowds the streets with cars, and these homes often have the “residents” hanging around out front all day, drinking alcohol and staring down (gang-like) all the people who walk by — and looking at young girls (kids) in ways that make me (mother of girls) VERY uncomfortable. They usually are loud, too — loud TV, cars, fights, radio, etc.
I know that sounds like a stereotype, but that is **my personal** experience after being born an raised in Southern California. I’ve seen too many neighborhoods deteriorate right before my eyes because of the overcrowding issue, and everything that entails.
We must not have the whole story. That $120,600 doesn’t make sense even in this market.
Figure this Deleon chick heloced the place for major bucks, and skipped with the cash. What else?
Hopefully, she’ll spend every dime in her homeland paying off gang members who will be looking for a piece of her windfall.
And then she’ll be back in the US under some sort of political refugee status, trying to escape the gang members in her homeland. Wash, rinse, repeat.
‘Everyone’s waiting for the bottom.’
Except the sellers, who are still waiting for the peak prices to return.
‘Everyone’s waiting for the bottom.’
That quote is an indicator that we have entered the bargaining stage.
The sales people think its silly anyone is waiting and not giving them a commission. We’ve heard this for years and will hear it all the time on the way down.
San Deigo is down 25% and they still have a long way to go! Ghad… their prices aren’t even down to normal peak price/income, price/rent, or afford ability.
The other areas are just joining. I agree with Chris Thornberg, we’re only 1/3rd of the way through the downturn. We are just starting to see the layoffs this mess will create.
Got Popcorn?
Neil
” She said the mortgage broker encouraged her to overstate her income to qualify for the loan.”
You might as well jump! Go ahead and jump! Did she think this broker was her dad giving fatherly advice?
The the B said she is partly to blame. Partly? She is a freaking felon. Forget the house. She should lose any kids she has and that commission job, and spend a few years in jail. Is she so dense she does not know she is a criminal?
Even in non-recourse states, the banks should be able to report people like to this to the authorities, and sue them for damages arising from fraud rather than breach of contract. Whenever a story like this is published, the police really need to be tracking these felons down. Prosecution should be very easy as there is a confession. If they attempt to run, taser them and air it on TV for a few laughs.
The first question you must always ask before you decide to sue is, “Do they have deep pockets?” If not, don’t bother.
‘Now we’re just trying to unload it. If the first house had sold, we never would have been in this position.’”
If, if, if, IF! Again with the magic ‘If’. I’m fookin’ tired of hearing the word!
‘If’ I had a team of trained leprechauns I could hitch them up to my little brush cart and they could pull me up and down Steamboat Island Road, their wee little green tophats bobbing on their freckled brows, buckled green shoes twinkling, huffing and puffing effortfully, whilst I waved grandly and threw taffy to admiring children and racoons.
IF. But I don’t get to, because there is no IF here! Fook the ‘if’!
Oh, look, I woke up grumpy, I see. As well as trained leprechaunless.
I like your anger!
boy, I am saving my anger for the week ahead. It’s nice here and nobody is watching CNBC.
Can’t wait for all the bad news coming up.
Well, see, I don’t have to pro-rate my anger. Plenty more where the first anger came from.
But I share your eagerness for the next set of bad news.
I like your anger, too, but sometimes I get tired of all the bad news. I can remember being angry at all the good housing news because I knew it was not going to last and then all this sh*t would hit the fan. Everyone around me seemed clueless and didn’t want to hear that it was going to get uber grim. At least I don’t have the frustration of being treated like a tin foil hat crazy anymore. Of course, no recognition that I was right.
good point, Olympiagal, IF everyone had been able to sell at the top, but the percentage of sellers who did is massively dwarfed by those who wanted to.
just call them sellers-at-the-top wannabes
I notice that you’re really into leprechauns.
They have red hair, exciting foreign accents, and pots of gold. What’s not to like?
Although I wish they were a wee bit taller, and not so into those foppish four-leaf clover decorated neck ties.
