Foreclosure activity rising in most metro areas

I am one of those facing foreclosure, but I am stupid and irresponsible and bought a home I couldn't afford b/c I wanted to scam the system. Oh and I'm also Republican so have that burden to bear as well.

Nevermind that when I bought this house 15 years ago I was making over $200k but now at 50+ yo cannot even get a return call for a job at 1/4 that so am sitting in my basement freelancing. Nevermind that when my wife got cancer a couple years ago we kept making our payments even though it took all our 401k's and savings. We're just a bunch of irresponsible idiots.

What would really help would be for the admin to adopt legislature that would mandate holders of 2nd and 3rd mortgages to seriously renegotiate with folks who've hit upon hard times. In my case my 1st mortgageholder is willing to work out lower payments but No. 2 says no. I offered $5000 to release the deed but nope. The house is underwater so if foreclosed they will get nothing but that doesn't seem to matter, it appears to be a case of who will blink first. Right now we are trying to shortsell, the agent says they might get $1500 if anything. Something is seriously wrong with how bankers' minds work.

4 votes

#9 - Thu Jul 29, 2010 10:08 AM EDT

cats1975

Karma's a bitch.

1 vote

#9.1 - Thu Jul 29, 2010 10:18 AM EDT

saminmobilealabama

So, you're a Republican, but now you want the government to intervene in relieving your mortgage debt. Unfortunately, a Darwinian free enterprise system is what you asked for when you went to the voting booth.

1 vote

#9.2 - Thu Jul 29, 2010 10:22 AM EDT

Sacco-2083903

You made over 200k a year, and paid on a house for 15 years? Personally I'd have had that paid off if i was in that situation. If you had a 2nd or 3rd mortgage on the house, that sounds to me you used your house as a credit card during the good times. I feel bad for you on the cancer thing, but it does sound like you truly were irresponsible when things were going good.

3 votes

#9.3 - Thu Jul 29, 2010 10:48 AM EDT

The house was on a 15 year program until I bought a business. The secondary loans were for business. It takes capital to run a business, especially one where you must buy your raw material in bulk once a year. To get capital you need collateral, in my case it was the house. The business folded last year after a bank called in their LOC and I was unable to find alternative financing. I have many friends have the same thing happen- starting about January last year banks started calling in loans, even performant ones such as ours. They needed to get liabilities off their books. Was I irresponsible? You bet, if I could do it all over again I'd still be working for the man.

#9.4 - Thu Jul 29, 2010 1:55 PM EDT

MtMike-571674

StuTheDog

You got greedy, gambled on your "business" venture with your house as equity, probably got a ARM on the house, and are now paying the penalty or paid the penalty by losing your equity in your house or losing your house.

There are consequences for ones decisions.

Stop making yourself out like a "victim". I have a "line of credit" with my property for my business, but something I can afford, and "pay off".

I live within my means. I know my boudaries and those of my business.

#9.5 - Thu Jul 29, 2010 10:11 PM EDT

I really do not understand why people make light of the personal distress caused by this systemic problem. Nor do I understand why people (other than politicians) use the systemic failure to blame one political party or the other. Legitimate arguments can be made to lay this problem at Bush's feet, but similarly legitimate arguments lay blame on Clinton.

But the bigger problem for everyone is the fact that we have this problem, and we have to solve it. I represent many people in foreclosure in my law practice, and most of them are hard working Americans who made financial decisions that appeared sound at the time but were reliant on the continued increase on real property values.

In other words, my clients made the same business decisions (albeit on a smaller scale) that were made by the gurus of finance in just about every Wall Street firm. Some of those huge banks paid the ultimate price, but most of the others profited from the disaster and now are foreclosing on my client's properties.

I guess the point of my comment is that to blame any particular person or entity to satisfy your political leanings is unhelpful, and intellectually dishonest. There are plenty of people to blame, but I would rather spend my time working on solutions.

Here are two:

First, the home modification program works, so long as the property is not too far underwater. If the real property values are underwater, the program assists only the banks and harms the consumers.

If, for example, the $400,000 loan was taken out at the top of the market, but the home is now worth only $200,000, the modification program reduces the interest rate on the loan to 2% but does not affect the principal. The homeowner's monthly payments decrease, sometimes dramatically, but they are paying $200,000 above their home value. No one should do that. If the homeowner walks away - as they should do - the bank will presumably sell the home for $200,000 less closing and related costs and will clear about $160,000. That is the best case scenario for the lender and where the home sells quickly. The lender losing $240,000, plus all the anticipated interest and principal payments over 30 years.

