So they missed their Aug 2007 payment and deliberately did not pay their Sep-Oct payments (even though they supposedly could). Why didn't they make any payments since then?
I would guess, because once WaMu initiated FC, the debt was accelerated. In this case the servicer no longer is obligated to accept monthly payments until the entire past due amount is paid and the loan is reinstated. Unless, of course, the servicer decides to give you a workout, which it appears didn't happen.
They claim they tried to get a quote for the entire arrearage but the law firm didn't call them back.
which, if true, as well as not accepting 12 grand instead of 15 is going to look pretty bad, though hopefully this is in federal court and not 'let's see if we get a jduge who's up for re-election' local court
assuming mass elects judges
which, if true, as well as not accepting 12 grand instead of 15 is going to look pretty bad
I'm not so sure that looks bad. I'm not an expert on MA FC law, but in most states you can decline "partial payments" in this circumstance. The whole idea of a "workout" is that it's at the servicer's or investor's or lender's discretion. Borrowers cannot unilaterally decide to pay less than the amount due. (Of course, it's a separate question whether they were ever told what the amount due was.)
In any case, it sounds like at some point they did find out the amount of the total payoff, because the law firm told them how short their payment was.
Maybe the facts are clearer in the complaint. Maybe somebody will send me a copy of it.
in MI i'm under the impression that the person forclosed on has liek 6 months to purchase the property back.
what kind of cash do they haev to come up with? the value oweed to bring the original mortgage current or the value the home sold at auction for?
yes, that's the redemption period (180 days in MI). here's how Freddie defines it:
A period of time during which no additional costs can be accrued by the borrower in foreclosure a stipulated time-out. The borrower can redeem the home out of redemption by paying all principal, interest, taxes, and other costs owed prior to the expiration of the period. In the six postforeclosure-sale redemption states where the redemption period is longer than 60 days (Colorado until January 2008, Kansas, Michigan,
Minnesota, South Dakota and Wyoming), the borrower retains the right of occupancy but loses title. The investor gains the title but has no rights of possession, such as the right to enter the property even to make repairs or to preserve the property unless invited by the borrower or as required by local ordinances (such as for lawn maintenance). Many other states also have post-sale redemption provisions if certain foreclosure processes are used and some have a redemption period prior to the foreclosure sale.
"not accepting 12 grand instead of 15 is going to look pretty bad. . . ."
Nonsense, happens every day. I've never had a problem before a judge or jury with that fact. The alleged inability to reach anyone with authority to make a decision actually plays much worse in court.
decided not to do so in order to induce WaMu to modify their loan. This ought to be interesting.
Warning Moral hazard ahead...At what point do you determine whether or not the family could afford the current mortgage? IMO lawsuits will drag this thing on for years longer...I'll be old and gray before this whole thing is resolved.
must be what i read into teh 12/15 issue (damn those journalistic peoples and thier writing skillz) - given the rest of the narrative i buaght into it as 'look, we sent them a check and they said 'you're 3 short. sorry mate'
gotta remember to be agenda free and aware when reading
Aren't modifications primarily intended for people who are in some form of an ARM mortgage who CAN (key word here) make payments if the loan was converted to a fixed at a reasonable rate?
This couple already has a fixed rate for a $275K loan, not exactly a bubble inflated value. They certainly can't claim to be trapped in a "predatory loan".
It certainly seems here like this couple simply can't or won't make the payments and now want the bank to eat a chunk of the principal.
Obviously the bank is going to say no, otherise what would stop everyone in the country from doing this. Of course after their "herculeen" effort fails they are crying to the courts about it. I hope this case gets tossed.
At what point do you determine whether or not the family could afford the current mortgage?
Well, traditionally, you determine that at the point that the delinquent borrower sends you income and asset verifications and a household budget and stuff and you order their credit report and you decide if they have a hardship or not.
I'm just going off what the article says, which is that they apparently had those famous "reserves" that people use to underwrite loans in the form of a retirement account, but they didn't want to liquidate or borrow against that.
I can understand why people don't want to do that, but then again if the borrowers used those retirement funds in the beginning when the loan was made to meet the "reserve" requirements, I can see why a lender would consider that they are able to make payments out of that money.
Let me add that I have always had huge problems with using retirement accounts to meet post-closing reserve requirements.
Precisely for this reason.
Per the article, he's still employed and her "work has slowed." Sounds like a cash-flow problem. These things happen.
But the problem is you can't get people to take money out of retirement accounts to tide them over in these situations.
But if you refuse to count retirement accounts as reserves, "prime" borrowers have a big hissy fit because they don't want to keep cash in taxable non-retirement accounts.
Then when it gets to a potential workout, you have to decide whether having this money in retirement accounts means "ability to repay."
ac writes:
Well, the financial industry has spent the last decade or so making a living by gaming the system.
Don't the rest of us get a shot at it now?
Right on, ac. We have been conservative and responsible with our finances and are starting to wonder if we've just been the sucker at the table. Everyone else is playing by Hobbesian Rules and doing so with no accountability or penalty. At some point, the rest of us are going to join the party.
We thought we were avoiding a financial trap, while it now appears we missed out on the chance to lie, steal, cheat, and gain with impunity.
Do you think OJ would take money out of his retirement accounts to avoid foeclosure? Protected money is a good think for most people, even if they are not ex Heisman winners/societal outcast.
Isn't this exactly what we can expect thousands of homeowners to do now with this 'housing bill'. Two neighbors buy identical homes for $400,000. Homeowner A puts 20% down and makes his payments. Homeowner B puts nothing down and stops making payments. Homeowner B is eligible for a reduction in principal and a new FHA loan. Homeowner A isn't. Homeowner A isn't being played for a fool here unless he can runup enough other debt or transfer assets etc to make him eligible for the same deal.
For example: A fried of ours ran up over $100k on her Amex. She planned to sell her house for a $1M profit but bought in October of 2006. When that didn't work out, Amex let her pay $25k and be done with it. She smartly told us, "See, this is how the game works."
remember the program is supposed to be "voluntary" and its not in the interest of neighbors when the house next to you goes in FC. History tells us that the FC will probably happen anyway and sink all the property values on the block...
