Owners Stop Paying Mortgages, and Stop Fretting

[Elgringo]

Hey DISCOURAGED, you do't need a lawyer if you do you research well and have the time for it. it is complicated but you can do it. If you go to a lawyer it means to me that you will take the way out and will fall in the same predicament after this BK is over.

Educate yourself !!!! File yourself !!! Take control of your life !!!!

[Elgringo]

OK!!! RESEARCHNERD my is 8/26/2010 hope it will go well for us.
I didn't go to all the trouble of dealing with banks and credit cards after reading post after post on this website and others (NOLO)
Keep up the good posts for others to learn to defend themselves from predatory lending

[discouraged]

Thanks to all of you. I feel better. I finally quit paying my mortgage 2 months ago and am considering bankruptcy if I do not find a job by September - won't have the money for the BK until then anyway. I have 2 mortgages and the first one (BofA) is now saying they will work with me. Gee, I only applied for a mod last November and basically got the same runaround as researchnerd. The 2nd one, which is unsecured, is being VERY nasty - says they will get their money out of me, that they will take my house, etc.

Thankfully I have already talked to a person from our city's foreclosure prevention program who then set me up with a financial counselor who set me up with a BK lawyer so I know what to expect, but if I hadn't talked with them, he would have been very scary. I finally just politely said, "If I find a job I will be making payments to my creditors but until then there was nothing I could do." I then thanked him for his time while he was trying to say more threatening words and hung up.

Now I am just waiting until I have the money for the lawyer and try not to answer the phone. Sigh.

[MarkM]

It is sad and the current voluntary "restructuring" process is clearly a joke. I am not particullary sympathetic to homeowners who treated their equity as a piggy bank -- but some of the slimy tactics by mortgage brokers deserve some scruitiny as well.

Personally, I think a limited form of bankruptcy proceeding to deal with under water houses is wayyy over due. Something like the following --

The homeowner could commence an in rem proceeding before a Bankruptcy Court. This would not be a traditional bankruptcy proceeding but rather an in rem proceeding specific to the home in question. The homeowner would have to certify the home is their primary residence, they have resided in the home for 3 years and made at least 2 years of payment on any mortgages on the home. Both lender and homeowner would be required to submit an appraisal of the home in question to the Court. The Bankruptcy Court would approve the terms and conditions of a new recourse 5/1 ARM loan with 30 year amortization for 75% of the current appraised value of the home with an interest rate set as if the homeowner had good credit. The lender would receive a purchase option giving lender the option to buy 50% of the home at the current appraised value. The lender would get a credit against the purchase price for the amount of debt removed from the mortgage. If any of the loans stripped off the house were recourse or would be non-dischargeable in a bankruptcy, the lender would also have an option to continue to pursue collection of the deficiency amount not credited against the purchase option. Once the debt has been restructured, I'd leave the ability to order a turnover in the event of default on the restructured obligation with the bankruptcy court.

Suddenly, both lender and homeowner have skin back in the game and hopefully can ride out the next 5 years while property values recover ...

[sofarsogood2]

This part is so true and not too many people realize it. When the government decided that every American should have a home, regardless of income, it put all of this in motion. I know a couple of people who used to be in banking, and have since left the business, who told me some of the policies in place, enforced by government regulations, that forced them to get people into mortgages. One mortgage broker we used, who worked for a home builder's company, told us she would sometimes be in tears after clients left her office because she knew that they could never afford the mortgage but she had to push it through as the government set rules which allowed them to be approved for a mortgage. She said had she denied them, even thought she wanted to, she could get fined and lose her job. I have heard similar stories from others in banking. She quit her job shortly after we met her, as she simply couldn't do it anymore.

It really was a perfect storm, consumers blinded by a desire to own property they couldn't really afford, banks driven by potential profit (and dare I say greed) to loan money out to anyone breathing, and government sanctioning and pursuading it all. That coupled with the appraisal system saying homes were worth much more than they really were worth.. The best part is that instead of the government stepping up now, and saying their underwriting policies were partly to blame, they are stepping back and blaming it all on the banks, while handing them money to bail them out. (Hush money maybe...)

Again:
That theory only applied if the bank held the note.

As we all now know, immediately after the loan docs were signed, the mortgages were sold off- letting the original lender off the hook-they made their money at the front end and then dumped the crappy loan into a security, mixed with a few "good loans", got it rated AAA, chopped it up and sold it to multiple schmuck Hedge Funds.

Oh yeah, they maintained the servicing rights, for the most part, so they could continue to profit until the loan defaulted.

The mistake the government made was allowing this type of activity (securitization of mortgages) to happen. Offering incentives to make loans to lower income families is hardly holding a gun to the bankers head. Their greedy little minds came up with a way to get the incentive, but bail out on the risk by selling off the loan immediately. They had their cake and ate it too.