That situation helps no one. The bank loses a whole lot of money, the local property values drop because of the sheriff sale and the consumer's credit is further damaged.

But this is a problem partially of the bank's choices. I have never been successful - not once - in convincing a bank to reduce principal payments absent a long, drawn out litigation and successful conclusion at trial. Banks just do not voluntarily reduce principal, even when my client makes an offer to pay a $300,000 mortgage and can establish an ability to pay such a loan.

So my first proposal is to re-engineer the modification program to provide for a reduction in principal in cases as described above. If the bank takes a mortgage at $300,000, and the borrower can pay, the bank does not lose the quarter million dollars described above, the local property values are not further eroded, and the borrower can get to work improving his credit immediately.

I believe the reason for the bank's intransigence is because borrowers are unaware of their rights, and unaware of the limits of the bank's ability to enforce the terms of the note and mortgage against them. Due to this imbalance of financial knowledge, banks are regularly convincing people to stay in their homes while compelling payments of up to (and beyond) 50% of their regular net monthly income. This leaves many people in middle class homes (and better) but otherwise living their lives below the poverty line. This is an ugly situation and leads to stress and poor decision-making in the home. And outside of it.

My second proposal is the converse of the first: Education consumers about their real choices. If even 10% of consumers in foreclosure who are underwater simply walked away, I suspect that the lenders would start reconsider the strengths of their positions and we could see some substantive resolutions.

I will watch this blog and respond to appropriate follow up comments. I hope to engage people in discussion that does not include flames, excessive political baggage or finger pointing at whatever/whoever is supposedly to blame for the perceived downfall of America.

Except for lawyer jokes. I love lawyer jokes.

7 votes

#10 - Thu Jul 29, 2010 10:11 AM EDT

espliff

Excellent points Joshua, But the problem is that the banks have made the decision that they can recovery the losses by tax payer bail outs. Instead of lowering their projected profits and actually helping homeowners, its more beneficial to just foreclose and resale for half the loan amount and then request a bailout or over inflate their losses to increase their tax write offs. I really can not blame the bank, since they are not human but only an enterprise created solely to profit. So helping would actually go against common business practices. I love capitalism for its freedoms but dislikes its insensitivity.

3 votes

#10.1 - Thu Jul 29, 2010 12:54 PM EDT

I just had a potential buyer look at my house (he "flips" houses by buying FC's and short sales). "How's business, must be great what with all the FC's?" His reply:

Sucks b/c banks are increasingly foreclosing but not selling for current, market value, instead they are holding out for the full value of their mortgage. The reason he speculates is it is more profitable to keep the inflated "assets" on their books for as long as it takes rather than take a write down and report a loss, even if it means they sit on the property for a year or more. He said he was at an auction yesterday in one of our more upscale counties, there were 35 properties being sold but only 2 got bids. Everything else was priced so high investors such as he couldn't make it work.

1 vote

#10.2 - Thu Jul 29, 2010 2:07 PM EDT

Andy-2094461

Good post and good points. However, I think there are several reasons (that I can think of) that banks do that:

1.) Right now, many people continue to pay their mortgage payments even though their homes are underwater. If they start doing this with some loans everybody will want to do it. Instead of large losses on a many mortgages, they will suffer slightly less losses on many more mortgages.

2.) How do you stop the program once you start? You cannot run this program forever or you risk creating another bubble in prices. If consumers know that they can profit if the house goes up in value, but don't need to partake in entire loss if the value goes down, it could lead to inflated prices again.

3.) How do you apply this fairly and consistently? I can see huge liabilities and swarms of lawsuits claiming discrimination or similar problems swamping banks. This says nothing of the inherent penalty applied to those who made large downpayments on their house, or did not use their home as an ATM pulling out equity. With the current market value of my house, I've lost my entire $100,000 downpayment. Those who made little to no downpayment will have lost nothing other than a temporary ding to their credit score, and wil have made us look like fools for trying to do the financially responsible thing.