Talked to a BK lawyer he said CC companies, banks, car dealers are just letting these people keep their trucks not pay back their loans because going after them is too expensive and there are too many of them. 75k sounds excessive... but dealers esp don't want to repo worthless trucks...
"unit472 writes:
Isn't this exactly what we can expect thousands of homeowners to do now with this 'housing bill'. Two neighbors buy identical homes for $400,000. Homeowner A puts 20% down and makes his payments. Homeowner B puts nothing down and stops making payments. Homeowner B is eligible for a reduction in principal and a new FHA loan. Homeowner A isn't. Homeowner A isn't being played for a fool here unless he can runup enough other debt or transfer assets etc to make him eligible for the same deal.
unit472 | 08.05.08 - 1:40 pm | # "
Exactly.. So in California under the anti deficiency act the good paying neighbor walks away anyway.. correct? Leaving the neighbor who got the work out in the first place on the street.
Tim: The place is in Point Loma, San Diego. It hasn't really "crashed," but it was supposed to be a way to make a mil in 2 to 3 years. Aint gonna happen.
The $75k write off was not automatic. They danced for a while first. She told us that, since there are no debtors prisons, and she already had a place to live, the CC companies could take a hike. She figured that she'd have some access to credit in about two years, even with a BK, and good access within 5. She has done this before. Her credit score took a hit, but she figured it was worth the gain.
She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool.
CSC's friend made me think. With all the FC and possible BK and walk a ways. What is going to happen to the avg persons credit score? With the new tighter regulation on issuing credit and theoretically a lot more people with damaged FICOs it would lead me to believe that consumer activity is going to take a dive. After all the growth here in the US has been mostly due to the growth in consumer debt and corporate leverage.
funny how price (XLF, SPY...) keeps rising on virtually no volume,
and even more funny to make a parallel with the real estate -credit crisis
ie Wall Street modus operandi is to keep doing the same thing until it stops working (ie until suckers run out) or better said: until they get hit in the face by a 2x4....
so you would think that it would have made the potential consequences of the credit bubble really apparent ... as in "what else is new? "
She told us that, since there are no debtors prisons, and she already had a place to live, the CC companies could take a hike. She figured that she'd have some access to credit in about two years, even with a BK, and good access within 5.
A question and a comment. My question is, how much do you trust what she told you? People lie about their finances all the time, in particular to folks whom the don't want to lose face with.
As to her plan, I'd say it would have made sense in 2000. The thing is, not unlike the lenders, her model is flawed in that she's not taking the activities of others into account. The more general this phenomenon becomes, the less likely new lenders in general are to disregard a prior BK. It works....until it doesn't. Sans another boom, I suspect her access to credit will be more constrained than she imagines.
"She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool."
A society in which many are only for themselves is one in deep trouble.
Currently Smoking Cannabis writes:
She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool.
But I was the fool."
except that if she had done something intelligent with the money she borrowed she would have been solvent.
No point to envy "weak links" in society.
(comment withdrawn if she happened to start a rather risky venture)
...Let me add that I have always had huge problems with using retirement accounts to meet post-closing reserve requirements
If this is truly the case (retirement funds were used to meet reserve requirements), I can only imagine the uproar the borrower would have made if the funds were not included. Per Fannie
...Reserves must be comprised of those liquid or near liquid financial assets that a borrower can readily accesssuch as ...the amount vested in a retirement savings account;
Then when it gets to a potential workout, you have to decide whether having this money in retirement accounts means "ability to repay."
Speaking as one of 300 million backers of their loan whose cash reserves for retirement are non-existent as a result of using them to pay medical bills--I absolutely insist that their retirement cash is in play.
If a court finds that those who have been winning under the system that works as long as you're educated, solvent and healthy get to plead out of their bad decision to overpay for the house they wanted, I am moving to Mexico.
In fact, the idea that they thought they were entitled to relief from the consequences of taking on debt might just do the trick.
I am awed by the idea of becoming a famous freelancing consultant by not paying my mortgage and then suing for the right to pay less in the future. Wow, sign me up to buy some business advice from those two right away--they clearly know how and when to try risky strategies!
"Speaking as one of 300 million backers of their loan whose cash reserves for retirement are non-existent as a result of using them to pay medical bills"
It's poor financial-planning to pull out retirement funds to pay medical bills. Those funds are generally protected in BK. Most folks would be better off taking the credit-rating hit of BK and keeping the funds. The exception might be if the retirements funds are so small as to not make the CR hit worth it.
This paper provides the first in-depth analysis of the homeownership experience of households in bankruptcy. The authors consider households who are homeowners at the time of filing. These households are typically seriously delinquent on their mortgages at the time of filing. The authors measure how often they end up losing their houses in foreclosure, the time between bankruptcy filing and foreclosure sale, and the foreclosure sale price. In particular, they follow homeowners who filed for chapter 13 bankruptcy between 2001 and 2002 in New Castle County, Delaware, through October 2007. They present three main findings. First, close to 30 percent of the filers lost their houses in foreclosure despite filing for bankruptcy. The rate rose to over 40 percent for those who were 12 months or more behind on their mortgage payment, about the same fraction as among those who entered into foreclosure directly. Second, filing for bankruptcy allowed those who eventually lost their houses to foreclosure to remain in their houses for, on average, an additional year. Third, although the average final sale price exceeded borrowers own estimates at the time of filing, the majority of the lenders suffered losses. These findings are pertinent to the recent debate over the bankruptcy code on mortgage modification. Finally, the paper also reports circumstances related to the loan, borrower, and lender that make it more or less likely that a certain result will take place.
[PDF, 241 KB, 31 pages]
CSC,
Go ahead and be pissed at your neighbor but I think your scorn is misplaced. As a shareholder of Amex a taxpayer, and Amex cardholder I am much more pissed at Amex for letting somebody run-up $100k in cc debt and then rolling over and writing off $75k. Let's get real here folks, in the lender/borrower relationship the real power lies with the lender. So when these loans go south, it's the lender's failure to act responsibly, in the underwriting process, that sets everything in motion. And if the lender is rolling over to fraudulent activity, then I'm even more pissed at the company as a shareholder, profits down, and as a cardholder, costs up. I believe this whole puffing up the "blame the borrower" is just a huge red herring for the lending industry.
