The Obama administration on Monday plans to announce a campaign to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence mounts that a $75 billion taxpayer-financed effort aimed at stemming foreclosures is foundering.
Read more about loan payments...
The government set expectations sky-high earlier this year when President Barack Obama launched an effort to help 7 million to 9 million homeowners avoid foreclosure.
Now, reality is setting in. Read more about the mortgage crisis...
i admire the seriousness of our President Obama in extending a helping hand to thousand of homeowners in having a hard time paying their mortgages and going through foreclosures. I dont know if the President knew that homewoners want to foreclose their properties not only because they can't afford to pay the monthly mortgage but also they think its no longer wise to continue paying a mortgage where the value is very much below their principal balance. Loan modification by just lowering the interest rate is not the right solution to the problem.
If I may suggest, the bank and other private lenders must come up with a process or solution wherein the property may be reappraised to what the current value of the property right now and base the monthly mortgage with the current value. In turn, these lenders can make an agreement with the homewoners that they can't sell the property in a certain period of time even if there will be equity on the property unless the homeowner will pay the balance in full. In this way, this will prevent the homeowners in thinking of foreclosing their homes. It's going to be a win win solution.
We're only partly responsible
The biggest part of the problem is the rampant abuse, usury, skirting of laws, fraud and plain incompetence by lenders. The banks and mortgage companies are guilty as sin of abusing consumers, and Bush/Cheney let it happen while their rich buddies gleefully made even more millions.
Certainly many homeowners are in this mess of a mortgage crisis partly because of poor decisions, lack of forethought, and other problems. I've made my own mistakes, too. And I support making reasonable profits. But the profiteering that's led to the downfall of the American economy is way beyond reasonable.
Income redistribution already happened: Your money went to the rich
In other words, the "income redistribution" by Obama that Limbaugh, Hannity and other (already rich) conservatives fear has ALREADY HAPPENED--in their favor! They simply--and greedily--don't want to give back what they've taken from you.
No, they have not literally stolen it--they just took it because you individually have little or no power or representation to earn what you deserve, to protect your rights, and to keep large companies with vast resources from charging you too much. They essentially nudged you aside, little by little, in every transaction, with every paper you've ever signed, till now you're at their mercy.
Now less than 1% of the US population owns an estimated 40-50% of the wealth in this country! That's happening while the poor became even poorer, and the middle class saw their incomes eroding since the 1970s. CEOs on average earned 42 times that of the average worker in the 70s. Now CEOs make about 411 times the average worker's salary!
Their powerful lawyers made sure that company execs like Angelo Mozilo (ex-CEO - Countrywide Bank) and Alan Mulally (CEO - Ford) and Rick Wagoner (CEO - GM) made their millions, riding in limousines and jets, while you suffer in joblessness, with a home nearing foreclosure. Dick Dauch of American Axle sucked in in $18.67 million in overall compensation in 2008, yet the company laid off many workers and slashed workers' wages by $10/hour!
My own family is a victim of mortgage fraud, RESPA and TILA violations, abusive practices by lenders and/or their representatives and contractors--including title specialists--and who knows what else. I am also only partially employed and seeking work.
I think these and other CEOs bear a large responsibility for this economic and housing crisis!
Even dogs can tell when a situation is unfair. A recent study reported on NPR showed that dogs who were treated differently in the amount of food they were given showed anger, depression and sadness toward their feeders. Awareness of unfairness is an evolutionary trait that ensures survival of the species. Evidently, we've been electing and supporting people--in government and business--who are fundamentally greedy and unfair--until Obama, that is. We hope.
Contact your county legal aid office or state attorney general for legal problems
We've had the devil of a time getting representation. We pray that our county legal aid office will take our case. Lawyers tell us that we would have to pay $10,000 to start a case! Who can afford that, if you're behind on your mortgage payments! What ordinary citizen can afford thousands in legal fees?
You too should review your loan paperwork. Call your FHA or HUD office to get help from a qualified agency or county legal aid. And you should not have to pay for this help!
Plenty of scam artists looking for your cash
Beware of anyone or any company asking for money up front. No legitimate housing counselor is allowed to demand up front payment. Under some circumstances, lawyers may charge up front--but be careful!