4.) What happens if the home prices rebound in the next 5 to 7 years? Do the people who had 25% of their mortgage forgiven just get to keep that money? If that's the case, I really wish I'd made no downpayment and stuck it to the bank.

There may be some work arounds to make loan modifications work, however I don't think it's a simple as chopping somebody's principle by 25%.

What I would like to see is a crack down on strategically walking away from your purchase.

#10.3 - Thu Jul 29, 2010 2:08 PM EDT

Mike-761978

To your first point. If a contract is not binding, the the whole system is a house of cards. Signatures, contracts and agreements mean nothing. It is financial anarchy which drives credit costs through the roof and ruins the confidence of businessmen.

On your second point. Please do, walk away, in fact run away! Quit sucking the life out the system by squatting in a house you are not paying for. Let people with real money and appetite for risk suck up that excess at market prices and then turn a profit.

Sure, in the case of the people who walk away, their credit is damaged, as it should be. More conservative thinkers who lived within their means are also rewarded. The defaults will in turn end up renting which is where they belonged in the first place.

1 vote

#10.4 - Thu Jul 29, 2010 3:36 PM EDT

This is to respond to the first three comments responsive to my post. I will say nothing in response to the fourth, as it does not address potential solutions.

Espliff, your explanation of why the banks do not make what appear to be common sense decisions regarding cutting losses makes sense. I have considered that explanation myself but I do not represent banks at the moment, and I have no real data to use to understand the reasons behind the decisions. I completely agree with you about your feelings of capitalism and I, too, do not blame the banks (although, when they are hurting my clients I occasionally get very upset at some of their callous decisions.)

You described the benefits and disadvantages of capitalism very well. I am going to steal that one. Thank you. :)

Stu, that is very interesting. I did not know that.

Andy, great and very thoughtful post. Let me respond to your thoughts in order.

Point 1: I completely with you; one of the points of my post was that banks make more money convincing people to pay loans that exceed the value of their homes than they would make by making deals. One of the first things I do in client meetings is determine the likely sale value of the home, compare it to their outstanding loan. For many people this is really an eye opener.

Like I said before: if even 10% of everyone underwater decided that they no longer wished to continue paying for something that was not worth the cost, banks would have to change their business models.

Point 2: I think you raise two issues in your comment here, but I think both are solveable with a little creative thinking. First, you ask how to stop the program once it starts. The answer there is to put an end date on it. That gives the government an opportunity to extend it if necessary, or let it expire.

The second point is a problem and I do not have a great answer. However it does seem to me that a schedule could be created whereby the bank gets a lien, but not a note, for the full amount of the existing note. That way if the home increases in value at the time of sale, the bank gets to collect its full amount, less proportional interest payments, but prior to sale the bank is limited to collecting on its note. Perhaps this is not much different than the current system. I am not sure.

Third point: Fairly and consistently? Little of anything in the financial markets and housing debacle these past few years has been either fair or consistent. Nevertheless, I take your point (and I am very sorry to hear about the hopefully temporary financial setback. Temporary because if you are able to wait out this real estate downturn I have little doubt that you will the return of most of your investment.)

I do not know how to make the system fair or consistent, but I suspect it can be done once a framework is established and people put their heads together. As to suits against the banks, per federal regulation banks are immune from nearly anything that has anything to do with the lending of money. Any type of system would involve the lending of money and banks would be virtually immune from all lawsuits.

Finally, point 5: Strategic walkaways. I often counsel clients to walk away. I have given such advice to business clients in business transactions prior to this downturn, and I have represented business people suing to enforce the contracts their partners have breached by walking away.

A contract always has two sides to each party: an upside and a downside. When you signed your note you promised to pay your note OR to face the bank's wrath in the form of a foreclosure action. You have elected to play on table A, but the bank was always aware that of the possibility that you, or anyone else, might choose to play on table B.

There is little difference between breaching a contract intentionally, and breaching a contract because you have no other choice.

Consider the situation I am often in while counseling clients. They desperately want to pay their note because they think it is the right thing to do, they want to keep their home and are desperately afraid of foreclosure, but their monthly income has become (usually through no fault of their own) too low to manage the monthly payments. They have a 401k, a pension plan (both quite moderate in size), a small savings account and little Bobby's college fund. All told, by supplementing their now reduced income they can pay the note on time for the next 12 months before they completely run out of all their remaining assets and will, then, go into foreclosure.

