Story Comments

While it may seem ridiculous and unfair to help distressed homeowners (which is not entirely the homeowners fault), until we Start helping distressed homeowners, we will be flooded with foreclosures. We can't sell off the foreclosures that are currently on the market now and we are soon to be flooded with many, many more by the thousands, not to mention the unemployment rate currently 7.6% (598,000 jobs lost in January 2009). You say it is unfair and ridiculous to all the responsible people - but do you realize by Not helping the Distressed Homeowners (try to stay in their homes to prevent foreclosures) you are going to bring down the value of your Own Property by another 20 to 30% by the time we are flooded with thousands more foreclosures. You can stick to your opinion and call it unfair and ridiculous and watch your Own Property Value keep going down or We can help them and hopefully you can hang on to the equity you have in your property. Appraisers are now being Told they...(Read more of this comment) Must include All Foreclosures and Short Sales in their Comparable Properties when doing Appraisals which is making all property values go down everyday - What will we do when we are continually being flooded with more and more foreclosures? If we don't help out now, as the saying goes "When you are selfish and greedy, you get Nothing". I'd rather help these homeowners, rather than lose all the equity in my property.(Show less of this comment)

I'm in agreement with Jewelie. It's ridiculous to reduce people's mortgage amounts! It's unfair to those who pay their mortgages as well as for those who still cannot afford house payments (prices are still overinflated in many areas)!

Commenting about the loss of 20% of the initial investment in your now secondary residence. It would not be losing as much if it was not competing against foreclosures. I read that 45% of home sales currently are for those type of fire sale purchases.
Regarding the forgiving of losses due to lost appraised values for others getting loan modifications, it is due mainly because the one who will buy the loan would not approve a loan with lost equity just as a potential home buyer would not pay the price of your initial investment and with the improvements even. Someone needs to take the loss so it would be either the lender who made a loan which is not affordable under the conditions marketed or the investor when the property goes out on a fire sale.
In either situation the Mortgage industry will use it to justify ripping off future home buyers because of losses which their previous practices caused yo a large degree.
Anyway, the point is lenders will not make loans for homes ...(Read more of this comment)below value, you cannot ask buyers to absorb the losses due to competing foreclosures. So the best was to prevent decline of the market further is to work ery hard toward reducing foreclosures. Then people will more than likely at least recover their investment costs from initial purchase and the improvements.(Show less of this comment)

Boomer414, I feel for you. Your's is not a situation I'd wish on anybody. I agree that a desparate need exists for a rewrite of the rules to assist folks in your position. I also, understand that you had no real choice in the matter. Back in the '70's I worked for a large multi-national that basically said relocate to Sydney, Australia. I choose not to and it cost me a very good paying job. You had no way of foreseeing the current circumstances. Wheather or not you read every detail of your contract is irrelavant at this juncture. That just proves that you were prudent and made the best decision for yourself at that time. I've seen a number of people who didn't pay attention to the details or didn't ask questions and were later surprised. I'm not sure what changes would be made to help you guys out. Obviously nobody considered that when they wrote the rules, but now something needs to be done. I hate to say this but as long you can keep your head above water I don't see any...(Read more of this comment)one coming to your aide. Probably if the rules were changed they'd have some condition that says you make too much money to qualify under them. Probably you're best bet would be if you find a loop hole in some law like the guy in Florida did to have his foreclosure stopped by the court. I fail to understand, given the current crisis, why any lender would foreclose on a property, Who are they going to sell the propert too if nobody is employed and credit is tighter than d!*k's hat band? All those empty properties are just going to deteriorate and drive the market lower. I believe that home owners should be given freedom to renegotiate anytime and anything when caught in situations out of their control involving employment. I'm a firm believer in negotiations. I think that is the only way everyone can come out clean. We need that option. (Show less of this comment)

We took an unpaid transfer a year ago and have been paying 2 mortgages for months now while our previous home sits empty and For Sale at 20% less than what we put into it over 4 1/2 years living in it(improvements, not just upkeep). Our agent says it is at a fair market value for these times. Although very tight, we have maintained both mortgages and utilities and insurances. This legislation gives homeowners that are underwater on their mortgage, an adjustment of the loan principal down to the home's current market value. What about homeowners like ourselves that were caught in the middle of this but have still managed to stay above water, barely? We are not even allowed to take the eventual loss of selling our previous home as a tax deduction. (Because a primary residence is a personal asset, homeowners can't claim a deductible on their tax return if they sold their home at a loss, says Saks) You may say we should not have taken the transfer, but then we would have stood the good cha...(Read more of this comment)nce of being laid off. I am in favor of keeping homeowners in their homes but forgiving a large percentage of their principal practically overnight when we can't even get a tax deduction for our eventual loss does not sit well with me. I could see restructuring at a low fixed rate for a longer time frame (maybe 40 years or more) but completely forgiving principal is unfair and I believe will lower my property value even more. We read our contracts BEFORE signing and made sure we understood them. That is our responsibility and only our responsibilty to read and understand what we put our signatures on. Maybe I am wrong but this is how I feel. (Show less of this comment)