Amex should put her on a list of people to never do business with again. In a few years one of their competitors will get screwed over as well.
Should I be jealous that she went out and spent $100k and only had to pay back $25k? I don't think so. If I could turn back time, would I become a drain on society like her, or would I be the same honest person I am now? It should be pretty obvious. I am honest not because it is the law; I am honest because I have always chosen to be.
I think it is ok to be upset at her for perpetrating the fraud and upset at Amex for letting it happen, but is your life so terrible now that you need to be angry that you chose a life of honesty? Come on!
After reading on WaMu's website that it would assist distressed borrowers with loan modifications, Lori Pestana called and was told they could not qualify until their payments were 50 days late.
If true, this is something they might get some mileage out of. It really doesn't seem smart to me for lenders to tell people they will help them but not until they are 50 days late.
And regarding the American Express lady: I really, really hope the credit rating agencies notice and take account of a person who does this sort of thing more than once. It's pretty clear to all of us here that she is a terrible credit risk. It should be equally clear to the raters.
WaMu, Countrywide, IndyMac, AmTrust Bank; these are all federally chartered savings banks. Since there are no federal consumer banking regulations these arrogant banks operate without fear of retaliation from the mortgage borrower. The federal regulatory system is designed this way for a reason. It protects these wealthy and powerful banks. In this case, the Bank has violated no laws, because there arent any. This borrower will only do the Legal Dance. Thats where the borrowers attorney and the banks attorney dance to the music of the court until the borrowers money runs out.
Ask John McCain, he was in office during the last savings and loan crisis. Congress has passed no legislation for the borrower to even question the Bank of Jesus. Its the Lynch Mob theory. Banks foreclose the house and hang the borrower. The sheriff in this case is the Congress. The Congress does not care, they haven't passed anything for the consumer but disdain.
Your elected officials live better on any given day than you do, so why should they do anything positive to interrupt their cash flow? There are 6 million foreclosures coming down the road.
Those homeowners are in for an education that they wont believe.
More and more judges think it's their job to use any means they can find in order to stop all residential foreclosures--traditional creditor rights be damned! These trumped up precedents will burden mortgage lending for decades. Lenders will almost have an affirmative obligation to do a work-out or, at least, carefully document why they couldn't. And all good debtors will pay that price.
More homedebtors looking for a handout for their poor financial decision. it is sickening that just about everyone can niot own up to making a stupid decision and buying to much stuff.
Your post is largely a non-sequitur. You seem to imagine that it's in any of those banks' interests to "do a legal dance" and run out the debtors' money-clock. To the contrary, unless the debtors clearly have the ability to pay, a workout has a good likelihood of being the bank's best path for loss mitigation.
It's poor financial-planning to pull out retirement funds to pay medical bills. Those funds are generally protected in BK.
Thanks for the advice. I'll jump in my time machine and advise my 23 year old self to follow it instead of the advice I got from my parents...wow, the time value of that money really shows in this exercise!
My point was that many people don't have the protected reserves that these (dumbasses/wily coyotes) are demanding that the court treat as untouchable.
Aw, c'mon! They missed one payment but thought they could catch up? Then they should have KEPT PAYING. Lenders accept late payments all the time. But no...the Pestanas deliberately stopped paying because they wanted a better deal and they probably didn't mind having more available cash. And for months, they barely put any effort into contacting WaMu. If it were me, I'd be on the phone to WaMu every day. I'd be hanging out at the local branch. Not only did the Pestanas NOT make a good faith effort to renegotiate with their lender, their actions CAUSED a preventable foreclosure.
To BG
If a Borrower has to go to the point of suing his federally chartered savings bank lender, odds are that the multi billion dollar lender can financially drag out the borrower quickly.
Most banks have an on staff attorney. The cost to the bank is minimal. Loss Mitigation is a great theory. From all that I read and see, Banks are reluctant to negotiate, discuss, modify, compromise, short sell, forgive or consider less than what is owed. For example, the new 700 page housing bill just passed states that in a refinance the borrowers bank must agree to it. The law does not mandate that the bank has to do it. If your read the entire hand book or the Office of Thrift Supervision very seldom does it say the bank must or will or is required to do anything. You do not seem to understand that there are NO regulations for the bank mortgage lender. That means that the banks federal regulator does not tell the bank anything, they ask the bank.
Banks are self regulated. The bank sir, does what it wants to do as it wants to do it. You really need to study Title 12 of the US Code and the federal regulations as it pertains to mortgage lending. Do you know that the Office of Thrift Supervision does not enforce the Equal Credit Opportunity Act, nor the Truth in Lending Act not the Consumer Reporting Act but yet is responsible for the act as it pertains to those Banks that it supervises.
You should note that the borrower always is at a disadvantage with a federally chartered bank. You will see many times where State officials or the federal regulators ASK banks to talk with the borrower. The federal regulator can not make the bank negotiate with the borrower. That is why the Congress needs to pass a federal consumer banking regulation giving the borrower a voice in which to contest, object or fight their foreclosure. Understand that if you do the research you will find that Federal banks answer to no one. Let us be clear, banks operate with absolute impunity. Loss Mitigation is not a requirement for any bank, it is a tool which could be used
at the banks discretion.
If Banks were required to be fair and just then we would not have 2.5 million foreclosures today and a total of 6 million projected by 2009 year end. With all due respect BG, do the math. How many homeowners in the US have successfully fought their foreclosure? How many Banks actually spent the time to try and modify or mitigate their delinquent mortgage loans with the borrowers? The number of foreclosures tells you how cooperative these banks are.
Unlike the comments I read, the homeowner did not cause the foreclosure crisis. The reason is simple- THE BANKS MADE THEIR RULES OF CONDUCT TO FIT THEIR INDIVIDUAL MORTGAGE LOAN OPERATIONS.
In this housing bill who got the financial protection ,the lender or the borrower?
I am with Tanta, it has always been a bad idea to count retirement as post closing cash reserves. Sure, the borrower can access them and use them to pay the debt but you can't force them to, or, at the very least, it will be very difficult to do so.