Under those circumstances, where you are their attorney, would you counsel them to deplete all of their assets? Or would you counsel them to stop paying the mortgage and start saving their money for as long as they can so that they can try to start over?

It is a very easy question when put that way.

But please don't think I am making light of your concerns with strategic walkaways. I understand your objection, and your fear of the impact it might have on your home property value. On the macro scale, I might agree with you, but when trying to assist the individual homeowner, the macro concerns are not that persuasive.

1 vote

#10.5 - Thu Jul 29, 2010 10:55 PM EDT

cats1975

American homeowners bit off more than they could chew but love to blame the banks for their problems. True, there should have been a better checks/balances system in place to keep some people from getting mortgages in the first place. Let's face it...the people who were just "too stupid" to know what they were doing are well in the minority. If anything, it's the "biting off more than they could chew" people who caused this crisis. If anything, look at the banks as enablers but not the primary cause. But we're in America which has slowly but surely become a country of victims. Noone takes responsibility for their own actions.

1 vote

#11 - Thu Jul 29, 2010 10:12 AM EDT

Foxden Racing

It's funny that so many people go on about 'the citizens are obviously just whiners, not taking responsibility for their actions', yet most never talk about businesses taking responsibility for their actions. Fault in a situation like this is never one-sided.

I'll beg to differ on the fault itself, but only on which one was the greater of the evils. Stupid people are stupid, yes, but nobody brings the concept of 'trusted professional' into these discussions. It's always either a dumb customer knowing every minute detail of what they were getting into, or big evil businesses taking deserving, hard-working individuals for a ride. Like everything else it's not black and white, but a shade of gray.

The investment banks amplified a big problem into a colossal one by creating derivatives; they allowed the entire economy to gamble on the stability of mortgages.

The banks doing the mortgages bought into the idea of derivatives; being able to offload them into derivatives meant they no longer had vested interest in whether or not it was a loan doomed to fail.

The banks doing the mortgages also pushed hard for nonstandard mortgages, on the promise that 'oh, take a smaller payment now, and 2 or 3 years later refinance when your home price doubles'...which kept the cycle going, until the head of the snake caught up to the tail...

The mortgage brokers...especially the 'ZOMG get money now!' places...abused the trust placed in them by potential customers to encourage people to bite off more than they could chew, in order to get a fatter commission and big money from interest.

The realtors abused the trust placed in them by potential customers by assuring them that home values will always rise, so don't worry if it costs too much; buy now, sell in a year or two, use the difference as a down payment on an affordable mortgage

The rise of Day Traders changed the #1 reason for buying a house from 'I'm buying this for a place to live' to 'how much will buying this add to my net worth?', opening the door to those abuses of trust.

Normally-intelligent customers rolled the dice on whether or not the 'rising value express' would ever plummet off a cliff. Unfortunately for them, it did.

Typical customers were assured by the professionals they placed their trust in that all would always be well, $250k is the new $100k, and since the value of the home went up over the past year how about another loan for the difference?

Stupid customers were victims of a carrot and string act...tempted with the idea of home ownership, prices too low to be real [thanks to items such as interest-only loans], and the promise that they're not being misled...when instead they should've been told 'no' and left it at that. But, $0 from saying no is a lot less short-term income than $x in interest until the schmuck defaults.

There are no innocent victims here, but there is a lot of misplaced trust, optimism, and unabashed greed to go around. There's a lot of normalization going to happen in the next few years...the Fed funds rate has to return to 'normal' ranges, home prices have to return to 'normal' ranges [as measured in price per square foot, inflation-adjusted], even stocks, savings, and debts have to normalize. Until that happens, we haven't hit bottom yet.

4 votes

#11.1 - Thu Jul 29, 2010 11:45 AM EDT

Kevin Bitz

If Bush 2 had not had the housing boom.. his economy would have been toast... go check the figures on job creation... they pretty much all in housing.... and the ATM'ing of your house was the only thing that kept the economy going..... now that people cannot/will not borrow against their home.... we are in the tank...

#12 - Thu Jul 29, 2010 10:38 AM EDT

Uh, you're a Fox News watcher obviously. You're blaming Fannie and Freddie for this mess when in fact they were victims of a flawed securitization model set up by the big portfolio lenders, investment banks and bond insurers. That isn't to excuse Fannie and Freddie, because they should have known better. But they didn't start the fire.

