California's 90 day Foreclosure Freeze

At lunch today I was listening to several people talk about California’s new foreclosure prevention act. You should have heard the people talk about how unfair this new law was! I heard words like moochers, freeloaders, bozos, crooks and the list goes on.

Why is it that every time the topic of helping homeowners comes up there is someone insinuating that the homeowners are getting something for free or they talk about how unfair it is that the homeowner is getting some sort of help.

Facing the loss of one’s home (foreclosure) has a debilitating affect on a great number of people. Thinking that they have 3 months free rent is absurd.

There is nothing “free” about facing the reality that you have no where to go (bad credit often means no rental available).

There is nothing “free” about losing a job or having your hours cut.

There is nothing “free” about closing a business you worked years to build up.

There is nothing “free” about the diminishing balance in your 401K/retirement fund.

Sure, the homeowner needs to take a share of the blame, after all they made a decision to purchase or refinance a home. But what about the banks? Aren’t they the ones who really created this mess by instituting loan products that made it too easy for people to participate? They are the ones who created a loan program that made it possible for anyone to get a loan with no financial verification which led to this financial debacle!

Was it is okay for them to securitize our loans (both credit cards and mortgages), rate them as “Triple A” then sell & resell them to the highest bidder, knowing that these type loans were destined to fail from the beginning? Shouldn’t that be considered “FRAUD”?

Why do they deserve a “pass” from our wrath? Surely everyone understands that if they had not let their greed overwhelm their logic we wouldn’t be in the economic predicament we find ourselves in today.

I say Congrats to California for taking a stand on the side of the homeowner! It may not be the cure all for this problem, but it makes the banks as least “try” to work through this problem before closing their door on a homeowner in distress.

Judge Stops Bank's Foreclosure Action

On March 6, 2009 a Florida Jurist, Judge Donna Berlin slammed the foreclosure door on Washington Mutual Bank in a mortgage foreclosure case.

Judge Berlin issued an order Canceling Foreclosure Sale and Enjoining Plaintiff from Applying for Sale Date. In this case, it seems that the homeowner was working with WAMU trying to get a loan modification for her mortgage. Unfortunately, WAMU was moving the foreclosure process forward through the court system.

Because the homeowner was talking with WAMU’s home retention dept. it appears that she didn’t take the appropriate actions in the Court to defend herself because of the ongoing loan modification negotiations. But why would she? She was convinced that “her bank” would work with her.

Just a month before on February 6, 2009, the Judge entered an order on February 6, 2009 setting aside a final judgment of foreclosure because of excusable neglect.

Despite that the foreclosure judgment was set aside, it appears that the company representing WAMU went ahead and asked to set a sale date and received a sale date of March 30, 2009. Bear in mind that there is no final judgment at this point.

Judge Berlin gets it! The Judge stopped WAMU from applying for another sale date until they receive a final judgment from the Court.

Over and over again we hear of stories where the bank has played “games” with homeowners who are either in the middle of a loan modification or in the middle of a “short sale” negotiation.

This recession is causing enough problems in this economy without the banks taking back houses every chance they get. When are the banks going to realize that most homeowners WANT to stay in their homes? WAMU boycott the recession with us by helping homeowners stay in their homes!

Homeowners let this story serve as an example of what you shouldn’t do! Do not assume that your mortgage company is working 100% on your behalf. Be mindful that the clock continues to tick on the foreclosure process. If you have a question on the foreclosure process in the state you live in, call your neighborhood housing agency, your local realtor or an Attorney.

And remember to help us Boycott the Recession by helping other homeowners stay in their homes.

Talk to you soon!

You can join us in boycotting this recession by going to www.BoycottTheRecession.org

Where is the Help for the Homeowners?

Earlier this month, during a panel discussion with OTS Director John Reich, Federal Reserve Board Vice Chairman Donald Kohn, FDIC Chairman Sheila Bair, and Federal Housing Finance Agency Director James Lockhart, the Comptroller of the Currency John C. Dugan said "that new data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months."

He went on to say that “After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,”

A key question, Mr. Dugan said, is why is the number of re-defaults so high? “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”

Let's discuss this, shall we?

Question 1 - Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers?

Answer: YES! When providing modifications for the homeowners the banks do not make their decisions based on what the homeowner can afford, but instead their decisions seem to be based on the amount owed on the loan. Most banks are unwilling to budge for the homeowner and will even close the file after making a modification offer, if the homeowner takes to long (as little as 72 hours) to make a decision.

Question 2: Is it because consumers replaced lower mortgage payments with increased credit card debt?

Answer: Very possible - especially in the cases of "teaser" rate loans. We find that the providers of these loans qualified the borrower only at the beginning interest rate and failed to qualify the borrower at the "real" rate.

This failure often make the unsophisticated borrower feel that they have more latitude in terms of disposable income and who subsequently made purchases based on today's monthly payment totals instead of making purchases based on the adjusting loan balance.

Question 3: Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments?

Answer: The failure of the mortgage providers to properly look at the applicant's paperwork is a big part of this problem. The stated income program was at first one of the greatest lending programs I have ever seen in my 20 year real estate career. This program allowed self employed people finally get a chance to purchase a home without having to explain why there 1040's only showed little or no income (line 36).

The problem with programs like these is that everybody decided to use it to get their client a loan (and rightfully so). However, when it was credit driven, meaning your score had to be above a certain level, everything was running smoother. Then one day, the mortgage provider relaxed their guidelines and reduced the requirements.

All of a sudden EVERYBODY was getting a home loan or refinancing their existing home. It was like the Wild, Wild West out in Real Estate land! The folks who wouldn't normally qualify for a loan are now homeowners! This in itself is not bad, but unfortunately the mortgage providers should have underwritten these loans better.

Question 4 - Or is it a combination of these and other factors?”

Answer: There is another factor I want to bring forward. Loan's with one hundred percent (100%) financing. It was okay for this program to have been released. But shouldn't the mortgage providers insist that anyone who accepted this loan must first go to some sort of financial responsibility class?

I know, hindsight is One Hundred percent (100%)! However, they should at least have made sure first time buyers or people with credit scores under 650 attended this type of class.

Now that we've answered these questions I want to make an observation.

Why are we talking about loan modifications in terms of failure?

Shouldn't we instead be questioning the banks about why they are not doing more to help the homeowners in distress?

Didn't the banks get a bailout package?

Why isn't anyone we asking them to share the bailout package with the homeowners in distress?

In my next submission, I'm going to talk about the Bank Bail-Out Plan & the possible affects it may have on homeowners!