House 'Under Water'? Should we Do Like the Banks Do and Just Walk Away??
Banks aren't taking possession of houses after foreclosure, creating a "shadow inventory" that may derail the recovery. Here's a terrible new twist to a housing meltdown --- Banks are refusing to take possession of houses after the foreclosure process because of the prohibitive cost, from legal to maintenance fees, of being stuck with the same worthless mortgages with which they've saddled American homeowners. It's a problem of their own making: Foreclosures shot up 7 percent in July, and the rate is nearly a third higher than this time last year. There is no end in sight. That's led to increased homeowner abandonment of their properties, which in turn has led to escalating blight that has depressed property values and tax revenues even further.
Nobody is going to help you on this one. YOU have to spring into action. Instantly rent every room to a couple with two incomes. You'll make the payments and your credit cards. Sure, it looks like RUSSIA, but hey, tough times make for TOUGH PEOPLE. Next. Put the house up for sale. CRAIGS LIST, a dozen realtors, ads in all the papers. There's a fabulous, hot real estate market right now. A LOT OF PROFESSIONALS do have credit. Interest rates are still ok, probalby won't change until AUGUST 2012 when entire planet will go into inflationary mode.... A lot of smart people want to buy now. They did NOT stick their tit in a wringer and buy a house a no income property when prices was high, like you did. Or spend all tha tmoney on fixing up, costly, cheating constractors. They want to buy now.
The banks are still alive. They haven't drowned yet. By 2011, around half of the mortgages in the shell-shocked United States could be underwater, which is a softball euphemism for utterly worthless. The financial industry is well known for such empty metaphors -- including "class warfare," ably dissected above by Berkshire Hathaway billionaire Warren Buffet. That's because they are easier to stomach than the purposefully labyrinthine, fearsomely destabilizing details.
Take "jingle mail," for instance, industry-speak for homeowners who mail
back their keys and purposefully walk away from lenders who have left them
to drown underwater; that is, with homes whose market value is
significantly below their mortgage debt.
It's a cute euphemism for such a fucked-up state of affairs engineered by
the financial industry, and its colluders in the government and media.
Greased by a thoroughly unregulated over-the-counter derivatives market
that is fast approaching $600 trillion (that is not a typo) and now under
investigation for antitrust trading, Bank of America, J.P. Morgan Chase,
Citigroup, Goldman Sachs and other titans of Wall Street seized the
opportunity to lock homeowners into unfair mortgages that could ruin their
balance sheets, and the American economy, for good.
Sure, they should have known what they were getting into, but when is the
last time you read your pages-long disclosure contracts on your home or
credit card? Derivatives thrive on such mind-numbing complexity, which is
why the financial press and industry continually lionizes bankers like
Merrill Lynch's John Thain, whose firm lost billions and had to be acquired
by Bank of America to stave off a systemic economic collapse, "as the
smartest guy[s] in the room."
And even they don't know, or are just fine with not knowing, all the
details of their dense financial contracts: When Federal Reserve Chairman
Ben Bernanke was asked by Rep. Alan Grayson, D-Fla., where $500 billion of
American taxpayer money exported by the Federal Open Market Committee to
foreign central banks went, his response was probably the same as most
homeowners asked about the details of their mortgage contracts: "I don't
This is why Buffet called derivatives "financial weapons of mass
destruction," a more apt euphemism for an industry in love with
So the argument that homeowners should intimately know the twists and turns
of their mortgage contracts, most of which are designed to lock them into
debt for a very long time, is disingenuous, at the least.
Especially when it is the banks who locked them into those contracts,
rather than the supposedly cold, calculating jingle-mailers that are
walking away from houses the banks marketed, sold and then foreclosed, only
to leave them with stunned homeowners who find they're liable for tens or
hundreds of thousands of dollars in city fees.
"It is just bone stupid," the Center for Responsible Lending's Kathleen Day
told AlterNet by phone. "Banks foreclose on families, kick them out of
their houses, which puts even more people underwater. And then they walk
away from those same houses. It's almost like a sitcom, but it's a
The tragedy has gone viral. Small and large banks across the country have
punted these compromised mortgages, often located in cities sundered by the
housing bubble like Buffalo, N.Y., Cleveland and others.
