Tuesday, February 17, 2009

A Report From The Frontlines - Part 2

The vast majority of homeowners, who are flooding the market with their short sale listings and sticking their lenders (most of which YOU now own) with hundred thousand dollar losses, could pay their mortgage if they felt they had to. But, because the Joneses down the street were able to get rid of their mortgage by short selling at a $75,000 loss to the bank , and they aren't facing any long-term consequences, well, now the Smiths want to do the same. And so do the Riveras and the Wongs and the McNeelys.

The safeguards that are in place to prevent "just anyone" from being approved by the bank for a short sale are failing miserably, and the result is that everyone thinks that they can just walk away from their mortgage obligation and just have a hit on their credit report for a couple of years. A candidate for a short sale is supposed to prove to the bank that they are completely bankrupt. The package that I am responsible for putting together and sending to the bank must contain the following as proof of insolvency:

1. A hardship letter - this is a one-page letter written by the homeowner explaining to the bank why they can't pay their mortgage.

2. Income tax returns from the past two years. -

3. Copies of all bank account statements from the past two months.

4. A financial worksheet showing all of the monthly sources of income and expenses.

I have a pretty good feeling that a lot of people are being about as honest with the financial information that they give me for the short sale request package as they were with the financial information they gave to the mortgage broker when they got their $550,000 loan. And, I can assure you that the banks are not checking to see if there are other bank accounts that weren't included, or if the information on the financial worksheet is accurate.

I come home each night, and I hear CNN hosts ranting about how poor, upstanding, hard-working, Main Street Americans are being forced out of their homes by big, evil, Wall Street tycoons. And, while Wall Street is ultimately responsible for creating loan "products" for people that couldn't afford them, and while there are a lot of people who really cannot fulfill their mortgage obligations because of lost jobs or resetting interest rates, there are also an awful lot of people who just don't want to keep paying. Media personalities, like Lou Dobbs, present, night after night, stories of poor people who got hoodwinked by the faceless Wall Street elite into signing those mortgage papers and now can't pay. And, I am certain that a lot of people really didn't understand what they were signing, and there were a lot of people preyed upon by predatory lenders. But, because of these heartbreaking stories of single mothers losing their suburban McMansions to foreclosure, too many people think that the right thing to do is to take revenge on those sinister mortgage lending banks by short selling.

The first solution that needs to be implemented: banks need to completely stop doing short sales (except in the case of the death of a spouse or a domestic partner). They need to simply foreclose on properties where the owners have stopped making payments. I guarantee that bank losses, in the long run, would be less if homeowners had only the options of paying the mortgage, or having a foreclosure destroy their credit for years and years to come.

Cutting out the option of short sale would also save a lot of people from "inadvertant foreclosure." What I see happening now, is that a lot of people who want to get out from under decide to list their property as a short sale, thinking that it will be as easy as it was for the Smiths down the street. But, months pass and still no buyer. Finally, after 8 months of marketing (and not paying the mortgage, or condo fees, or property taxes - but still going out to eat every night) they get an offer that's $100,000 below what they owe. Their realtor puts together the short sale request package and sends it to the bank. But, it takes 4 to 5 months to be processed by the bank's short sale department, and in that time the foreclosure department sets a date for the foreclosure sale. And, now these people, who could have paid their mortgage, but opted for a short sale, ended up with a foreclosure and will likely never be able to buy property again.

I have a few more observations and ideas regarding this mess...(to be continued)


Dogcrap Green said...

The problem with you fucking liberials you all fucking brillant in deciding how to spend other people's money. Tell me what you are going to do after the other people run out of money and it's your turn to anti up?

Here a thought on a bailout plan - DO NOTHING. Let home prices fall. Let responsible people buy them up at the new platu. And we all move on. This plan means that young can expliot our problems and get a footing on their future instead of being the ones burden with our problem.

To date Obama has propose no stilmlus plan. His ony plan is to expliot the siutuation to urther burden the economy by expanding the government byond the means of the OTHER people you are so eager to tax.

I got news for you. You fucking loser. When Castro set out to expand government control through his social justice reform program just as Obama is doing - EVRYBODY became the other people because their OTHER people were taxed into nothing.

Cyrus said...

Mr. Dogcrap,

As soon as you graduate from anger management class, and learn how to express yourself clearly in English, please come back and let us know what you were trying to say. Seriously.