If you knew anything about the mortgage industry you would know that Fannie and Freddie did very well until about 2001 - 2002. That's when they started to lose substantial market share to the portfolio lenders like Countrywide and WaMu. "Portfolio" means the lender originates to its own guides rather than originating Fannie/Freddie backed loans. About 85% - 90% of WaMu's loans were portfolio and about 75% of Countrywide's were. These companies offered risky loans like Option ARMs, many loans with negative amortization, etc while Fannie and Freddie offered generic fixed rate and conservative 3/1 and 5/1 ARM programs. Fannie/Freddie have NEVER offered a negative amortization product. Fannie and Freddie were also set up so that mortgage insurance (MI) was required on LTVs over 80%. The competition on the other hand offered 1st/2nd Combos up to 95% or even 100% with no MI. Mortgage insurance isn't necessarily a bad thing, but the companies that offered MI-less programs were very successful into turning borrowers against the idea of paying the monthly premium. That isn't to excuse the MI companies either, because they had their rosy glasses on too when it came to risk.

It is well known that the critical years of creating this mess were '04 - '06, mostly '05. Because of the crazy portfolio lending that defined the market there were far fewer traditional Fannie/Freddie loans being originated. But Fannie and Freddie wanted a piece of the pie, so they went to the big portfolio lenders and investors and told them they would securitize some traditionally non-Fannie/Freddie lines of business. This is how they got into trouble, but buying into the nonsense of Countrywide, WaMu, Aurora Loan Services (Lehman), etc.

Little did Fannie/Freddie know at the time that the model they were buying into, the model that had undermined traditional Fannie/Freddie lending, was a scam riddled with fraud and unrealistic expectations. So being careless was their fault, but the ultimate responsibility lies with the portfolio lenders, investment banks and bond insurers that created a flawed model.

4 votes

#13 - Thu Jul 29, 2010 11:02 AM EDT

MR-392541

Last I checked, the CEO of Fannie walked ou the door with 90,000,000. The poor victim.

#13.1 - Thu Jul 29, 2010 11:32 AM EDT

http://go-patriots.com/FannieMae%20History.htm

You're gullible. Former CEO Daniel Mudd (a big Republican) earned just under $80,000,000 over his entire career with Fannie Mae from '00 to '08. This includes his employment prior to becoming CEO. Pretty hefty, but not outrageous in the world of "high finance". He was not paid severance when he was dismissed in '08.

Take another spin at the wheel.

#13.2 - Thu Jul 29, 2010 1:12 PM EDT

ken-290247

Matt, Problem with what you are saying is no one really understands how the securities business works. They do not want to spend the time and effort to really understand why we are in this mess right now. Easier to just start pointing fingers and listen to the propaganda released by the media both the left and the right. You either are in the business or did your homework. The comment someone made that the left made the loan programs happen and the right took advantage of it is right on the mark. We also have thousand of homes waiting in the wings to be foreclosed on. I am in this business and have direct contact with reps from FNMA, Freddie Mac and the FDIC. They can't handle the asset so they just let an owner in default remain in the home. Slowly they will eventually take back the asset. Will take years for these foreclosures to be taken over and liquidated. If unemployment numbers do not go down by a significant amount it will take forever for this to end. Matt you should also take a look at what Franklin Raines and Jamie Garelick contributed to the FNMA and Freddie Mac disaster before you blame the GOP. Link below will give you the dates and what happened over the past ten plus years.

#13.3 - Thu Jul 29, 2010 1:31 PM EDT

This is not a credible link. It's right-wing propganda.

The Raines issue is far removed from the housing implosion. Really a separate issue that was dealt with and is unrelated to what happened in '08.

Unemployment won't be going down anytime soon. If you look at all that is out there, real estate, retail, etc, much of it was developed to deal with the false demand of the bubble. If everything could be written down instantly employment would pick up, theoretically. Of course, if everything was written down instantly the economy would be completely destroyed. It's going to take years to find equilibrium regardless of who is in control.

2 votes

#13.4 - Thu Jul 29, 2010 2:23 PM EDT

MR-392541

A few thoughts:

People are purposely foreclosing, saving the money they would pay for a mortgage and living rent free.