FHA and HUD approved counseling agencies will not ask for any monies up front, and should disclose any fees for additional counseling after the first consultation.
Below is a list of resource. This will get you started. But...
Start NOW! HUD is slow to help
Don't be surprised if these agencies don't help you! We had to talk to our HUD field office director, then an FHA director in Oklahoma, to discover that our bank's fraudulent practices had put our loan in jeopardy. It is no longer FHA insured because of their fraud and mistakes.
After 3-4 months of exhaustive research, we finally were put in touch with an FHA approved trainer who trains HUD approved housing counseling agencies. A housing director at the Inner City Christian Federation (ICCF) in Grand Rapids, MI, she was the first person to completely understand every wrinkle of our situation. What a relief!
Push for change and consumer protections
Most of the housing counselors you may encounter are not yet trained and ready for the avalanche of mortgage fraud and abuse cases. Keep pushing! Demand that your senators and representatives push for greater consumer protections, fines and a moratoriam--or stoppage--of foreclosures! Call for a mortgage moratorium to stop foreclosures in your state, too!
You can contact your state representatives and senators for help too. States can enact laws to protect its citizens when the federal government has not.
Ask your local church or nonprofit organization to help you fight lenders, predatory and weak laws and help protect you. Religious organizations have a spiritual mandate to help members of their congregations. If they won't stand up for you, leave them, boycott them, protest and demand help, and keep pushing for it!
"I am my brother's keeper" is a Biblical maxim. Also remember "...neither shalt thou stand idly by the blood of thy neighbour..." from Leviticus, 19:16.
The government works for you, but sadly, they don't do enough unless you shout for it. Especially under Bush-Cheney, fraud, waste, corporate abuse of citizens, overcharging and the foxes guarding the henhouse was encouraged--and we're paying for it now.
Thank God for Obama's administration. It seems to be the most responsive to consumers and ordinary citizens ever. Keep demanding that responsiveness!
Resources
HUD - who to contact
HUD on predatory lending
White House blog - on mortgage foreclosures and crisis
HUD - Guide to Avoiding Foreclosure
Michigan only - Inner City Christian Federation (ICCF) in Grand Rapids, MI (616) 336-9333
Over the past 6 months, I have been amazed at the reaction to The Mortgage Mess. It's like no one could see it coming! Anyone who had any sense at all knew this would happen eventually.
The house I live in is a good example of what has been going on for the past EIGHT years. Maryland has it's real estate tax records online - searchable by address. The sales, taxes and so forth are easily researched. In May of 2000, my landlord bought this property (a 1940s frame house) for 55K. No improvements were made and I was his second tenant - starting in December 2000. In 2002 the house next door was for sale (same floor plan) for $125,000 and sold quickly. In December of 2006, my landlord offered me first right of purchase - at nearly 6 times what he had paid for it! Other comparables were being sold at the time for that amount.
(I said no thanks, told him I'd move out if the house were on the market and - fortunately for me - he decided not to follow through)
So what would make the price of a house double in 2 years, then more than double AGAIN in the next 4 years? It's really rather simple. People got enticed to play a game run according to "The Greater Fool Principle". The Greater Fool Principle (GFP) is rather simple: I will buy this thing (whatever it is) on the strength that a Greater Fool than I am will come along and pay more for it.
I'm not talking about flipping houses. That's a whole different thing: take a house improve it (either fundamentally or cosmetically) and get a return for improving it. What I'm talking about is how people would buy a house, sit in it for 6 months, sell it and get a 15-25% profit! Then they'd take that money and buy a higher priced house and do the same thing again in 6 months. Even worse, some people were buying houses, using savings to make payments they couldn't have afforded on just their income - with the belief that they could sell the house to make 15-25% on the "investment" of their savings in making 6 mortgage payments.
The bundling of these risky loans (risky because of GFP behavior) into speculative investment instruments only compounded the problem - now investors (professional traders as well as retirement accounts and non profits) had bought into the action.
Eventually the house of cards fell down. That's the problem with playing a game run by GFP - eventually you run out of fools.