Olympiagal…you paint quite a picture.
Of course, now I’ll have the image of those danged leprechauns in my head all day.
OG, if you’re not a professional writer, you should be. You make someone like P.J. O’Rourke look like a humorist piker!
the new claim - so did you get short or are you lying about the past ?
“We knew it was coming. For several years we had prices going up 20 percent a year. Did anyone’s income go up 20 percent a year?,’ Six said
This is the one that got me. So this loser defaults after “pulling out equity” (to do what, live the high life?) yet wants to feed the loss to someone else with no repercussions to his credit or life? Un.freaking.real.
“Sal Poliandro of Re/Max Properties in Ridgewood tells of a Hackensack short sale in which the homeowner owed $650,000 because he refinanced to pull out equity at the peak of the boom market. But the monthly payments were impossible. The house ultimately sold for $430,000 — $230,000 less than the amount owed on the mortgage.”
“‘The seller’s goal was to stop making payments without ruining his credit and his life,’ Poliandro said.”
A short sale must hit your credit pretty hard. Anybody?
if a 400 hit to one’s FICO is considered hard, then yeah..
Short sales are suppose to be for people who lost their job ,serious misfortune ,no funds what-so-ever ,no savings ,no other assets etc. . The fact that they are giving short sales to even people who took their equity out and have it sitting in a account somewhere ,or spent the money on junk is different than the “short sales ” they use to do when I was in the business years ago .
In fact ,I’m almost sure my neighbor was pulling a fast one on the “short sale ” they attempted . I happened to know the financial position of my neighbor before they walked (because they bragged about it all the time before the market turned ). The neighbors very quickly transferred assets and attempted to look poor for short sale purpose .Interesting how the neighbors didn’t even leave a forwarding address so I could get a hold of them and they left in such a hurry it was mind-blowing . That’s why I’m saying during these sort of desperate times ,the borrowers continue to commit fraud to avoid their mistakes or any penalty for their actions . Victims ..such BS ,gamblers not wanting to pay for their mistakes . Don’t criminals want to make someone else pay for them ? It’s the attitude of I’m going to get mind and some greater fool, or government , or some innocent ,is going to pay for what I get .
“What do you do if you’re a single mother who can’t afford your mortgage payments of more than $3,700 a month, but you can’t sell your house for anywhere near the amount you owe on the mortgage?
The answer is she never owned the house in the first place so who gives a flying $#@%
Ting, Ting, Ting. That is correct sir!
“What do you do”
Easy, stop paying the mortgage and look for a rental before your credit takes a hit. It ain’t rocket science, people.
“The winner? HSBC Mortgages Services Inc., which would likely put the home on the market soon.”
The question is when. They are hoping for a bailout before writing off the difference between the mortgage and the actual value. And HSBC mortgage services is just the servicer — the mortgage is “owned” by investors in mortgage bonds. They may not have been told they lost money yet.
I have a feeling (no evidence) that conventional MBS servicers are sitting on REO and letting them deteriorate. They may be doing it at the behest of the controlling bloc of security owners. If the REO is sold then a loss is realized; if its kept on the books you get a cash flow reduction. Maybe the security owners hope they can sell to some sucker who won’t notice that the monthly payments are way below the contractual amount. Any thoughts by anybody?
Everybody is being so cruel these people are going to be homeless and the poor banks will lose a lot of money. Where is the love for your fellow man?
By the way screwem one and all with the first Joshua tree you see.
It’s not cruelty, sir. Schadenfreude that big has a core of love somewhere deep beneath the surface.
And given the amount of crap all those smug, high-steppin’ “homeowners” were dishing out for all that time, it’s richly-deserved schadenfreude if you ask me.
Same as all those damned dot communists before 2000. Crash and burn you SOBs, how you like me now??
Cruel? They trashed the economy which we will all have to bear!