If the old model of "you make the mortgage, you hold the note" existed, the crappy loans designed to fail would not have happened in the first place because the originators (like your friend) knew they would fail. Banks made the loans because they made money at the inception and then sold off the risk- not because the gov. held a gun to their heads

For those blaming the homeowner- we really don't know all the details but:
Placing the blame on some guy who's income, and financial acumen, is derived from getting pests out of your attic is a bit of a stretch, don't you think? His bank held his hand and willingly led him into a stupid decision, while their other palm was getting greased behind their back.

The bankers are college educated financial specialists. They should have known better.

So, yeah, I blame the originating bank.

[researchnerd]

The banks brought so much of this on themselves. Trying to work with the big lenders like Chase or BofA is a joke for the most part. The right hand does not know what the left is doing, and doesn't care. Hardly anybody is granted a permanent mod.

This was my experience as well. We applied for a mortgage mod last fall (Citi) and didn't hear anything back. When we followed up, one person said we'd been declined but told us to apply again. We did so, and never heard anything back so we just stopped paying the mortgage. 2 months later they called and said they had no record of us ever applying for modification. But then when we offered to send paperwork again, they magically "found" our application and promised to expedite it.

A month later, we got a letter saying they wanted to help and asking if we'd ever considered applying for a modification. WTF? That was the day before we received our foreclosure notice. We thought about applying again but decided it wasn't worth our time and energy. There is no coordination on the bank's side, and having to re-send the same paperwork over and over to cover their incompetence is just an exercise in frustration. They don't know what they are doing and they don't care one way or another.

I thought stopping our mortgage payments was going to feel awful, but it turned out to be a huge relief. Like the people in the article, we could actually go out for pizza once in a while and start having a life again.

[DuncanW]

Umm, yeah the door swings both ways, but in the current fiasco the lenders definitely are at minimum equal partners in blame, and they were totally stupid. They really did bring this on themselves by fueling the housing bubble. But what's done is done. It really is a strange set of rules, that people that borrow responsibly end up getting to pay back every penny and those (like me) who borrowed way too much thinking the party would never end get to 'send back the keys' and walk away. But the rules is the rules and I'm not going to use my 401k (what's left of it) to pay back money when I have no legal obligation to corporations that walked off with their piles of taxpayer cash and then didn't work to modify people's loans in a good faith manner. A dear friend of mine got behind on his mortgage but since he had 50% equity to value BofA did finally agree to remodify but now he has only 25% equity after they were so kind as to wrap all his late and attorney's fees and whatever else could eat up $15k. So I owe BofA ~$70k on credit cards and I'm supposed to feel some moral obligation to pay them back? Puh-leeze, I'd rather follow the rules, just like they insisted on doing in dealing with my friend's problem. Maybe if I can scrape it together in actual cash I'll give my friend 15k of it once the dust settles on my situation.

[CreditCretin]

Much of the current real estate meltdown has to with government incentivizing and even requiring banks to make loans that no well-run bank would have ever made but for those incentives and requirements. This lending fueled the housing bubble in large part.

This part is so true and not too many people realize it. When the government decided that every American should have a home, regardless of income, it put all of this in motion. I know a couple of people who used to be in banking, and have since left the business, who told me some of the policies in place, enforced by government regulations, that forced them to get people into mortgages. One mortgage broker we used, who worked for a home builder's company, told us she would sometimes be in tears after clients left her office because she knew that they could never afford the mortgage but she had to push it through as the government set rules which allowed them to be approved for a mortgage. She said had she denied them, even thought she wanted to, she could get fined and lose her job. I have heard similar stories from others in banking. She quit her job shortly after we met her, as she simply couldn't do it anymore.

It really was a perfect storm, consumers blinded by a desire to own property they couldn't really afford, banks driven by potential profit (and dare I say greed) to loan money out to anyone breathing, and government sanctioning and pursuading it all. That coupled with the appraisal system saying homes were worth much more than they really were worth.. The best part is that instead of the government stepping up now, and saying their underwriting policies were partly to blame, they are stepping back and blaming it all on the banks, while handing them money to bail them out. (Hush money maybe...)

[goingcrzy]

I gotta imagine alot of this is from pure anger directed at the banks. The banks held themselves out as a "helper" to those who were struggling in a bad economy. A mortgage modification seemed like a real solution - but to those of us who have gone through it know the different side.

The entire mod process just makes one angry at the banks. Not because they loaned out the money - but because of the sheer idiosyncrasy of the mod process.

I think this is why so many people now look at walking away from the house as a business decision and not a moral one.

[justbroke]

Can we petition for a "like" button?

At the top under "Thread Tools", just select "Excellent" and click "Vote Now"

[sofarsogood2]

I don't point so much a finger of blame at the banks as I do government meddeling. Left alone, a bank will only make loans to people it believes are willing and able to repay the loans and only upon security that can be liquidated to recover most of the balance if the borrower fails to repay. A bank that habitually and regularly makes bad loans doesn't survive. It's that simple.

Much of the current real estate meltdown has to with government incentivizing and even requiring banks to make loans that no well-run bank would have ever made but for those incentives and requirements. This lending fueled the housing bubble in large part.