Housing is an important part of one's everyday life. An "ordinary and reasonable profit" is something everyone would like to get if they need to sell their housing. What has been going on for nearly the past decade has been anything but "ordinary and reasonable".
Housing sales are recorded in the tax records. It would seem easy to cap the resale price of housing - only allowing for a certain percentage of increase over time. Improvements made by the owner could be taken into account in arriving at a "maximum selling price".
A home sales price cap would eliminate the GFP in real estate and curtail risky behavior in the real estate markets.
I started marketing sub-prime loans to homeowners with a bit too much credit-card-sliding habit and enough equity to come up on the cold calling lists of the mortgage broker where I was working in 1997. Lacking much sales skills, I was quickly put in the back office arranging funding wires, and not long after coordinating credit lines to keep up with the banner year we had in 1998. It was later when I worked for 'Due-Diligence' for Washington Mutual that I began to learn the damage we were doing (no it didn't come to me quickly or easily, but that's when the lightbulb began to glow weakly).
WaMu was making tons of loans to people all over the country. They needed to turn those loans into cash to continue the business that was earning all those lending fees, so they 'securitized' the loans by bundling statistically similar loans into trade blocks and offering them on the 'secondary' market (not trust fund babies, more like retirement fund and mutual fund managers) for what were considered acceptable risk investments with attractive rates of return to outpace inflation, while paying back to the retirees and mutual fund contributors and still making lovable piles of money for the managers of those massive blocks of capital.
At the point in the assembly line I was working, I could see a lot farther back into the bowels of the machine than most folks ever have. When we prepared a deal, a pretty large office filled up with a hundred or so cases of loan files with 10-20 loans in each case, representing a tiny fraction of the trade block (valued in billions of dollars) but were the ones considered to be at risk for not meeting up to the standards of the block. A team of independent auditors showed up prior to the date of the sale to pore over the loan files case by case checking risk parameters and accepting most of the files as representative of the block and swapping into a prepared slice of loans set aside as likely acceptable to fill in gaps for those rejected. Quick thumb math says a typical mortgage is $250,000, each case holds ~2.5 - ~4 million in mortgage loans, and the room had around 300 million dollars of loans to work this process for the billions of dollars that would flow back into WaMu for making new mortgage loans while the securitized block went to the secondary market investor to hold and accept the cash flow stream that those billions in loans represented.
Looks pretty win-win, but it started to dawn on me at this point that the way broker premiums paid back out to the sales guys making the loans, there was a pretty fuzzy picture presented to the investors who were turning mano-a-mano deals into big jars of money making those deals mush together like a nice bean dip. And as hard as the auditors were working on that tiny 'representative' slice, they were not nearly as intimately familiar with any of those deals as the broker or loan officer who got paid bonuses by making those deals look less risky than they necessarily were.
I never could find anyone who made the math all work out, everyone was just running hard to pay day to make the next deal up work better. It turns out in retrospective reporting that there was not a point anywhere along the line that had the macroeconomics of this industry at all quantified, it just kept making money so they kept going, churning out all these block-sale mortgage-backed securities with plenty of hidden risk built in by the way sales was paid to sweep any dirt under any rug they could find to hide it from the next higher investor on the food chain.
The amount of finger pointing that has gone on here is just amazing, but it really comes down to nobody minding the store while the entire country was involved in enjoying, if not 'irrational exuberance' at least mindless money flinging while property values shot through any previously reasonable rates of inflation due to the utter lack of regulation of the process by which we were facilitating the mortgage rush.
For now I deliver the mail, having leaped off this national train wreck when the sub-prime lender I was employed by in 2007 went under. Someday I hope to work on a project to reverse-engineer the mortgage-backed securities, but I still don't see anyone thinking this idea through. Of course, faced with my analogous bean dip, it may seem impossible to put the beans back on the vine, but we live in an age of impossibilities and I expect the best way out is to unravel the mushed together securities back to the mortgages that they were blended from so that business can do business with the borrowers, not play hot potato with toxic assets.
I am fortunate. At this moment I have a job and my mortgage is above water. However, the state of the economy gives me pause and I am concerned about the future of my job and my retirement savings. I am at the age where 100% of my retirement is in stocks.