This kind of dredges up very old memories (back when we were first developing our reptilian snouts) of how I was taught that when you looked at a borrower's tax returns (yes, we did that on a regular basis) you did NOT want to count barter income as qualifying income because if you did then the borrower could make their payment in like kind. Hello, yes, this here is Bessy, she is a good ole' girl, best milking cow I ever had, oops, sorry, better have someone clean that up, here, I am just going to tie her up here to your shiny-you see where this is going. . .
The lawsuit is stupid but it doesn't change the fact that foreclosures are surging and will continue to surge.
The main reason for all the foreclosures is companies like WM with the help of wall street made credit too easy and inflated and asset bought with massive leverage - never a good thing.
Yes these people will lose their suit likely (and they should) but they had a fixed rate loan and still couldn't afford it. They might have been one of WM BEST customers....lmao.
To echo the comment of the story, I was advised by all three banks I have been involved with (primary & secondary on one home, and primary on second home), that they would not be able to discuss a workout or financial program without being at least 30 days late on payments....
Anecdotal, sure, but consider me as providing three additional data points representing Wells Fargo, HSBC, and Countrywide.
Gee, I don't know, Beave... Given the fact that I've dealt with Harmon myself and beaten them in court for an illegal foreclosure action, coupled with the facts that Gary Klein handled Pettway & Hubbard v. Harmon Law Officeshttp://asp.abdatalawserve.com/caseinfo.aspx?cid=79
and that Pettway was the second CA filed against HLO for FDCPA violations and settled (and that Mark Harmon had a verdict for FDCPA violations rendered against him and his private lender Realty Funding in NH), I'm wondering if there isn't just a tad bit more going on than is either included in the media coverage or that anyone wants to bother to give any credence to.
But that's a very lovely dress that you're wearing, Tanta.
I suspect WM had inadaquate staff to cope with increasing delinquencies ect... Hell I bet their staff has been downsized/ automated/ outsourced in pursuit of the holy quarterly profits. Ever try to get through to your phone company on the phone??? Its a race to the bottom. Anyone who can collect the same money while providing little or no goods or services, wins???? Did they try written communication??? A judge might be more sympathetic that way.
OT but related- ever notice that your credit card payment goes to a P.O box?? That way you can't send it certified mail. This would prove you sent the payment on time. It would also clog up the system if everyone tried it.
My point was that many people don't have the protected reserves that these (dumbasses/wily coyotes) are demanding that the court treat as untouchable. I hear you PhoenixRising. Due to unemployment, in order to pay health insurance premiums, I had to cash out my IRA when it was down 40% from what I had put in. On top of this the IRS hit me with a 50% tax for early withdrawal. In order to use these health insurance benefits I had to wait many hours in line at the emergency room behind illegal aliens who were paying nothing. The same illegals who were outbidding me for jobs.
I knew that they would work in a provision to screw over the borrowers and save the banks in that law. My wife fell ill and I had to relocate my family across the country to get help. Countrywide wouldn't even consider a short sale unless we were 3 months late. So now I found a buyer, and CW has completely sat on it for over a month now. Now the house is going to foreclose because I can't find a job. Looks like the lawyers have found another way to profit from peoples' misfortunes.
Property taxes doubled, tripled or quadrupled in the past 5 years for half of all FL property owners.
Property insurance doubled or tripled for all property owners in FL "due to the hurricanes" even though most homes had NO DAMAGE !!
Not being able to make mortgage payments might not be about medical bills or loss of employment.
There is more to the story than the media and government is telling us.
FL is in terrible shape - huge jobs losses, major corporations shutting down, people fleeing the state for the Carolinas and cheaper places to live - because the governments took all the money !!! (Our major insurer is state owned)
So now it's up to banks and borrowers to deal with each other. Yes the Feds are going to sure up the banks to prevent panic and collapse.
If people decide to stop paying and get back on even footing with the banks, so be it. Eventually, the property values will have to reset (fall) to a level that reduces the governments property taxes back to pre-boom levels. Too bad the dumb-ass government couldn't keep their hand out of the cookie jar to begin with -
Banks make money on lending. The writer who thinks credit will keep getting tighter due to the AmEx experience, NO. The opposite will happen.
The banks will be so eager to extend credit to the 6 million foreclosed clients that they will pressure congress to change FICO standards and banks will be able to bring all of the risky borrowers back into the fold sooner rather than later -
because they can't make money if they aren't loaning it.
Hah! They've been "doing as I do, not as I say" and watching The Donald.
wow. that's...clever.
also, anyone who know's, in MI i'm under the impression that the person forclosed on has liek 6 months to purchase the property back.
what kind of cash do they haev to come up with? the value oweed to bring the original mortgage current or the value the home sold at auction for?
So they missed their Aug 2007 payment and deliberately did not pay their Sep-Oct payments (even though they supposedly could). Why didn't they make any payments since then?
I hope neither of them commits suicide. That would immediately identify them as true victims... ;-/
Why didn't they make any payments since then?
I would guess, because once WaMu initiated FC, the debt was accelerated. In this case the servicer no longer is obligated to accept monthly payments until the entire past due amount is paid and the loan is reinstated. Unless, of course, the servicer decides to give you a workout, which it appears didn't happen.
They claim they tried to get a quote for the entire arrearage but the law firm didn't call them back.
which, if true, as well as not accepting 12 grand instead of 15 is going to look pretty bad, though hopefully this is in federal court and not 'let's see if we get a jduge who's up for re-election' local court
assuming mass elects judges
"provide certification to the Secretary that the mortgagor has not intentionally defaulted on the mortgage or any other debt."
Maybe congress should pass a new bill that removes this unfair restriction.
which, if true, as well as not accepting 12 grand instead of 15 is going to look pretty bad
I'm not so sure that looks bad. I'm not an expert on MA FC law, but in most states you can decline "partial payments" in this circumstance. The whole idea of a "workout" is that it's at the servicer's or investor's or lender's discretion. Borrowers cannot unilaterally decide to pay less than the amount due. (Of course, it's a separate question whether they were ever told what the amount due was.)
In any case, it sounds like at some point they did find out the amount of the total payoff, because the law firm told them how short their payment was.