Unfortunately JC, you are right. Our lawmakers are notorious for making good ideas useless to those who need them the most. I've seen too many good ideas fail because of all the exemptions and exceptions. I often believe that is by intent. The right hand takes away what the left hand gives. This time it is urgent that they act quickly AND effectively. Homeowners NEED options and barganing power if they are to survive. I see too many similarities between this crisis and The Great Depression. Top Down Economics has never really worked and yet Washington can't seem to move beyond them. I don't believe that a repeat of the Depression is likely, but the new and improved crisis can be just as devastating.

Thanks for the perspective from both JediJoe7 and Jax08.
The problem that we will face with the new legislation is if the legislation will be too limited by our lawmakers for it to be truly effective. They have a way to avoid making an easy, fair and effective change to our laws and instead make it into some maze of exceptions and preconditions which seem to sidestep the intended goal the changes in laws should cover.
Whether the fault is the Mortgage Bankers or banks in general for coming up with these types of loans, making them illegal in the future and to undo the damage already inflicted by the loan types will help the home-owners and economies with a recovery from the present mess that exists.

Jax08, I understand your position. I place some of the the blame on the real estate agents and mortgage brokers because they had to know what was coming. Yes, they have to give the customer what the customer wants. But, I feel that it was their duty to make certain that the customer understood the possible consequences of their choice before they made it. If the agents and brokers made it clear to the buyer what could happen and the buyer continued to insist on accepting the bad option, then fault can rest with no other than the buyer his/herself. I just happen to know from my experience buying our home that all these things were made available to us without a great deal of explanation or warning. I had to literally read the fine print myself and worry the broker to death with questions. I also choose to only use about 70% of what we had been approved for. I knew that it was a seller's market in the '90's. I knew the prices in the area were inflated. I felt that we had been a...(Read more of this comment)pproved for a ridiculously high amount. I took the time to educate myself on all the "new" products being offered. I had just gone to work for the state. I work in IT and was watching jobs being transplanted to India. My government job paid considerably less than the same job in the private sector had. I wanted to keep some wiggle room in the budget just in case. I insistd on a traditional fixed rate mortgage while the broker was preaching the "advantages" of the alternatives. I personally know too many people who did not do what we did and they are losing their homes. In the last year four families I know in our neighborhood have lost homes. I am truly sorry for all those folks and wish something could be done for them. But as you say if you really want to get to the root of the problem then you have to look to the bankers who concocted these monsters. I can't help but wonder if the people who bought into them truly understood the risks they were taking? And, did the agents and brokers who signed them up make sure they understood before signing on the dotted line? I believe that a good agent would have assessed their client's situation and guided them to make their best decision. Our agent left us pretty much on our own until it came to closing. I'm betting that is what happened with most buyers. For this reason I say the agents and brokers are partially at fault. I know ours wanted us to buy a more expensive home. Anyway, that's all academic. The question now is how do we fix this mess ASAP and insure it doesn't happen again?(Show less of this comment)