Those big screen TVs sure look nice. I'd love to have one of those 120Hz 1080p sets. I have the money, but spending it just doesn't seem prudent. What if I am laid off? I'd be looking for work in a very difficult job market. I feel like I need to forego the big ticket items. My 4 year old computer will have to do for a while.
Some of my friends are not in as good of shape. They have both mortgages that are upside down and employment issues that are preventing them from making payments. Still others have upside down mortgages and are working multiple jobs to make each payment.
So, who do we bail out and how does it help the economy? Apparently, one must be at least 60 days behind on mortgage payments to qualify for help. Help may take the form of extended terms, principle adjustment to current market rates, or another form to help prevent foreclosure.
If I were the person working 2 or 3 jobs to assure I could make my payments, I would not feel very good about the guy across the street, who may only be working one job, getting a deal where the bank reduces the principle on his loan while mine stays upside down. That would not be equitable and it would likely not help the economy either. That guy across the street will only be able to pay his mortgage; he won’t have any extra money to help revive the economy.
If anything good id going to come from loan program adjustments, they must be made available to all homeowners. This will be both equitable and allow those meeting current payments to feel more confident and freer to spend. Those not currently making payments will get to keep their house, and that will be their contribution.
Since I am above water, I won’t feel cheated, providing this help does not extend to real estate speculators. The fact that my house is above water is a simple combination of my market and when I bought. I could just as easily bought at the top of a fragile market had I needed a home in any of the hot-spots at the time. I feel very fortunate, but I also feel very guarded against worse days to come. Helping those in worse situations should help the economy turn around and will in turn give me the confidence to buy that high definition TV I’ve been drooling over for months.
This will only work if we help everyone that is upside down on their primary residence due to market shifts beyond their control. We can’t just bail those who are late.
When I clipped out the Sunday, Dec. 21, front page-above-the-fold story:
"WHITE HOUSE PHILOSOPHY STOKED MORTGAGE BONFIRE"
I had no idea it was part of a SERIES of Pulitzer-caliber investigative reports on various aspects of our current economic crisis under the title:
The Reckoning!
To read the first addictive paragraph and get links to the BONFIRE as well as the entire series, check out my E-Blogger blog:
"Lauralyn Bellamy Said What?" www.lauralynbellamy.blogpost.com
As to where the money for this recovery should come from...frankly it's time to pull back on military spending just as we pull back our troops from the Iraq invasion. Yes, I'm ex-military myself, but we need to really resist the urge of investing in building military programs, facilities and weapons right now. There are too many much more important needs, including those in roads, environment, health, energy, our power-grid as well as protecting our ports, nuclear plants and water systems from terrorism.
If Obama has as much guts as he is smart, he can create a significant stimulus program by diverting military funds to programs which create a more direct impact on our lives, our economy, our health and our internal security.We have alot of these needs right in our own area.
The IdeaMan
Now the only problem I forsee with this law is that banks may end up dictating home prices. That's a big maybe.. I think the reason they require 20% or 10% down is just in case you pay to much for a home. So if you put 20% down and the home is worth 20% less well, the bank wouldn't take that loss. That would be on you. But if it goes beyond the 20%, then the law would state the bank would be required to write down the principle of the loan to the home value minus the 20%. This is only fair that the bank would do this. After all you've already lost everything you put down. You took that much risk. The bank should take the rest.
If anyone has any thoughts or ideas for or against proposed law, please add it to this blog.
There was a big misconception that if you give banks billions of dollars, that they'd trickle it down through the economy. Trickle down Economics works in a growing economy but doesn't work in an economy where private industry is sinking. Bailouts should only be offered when we've reached a bottom. Consider the consequences if the government gave money to someone who was living well beyond their means. Need I say more?
Bailouts from the TOP down are not going to work in this spiraling economy. There must be a reward on both ends of the Mortgage industry for a successful turnaround to occur. That is why I'm proposing the following plan.
The first proposal in my plan addresses the borrowers. The government must come up with a plan that is good for borrowers, good for lenders and promotes home ownership even during hard times in which a home is upside down. Recently, borrowers have begun questioning how much good credit is really worth. With home prices in some regions in the United States 40 to 50% below market highs, borrowers are comparing their 700 plus credit score to their $200,000.00 net equity implosion on their home loan. I've spoken to several borrowers who care less about their credit in these conditions.