Maybe the facts are clearer in the complaint. Maybe somebody will send me a copy of it.
in MI i'm under the impression that the person forclosed on has liek 6 months to purchase the property back.
what kind of cash do they haev to come up with? the value oweed to bring the original mortgage current or the value the home sold at auction for?
yes, that's the redemption period (180 days in MI). here's how Freddie defines it:
A period of time during which no additional costs can be accrued by the borrower in foreclosure a stipulated time-out. The borrower can redeem the home out of redemption by paying all principal, interest, taxes, and other costs owed prior to the expiration of the period. In the six postforeclosure-sale redemption states where the redemption period is longer than 60 days (Colorado until January 2008, Kansas, Michigan,
Minnesota, South Dakota and Wyoming), the borrower retains the right of occupancy but loses title. The investor gains the title but has no rights of possession, such as the right to enter the property even to make repairs or to preserve the property unless invited by the borrower or as required by local ordinances (such as for lawn maintenance). Many other states also have post-sale redemption provisions if certain foreclosure processes are used and some have a redemption period prior to the foreclosure sale.
http://www.freddiemac.com/news/pdf/interventions_in_mortgage_default.pdf
"not accepting 12 grand instead of 15 is going to look pretty bad. . . ."
Nonsense, happens every day. I've never had a problem before a judge or jury with that fact. The alleged inability to reach anyone with authority to make a decision actually plays much worse in court.
decided not to do so in order to induce WaMu to modify their loan. This ought to be interesting.
Warning Moral hazard ahead...At what point do you determine whether or not the family could afford the current mortgage? IMO lawsuits will drag this thing on for years longer...I'll be old and gray before this whole thing is resolved.
must be what i read into teh 12/15 issue (damn those journalistic peoples and thier writing skillz) - given the rest of the narrative i buaght into it as 'look, we sent them a check and they said 'you're 3 short. sorry mate'
gotta remember to be agenda free and aware when reading
Aren't modifications primarily intended for people who are in some form of an ARM mortgage who CAN (key word here) make payments if the loan was converted to a fixed at a reasonable rate?
This couple already has a fixed rate for a $275K loan, not exactly a bubble inflated value. They certainly can't claim to be trapped in a "predatory loan".
It certainly seems here like this couple simply can't or won't make the payments and now want the bank to eat a chunk of the principal.
Obviously the bank is going to say no, otherise what would stop everyone in the country from doing this. Of course after their "herculeen" effort fails they are crying to the courts about it. I hope this case gets tossed.
It kind of sounds like these folks had the ability to make payments, but decided not to do so in order to induce WaMu to modify their loan.
Well, the financial industry has spent the last decade or so making a living by gaming the system.
Don't the rest of us get a shot at it now?
I know I'm signing up for my 300 days free rent from Fannie Mae.
Hopefully the lender doesn't get suspicious that I'm sleeping on an air mattress and keeping most of my stuff in storage.
At what point do you determine whether or not the family could afford the current mortgage?
Well, traditionally, you determine that at the point that the delinquent borrower sends you income and asset verifications and a household budget and stuff and you order their credit report and you decide if they have a hardship or not.
I'm just going off what the article says, which is that they apparently had those famous "reserves" that people use to underwrite loans in the form of a retirement account, but they didn't want to liquidate or borrow against that.
I can understand why people don't want to do that, but then again if the borrowers used those retirement funds in the beginning when the loan was made to meet the "reserve" requirements, I can see why a lender would consider that they are able to make payments out of that money.
"In January, Lori Pestana called WaMu again but was "caught up in an endless telephone loop,"
Is this a negative or positive feedback loop? I also get so confused about which is which.
Tanta thanks. BTW I am trying to stay on topic just for you...
Let me add that I have always had huge problems with using retirement accounts to meet post-closing reserve requirements.
Precisely for this reason.
Per the article, he's still employed and her "work has slowed." Sounds like a cash-flow problem. These things happen.
But the problem is you can't get people to take money out of retirement accounts to tide them over in these situations.
But if you refuse to count retirement accounts as reserves, "prime" borrowers have a big hissy fit because they don't want to keep cash in taxable non-retirement accounts.
Then when it gets to a potential workout, you have to decide whether having this money in retirement accounts means "ability to repay."
ac writes:
Well, the financial industry has spent the last decade or so making a living by gaming the system.
Don't the rest of us get a shot at it now?
Right on, ac. We have been conservative and responsible with our finances and are starting to wonder if we've just been the sucker at the table. Everyone else is playing by Hobbesian Rules and doing so with no accountability or penalty. At some point, the rest of us are going to join the party.
We thought we were avoiding a financial trap, while it now appears we missed out on the chance to lie, steal, cheat, and gain with impunity.
Do you think OJ would take money out of his retirement accounts to avoid foeclosure? Protected money is a good think for most people, even if they are not ex Heisman winners/societal outcast.
Isn't this exactly what we can expect thousands of homeowners to do now with this 'housing bill'. Two neighbors buy identical homes for $400,000. Homeowner A puts 20% down and makes his payments. Homeowner B puts nothing down and stops making payments. Homeowner B is eligible for a reduction in principal and a new FHA loan. Homeowner A isn't. Homeowner A isn't being played for a fool here unless he can runup enough other debt or transfer assets etc to make him eligible for the same deal.
OT: Freddie Mac Responds To The New York Times
Freddie Mac Responds to The New York Times - News Archive - Freddie Mac
For example: A fried of ours ran up over $100k on her Amex. She planned to sell her house for a $1M profit but bought in October of 2006. When that didn't work out, Amex let her pay $25k and be done with it. She smartly told us, "See, this is how the game works."
It makes me sick to think she was right.
unit472
remember the program is supposed to be "voluntary" and its not in the interest of neighbors when the house next to you goes in FC. History tells us that the FC will probably happen anyway and sink all the property values on the block...
Currently Smoking Cannabis
Talked to a BK lawyer he said CC companies, banks, car dealers are just letting these people keep their trucks not pay back their loans because going after them is too expensive and there are too many of them. 75k sounds excessive... but dealers esp don't want to repo worthless trucks...
What are is the 1M house in?
What is the 1M house located in?
My landlord wants to rent out my unit at "market rate." By law, he is only allow to increase by a max of 2.7%
Now he's saying he wants to move back into the unit.
I smell another lawsuit.
