On Foreclosure, Again

As if to add insult to injury.

Many of the new residences built during the past ten years were constructed in planned communities. Large subdivisions with lots of houses that mega-developers convinced politicians would be good for "affordable housing." Of course, not one house was "affordable," but they got their permits and ran with it.

Since they were planned communities, part of the selling point were the covenants, conditions and restrictions (CC & Rs) which had requirements on everything from paint colors to maintaining common areas and landscaping. It created a homogenized look.

Of course, those things cost money, so homeowner's associations were created which established fees for each home.

And now, as money gets tight, many homeowners, while still paying the mortgage are not paying homeowners dues. And the homeowner's associations are filing for foreclosures.

The way this works is that the homeowner's associations are in junior positions to the lenders, which means if they foreclosure, they have to pay off the lender in order to own the home. Could be expensive. But in the meantime, it's pitting neighbor against neighbor. And that is frightening.

Something is still seriously wrong in this country.

Foreclosures: What Is Your Bank Doing?

The two articles made my stomach turn.  First, banner headline in yesterday's Wall Street Journal that banks are ramping up foreclosures.  According to the article, now that the lenders "understand" what the Obama Administration's requirements for assisting defaulting homeowners, the lenders apparently, in a matter of a few weeks, have managed to survey their portfolios, determine who is qualified to re-negotiate their loans and who shall be foreclosed and evicted.  

Meanwhile, the changes to the bankruptcy code which would permit federal bankruptcy judges to modify home loans, the cram-down provisions, remain bogged down in the US Senate.  Banking industry lobbyists apparently can control 100 US Senators far better than that unruly US House of Representatives who did pass the modifications to the bankruptcy laws.

As appalling as the realization that lenders who are essentially being bailed-out unconditionally, turn around and pull the plug on thousands of homeowners, is what is happening to elder borrowers.  Folks who have lived in their homes for dozens of years, had significant equity, could pay their taxes on the miniscule incomes they had, but were swayed by mortgage brokers who trolled the public records looking for just these kinds of people.  They were told by these mortgage brokers that they could take the equity, live a better life, perhaps use the money to pay the loan...many of them didn't make enough money to pay the first mortgage payment.  Meanwhile the mortgage brokers walk off laughing with thousands of dollars in commissions and fees.  And of course, these elders, our mothers, fathers, grandparents, are in foreclosure or out of their beloved homes.

While there have been several very public criminal investigations of mortgage brokers committing fraud, the victims have been lending institutions.  Not people.  Not elders seduced in classic huckster style, to borrow way more than they could afford, eventually losing their homes.  So while we as a society are so busy saving banks, we have done a horrible job helping our neighbors.  We are not protecting their homes, we are not prosecuting the fraudulent lenders and brokers who preyed on people (not banks).  We are not standing up to the US Senate telling them to do everything they can do to help homeowners.  Pass the cram down provisions now!

Meanwhile, stop into your bank.  Ask to speak with the branch manager.  Tell him or her that you are upset your bank, your money, is being used to foreclose on your neighbors.  Tell them you don't want that to happen.  That you want your bank to work with every single homeowner until that homeowner calls it quits.  Tell them you want the bank to look at the mortgage brokers who brought them the loans, to send cases to prosecutors where the loan was clearly predatory and the victim is hurting.  Tell them you are embarrassed and ashamed of their behavior.  Talk to them, all their ads claim they listen.

Since I posted this this morning, I read this great piece on the status of the cram-down provisions in the US Senate.  If you live in one of the states with the Democratic Senators opposing the re-institution of the cram-down provisions, or even if you don't, call the folks on the list in the article. Call them every day.  It's important not only for the folks trying to work with the banks, but for your own neighborhood, community, and conscience.

Hey, It's America!

I would never begrudge anyone trying to find silver linings in a disaster.  But, I think, there is something, well, er, distasteful in making a lot of money off the disaster you caused.  In an article that must have some public relations counsel squirming, former highly paid and highly placed executives of Countrywide Mortgage have a new company which acquires "sour" mortgages for pennies on the dollar.  The business model is to then contact the borrowers and work out a plan.  

Essentially this is the privatized model for what President Obama is proposing for the so-called toxic assets on banks books.  But here is the rub.   More than likely many of the sour loans this new company is acquiring were originated by Countrywide and it's progeny.  It's sort of like causing the tsunami then selling towels for the victims to dry off.  The sub-prime loans, teaser rates on adjustables, piggy-back loans, all those ideas originated with Countrywide and other "smartest men in the room."

Hey, it's America.  But really, isn't it time for us to question the morality of this business plan?