JediJoe7 - I agree with much of what you have said and at first I thought the Loan Officers and Banks were at fault putting consumers in these Loan Products until one day I went to the bank to talk to my representative about investing and changing some of my products and the subject came up about the "mortgage mess". She said everyone is blaming the banks and Loan Officers and she said we were forced to give consumers these loans because they were available and Buyers qualified for them and wanted them. While they personally may not have agreed, and counseled people on taking a fixed rate Consumers still wanted these other products. As far as Real Estate Agents, again I guess I just do not understand how or why the agents and the Loan Officers are at fault. What should they have done, refused to allow a Buyer to take an ARM product and risk getting sued for not giving them what they were entitled too? and should the Agents have refused to sell Buyers the home they wanted to Purchas...(Read more of this comment)e and also risk getting sued? Real Estate Agents and Loan Officers do not regulate the Loan Products. I do agree the Bankers Association is the main source of why these products were so readily available and placed into action. In my opinion, it still comes down to what Loans were available to Consumers when they wanted to purchase. Many Consumers chose the Interest Only ARM because their payments were much lower and they qualified for that product. The economy tanked due to the housing market and I believe it only makes sense to correct the problem where it started.
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JediJoe7
The views you expressed are pretty close to my views on the home financing problems we now are facing. The only way to get our economy back on track is to determine the symptom, trace down the area of the problem and isolate the problem.
We want people in homes and adding to the cash flow for our economy to recover. We know that the loans that were given out without proper regulation were not sound.
Correct the lost homes, lost revenue and set these loans to terms which are fair and sustainable. Also add the regulations to prevent loans of the type which are failing in high numbers from being tried again.
Removing the problems in title 11 which seemed yo encourage this type of ending will both encourage lenders to work out loan conditions that are fair and affordable. It will also help borrowers to get back on their feet financially when trying to set up wage earner plans in chapter 13. Currently many plans fail due to the Exploding ARMs offsetting their abili...(Read more of this comment)ty to meet their plan and force those with the problem to have their plans fail.(Show less of this comment)

Jax08, your point is valid. I won't argue that at all. But you have to consider that while the government relaxed the qualifications and rules to push those loans out, it was the mortgage bankers who devised such things as the ARM, Interest Only Loans and all those other questionable gimics. Admittedly the government regulators should not have permitted those products to be marketed, but they did. So, in my view it is only fair to equally blame the regulators, the bankers, the mortgage brokers and the real estate agents. Basically it was a massive conspiracy to take advantage of and over sell home buyers. Some may agrue that the buyers themselves should have been wiser about entering into such contracts. I think maybe a goodly percentage of buyers, especially younger couples, didn't have the experience and forethought to see what could happen a few years from closing date. I've worked in government for 18 years and I am so tired of hearing the excuse "I'm just doing my job." ...(Read more of this comment)When "just doing your job" can lead someone down the road to ruin its time to take a step back and think how you would feel if you were on the receiving end. And I guess that's why I'll never hold an elected office and probably will not advance any higher up the food chain than I am now. Now its time to pay the piper and the price is horrendous.
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Thanks JC-Vista. I further would like to add that many people have tried to hold the Real Estate Brokers and Mortgage Brokers accountable for this Mortage Mess and blaming them and calling them greedy, when all they were doing was Doing what they were asked to do - Their Job. Should the Real Estate Brokers and Mortgage Lenders have told people, "No You can't have that Loan and No you can't Buy a house? It would have been illegal and discriminating to turn Buyers away for Loans and Homes that they were qualified to Purchase that our Government approved. Our government not only allowed the Mortgage Brokers to originate these Loans, our Government lowered the standards on Lending money and thats how people who were never able to purchase a home before bought Houses. The Loan Officers at the Banks were forced to give Consumers these Loan Products that were made available to Consumers by our Government, Our Treasury Department, etc. Consumers wanted to purchase homes and these Loans we...(Read more of this comment)re made available to them originated by Who? Our Government. The Mortgage Brokers and Banks were forced to give Buyers all the Loan Products that were available to them at that time. The Real Estate Brokers were selling houses to people who Wanted to Buy a Home. What's wrong with that? Everyone was doing their job. You can't tell a Buyer Not to Buy a home or Not to take out a Mortgage. They wanted to buy a home and they were qualified under the guidelines to purchase. As I mentioned before, it starts at the Top(Our Government). Buyer wants to Buy a House, Buyer applys for Loan, Loan Officer approves Buyer for Home Loan. Buyer contacts Real Estate Broker, Buyer purchases a home. Real Estate Brokers and Mortgage Lenders were only doing their jobs. Our Government made these Loans available to the General Public - and they didn't stop these Loans until it was too late. (Show less of this comment)

Excellent posting jax2008 and thanks JediJoe7 for your comment on this should have happened long before the current situation turned out like it is today.

In reply to the people who are baffled:

People who purchased homes in the last 5 years bought in a "Seller's Market". They bought in a market where many homes needed alot of work, were not maintained and many Buyers had to Buy the House with-out a Home Inspection which led to more repairs they were unaware of and some people had to update their homes only to have the value go way down to 20 to 52%. The reason they bought with-out a Home Inspection is because there were at least 5 other people putting in a contract on the same house and Sellers were able to choose the Highest Bidder, No Home Inspection and also had the Buyers Guaranteeing Funds if the house didn't appraise at the Sales Price so the Buyers had to come up with the cash to meet the sales price if the house did not appraise AND Sellers paid NO CLOSING COSTS. It's called supply and demand. There was a large number of Buyers and not enough houses to Buy and we are suffering from all of these results. They also wer...(Read more of this comment)e given Loan Options of Interest Only Loans which Lenders were recommending because the equity was increasing in homes by the thousands every month. People are being laid off from their jobs everyday. Sales people in every industry who are paid on commission have very reduced incomes and can not get unemployment, which leads to No Income.
Property values have dropped at least 20% at a minimum and as much as 52% in other states. Think about that. If you bought a home for $300,000 if it went down in value 30% that equates to a $90,000 reduction and the house is worth $210,000. How can that Homeowner refinance into a Fixed Rate? They do not stand a chance. People who bought in the Sellers Market had to overbid thousands on a house in order to purchase, were forced to NOT even get the opportunity for a home inspection and then left to fix up these houses just to have the real estate market take a complete dive and were counseled to take an interest-only loan and refinance at the end of the 3 or 5 year term and then those same people are not able to refinance into a fixed rate loan due to the significant drop in the market value and then many are losing their jobs, losing all the money they have put into their homes and losing them to Foreclosure. Everyone is effected by the falling house prices. We need to stop blaming people and HELP them to stay in their homes so they don't wind up in the streets.
For all the people who are blaming the homeowners calling them irresponsible - Look at what these poor people have gone through in order to purchase a home and then having to walk away and lose it all in the end. For all the people who were Not forced to Buy in a Seller's Market who are able to keep the same job, Congratulations! Now let's stop blaming the distressed Homeowners -Start looking at who started this mess. It starts at the top and goes down. American citizens are just the pawns being victimized. The longer you resist trying to help distressed Homeowners, the more your property value will go down. People should really educate themselves before they go around blaming, judging and criticizing other people.

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I agree with jc-vista. This should have been done long ago before the melt-down. Too many honest families are losing homes because they were over-sold by greedy real estate and mortgage brokers. It makes no sense to put home owners on the streets and sit holding a vacant property that's deteriorating and depreciating as it waits to be resold. It is always better to have some cash flow than none at all. And you will always have people who take unfasir advantage of everything, but that is no excuse to punish those who make an effort. That sort of mentality is like the "kill 'em all and let God sort 'em out" philosophy. Home owners should have leverage to renegotiate an oppressive loan or a new affordable deal when they are victims of job loss or pay reductions. Keeping folks in their homes is crucial to turning the economy around. Placing more people on the streets only adds fuel to the fire.

It is about two years late in coming for this legislation to become law. Hopefully the legislation does become law shortly.
As the author of the news article implies, the fact that resetting loans to current appraised values and to current conventional rates plus a reasonable risk premium would encourage lenders to make workable renegotiations before one is faced with entering bankruptcy protection.
Also with runaway loans now with no ability to renegotiate the loan conditions, many BK wage-earner plans are damaged and house loss usually results due to payments that cannot be maintained with an already limited budget.
Usually now it is best to surrender the home in full satisfaction than to attempt to try to hod onto poorly conceived lending conditions these loans have.
To address the overspending fallacy that some imply as a reason why so many loans are failing now, it is just that, a fallacy. People attempt to keep up with the loans and later cannot do this while atte...(Read more of this comment)mpting to divert monies from other bills such as utilities. They then usually end up insolvent because of the late charges, over limit fees, repossessions and other charges due to redirecting income to the house.
Besides helping home-owners, it prevents bailouts needed from taxpayers. This is adjusted by the judge and the parties who own the loan and the homeowner repaying the loan are between the two parties, the taxpayer is not involved.
for opposition such as MBA, their claim is unfounded. How would a foreclosure costing about 5 grand topped with a return in principal of less than 80%, another house to compete against those trying to sell their homes due to relocation or lifestyle adjustments be cheaper than allowing homeowners to stay and pay, keeping the cash flow available but at slightly lesser terms?(Show less of this comment)

RE: [I'm baffled.... Isn't this rewarding irresponsible behavior for many people. What percentage of these people really were caught by tough circumstances and not overspending?]

It would be fair to say that there are some who were irresponsible and overspent, and that their woes are not due to "tough circumstances".

But it would also be fair to go to the top of the food chain and take a look at the realtors, mortgage brokers and financers who engaged in irresponsible, even unethical and illegal behavior, and gained financially from it. They are the ones who seem to be walking away without consequence. Except maybe a big dent in their commissions.

I'm baffled.... Isn't this rewarding irresponsible behavior for many people. What percentage of these people really were caught by tough circumstances and not overspending?