"unit472 writes:
Isn't this exactly what we can expect thousands of homeowners to do now with this 'housing bill'. Two neighbors buy identical homes for $400,000. Homeowner A puts 20% down and makes his payments. Homeowner B puts nothing down and stops making payments. Homeowner B is eligible for a reduction in principal and a new FHA loan. Homeowner A isn't. Homeowner A isn't being played for a fool here unless he can runup enough other debt or transfer assets etc to make him eligible for the same deal.
unit472 | 08.05.08 - 1:40 pm | # "
Exactly.. So in California under the anti deficiency act the good paying neighbor walks away anyway.. correct? Leaving the neighbor who got the work out in the first place on the street.
thanks for that OT, bacon!
The new bubble...lawsuits.
Tim: The place is in Point Loma, San Diego. It hasn't really "crashed," but it was supposed to be a way to make a mil in 2 to 3 years. Aint gonna happen.
The $75k write off was not automatic. They danced for a while first. She told us that, since there are no debtors prisons, and she already had a place to live, the CC companies could take a hike. She figured that she'd have some access to credit in about two years, even with a BK, and good access within 5. She has done this before. Her credit score took a hit, but she figured it was worth the gain.
CSC - Is her name Citigroup ?
She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool.
But I was the fool.
CSC's friend made me think. With all the FC and possible BK and walk a ways. What is going to happen to the avg persons credit score? With the new tighter regulation on issuing credit and theoretically a lot more people with damaged FICOs it would lead me to believe that consumer activity is going to take a dive. After all the growth here in the US has been mostly due to the growth in consumer debt and corporate leverage.
How the game works indeed:
funny how price (XLF, SPY...) keeps rising on virtually no volume,
and even more funny to make a parallel with the real estate -credit crisis
ie Wall Street modus operandi is to keep doing the same thing until it stops working (ie until suckers run out) or better said: until they get hit in the face by a 2x4....
so you would think that it would have made the potential consequences of the credit bubble really apparent ... as in "what else is new? "
She told us that, since there are no debtors prisons, and she already had a place to live, the CC companies could take a hike. She figured that she'd have some access to credit in about two years, even with a BK, and good access within 5.
A question and a comment. My question is, how much do you trust what she told you? People lie about their finances all the time, in particular to folks whom the don't want to lose face with.
As to her plan, I'd say it would have made sense in 2000. The thing is, not unlike the lenders, her model is flawed in that she's not taking the activities of others into account. The more general this phenomenon becomes, the less likely new lenders in general are to disregard a prior BK. It works....until it doesn't. Sans another boom, I suspect her access to credit will be more constrained than she imagines.
"She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool."
A society in which many are only for themselves is one in deep trouble.
"ac wohrtan lust us to lage..."
Wulfstan, Sermon of the Wolf to the English, 1014
Currently Smoking Cannabis writes:
She once told us "You guys live according to the way things SHOULD be, and I live according to the way things ARE." I just shook my head and thought she was a fool.
But I was the fool."
except that if she had done something intelligent with the money she borrowed she would have been solvent.
No point to envy "weak links" in society.
(comment withdrawn if she happened to start a rather risky venture)
...Let me add that I have always had huge problems with using retirement accounts to meet post-closing reserve requirements
If this is truly the case (retirement funds were used to meet reserve requirements), I can only imagine the uproar the borrower would have made if the funds were not included. Per Fannie
...Reserves must be comprised of those liquid or near liquid financial assets that a borrower can readily accesssuch as ...the amount vested in a retirement savings account;
CSC
I wonder how well she sleeps at night? Of course if you don't have a problem with cheating I guess it doesn't affect your sleep.....
You aren't a sucker; she's without ethics.
Then when it gets to a potential workout, you have to decide whether having this money in retirement accounts means "ability to repay."
Speaking as one of 300 million backers of their loan whose cash reserves for retirement are non-existent as a result of using them to pay medical bills--I absolutely insist that their retirement cash is in play.
If a court finds that those who have been winning under the system that works as long as you're educated, solvent and healthy get to plead out of their bad decision to overpay for the house they wanted, I am moving to Mexico.
In fact, the idea that they thought they were entitled to relief from the consequences of taking on debt might just do the trick.
I am awed by the idea of becoming a famous freelancing consultant by not paying my mortgage and then suing for the right to pay less in the future. Wow, sign me up to buy some business advice from those two right away--they clearly know how and when to try risky strategies!
Jas is wrong. They are not dopes. They are sacks of shit, like more then 50% of the population.
"Speaking as one of 300 million backers of their loan whose cash reserves for retirement are non-existent as a result of using them to pay medical bills"
It's poor financial-planning to pull out retirement funds to pay medical bills. Those funds are generally protected in BK. Most folks would be better off taking the credit-rating hit of BK and keeping the funds. The exception might be if the retirements funds are so small as to not make the CR hit worth it.
Throw the freeloaders in jail, and make them pay all court costs for frivolous lawsuits. Throw their lawyer in jail with them.
Phil Fed has a new working paper, thought some might be interested:
"The Homeownership Experience of Households in Bankruptcy," by Sarah W. Carroll and Wenli Li
Working Papers 2008 - Philadelphia Fed
This paper provides the first in-depth analysis of the homeownership experience of households in bankruptcy. The authors consider households who are homeowners at the time of filing. These households are typically seriously delinquent on their mortgages at the time of filing. The authors measure how often they end up losing their houses in foreclosure, the time between bankruptcy filing and foreclosure sale, and the foreclosure sale price. In particular, they follow homeowners who filed for chapter 13 bankruptcy between 2001 and 2002 in New Castle County, Delaware, through October 2007. They present three main findings. First, close to 30 percent of the filers lost their houses in foreclosure despite filing for bankruptcy. The rate rose to over 40 percent for those who were 12 months or more behind on their mortgage payment, about the same fraction as among those who entered into foreclosure directly. Second, filing for bankruptcy allowed those who eventually lost their houses to foreclosure to remain in their houses for, on average, an additional year. Third, although the average final sale price exceeded borrowers own estimates at the time of filing, the majority of the lenders suffered losses. These findings are pertinent to the recent debate over the bankruptcy code on mortgage modification. Finally, the paper also reports circumstances related to the loan, borrower, and lender that make it more or less likely that a certain result will take place.