Call me naive, but my solution to much of this would be to legally go after anyone who signed their name to a liar loan , the people that originated the loan, the appraisers who knew the property wasn’t worth the value they stated and yes, even the RE agents if they were aware of it and encouraged it . In my eyes, they were all criminals signing their names to papers that were fraudulent. The feds can go after those who didn’t pay their income taxes and make them cough up the money, so why not in this case too? But no jail time, please. That would just cost the tax payers MORE money. Hmmm, you say you lost your house? Oh well…we’ll auction off everything you own and put it into a large fund to help defer the trillions of dollars that irresponsible people are causing banks to lose due to their sheer greed.
Yes, yes….I know this will never happen. I’m naïve, not stupid. But my fantasy does put a smile on my face.
You could probably liken this to the illegal immigration fiasco. Instead of locking up 12 million people here illegally, you give them citizenship to fix the problem. In the case of housing and the millions of people that lied to get the loan, you reward them with reduced price home-ownership. In the case of illegal immigrants that lied to get the loan, you reward them with citizenship and cheap homeownership.
Normally ,people who would commit loan fraud would be subject to losing their recourse on the loan and could be charged with all the damages and could suffer criminal charges .Anybody that was involved with a loan crime could face investigation and penalty . The problem is that the loan crimes were so wide-spread ,including the lenders very agents ,that it’s to much for the system to handle. .Another complaint is that the lenders “did” breach their duty to prevent fraud ,so now we have so much crime that there isn’t enough courthouses to handle all this not so petty crimes, (thousands of dollars lost ,neighborhoods destroyed ,unfair taxes charged, vacant houses and foreclosures destroying neighborhoods and attracting crime and health hazards, etc. ) .
There must be some other answer to the current housing meltdown problem than rewarding the people that had a hand in creating it.
“There must be some other answer to the current housing meltdown problem than rewarding the people that had a hand in creating it.”
everyone found guilty should be sentenced to COMMUNITY SERVICE. give something back! (additionally, CEOs found guilty should have their bonuses stripped…and used to build homeless shelters.)
The only time I ever borrowed on margin was to pay cap gains tax.
It seemed the only thing I could do. Then I sold dead stocks so I would have no more debt.
All these homeowers have a free pass.
That is the part of this mess that hurts my feelings.
My reward shall be a lovely home anywhere I want for under 250k.
OffTopic Wall St Report-
I’ve made mention in the past of an accountant friend who audits the auditors(Accenture, Las Vegas Gaming Commission, casinos, etc). In a private discussion this morning, he indicated his 80-something year old brother in law was called by un-named banks to do workouts between them and builders. After working on this for 3 weeks, his brother in law stated that he is “terrified”. Also he stated, “although I was young during the depression, this think will dwarf the depression if it unwinds in an out of control way”.
Take it for what it’s worth but my friend is no ham and egger.
If it does unwind in an out of control way (the probability of which seems to rising) my guess is that that would probably happen sooner and more quickly than even most of the bears imagine, i.e. we could be living in a very different world by the time, say, the Olympics rolls around.
The upside is we won’t have to hear the candidates debate whether or not liberal toilet tissue usage is destroying the planet.
Thanks for the input, exeter!
Oh Lord, stuck in Lodi (Ca. & NJ) again…
Nycityboy said:
“Bingo, edgewaterjohn. In the past you didn’t go to anonymous strangers. You went to your local bank. It may have been difficult to get a loan but it was much more of a partnership than anything we have now. Bankers didn’t give money to people that couldn’t pay it back and people didn’t just skip out on loans at the first hint of inconvenience.
I believe people foolishly thought that corporations held the same values as their local bank. Boy, were they wrong. The mess we have now is a by-product of financial globalization.”
I went to my local bank in 2003 when I bought my house. 50% down, 15 year fixed at 4.5%. Fully documented. A year later, they sold it to Providian, who then sold it to Citicorp. There are very few local banks who hang onto mortgages. I wonder if I stop paying if we will find out that no one knows who holds the paper…………