Could we have statstics by race of the foreclosures please? Afterall, we are asked when a loan is made so they have the numbers? Why won't they publish them? They forced the banks to make the loan, right?

Yeah, way to go F&F. Glad you're exempt from federal oversight I bet.

1 vote

#14 - Thu Jul 29, 2010 11:31 AM EDT

Joelochi

It was not "Repubs" read the Steven Holmes article published September 30 1999. In the article it clearly shows the the Clinton admin started this whole thing by directing Fannie and Freddie to loosen standards to boost the numbers of low income and minority families buying homes. This whole thing snowballed from there. The banks saw what seemed to be success from Fannie and Freddie so they in turn loosened the standards on loans. That was the beginning, as much as i did not like bush we can not blame him or ANY POLITICAL PARTY for this mess. The end result is that we have found as a society not everyone deserves or can own their own home. Some banks misled consumers, some consumers misled banks and some consumers fell on hard times. So here we are!

3 votes

#15 - Thu Jul 29, 2010 11:36 AM EDT

BS. We can blame a party for this mess. It was caused by the fiscal and monetary policy of the Bush Admin: huge tax cuts aimed at the very wealthy coupled with historically low interest rates. All why the country is spending hundreds of billions on wars. This is a classic supply-side bubble. Do you think it's a coincidence that after 8 years of Reagan we had the Savings & Loan Crisis, and after 8 years of Bush we had this implosion? It's not coincidence. Like Bush, Reagan cut taxes for the wealthy while dramatically driving up the deficit. They were both cut tax/increase spending Republicans. In his Congressional Testimony Greenspan admitted that tax cuts, low interest rates, and corporations' failure to manage their own risk caused this. Greenspan, a free market idealogue if ever there was one, could not explain the banks failure to protect their interests ahead of time. Greenspan said this crisis has challenged every notion he has about free markets, risk management and deregulation.

1 vote

#15.1 - Thu Jul 29, 2010 1:33 PM EDT

Why are people mostly arguing about who to blame and not discussing possible solutions to the problem? I would find that discussion much more interesting.

#16 - Thu Jul 29, 2010 11:40 AM EDT

Mike B-802126

People would rather Bit** moan an complain it is easier to process. I do like your first post. I am in the review process. Mortgage at 364,000 includes a $ 64,00.00 2nd. took a huge pay cut to stay employed 10%. Value of home according to B of A is now $ 178,000 to 205,000..

It will take to long to regain my loss in value... Time to put on the walking shoes unless the bank is truly working at be helpful. We will see

1 vote

#16.1 - Thu Jul 29, 2010 12:41 PM EDT

Mari-1045269

Hopefully, BO won't try to help. If he does, we the taxpayers who are still working will also wind up homeless.

#16.2 - Thu Jul 29, 2010 1:54 PM EDT

Joshua I liked your earlier post, your observations are spot on. I am not sophisticated enough to offer practical suggestions but am confused by something. I paid a mortgage for many years before disaster hit, during this time they (the banks holding my mortgages) earned approximately $180,000 in interest. Why can't some of that be factored in when determining how much principle to write down? Instead they want to foreclose then everybody loses. Nobody seems willing to budge.