The second proposal in my plan addresses the economic equity crisis in our banking institutions. More and more banks are nolonger capable of lending money even to good borrowers simply because they don't have money to lend. Most Americans with good credit and good income can attest that they've recently been denied credit by their banks. Often times they are for reasons that are unclear and unexplainable. American Express, Bank of America, CITI Corp, and many other banks are begining to lower credit lines, close lines of credit, and deny applications to credit to both good and bad borrowers.
The answer doesn't lie in providing these banks a blank check. The policies of Corporate America are NOT to give away money in poor economic conditions. Their first objective is to appease investors. It's in their best interest to use the money that is given to them by the Feds to instead buy more banks that have fresh deposits. Rather than become more vulnerable through lending, there objective is to get as much cash in to their balance sheets as possible.
ALL THREE PROPOSALS ARE NECESSARY FOR IT TO WORK:
FIRST PROPOSAL:
Provide an incentive to borrowers to pay their mortgage. Right now, borrowers are being given an incentive to NOT pay their mortgage. This is resulting in bad borrowers walking away from their good credit and homes. Providing incentive is simple. Mortgage companies need to adopt a Principle payment BONUS incentive program similar to a matching corporate 401K plan. It would begin by banks offering to match up to 20% of the additional principle payment. For example, if a borrower pays $1000.00 in additional principal above and beyond their normal monthly mortgage payment, it would look like this. Normal monthly payment $2500.00 + $1,000.00 additional principal. Once the borrower pays that additional principal payment of $1,000.00 on a mortgage with a balance of $480,000.00, the lender then deducts the $1,000.00 off the balance of the loan and additionally matches it by deducting another 20% of the principal payment, which would be $200.00. So, any additional principle would be matched by 20%. So the end result of this transaction would look like this. $480,000.00 minus $1000.00 = $479,000.00 minus the 20% of the additional principal payment ($200.00). The total amount due on the loan would then be $478,800.00. Every month that the borroer pays additional principal on their loan, the bank lowers the balance of the loan by 20% of the principal payment.
SECOND PROPOSAL:
As a result of Proposal #1, banks would NOT need an injection of equity into their balance sheets from the Federal government. They'd in a since be giving themselves an injection and they'd be saving a snowballing mortgage crisis from developing any further. This would encourage borrowers to continue paying on their existing mortgages and would discourage defaulting. Over the long haul, borrowers would be getting 20% off of their existing mortgages and lenders would receive a quick and LARGE injection of dollars from borrowers. But in return for providing this incentive to borrowers, the government would provide a substantial TAX cut to lenders. Providing these TAX cuts would encourage lenders to participate in the program. The lenders would be receiving an injection from their borrowers through additional equity payments, and the lenders would be rewarded with a Corporate TAX cut.
THIRD & LAST PROPOSAL:
Make this program good for 5 years to all borrowers. Allow borrowers who are behind on their mortgages to Reorganize in Chapter 11 Bankruptcy. Only allow participating banks to receive TAX cuts. Put a freeze on all adjustable interest rates.
To prevent further distruction of our Economy, I believe that the government needs to impliment this program IMMEDIATELY. Otherwise, borrowers are going to bring this economy to a hault by defaulting on everything from home loans, credit cards, and autos.
(In response to a request for input by the Obama-Biden Transition Project I sent the following e-mail letter to President-Elect Obama. I thought I’d share it with you).
Dear Mr. President-Elect: First, I think that a very important proposal of yours made during the campaign is to allow people to bring their home mortgages into bankruptcy filings. As in any financial crisis a lot of old debt has to be bled out of the economy before recovery can take place. This is even more urgent now because the investment community continues to hold large amounts of bundled securitized assets that have stymied efforts to reignite lending and investment. "Toxic" mortgage-based assets can be resolved in bankruptcy court. Lenders will lose money -- and so many people say that they ought to lose money -- but nothing like they would if we just allow a giant wave of foreclosures to overwhelm the economy. More importantly, troubled homeowners would be able to keep their homes with mortgage payments they could afford. Rules and regulations can be included in legislation to prevent abuse. Finally, the so-called "bail-out" money could be more effectively used: equity shares could be purchased where most need: in institutions with the greatest need for liquidity and re-capitalization. Short of dramatic action to eliminate a lot old debt, the prospects for future economic development seems very bleak.
