Many borrowers have been pursued before by aggressive debt collectors who encouraged them to use their retirement accounts, borrow from family members or raid their child's college fund to catch up on their bills, said Michael Shea, executive director of Acorn Housing, a counseling agency. "They badger you until [you] don't want to talk to the servicer again," he said. "By then, [you] don't even want to answer the phone."

Even though lenders said they were reaching out, it remains difficult to work out deals, said Mosi Harrington, executive director of Housing Initiative Partnership in Prince George's County. "We have cases that we have tried for two months to get paperwork to the right department," she said. "They put you on hold for half an hour, and the phone clicks off."

'nuff said.

I am not sacrificing my retirement account to feed these vampires, either.

Someday this war's gonna end...

I know the war is going to end soon. Nearly every daily in our state had a big feature article by local realtors declaring that this is the time to buy. Desperate times.

How about they send notices disguised as funeral invitations? I always open those if only to check that it's not mine.

I've been hearing that some angry clients are not only waiting for the foreclosure to take place (while pocketing everything they can), but before the padlock gets put on the door, they are trashing the house.

Concrete is being poured down the pipes, electrical wires cut throughout the house, kitchems and bathrooms being taken apart and sold as scrap for extra money. Not only is the foreclosure process going to cost the lenders $50,000. They won't be able to sell the house "as is" because the new financing company won't accept that run down condition at closing. New buyers won't even get insurance on it.

That means that the lenders may have to "fix" the property so they can sell it. If enough people get angry enough to do this, it will bring the banks to their knees.

Are we talking about IndyMac?

That post will make me smile for a couple of weeks.

What is needed is a cheap consumer voicemail system programmed to deal with debt collectors.

For mortage related problems press 1.
For auto loans press 2.
For credit cards in arrears press 3.

All arranged to go in a nice infinate loop, around and around. Just have a separate cell phone for people you actually want to talk to.

Nothing surprising, I look at the caller ID before I answer - Dial America gets ignored. If I pickup and there is no immediate response to my "Hello?" I hang up. If you want to talk to me the CallerID better say the name of a company I deal with and it better not be a robo call.

Called my servicer yesterday to ask a question about taxes and escrow. Select 1 for your balance, 2 for your payoff amount, 3 for your next payment, 4 for something else. I selected 4 and was connected to the workout department! She was polite and connected me to the correct place but it's a sign of the times I guess

Tanta is consistently extraordinary. Excellence is manifest in her analysis and prose on a daily basis. What a pleasure to read her posts.

The police use the same tactics with other types of criminals with outstanding warrants. Free flat screen's. Lottery winnings.
Works like a charm, they are addicted to free cheese.

If they are going to walk from purchases fine, STFU and walk already, but the reality is that most have already extracted funds from the property under false representations, and that is theft.
This sub group should be hunted, how can a serious business blog encourage theft?

Goose meet gander? sure, prosecute both lenders and borrowers to the full extent of the law and bury them.

In eight years of popular outrage at the most outrageous time of my life, this is the most eloquent polemic I have read.

This is one for posterity.

umber2son
That and the war on the american sheeple by Wall Street.

I go to work and I act like the Colonel- it will just all be good if we keep pushing it forward!

But I come home and sink into the Captain....BS from Washington and Wall Street is piling up so high you need wings to rise above it.

Someday this war's gonna end...

Dave writes:
Are we talking about IndyMac?

...you prob'ly think this song is about you...

Mark Twain could have written that post. nice

idoc, ask your broker "friend" how he lives with himself.

I'm watching Dr. Who. The good DR was just in a Hooverville, whilst the Dahlek just ordered pig men....I'm off to the bunker.

I'm so friggin' scared I can't type.

Cheers,

I think the homeowners like me who have a significant amount of equity in their homes will NOT walk away. Back in the nineties when the Los Angeles townhome I purchased in 91 dropped in value from my $150,000 puchase price to around $90,000, I never once considered walking away. I knew that in the long term the value would climb back up again. And it did: at the height of this real estate bubble I could have sold it for $400,000.

if i were smart i'd move to the Caymans, setup my own HF, and sell CDS protection all day long. and WTSHTF, turn off my fax
idoc

that's so 2005

After reading several of your witty and insightful (aren't they all) blogs, I felt moved to comment.

