The housing bust is littered with sob stories about people losing their family homes. As I noted Responsible Homeowners are NOT Losing Their Homes.
To see the truth in this statement, one needs to have a clear definition of “responsible homeowner.”
A “responsible homeowner” is a buyer who, if they utilized financing, did not stray from the conservative parameters set forth by lenders (prior to the bubble) and financial planners. This includes using a maximum 28% debt-to-income ratio on the mortgage, at least a 20% downpayment and fixed-rate conventionally amortizing financing.
Few who fit this definition are going to lose their homes; although, some of them may chose to walk away from the debt because they are hopelessly underwater. The only ones who fit the above definition who are in danger of losing their homes are those who lose jobs; they are the truly sad casualties of the housing bubble. Unfortunately, this is becoming more common due to the financial crisis caused by all the homeowners who borrowed irresponsibly.
Responsible borrowers are not the ones defaulting on their mortgages; irresponsible homeowners are.
If “responsible homeowner” is defined as a buyer who believed they could manage their monthly payment and did so until the loan terms changed, then by this definition, many responsible homeowners are going to lose their homes.
Almost everyone who signed up for a toxic loan thought they could make the payment; most did for a while. Many were convinced they could make the payments by a predatory lender out to make a few bucks on the origination. Many more believed they could supplement their incomes with the rapid appreciation they would enjoy as their house values rose to infinity. Does ignorance to their inability to sustain their housing payments make them responsible?
In the political debate surrounding foreclosure moratoriums and homeowner bailouts, the politicians are using the latter definition of “responsible homeowner.” The ignorant and those who knowingly took excessive risk are being rewarded with a government bailout. The prudent are the ones paying the bill.
I recently came across another sob story about someone struggling to keep a house she can’t afford. It is well written. But the woman lacks the ability to step back from her situation and see that she’s just another entitled whiner who needs to move on.
By Andrea Egizi — Oct 21, 2012 at 1:15 am
Editor’s Note: Andrea Egizi is a journalist who focuses mainly on the the issues of ethics, equality and human rights.
For millions of Americans, owning a home is the grandest symbol of accomplishment into the illusion of the “American Dream”. In the United states, we have been indoctrinated to believe being a homeowner signifies success, financial stability and responsibility.
My former husband and I had been renters a few years before the thought ever crossed our minds to look into the prospect of home-ownership. ..
We were so disillusioned and eager to have a home of our own for ourselves and our two small children that we short-shortsightedly signed onto a mortgage that was affordable, but still a heavy financial burden. Not convinced by the lender to take on a sub-prime 80/20 loan, interest only or a no-doc loan; (as was originally presented when we first applied and has been the main focus on the burst of the ensuing housing bubble) a conventional Fanny Mae/Freddie Mac loan was readily available with 0 percent down. …
So this woman and her husband put no money down and obtained the largest mortgage they could afford by the lax standards of the housing bubble. Genius.
Our marriage fell apart soon after for mostly personal reasons (the recession played a major role as well) and the balance of the loan was placed solely on my shoulders.
Whoa! The family income just got cut in half, yet she still plans to keep the house. How is she going to afford that? Most people sell the house when they get divorced, or if they are underwater they short sell or strategically default. Once she got divorced, she could no longer afford the property, and she needed to get out, irrespective of any emotional attachments she might have to it. Just because her and her former spouse signed some loan documents doesn’t entitle her to live in this house forever, particularly if she can’t afford it on her own.
Think about this scenario. Many young couples get married and buy a house counting on both their incomes. Invariably, they want to start a family, but they can’t afford to because they need both incomes to make the house payment. Let’s say the wife gets pregnant and quits her job anyway. Should the family be given a loan modification and be allowed to keep the house they can no longer pay for? If loan modifications were permitted under those circumstances, wouldn’t everyone do it? Isn’t giving them a loan mod crowding out a family who lives within their means? Just because the couple could afford the property on two incomes doesn’t make them entitled to keep it on one income. The same is true for the author of this article.
I was relieved to hear that President Obama had signed a new bill to help homeowners like me called the “Making Homes Affordable Program” a.k.a. HAMP, and that it was geared specifically to help struggling underwater homeowners stay in their homes by coming to an agreement on a loan reduction between the lending bank and the homeowner. Seeing as my hours at work were reduced due to economic downturn, and I had lost an entire half of our family income due to impending divorce, I considered this program as a godsend.
As I pointed out in Bailouts and False Hopes, these programs were designed to elicit responses such as her’s. Despite the false hope this program generated and her fervent belief she deserves a break, the program was not designed for her. She didn’t need temporary help due to a small setback, her life circumstances radically changed, and she could no longer afford the property.