Hello,
I can’t believe that we are having this huge mortgage crisis. I know we live in the land of free speech and freedom of the press, however there is some communication that does not make any sense to me. I pay my mortgage and have never been late. I hear that there are foreclosures all over the place that are causing us to go into a recession, but then according to the press it is really only 10% of all people that have mortgages which are not paying. That still leaves 90% of those of us that do. I was always told that performing at 90% of anything is always a good thing. So where is the problem?
Then I was taught, to never complain about something with having your own solution, so here it is. Instead of the government just helping the individuals with foreclosures they should work with the banks to reconstruct everyone’s loan. How, there should be a way the government could work with banks to buy anywhere from a half point to a full point off everyone’s loan. This should only be for 5 to 10 years of the loan. This would automatically create a little bit of relief for everyone producing extra money that could be used immediately. There would be no need to send a stimulus package out to tax payers because you would create one for the next 5 to 10 years. Then in return for working with consumers the banks my get a grant from the federal government or even better a tax cut on the money they claim would be loss.
Everyone has to feel the pinch, and loosing a little bit of profit while still making profit is better than loosing the whole thing.
Rick Davis = John McCain Campaign Manager
Rick Davis = Republican Lobyist for firm Davis Manafort
Davis Manafort = Firm on the payroll of Freddie Mac paid to counter mortgage regulation
Rick Davis = Member by direct association to the group that is responsible for a major contribution the current mortgage crisis
John McCain chose this man to run his campaign! NOW who has bad judgement when it comes to the people he decides to associate with?!?
Maybe this is a simplistic view of the situation, but here's how I see it.
We have millions of foreclosed and abandoned properties. We also have millions of single parent households where the parent (usually the Mom) is working hard (sometimes with 2 or even 3 jobs). These single paprents have a stable work history for at least 2 years, haven't not defaulted on a loan or mortgage in the last 5 years, are not living above their means, haven't a prayer of a chance at getting a home because they cannot save money for a down payment.
Why can't we figure out a plan to match up these stable single parent households with the properties lying vacant? Why can't we set up a structure whereby they can repay over time the amount of back taxes owed on the property so the local government recoups lost revenue.
This seems like a win:win to me. Why should these properties eventually go to speculators who play with real estate like they are playing Monoply when deserving families could move into them, bring the tax rolls up for local governments, and give these families pride of ownership and security for the future. YES, WE CAN!!
John McCain is calling for the purchase of $300 billion in toxic mortgages. His proposal is good for the lenders, who will get a cash pay off on overpriced homes. It is also good for those who bought overpriced homes because they will be able to refinance them at their current value. For example, if a home purchased for $400,000 two years ago is now worth $200,000, the lender will receive the full $400K from the government and the homeowner will get it refinanced for the current $200K value, which is great for both of them. The problem is that the $200K cost will be carried by taxpayers. We have to keep in mind that the entire "rescue" will be funded by taxpayers, initially as debt but ultimately as the responsibility of all of us to pay off.
Another problem with this plan is that it is not fair to those who do not own homes and to those who bought homes they could afford. These two groups (renters and responsible homeowners) get nothing out of the plan except for responsibility for the added national debt. For example, Mary Smith and Joe Blow both earn $50K annually. Mary buys a modest home in the city for $80,000 while Joe buys a $300,000 home in the suburbs. Mary knows what she can afford and lives within her means; Joe buys a home that he thinks he can afford because he expects it to appreciate but it doesn't. Joe's interest-only loan has just seen the interest rate increase by two percent and suddenly he can no longer afford his mortgage payments. What does the government do under McClain's plan: it pays off Joe's loan and refinances it at a low interest rate and for a total value of, say $180,000 (example only). Joe made a disasterous financial decision and gets rewarded for it; Mary did the right thing and gets nothing. Where is the equity (no pun intended) in this and what message does it send to us?
John Shannon