1.Do you think the mortgage servicers will stop to think what they sowed for this year's crop when they have reaped megamillions from last years' crops?
Blake Fleetwood: Richie Rich: When a Two Million Dollar Xmas Bonus is Chump Change

1. From Greenspan sees strong chance of U.S. recession - Feb. 15, 2008 a quote from Greenspan:
   "If it weren't for the fact that business were so well-supplied with capital - thanks to the low interest rates over the last several years - he said the economy would already be in recession." Greenspans's rationalization of his actions get wierder and wierder. Isn't this like telling a worker in a polluted toxic waste plant working for 25% more than going wages, when he is stricken with cancer after a few years that he is lucky that he is so well-equipped with some savings for cancer treatment. I know a couple of young (20's) women who quit working for mortgage companies because of what they believed was the companies' unethical practice of pushing loans the borrowers could not afford. This was at a time when the leaders of our economy were encouraging reckeless borrowing and lending in the name of "American dream" of home ownership. It is depressing that fresh-out-of-college youth understands priciples of economics better than the leaders of the economy. Wait, it is actually encouraging; these old fogies will retire/die soon.

This is great stuff. Tanta--do you want to be Jonathan Swift or Thomas Paine when you grow up? I thought you were just playing a feminine Tonto to CR's Lone Ranger, but maybe you have a calling greater than the silver/LCD screen?

Two snaps, Tanta. You go, girl!

Wow, great post, great thread.

If any good comes of this at all it'll be that the vast majority of Americans realize that they're sharing the same boat. (Much to Carl Rove's displeasure I'm sure.)

good read about how we feel...

Yahoo! 404 - Page Not Found

You have borrowers who choose the lesser evil of losing their homes in silence rather than the greater evil of trying to deal with you.

Well said.

Maybe part of the answer in the long term is peer-to-peer or direct lending. Instead of lending your cash (or your pension fund's cash) at a low rate to some crook in a suit and letting him lend it at usorious rates, let's dispense with the middlemen. One rationale for interposing bankers in the process was that they were professionals who could better determine good borrowers from deadbeats. Well....

I've read a bit about Grameen Bank and other microlenders. Their default rate would put Citi to shame. Perhaps they have something to teach the rest of us?

Most of the articles on this site are pretty good but this one is kind of a joke. The fact is that there is no 'work out' for most of these borrowers who are heading into foreclosure. Most of them should never have been given loans to begin with and probably none of the 'ARM' crowd can afford their home at the fully amortized rate. They just can't.

So whether the bank talks to the borrower before they foreclose makes no difference. I mean really, that Washington Post article was about a cashier and a receptionist who were trying to get a workout after their loan reset. Those people should be renting.

By the way, why do most people on this site feel like the borrowers are such victims? Most of them didn't have to put any money down, they got to live in a huge house at a teaser rate, and now they get to live rent-and-payment-free for the next year while they wait for the bank to foreclose. That sounds like a pretty awesome deal to me.

The real victims in all of this are people like myself who have been responsibly renting for years, have 20% to put down, but are too afraid to buy a house because values are too far out of whack.

Maybe part of the answer in the long term is peer-to-peer or direct lending. Instead of lending your cash (or your pension fund's cash) at a low rate to some crook in a suit and letting him lend it at usorious rates, let's dispense with the middlemen. One rationale for interposing bankers in the process was that they were professionals who could better determine good borrowers from deadbeats. Well....

I've read a bit about Grameen Bank and other microlenders. Their default rate would put Citi to shame. Perhaps they have something to teach the rest of us?

The solution to this is incredibly simple: require borrowers to put 20% down. That's it. If each borrower throughout this entire wacky bubble period had been required to put 20% down, this bubble never would have happened.

Intermediaries are fine. You just need to make sure the borrower has some significant skin in the game. When you put $80,000 of your own cash into a $400,000 house, I can assure you that walking away is no longer such an easy solution.

Tanta,

Seriously, this is high snark from you. And I love it, of course. But what happened? Did some very specific piece of news get you so thoroughly exercised or is this a straw and camel situation? As a friend used to say, "Enough is enough and too much is a plenty."

Watching in Awe- No question, if I were lending MY money to someone to buy a house I would certainly demand they put a healthy amount down. Of course, the intermediaries weren't lending THEIR money, so they had no skin in the game either. The #1 reform I hope to see- bonuses are paid to bankers only as the loans made are paid back by the borrowers.

Last year, for the first time in my life, I knew I was going to be over 30 days late with my mortgage payment (I had only once before ever been late at all).