That theory only applied if the bank held the note.

As we all now know, immediately after the loan docs were signed, the mortgages were sold off- letting the original lender off the hook-they made their money at the front end and then dumped the crappy loan into a security, mixed with a few "good loans", got it rated AAA, chopped it up and sold it to multiple schmuck Hedge Funds.

Oh yeah, they maintained the servicing rights, for the most part, so they could continue to profit until the loan defaulted.

The mistake the government made was allowing this type of activity (securitization of mortgages) to happen. Offering incentives to make loans to lower income families is hardly holding a gun to the bankers head. Their greedy little minds came up with a way to get the incentive, but bail out on the risk. They had their cake and ate it too.

If the old model of "you make the mortgage, you hold the note" existed, the crappy loans designed to fail would not have happened in the first place.

For those blaming the homeowner- we really don't know all the details but:
Placing the blame on some guy who's income, and financial acumen, is derived from getting pests out of your attic is a bit of a stretch, don't you think? His bank held his hand and willingly led him into a stupid decision, while their other palm was getting greased behind their back.

The bankers are college educated financial specialists. They should have known better.

So, yeah, I blame the originating bank.

[MSbklawyer]

The banks brought so much of this on themselves. Trying to work with the big lenders like Chase or BofA is a joke for the most part. The right hand does not know what the left is doing, and doesn't care. Hardly anybody is granted a permanent mod.

So, debtors figure it out. And do what is in their self-interest. That's as old as time itself.

I don't point so much a finger of blame at the banks as I do government meddeling. Left alone, a bank will only make loans to people it believes are willing and able to repay the loans and only upon security that can be liquidated to recover most of the balance if the borrower fails to repay. A bank that habitually and regularly makes bad loans doesn't survive. It's that simple.

Much of the current real estate meltdown has to with government incentivizing and even requiring banks to make loans that no well-run bank would have ever made but for those incentives and requirements. This lending fueled the housing bubble in large part.

[Flamingo]

What scares/bothers me about the above article is the comment made by the houseowner..."One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.
It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

Here they benefit from the value of the house by purchasing a large item and put the blame on the lender by stating it was the lender's fault for giving them the loan in the first place. It was their choice to use the equity at that time and they put themselves in jeopardy...the door swings both ways...

Denial is a common defense among people with big mortgages/high debt. They blame everyone else for being in that position for a while but reality eventually sets in as to the mistakes they themselves made.

[ryan]

The banks brought so much of this on themselves. Trying to work with the big lenders like Chase or BofA is a joke for the most part. The right hand does not know what the left is doing, and doesn't care. Hardly anybody is granted a permanent mod.

So, debtors figure it out. And do what is in their self-interest. That's as old as time itself.

[sofarsogood2]

I don't think the banksters ever anticipated this part of the equation- that is, so many homeowners deciding that the struggle to pay that mortgage after pay cuts, increases in local taxes, fuel, food ect- is just not worth it. They thought everyone would "behave" and starve themselves and their families to keep the house. Being house poor is only tolerable for so long. The stress of trying to put food on the table, buy gas to get to work and pay the other neccessary bills (add in some jacked up interest rates on CCs) in addition to an inflated mortgage payment is unbearble and not doable after awhile. People begin to see the futility of their efforts. There is no light at the end of the tunnel.

HAMP Mods that collect partial payments from homeowners, then deny the mod after 6,7,8 mos. of payments are robbery and yet another fraud played on the vulnerable. It's like supplying them with the funds to foreclose. What happens to those payments after they are put in a "suspense fund" (thats were they go during the trial period) and then the mod is denied, or it's a crappy mod and the owner turns it down? If the owner can't come up with the difference beween the mod payment and the original payment, the servicers get to eat up those trial payments with late fees, attorney fees, payments to companies to check and see if you are still there....blah blah. You just wasted money you could have saved for a rental.

We all now know that only a select few people even get a mod, most of the time with no principle reduction, leaving them underwater and enslaved for life. Then after 5 years, the rate starts to tick up-(that sounds oddly familiar, doesn't it?) How many will default after the first or second mod rate hike. It's a band-aid on a broken leg. I truly believe HAMP was designed not to help homeowners, but to extend the process over time so the banks can cope with the losses. Also, those partial payments bring in a tidy sum.

Equity for homeowners who purchased or refinanced after 2002 will not return for many, many years- mod or no mod.

I consider this Obama's greatest failure and believe it will cost the Dems the Presidency in 2012, if the Repubs can find a half decent challenger. Almost everyone knows someone who is in foreclosure/bankruptcy and they are angry. Yes, there are some who over extended themselves, but the vast majority just don't have a pay cut, job loss, or hiked mortgage payment built into their budget. They simply can't make ends meet.

TARP was a massive fraud and theft of taxpayer dollars and once again proves that tax dollars given to the wealthy never "trickle down".

It's a sad, sorry situation.