I had wasted no time in researching all the details and according to the guidelines, not only did I match all the criteria, but I seemed to be the perfect candidate for it. It was a relief I would be able to keep the roof over my children’s head, eliminating the ongoing fear of escalating debt and homelessness. …
The response letter from Bank Of America arrived like a package and I even had to sign for it. I read each word slow and clear, careful not to misinterpret, and then I saw it, shocked like a confident student who just failed an exam: DENIED. The letter stated that I was denied entry in to program due to incomplete paperwork on my side and I had to now pay back all the money they were gracing me for the past nine months, equivalent to about $4,000. …
The word echoed in my head over and over… foreclosure. Foreclosure meant my kids would be without a home. Foreclosure meant I would have ruined credit. Foreclosure meant I would have to start all over again. Foreclosure meant that I failed.
This woman is crazy. The denial of the loan modification meant she was not qualified. Therefore, she would have to sell the house. Since she was underwater due largely to the fact she put nothing down, the sale would be a short sale or a deed-in-lieu. She could also strategically default. Her kids were not going to be without a home. They would move into a rental. Her only failure was to not recognize that her failed marriage changed her financial situation and she was no longer entitled to the house.
I started doing heavy research into other homeowner denials by the mega “too big to fail banks”(with the short list of recipients consisting of Bank Of America, Wells Fargo, Citigroup, and J.P. Morgan Chase) and TARP (Troubles Assets Relief Program).
With all of this data in my back-pocket, I made the decision to not give Bank of America another dime until they accept me into the HAMP program. … Next were the annoying phone calls that began trying to scare me into making payments that drove me to remove my land-line.
Turning off the land line is the modern equivalent to putting her fingers in her ears. How did they try to scare her? Did they imply Tony Soprano was going to stop by and break her kneecaps? Perhaps they tried to scare her by telling her she was going to face foreclosure if she didn’t pay? How terrible of them to relay the facts of her situation.
Four months later, Bank of America had results on my appeal: DENIED. The reason this time was that I failed to meet the financial qualifications. Very ironic to be denied entry into a program that was supposed to help struggling homeowners that were hit by economic difficulties.
I made yet another phone call to the bank, this time demanding to know what I can do to stay in my home. Since I am a waitress by trade, they said if I claim more tips on my tax return I could put myself into a higher tax bracket and therefore make the cut off for the program, whether or not I actually made that money. Also, they said I should take on a roommate or offer someone to live in my home and help me pay my mortgage. Fraudulent advice?
They weren’t telling her to commit fraud. They were telling her to MAKE MORE MONEY because she couldn’t afford the house.
And do we now live in a society where waitresses are entitled to be homeowners? Should we let waitresses crowd out higher wage earners who really could afford the property? Are we at the point that once someone moves into a property it’s theirs for life whether they pay for it or not?
Another option they offered was short sale. With this type of transaction, the homeowner must stop making payments and fall behind (this fact did not bother me considering I was already behind in payments). The short sale process can be long, painful and subject to the whim of the bank and the buyers. Many people I have spoken to about short sale told me they were in the selling process, only to be denied for one crazy reason or another right before closing.
This is a bullshit excuse. She didn’t attempt a short sale because she wanted to keep the property. They weren’t going to deny her short sale. She couldn’t afford to keep the property, and she obviously had no assets for them to go after.
The bank also tried to convince me into Deed in Lieu of Foreclosure, meaning I just hand over the house and deed and walk away, but the major problem with that would be, I would still have bad credit and nowhere to live.
She already had bad credit. She wasn’t paying the mortgage, so that is another bogus excuse. And what’s this nonsense about having nowhere to live? Were there no rentals available in her area? Is she too good to be a renter?
I was about to give up, sign on for a short sale or Deed in Lieu and move out, when I stumbled across an article from Zerohedge that led me to a campaign for homeowners that are demanding they see their original mortgage note to prove the bank does/does not hold onto it and therefore may/may not be able to foreclose.
Now she resorts to bullshit legal maneuvers. What about the ethics of that?
This was something I never heard of before since my war with the bank began, and considering my mortgage was sold three times, I could be a potential victim of fraud.
A victim of fraud? Look how easily she rationalizes her descent into chicanery.
I sent an email to Bank Of America, as provided by the Zerohedge article, demanding to see my note and they did respond in the twenty days they are required by law to do so. … I have every right to see my bank note with my signature on it, especially in these circumstances so I sent them another email request to see my note and was denied yet again. This sort of dodging behavior was leading me to believe that Bank of America didn’t have possession of my note and therefore may not have any legal possession of my home.
They didn’t have any legal possession of her home? WTF? Let’s say the bank didn’t have her note. So what? Someone does. The house that she borrowed 100% of the money to acquire and that she is not paying for certainly doesn’t belong to her.
So the question I raise is, why are we letting this happen to us and why didn’t the Obama administration do more to help?
Because she doesn’t deserve any help. She is living in a property she can’t afford, and in the process she is crowding out another family who could afford the property if it were recycled through the system. That’s the injustice here.
Someone will undoubtedly accuse me of lacking compassion because I don’t want to see the bank give her a house she can’t afford and doesn’t deserve. The best thing for this woman is to get out of this house she can’t afford and move into a rental she can. It’s sad that she has formed an emotional attachment to a property she put nothing down to acquire and in which she has no equity, but that is her own foolishness. I don’t read much outrage about renters being forced out of a house. If she were facing eviction from a rental, would she be just as distraught and would she be deserving of as much sympathy? And is it right to deny home ownership to another more responsible family so she can avoid shedding a few tears over a house she has no financial stake in?