I called my mortgage lender, Wells Fargo, to inform them of this, to let them know the reason why and most importantly, to let them know when I would have all the money I owed to them. The lady on the phone was very kind and said she'd put a note in my account. That's all I wanted, so I was happy.

The next week, I've got the money together to be current, call Wells Fargo and they tell me they have no record of my having called earlier, attack me for being a deadbeat and then refuse to take my payment unless I enter credit counseling. I was incredulous, the lady on the phone said she literally could not take my payment until I entered credit counseling, and then started to ask me very personal questions about my finances. I hung up on her and tried again, until I found someone willing to take my payment.

I've learned my lesson, never call Wells Fargo.

[Tanta writes:
In many cases the banks were forced by policy to do business with people against their better judgment.

Ah, yes. The old "these poor banks were forced by the gubbmint to make loans to poor people, who are sharks" argument. Spare me.]

ACORN, CW, and the Lehmans of the world remind me of that Gahan Wilson cartoon of the creepy looking kids selling 5c lemonade on one corner while their confederates around the corner collect $5 from the customers lined up at the "Lemonade Antidote" stand.

Yes, there were plenty of predatory lenders out there, helping originate crappy liar loans, no down piggy backs, and thin equity low credit score junk paper to predatory borrowers in the expectation that they could repackage it and sell most of the sliced crap into the secondary market through predatory securitizers who figured they could pass the trash to credulous investors who put their money out based on S&P/Moodys/Fitch ratings.

It worked for several years too, going from ABS to CDO to CDO-squared to CDO-nth power, until suddenly the muzak stopped last July and August. Now the new scam is to highlight the torment of the credit-o-holics who have overdosed on all the freely available money in order to get the same politicians who were juiced by the PAC bribes from their builder, broker, and investment banker supporters to create this environment to "socialize" the mess [S&L Meltdown, Keating Five, RTC redux] and save them from the consequences of their scams by propping up collateral values so they can get back to fleecing savers and credit junkies.

In a minimally sane world, this would be a great big NO SALE. In the world we actually inhabit, the various creepy interest groups who gave us the present mess will probably go a long way towards succeeding in further debasing the financial system to eke out another short term advantage until they can figure out the next big scam to keep the action rolling. Any one of the current presidential candidates with a good chance of winning, together with the bulk of Congress, present or future plausible candidates, can be counted on to roll over for this. Indeed, one member of the last "Keating Five" group is in the A list for the Oval Office. Another A-lister has previous real estate and commodity market scams in her unauthorized resume. The third is a demonstrated master of spreading pixie dust backed by zero substance over mesmerized audiences; just the trio needed to give the voters an illusion of a real choice and then get back to the important business of making sure that this mad merry-go-round of "heads I win, tail someone else, or if all else fails, the taxpayers lose" gets another whirl or two.

The next step in this is to wonder exactly what the value of mortgage servicing rights are when the costs exceed the fees.

This is not a minor matter, although it may be possible to delay recognizing this on balance sheets.

CFC has $20b in MSR's listed as assets.
WFC has close to that.

BAC has only booked $3 billion.

The point is that if these assets disappear, it cuts heavily into capital.

It's possible that they might be able to protect the balance sheet estimate by expensing the extra costs somewhere else.

Nevertheless, timing differences reverse themselves and economic reality can only be delayed. Maybe that's enough.

Plus, they seem to be using higher math in calculating these things. Convexity and all the other fine points of valuing assets.

I dunno -- maybe all the costs should go into loan loss accruals.

Still, when you have huge assets that seem impaired, it seems like a big deal to me.

Barrons ran a favorable article on WFC but didn't talk about msr's.

For all I know there is more than one borrower out there who can comfortably afford his payment, but has decided to let the thing go to foreclosure, even though he wouldn't have dreamed of behaving this way twenty years ago.

Most likely this behavior wasn't as prevalent 20 years ago because buyers back then actually had some equity in their homes. Today's borrowers ... not so much. It's much tougher to walk away from a house when you have tens of thousands of your own money invested into it as a down payment.

This whole 'morality' thing is a canard. Most people are as moral as their wallet tells them to be. Twas always and ever shall be.

A look at housing prices in the San Fernando Valley (Los Angeles): Kate in the Valley

Paul, in my neck of the socal woods, which is another valley with the same weather, I just sold my 1650 sf home for $735k.

Can we settle this issue of "victims" once and for all? I'm sick of reading strawman attacks along the lines of "I can't believe you think they are victims; these are the real victims!".