[PDF, 241 KB, 31 pages]
"...they tried at least twice..." I guess that's a herculean effort in these troubled days.
CSC,
Go ahead and be pissed at your neighbor but I think your scorn is misplaced. As a shareholder of Amex a taxpayer, and Amex cardholder I am much more pissed at Amex for letting somebody run-up $100k in cc debt and then rolling over and writing off $75k. Let's get real here folks, in the lender/borrower relationship the real power lies with the lender. So when these loans go south, it's the lender's failure to act responsibly, in the underwriting process, that sets everything in motion. And if the lender is rolling over to fraudulent activity, then I'm even more pissed at the company as a shareholder, profits down, and as a cardholder, costs up. I believe this whole puffing up the "blame the borrower" is just a huge red herring for the lending industry.
Amex should put her on a list of people to never do business with again. In a few years one of their competitors will get screwed over as well.
Should I be jealous that she went out and spent $100k and only had to pay back $25k? I don't think so. If I could turn back time, would I become a drain on society like her, or would I be the same honest person I am now? It should be pretty obvious. I am honest not because it is the law; I am honest because I have always chosen to be.
I think it is ok to be upset at her for perpetrating the fraud and upset at Amex for letting it happen, but is your life so terrible now that you need to be angry that you chose a life of honesty? Come on!
"I believe this whole puffing up the "blame the borrower" is just a huge red herring for the lending industry."
Yea, but one that works. Americans suck up to money and power but nurse petty resentments toward others at their level.
After reading on WaMu's website that it would assist distressed borrowers with loan modifications, Lori Pestana called and was told they could not qualify until their payments were 50 days late.
If true, this is something they might get some mileage out of. It really doesn't seem smart to me for lenders to tell people they will help them but not until they are 50 days late.
And regarding the American Express lady: I really, really hope the credit rating agencies notice and take account of a person who does this sort of thing more than once. It's pretty clear to all of us here that she is a terrible credit risk. It should be equally clear to the raters.
WaMu, Countrywide, IndyMac, AmTrust Bank; these are all federally chartered savings banks. Since there are no federal consumer banking regulations these arrogant banks operate without fear of retaliation from the mortgage borrower. The federal regulatory system is designed this way for a reason. It protects these wealthy and powerful banks. In this case, the Bank has violated no laws, because there arent any. This borrower will only do the Legal Dance. Thats where the borrowers attorney and the banks attorney dance to the music of the court until the borrowers money runs out.
Ask John McCain, he was in office during the last savings and loan crisis. Congress has passed no legislation for the borrower to even question the Bank of Jesus. Its the Lynch Mob theory. Banks foreclose the house and hang the borrower. The sheriff in this case is the Congress. The Congress does not care, they haven't passed anything for the consumer but disdain.
Your elected officials live better on any given day than you do, so why should they do anything positive to interrupt their cash flow? There are 6 million foreclosures coming down the road.
Those homeowners are in for an education that they wont believe.
Michael LittleBig
been there ,done that.
Did Boston move to Michigan?
More and more judges think it's their job to use any means they can find in order to stop all residential foreclosures--traditional creditor rights be damned! These trumped up precedents will burden mortgage lending for decades. Lenders will almost have an affirmative obligation to do a work-out or, at least, carefully document why they couldn't. And all good debtors will pay that price.
More homedebtors looking for a handout for their poor financial decision. it is sickening that just about everyone can niot own up to making a stupid decision and buying to much stuff.
Michael LittleBig,
Your post is largely a non-sequitur. You seem to imagine that it's in any of those banks' interests to "do a legal dance" and run out the debtors' money-clock. To the contrary, unless the debtors clearly have the ability to pay, a workout has a good likelihood of being the bank's best path for loss mitigation.
It's poor financial-planning to pull out retirement funds to pay medical bills. Those funds are generally protected in BK.
Thanks for the advice. I'll jump in my time machine and advise my 23 year old self to follow it instead of the advice I got from my parents...wow, the time value of that money really shows in this exercise!
My point was that many people don't have the protected reserves that these (dumbasses/wily coyotes) are demanding that the court treat as untouchable.
Aw, c'mon! They missed one payment but thought they could catch up? Then they should have KEPT PAYING. Lenders accept late payments all the time. But no...the Pestanas deliberately stopped paying because they wanted a better deal and they probably didn't mind having more available cash. And for months, they barely put any effort into contacting WaMu. If it were me, I'd be on the phone to WaMu every day. I'd be hanging out at the local branch. Not only did the Pestanas NOT make a good faith effort to renegotiate with their lender, their actions CAUSED a preventable foreclosure.
No soup for you. NEXT!
To BG
If a Borrower has to go to the point of suing his federally chartered savings bank lender, odds are that the multi billion dollar lender can financially drag out the borrower quickly.
Most banks have an on staff attorney. The cost to the bank is minimal. Loss Mitigation is a great theory. From all that I read and see, Banks are reluctant to negotiate, discuss, modify, compromise, short sell, forgive or consider less than what is owed. For example, the new 700 page housing bill just passed states that in a refinance the borrowers bank must agree to it. The law does not mandate that the bank has to do it. If your read the entire hand book or the Office of Thrift Supervision very seldom does it say the bank must or will or is required to do anything. You do not seem to understand that there are NO regulations for the bank mortgage lender. That means that the banks federal regulator does not tell the bank anything, they ask the bank.
Banks are self regulated. The bank sir, does what it wants to do as it wants to do it. You really need to study Title 12 of the US Code and the federal regulations as it pertains to mortgage lending. Do you know that the Office of Thrift Supervision does not enforce the Equal Credit Opportunity Act, nor the Truth in Lending Act not the Consumer Reporting Act but yet is responsible for the act as it pertains to those Banks that it supervises.
You should note that the borrower always is at a disadvantage with a federally chartered bank. You will see many times where State officials or the federal regulators ASK banks to talk with the borrower. The federal regulator can not make the bank negotiate with the borrower. That is why the Congress needs to pass a federal consumer banking regulation giving the borrower a voice in which to contest, object or fight their foreclosure. Understand that if you do the research you will find that Federal banks answer to no one. Let us be clear, banks operate with absolute impunity. Loss Mitigation is not a requirement for any bank, it is a tool which could be used
at the banks discretion.