#16.3 - Thu Jul 29, 2010 2:30 PM EDT

Justkeepswimming

Mr. Denbeaux, you are right...not everyone made good decisions, but not everyone made bad. Things happen in life, and had the housing bubble not popped, we might have been able to get through them without losing our home. There are alot of people stuck, thats all I know. I am one of them. We have always been diligient about keeping our credit score up and our bills down. We had a small starter home that we fixed up and sold for enough of a profit to buy a little piece of property and build a house. Its a modest 3 bedroom home, nothing huge. We did much of the work ourselves. We were both working at the time. When we had our first child we refinanced into an interest only loan to get our payment down so I could cut my hours back and thats where we went wrong. My husband is an electrician and when the construction hit its slowdown, he began his lay-offs. He has been laid off more then he has worked this year. Had this been the only thing that happened, we would have been able to keep our heads above water but as is true with everyone, when it rains it pours. Our nephew got put into foster care in the state he was living so we applied to get him out and placed with us. He was 2. He was eventually placed with us, after all the paperwork, home studies, etc., but turns out the state he came from does not have any assistance for relatives caring for a child. None. We got a $50 walmart gift card (that we requested) from them when I flew out to get him because he was changing climates and needed different clothing. Our property taxes have been raised every single year we have lived here. We have fought them every year but they were only willing to "comprimise" which in effect didn't help us out too much. If we could sell our house for the value we are assessed at, I would move out tomorrow!! That coupled with the fact our home that we thought we would always have equity in because of all the work we did ourselves is now worth half of what it appraised for when we refinanced 3 years ago, we are now underwater. We applied for the loan modification program before we ever missed a payment because we had begun making our payments out of a line of credit we had and knew if my husband didn't go back to work we would be in trouble. We have called the bank faithfully every week for 6 months since we applied. All they will tell us is, "It's still pending". We have been told by numerous people that they will most likely wait until we have missed enough payments to just foreclose, and then they will sell it at auction, and the government will make up the difference, thanks to our faithfully paid taxes. In our situation, the bank will not accept a payment if you miss more then 1 payment unless that payment is for all the back amount owed. They send the check back. So what do you do? They won't give you any info when you call, or any idea of what you can do to work with them, you can't sell because you are all of the sudden upside down, and the bank won't take your money, they want to wait until they can take your house.

#16.4 - Thu Jul 29, 2010 2:41 PM EDT

Paduki

Joshua, I'm a homeowner upside down on my home's value to mortgage, my payments are current. My concerns are 1) that the shadow home inventory will suddenly be available as banks decide to cut losses and unload inventory, further depreciating home values. I was forced to retire due the economic downfall, and so have a fixed income. 2) I hear a lot of chatter from elected officials about needing to increase taxes to cover costs. It is likely that increases in income, property and other taxes would eventually put me in a position of not being able to meet my mortgage. Any thoughts?

#16.5 - Thu Jul 29, 2010 4:15 PM EDT

I will respond to each comment in order:

Mike B-802126 - I would do four things in your position:

First, understand (as you do) that you are not going to ultimately keep the home.

Second, stop paying the mortgage entirely, and start saving money.

Third, fight the foreclosure as aggressively as you can,

Fourth, relax. Don't get too stressed about the situation. You are doing the best you can with a bad situation.

Mari-1045269 - Unhelpful. Please note you have absolutely no idea of my political leanings from my postings here, and I would really prefer not to know yours. I don't care if you are a left-over hippy from the 60s or a Birther: if you have a good idea to discuss about solving this crisis I am ready to talk and to listen.

StuTheDog - I think you are looking at it the wrong way. The interest you paid prior to the collapse was interest you agreed to pay (and it sounds like had no problem paying.) It is really not relevant what happened before (unless the problems before involved fraud in the creation of the note or mortgage). The question is what to do now.

And that is impossible for me to say with the information I have.

I think you will not find banks willing to reduce principal unless you have a very strong predatory lending case AND you prove it in Court.

Justkeepswimming - I do not know where you are writing from. If you are in New Jersey, I can tell you EXACTLY what to do. If in New York, I know to whom I would send you.

However, no matter where you are, I am pretty sure that your concerns about the bank quickly selling your house at sheriff sale are probably overblown. I suggest you contact an attorney in your area to ask for assistance and advice.

Paduki - Yes. Do NOT deplete your assets to stay in a home you cannot afford. If you cannot afford the mortgage, then you are probably going to lose the home, but you are better off losing the home with assets remaining than without. I feel uncomfortable giving any more advice in this forum. I suggest you contact an attorney in your area for assistance and advice.

#16.6 - Thu Jul 29, 2010 11:15 PM EDT

Mike B-802126

Joshua, i appreciate your advice. First I have stopped making the payment while under review, 7 months now i have been under review. We have been paying off other smaller debt all the while saving as much as we can. 2nd its just a house i can rent another in the same neighborhood. 3rd If i cant control it with my two hands i do not worry about it!! and 4th i will fight them as hard as i can with the resources that are available to me.. Thanks again.

#16.7 - Fri Jul 30, 2010 11:02 AM EDT

Justkeepswimming

Thank you Mr. Denbeaux for your advice. We are actually in Washington State. If you know someone out this way you could refer us to that would be great. Otherwise, what kind of an attorney would we try to contact? Real Estate? Thanks again!

#16.8 - Fri Jul 30, 2010 10:49 PM EDT