The banks' reason is simple enough: They're not worth anything to them
either. A sobering analysis from the Cleveland Plain Dealer calls those
mortgages "toxic titles," but the problem is beyond terminology now.
In an enlightening piece, the Milwaukee-Wisconsin Journal Sentinel locally
"found more than $400,000 in back taxes, fees and demolition costs owed on
nearly three dozen properties that lenders foreclosed on in the past two
years but didn't complete the process," with many more to come.
In other words, banks aren't just walking away from homeowners, after
leading them through Kafkaesque foreclosure suits and pocketing fees for
it. They're also walking away from their practically bankrupted cities,
which are slowly swelling with abandoned, vandalized and otherwise-ruined
properties, further depressing their already-broken local economies. But
even though the disturbing and nearly impossible-to-trace practice has gone
viral, it has nevertheless been ignored.
"We really are not up on any of this," American Bankers Association
spokesman Jim Eberle said by phone to AlterNet. "We really don't know about
that happening in the banking industry. I don't think we really want to be
in your story, because we really don't know enough about what's happening
and which lenders and servicers are possibly doing this sort of thing. We
really don't have a handle on it, if it is going on."
For those keeping score, that's three "We don't know" qualifiers in three
straight sentences, but Eberle's financial services organization is
evidently not alone in its ignorance. Representatives I spoke with by phone
and e-mail from the National Association of Mortgage Brokers and Mortgage
Bankers Association refused to go on record with AlterNet about the trend.
To be fair, even Day's Center for Responsible Lending hasn't looked at the
problem in depth.
These deafening silences, compounded by inscrutable mortgage legalese,
compels underwater homeowners, bogged down by maddening fine print on
worthless mortgages parceled out in bad faith, to do something that many of
them would probably rather not do, which is run. Run like hell.
Of course, if homeowners could, like corporations, declare bankruptcy and
allow judges to modify their contracts -- a process called cramdown
(another hilarious econo-term) -- then they would arguably be able to pay
off their debts, stay in their homes and make their lenders happy. But it
is those very lenders who not only successfully lobbied against allowing
bankruptcy judges to take over mortgage terms, but also have steadfastly
refused to do so themselves.
The Obama administration, which publicly and lamely passed on the
opportunity to take a stand on a cramdown amendment floating through the
Senate in May, has supposedly tried to pull its head of the sand on this
issue. It has promised to publicly disclose which mortgage servicers and
lenders, who are receiving $50 billion in subsidies, are failing to live up
to their agreements with the White House to stem the foreclosure bloodbath.
"Right now," Day explained, "bankruptcy judges can modify any contract but
mortgages. They can modify everything but the roof over your head. When
Obama first proposed his plan, there were lots of carrots but one stick:
But that agreement, named the Homeowners Affordability and Stability Plan,
has so far given less than 10 percent of delinquent borrowers a break, with
few banks modifying at all and some modifying even less.
According to the Washington Post, J.P. Morgan Chase has modified 20 percent
of its borrowers, Morgan Stanley's Saxon Mortgage Services has modified 25
percent, Citigroup has modified 15 percent, Wells Fargo has modified 6
percent and Bank of America, probably the worst of all economic offenders
(next to the unrepentantly greedy Goldman Sachs, that is) has modified a
paltry 4 percent.
That's pretty ridiculous for a financial services organization that, as the
Washington Post article explained, told at least one denied homeowner that
it wasn't participating in Obama's plan, although it was. This is the same
cutthroat bank that bought mortgage-fraud poster boy Countrywide and the
failing Wall Street powerhouse Merrill Lynch, perhaps to help both avoid
bankruptcy due to balance sheets filled with toxic titles.
In fact, Bank of America's buyout of Thain's Merrill Lynch was such a
secretive process that it reportedly compelled Henry Paulson -- former
Treasury secretary, Goldman Sachs CEO and mentor to Thain -- to shred what
ethics guidelines the Bush administration had left in its shock-doctrine
The same Bank of America that, according to investors and federal
prosecutors, abetted Ponzi schemer Nicholas Cosmo, who sucked over $400
million dollars out of their pockets. The same bank that can't even
persuade a judge to allow a supposedly simple $33 million settlement with
the Securities and Exchange Commission, because of lies tied to bonuses
handed over during the Merrill Lynch takeover. The same bank ... well, do I
really need to go on?