So based on her experience and personal ethics, what advice would she offer others in her circumstances?
So what can defaulted homeowners do to stay in their homes and fight off the bank’s constant harassment? First, stay calm. Second, stay in your home. Third, do NOT send the bank any money.
In other words, become a squatter.
Then game the system…
Fourth, contact (in writing) your mortgage lender to see your original wet ink mortgage note. More than likely they will deny your right to see it and that is okay; that is the first step that they are admitting they probably don’t have possession of it.
Fifth, if the bank does not agree to let you see the note then sit tight and wait for the sheriff to serve you formal foreclosure papers (and don’t worry, this is not the Old West so don’t be afraid to answer your door. You are not the criminal here, the bank is). And also know, before the sheriff arrives, you technically are not “in” foreclosure but what the banks are calling “pre-foreclosure”.
Seek more methods of delay to get free housing…
Sixth, do some research. The internet is the best way to find out all the updates and information on your state’s foreclosure proceedings. I know that here in New Jersey, the sheriff sale of a home is an average of 900 days after the sheriff serves foreclosure papers; which leaves plenty of time to see a lawyer or talk to an advocacy group about your ordeal and be offered some resources you may be able to use.
Seventh, if you have a lawyer in your area who will give you a free consultation, do it. Most likely if you are in foreclosure you cannot afford a lawyer, but at least you might get some legal advice for free on what your next step could be. Foreclosure advocacy groups are popping up all over the country in response to the housing market and bailout scams as well. When searching for an advocacy group in your area, always look for one that is non-profit; most likely ending in .org and not .com. Also look into your states squatter’s rights, especially if you have children.
And convince yourself you are doing nothing unethical.
One thing to keep in mind, this is war between the big banking cartel and you. It all might seem like a frightening place to stand, but you really do have more power than you think. Knowledge is truly power and the most you can do is arm yourself with the know-how to fight back. The reality is, unfortunately, you might lose. A new law could very well pass to force defaulted homeowners out of their homes,
Or they could merely enforce the old laws already on the books…
but in the meantime live your life as normally as possible; enjoy your children, savor your favorite meal, dance around at a concert, laugh at your high school yearbook picture and have in your back pocket a viable plan B, C, and D just in case you may need it.
She gives some sound advice. Remember to take a look in the mirror after following it.
Even teachers go Ponzi
Ponzi borrowing crossed every socioeconomic boundary. From the minimum wage earner who spent his condo to the Laguna Beach posers who squandered millions, everyone got caught up in the madness. Teachers are supposed to be wise enough to know better; after all, we charge them with teaching our children. Hopefully, they teach them something other than how to piss away their family home.
- This property was purchased for $230,000 back on 1/16/1990 near the peak of the previous bubble. The first mortgage information is not available.
- On 6/29/1999 they refinanced with a $195,500 first mortgage.
- On 6/25/2001 they refinanced with a $243,100 first mortgage.
- On 6/24/2002 they obtained a $25,000 HELOC.
- On 1/13/2004 they opened a $75,000 HELOC.
- On 6/30/3004 they refinanced with a $348,000 first mortgage.
- On 8/10/2004 they opened a $50,000 HELOC.
- On 6/13/2006 they obtained a $116,000 stand-alone second.
- Total property debt was $464,000.
- Total mortgage equity withdrawal was $234,000 plus their down payment.
The quit paying before the beginning of the 2009-2010 school year. They were allowed to squat until 1/6/2011.
What would they teach our children about managing personal finances?
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Proprietary OC Housing News home purchase analysis
$499,900 …….. Asking Price
$230,000 ………. Purchase Price
1/16/1990 ………. Purchase Date
$269,900 ………. Gross Gain (Loss)
($18,400) ………… Commissions and Costs at 8%
$251,500 ………. Net Gain (Loss)
117.3% ………. Gross Percent Change
109.3% ………. Net Percent Change
3.4% ………… Annual Appreciation
Cost of Home Ownership
$499,900 …….. Asking Price
$17,497 ………… 3.5% Down FHA Financing
3.47% …………. Mortgage Interest Rate
30 ……………… Number of Years
$482,404 …….. Mortgage
$124,601 ………. Income Requirement
$2,158 ………… Monthly Mortgage Payment
$433 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$125 ………… Homeowners Insurance at 0.3%
$503 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$3,219 ………. Monthly Cash Outlays
($320) ………. Tax Savings
($763) ………. Equity Hidden in Payment
$19 ………….. Lost Income to Down Payment
$145 ………….. Maintenance and Replacement Reserves
$2,300 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,499 ………… Furnishing and Move In at 1% + $1,500
$6,499 ………… Closing Costs at 1% + $1,500
$4,824 ………… Interest Points
$17,497 ………… Down Payment
$35,319 ………. Total Cash Costs
$35,200 ………. Emergency Cash Reserves
$70,519 ………. Total Savings Needed