CR/Tanta, can we set up a poll, so that each class of person affected can get a vote of victimhood by the readership? At least then, the comments might read "the 74% of you who think that people who were induced to lie about their income by their broker are victims are idiots".

Culpability and responsibility aren't binary functions, nor are the punishments that are being inflicted in this mess.

Don, don't worry about about California housing prices. Once we're done loading it up with debt and encumbrances, we'll give it back to Mexico. They'll call their new/old state something like Aztlan.

It will have an agro-industrial economy. The agro will be dope grown in Mendocino. The industrial will me brewing crystal meth in the central valley.

We'll still have elections, but they will be much less confusing. The outcomes will be already known. All of us debt peons will dutifully troop over to the Patron's haceinda before the vote to get our instructions.

BEl Goyo said:

But what are the alternatives? I wonder, would borrowers be willing to pay a premium to have the servicing of their loan be local? Or not subject to transfer? Is there a market for "niche" servicing?

This is nothing new. 25 years ago I had a loan sold out to GMAC. Pinheads send me a coupon book with 360 little pieces of paper in it, like the taxes were never going to go up.

about the mid 90s, the government mandated one of those pieces of papers you get at closing is the percentage of loans they keep. I found a great local bank that kept their paper. Used them on a couple mortgages. If I have a problem, i can call or go to the bank, take the elevator to the 2nd floor and TALK to the PEOPLE. Cost me .25 of a percent over the cheapest rate, but to me, it is a better deal than sleeping poorly at night.

What is aggrevation worth?

Gomer

Ambac in Talks to Split Itself Up
By CARRICK MOLLENKAMP, KAREN RICHARDSON and LIAM PLEVEN
February 17, 2008 7:18 p.m.

Ambac Financial Group Inc. is in discussions to effectively split itself up in a move aimed at ensuring that municipal bonds backed by Ambac retain high credit ratings, according to a person familiar with the situation.

A deal could fall apart because of the complexities in such a move, this person said. Bond insurers in recent weeks have become ground zero in the global credit crisis because the companies contractually have agreed to stand behind billions of dollars in securities underpinned by U.S. subprime mortgage loans.

A halving of Ambac would create one unit that insures municipal debt and one that would cover rapidly diminishing securities tied to the mortgages in a structure that effectively creates a so-called "good bank" and "bad bank." Bond insurers generate revenue by promising to cover bond payments on debt issued by a range of entities, including local governments. Bond insurers now are under pressure, though, because they also agreed to guarantee payments on mortgage debt or securities to banks, brokers and investors.

Ratings companies now are poised to further cut credit ratings on bond insurers because of those guarantees. Ratings downgrades can have chain reactions and lead to increased borrowing costs for municipalities and write-downs for banks that own debt backed by the insurance providers. To avert financial chaos, regulators in New York, including state insurance superintendent Eric Dinallo and Gov. Eliot Spitzer have pressured the companies to find solutions or else face regulatory action.

Ambac is one of two bond insurers considering an effective break-up. FGIC Corp. on Friday notified Mr. Dinallo's office, the New York State Insurance Department, that it is pursuing an effective break-up. But according to people familiar with the situation, FGIC's plan came as a surprise to a consortium of banks that had been in early discussions to shore up FGIC's capital. Talks between the two sides be prolonged and litigation may be one outcome. Ambac's plan is much further along and an announcement could be made this week.

But the plan to split Ambac is complex and has required tens of hours in recent days. While a "good bank-bad bank" model has existed for decades, there isn't a playbook for halving a bond insurer. A number of issues remain to be resolved, said a person familiar with the situation.

An Ambac spokesman wasn't immediately available for comment. Ambac is based in New York and is the second largest U.S. bond insurer behind MBIA Inc. FGIC ranks third.

Write to Carrick Mollenkamp at mollenkamp@wsj.com Karen Richardson at richardson@wsj.com and Liam Pleven at pleven@wsj.com

wia, thank you for the advice. (I thought I posted a response but it's not showing up. Possible I posted it in the wrong thread.)

only reflection...what will the investors think...how will europeans feel when the paper is shoved up their petard..gotta love it

Part of every homebuyer's mortgage/deed of trust is a provision that if you don't pay, the bank gets the property back.

Millions of Americans are now finding they choose to exercise that option, rather than to continue overpaying bloated amounts for overvalued property.

It's the American way and, it's in the contract.