Because of lying entities like these, cramdown died a painful death, even
though it could have saved everyone's sorry asses, from homeowners who
can't read their mortgage contracts to corrupt lenders who, pardon the pun,
bank on it.
And that's left us with this ugly game of toxic potato, where banks and
homeowners pass around the plutonium-enriched house until it detonates in
the city's lap as one more vandalized money pit that needs to be bulldozed.
Throw in the fact that each state has its own circuitous way of executing
such extreme displays of financial chess, and you have a scenario ripe for
"There's not any true uniformity," Eberle explained of the state of
American foreclosures and disclosures. "I'm guessing that each state has a
different method and timetable involved. There are some states that allow
the lender to go back to the homeowner to make up the difference on what's
owed on the mortgage and what's been received on the foreclosure auction.
If you don't get bidders, the mortgage lender or the bank would typically
bid as much as the property is worth.
"But whether it is the banks or the lenders, once they foreclose on a
property, they own it. And they're obligated to take care of the property,
in many cases, by city, county and state laws."
Of course, that's the conventional legalese that has been turned on its
head by increasing bank walkaways, whose math has been found challenging,
to say the least.
In July, New York State Attorney General Andrew Cuomo reported that J.P.
Morgan, Merrill Lynch, Goldman Sucks -- does a day go by without a reason
to hate them? -- and more banks receiving bailout billions from taxpayers
via Paulson and George W. Bush's ludicrous Troubled Asset Relief Program
handed out more in bonuses last year than they received in earnings.
It doesn't take a mathematician to realize that a bank like J.P. Morgan
Chase, which made $5.6 billion but paid out $8.69 billion in bonuses is
grifting the American people of at least some of the $25 billion it took
from their pockets. These are banks, after all, that will possibly collect
$38 billion in overdraft fees alone this year.
Given those numbers, it also doesn't take a political scientist, or a
Federal Reserve chairman, to divine that an underwater homeowner wouldn't
be well within his or her rights to tell those banks to, in the words of
that great American poet Dick Cheney, go fuck themselves.
Which is what they should do, right? No, says Day and the CRL, advice that
every bank in the nation -- ones not currently being seized, that is --
probably agrees with.
"The bottom line is, if you walk away, it really hurts your credit rating,"
she argued. "The credit card companies will use any excuse to raise your
interest rates. You're walking away from any money you put into the house.
If you can't afford the payments, and the lenders are negotiating in bad
faith, there's no pretty picture. But walking away wouldn't be our first
"If homeowners can do it another way, that's always better. What if they
can get a modification? if they can stay in their house, then they can
rebuild their equity. People are getting jerked around in all kinds of
ways, but if they can stick through it, they should." by Scott Thill, alternet.org
"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."
-- Warren Buffett .
THE FIX: The valient homeowner who sticks with his home contributes wealth to society, prevents the meltdown ergo should have a NEW OBAMA LAW to help him out! HANG IN THERE PEOPLE get SOME DOUGH!
And the WALK ON BY PEOPLE... well, they get a tear drop trailer and a truck hitch and take their VW bus to some beach, park and cook on a grill. That's a good life.
THE HIPPIE DIPPIE walks away, goes home to live with Mom and/or Dad. He can always save another down payment and start over when prices do another plummet. Now he has learned to recognize a plummet as a Plum buying opp. Next time if he's smart, he'll buy 1/4 of a four unit bldg, get 3 pals to come in, they'll all get in cheap, make their stripes in real estate, sell at a profit and move on to an 8 unit, each of em!
However, the SMART GUERILLA CAPITALIST STAYS in the house. What he does to make the payment which has doubled is... He rents every room to an employed person and gets a first and last month rent from them all! And makes them sign a contract with many rules and gives them a copy. Everyone cooks and does their own dishes and has a shelf in the fridge and area in the freezer. No borrowing or pilfering from another's food stash. Home owner sees to it everyone has a lock on their door so no CD's are missing. They share in the BASIC CABLE BILL EQUALLY. They share lawn/ garden watering equally. Garage storage if there are locks and keys as costly stuff can be out there. Next, he shuts himself in his home office and creates a GUERILLA CAPITALIST COTTAGE INDUSTRY. IF he already has one, he creates a second one, spawned by the first, some sideline.
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