If Banks were required to be fair and just then we would not have 2.5 million foreclosures today and a total of 6 million projected by 2009 year end. With all due respect BG, do the math. How many homeowners in the US have successfully fought their foreclosure? How many Banks actually spent the time to try and modify or mitigate their delinquent mortgage loans with the borrowers? The number of foreclosures tells you how cooperative these banks are.
Unlike the comments I read, the homeowner did not cause the foreclosure crisis. The reason is simple- THE BANKS MADE THEIR RULES OF CONDUCT TO FIT THEIR INDIVIDUAL MORTGAGE LOAN OPERATIONS.
In this housing bill who got the financial protection ,the lender or the borrower?
Michael LittleBig
Been there, done that.
Dead thread, I know, but been busy today.
I am with Tanta, it has always been a bad idea to count retirement as post closing cash reserves. Sure, the borrower can access them and use them to pay the debt but you can't force them to, or, at the very least, it will be very difficult to do so.
This kind of dredges up very old memories (back when we were first developing our reptilian snouts) of how I was taught that when you looked at a borrower's tax returns (yes, we did that on a regular basis) you did NOT want to count barter income as qualifying income because if you did then the borrower could make their payment in like kind. Hello, yes, this here is Bessy, she is a good ole' girl, best milking cow I ever had, oops, sorry, better have someone clean that up, here, I am just going to tie her up here to your shiny-you see where this is going. . .
The lawsuit is stupid but it doesn't change the fact that foreclosures are surging and will continue to surge.
The main reason for all the foreclosures is companies like WM with the help of wall street made credit too easy and inflated and asset bought with massive leverage - never a good thing.
Yes these people will lose their suit likely (and they should) but they had a fixed rate loan and still couldn't afford it. They might have been one of WM BEST customers....lmao.
SR
To echo the comment of the story, I was advised by all three banks I have been involved with (primary & secondary on one home, and primary on second home), that they would not be able to discuss a workout or financial program without being at least 30 days late on payments....
Anecdotal, sure, but consider me as providing three additional data points representing Wells Fargo, HSBC, and Countrywide.
Gee, I don't know, Beave... Given the fact that I've dealt with Harmon myself and beaten them in court for an illegal foreclosure action, coupled with the facts that Gary Klein handled Pettway & Hubbard v. Harmon Law Offices http://asp.abdatalawserve.com/caseinfo.aspx?cid=79
Sorry. Page not found.
and that Pettway was the second CA filed against HLO for FDCPA violations and settled (and that Mark Harmon had a verdict for FDCPA violations rendered against him and his private lender Realty Funding in NH), I'm wondering if there isn't just a tad bit more going on than is either included in the media coverage or that anyone wants to bother to give any credence to.
But that's a very lovely dress that you're wearing, Tanta.
I suspect WM had inadaquate staff to cope with increasing delinquencies ect... Hell I bet their staff has been downsized/ automated/ outsourced in pursuit of the holy quarterly profits. Ever try to get through to your phone company on the phone??? Its a race to the bottom. Anyone who can collect the same money while providing little or no goods or services, wins???? Did they try written communication??? A judge might be more sympathetic that way.
OT but related- ever notice that your credit card payment goes to a P.O box?? That way you can't send it certified mail. This would prove you sent the payment on time. It would also clog up the system if everyone tried it.
Hey, I posted this in another topic before I noticed there was a current WAMU topic -- sorry, bear with the repost if you read it on the other topic:
Went into a WAMU branch after work tonight, and noted that they are suddenly offering pretty-damn-enticing CD rates to members.
Is this the same panicked last-ditch move to raise capital that IndyMac did? Is WAMU going through its final death twitches on the operating table?
4.15 percent -- 6 month
4.25 percent -- 13-17 months
5.00 percent -- 48-59 months
That beats anything I found online.
My point was that many people don't have the protected reserves that these (dumbasses/wily coyotes) are demanding that the court treat as untouchable. I hear you PhoenixRising. Due to unemployment, in order to pay health insurance premiums, I had to cash out my IRA when it was down 40% from what I had put in. On top of this the IRS hit me with a 50% tax for early withdrawal. In order to use these health insurance benefits I had to wait many hours in line at the emergency room behind illegal aliens who were paying nothing. The same illegals who were outbidding me for jobs.
It looks like a court may be ruling on what exactly that might mean sooner than we thought.
Not in this case - the law you cite was enacted after the default in the case discussed in the article.
I knew that they would work in a provision to screw over the borrowers and save the banks in that law. My wife fell ill and I had to relocate my family across the country to get help. Countrywide wouldn't even consider a short sale unless we were 3 months late. So now I found a buyer, and CW has completely sat on it for over a month now. Now the house is going to foreclose because I can't find a job. Looks like the lawyers have found another way to profit from peoples' misfortunes.
Couple of Points:
Property taxes doubled, tripled or quadrupled in the past 5 years for half of all FL property owners.
Property insurance doubled or tripled for all property owners in FL "due to the hurricanes" even though most homes had NO DAMAGE !!
Not being able to make mortgage payments might not be about medical bills or loss of employment.
There is more to the story than the media and government is telling us.
FL is in terrible shape - huge jobs losses, major corporations shutting down, people fleeing the state for the Carolinas and cheaper places to live - because the governments took all the money !!! (Our major insurer is state owned)
So now it's up to banks and borrowers to deal with each other. Yes the Feds are going to sure up the banks to prevent panic and collapse.
If people decide to stop paying and get back on even footing with the banks, so be it. Eventually, the property values will have to reset (fall) to a level that reduces the governments property taxes back to pre-boom levels. Too bad the dumb-ass government couldn't keep their hand out of the cookie jar to begin with -
Banks make money on lending. The writer who thinks credit will keep getting tighter due to the AmEx experience, NO. The opposite will happen.
The banks will be so eager to extend credit to the 6 million foreclosed clients that they will pressure congress to change FICO standards and banks will be able to bring all of the risky borrowers back into the fold sooner rather than later -
because they can't make money if they aren't loaning it.