Real Estate Investing

Out here in the streets, I’ve already talked about how people are facing major struggles to find mortgage relief from lenders even after the foreclosure rescue plan has been put into place by the administration of President Obama.  Apparently the problem is widespread as indicated in an article published by CNNMoney.com.  The news agency published the experiences that home owners have shared with them in seeking relief and in reading through them, it appear that most have been either told “No.” directly or are still waiting for an answer after being given the runaround.  For example Jose Rivera was seeking a lower interest rate,

Rivera hit roadblocks from the start. He never received a call back from the first customer service agent at Bank of America, which bought Countrywide, despite leaving three messages. In May, he requested a different agent and was told because he has private mortgage insurance, he couldn’t apply until the end of May. He called back in early June and was told to try again at the end of July. Now that interest rates are rising, he’s concerned it won’t be worth it to refinance.

According to the article, the plan allows people with little or no equity in their home to refinance so they can have lower mortgage interest rates. “The plan waives the requirement that homeowners have at least 20% equity in their home, allowing them to participate even if they have loans of up to 105% of the value of their property, as long as they meet other criteria. This aids those who are current in their payments but have seen their home values decline.”

However people making their payments - even though they struggle - are the low man on the totem pole so are not finding help.  This is why one of my friends skipped her December payment …. so she could move up on the priority list.  In January she was able to refinance at a much lower rate.

This is a sorry state of affairs when people do try to hold on, but get such negative responses such as those experienced by Jeffrey Huegel,

It’s been nothing but a runaround. They just don’t care. Rather than let me stay in my home at an affordable interest rate, the bank would rather foreclose and receive nothing. I guess it’s better just to let them foreclose because I am fighting a losing battle trying to stay.

Tsk tsk.  Read the full CNN article here.

I watched part of the NBC News Special this weekend that Brian Williams hosted - a look inside President Obama’s White House.  I regret that I only watched the first half, but one thing definitely caught my attention.  It was how the President replied to how he’d respond to a woman’s letter stating her disappointment in how the banks with federal bailout money aren’t doing anything to help people save their homes.  He said he would answer that he’s also very concerned with how the money is being handled.

Lately I’ve had an abundance of experiences with both my friends and clients where lenders are quite UNWILLING to help sellers.  I might have talked about it before, but one friend was having a difficult time making her high-interest rate mortgage payment, so she called her lender to ask about refinancing.  The lender explained they could do nothing unless she missed a payment.  In response, she skipped her December payment and bought her kids a Wii for Christmas.  In January, she called back and they nearly fell over themselves to do a refinance… her payment went from a ridiculous $1200 p/month payment (for a $120,000 house) to about $850.

Another case study: a buyer has written an offer for a house - a GOOD offer.  The institution holding the mortgage has indicated they’d rather see it go to foreclosure than allow a short-sale.  Now I don’t know what gives with that - it seems like it would make better sense to forgive $10,000 than go to the expense of losing more than $50,000 if they foreclose, but I believe this is indicative of why we have a mortgage mess in the first place.  Are there any sound business guidelines to be found under the roof of this lender?

I don’t believe I’m the only one scratching her head wondering at the insanity.  In addition to the White House receiving letters, phone calls, and emails from people seeking help, they’ve also begun to contact their members of Congress.  And they’re getting results. According to MSNBC.com,

Rep. Maxine Waters, who represents Los Angeles, has called mortgage lenders directly to seek lower payments for her constituents.

Waters said it’s frustrating. She’s spent more than an hour on hold before, listening to music and getting transferred to different departments.

She said the process can be worse for homeowners who are only slightly behind in their mortgage payments. A grossly delinquent homeowner might get a specialist on the line who can modify the loan, Waters said. But other cases are handled by someone who merely threatens homeowners to pay up.

When members of Congress also get a run-around, you know something is wrong with the system.  I advocate that lenders take a long hard look at how their decisions are made, be more responsive to responsible homewoners, and stop trying to be punitive when homeowners are trying to find ways to make it work.

I’ll admit it… I looked up “Kerfuffle” when Tennessee blogger used it in his headline “Real Estate Kerfuffle in Key West.”  Disorder. Commotion. Disruption.  He links to another site called Rock Trueblood’s Watchworld and a post about DEBT becoming the next four letter word.

In the case of my current landlord (soon to be ex-landlord) this Realtor took my $1600 I paid for rent since December 2008 and never made another mortgage payment. In May 2009 (last month) I got the obligatory knock on the door from a Monroe County sheriff telling me the place I was renting was being foreclosed upon. Last words from the sheriff, so help me, were like the words of last year’s sheriff: “Don’t worry about moving out immediately. We have so many foreclosures clogging up the courthouse that we won’t be getting around to formally taking this place away from your landlord for another six months.”

The writer goes on to explain about three other squatters who haven’t made mortgage payments in months (to get the lender to negotiate) and years (they can’t produce the note to prove the new mortgage company actually owns it).

A friend of mine went 8 months without making a house payment. They got some phone calls but never a foreclosure notice.  They’re caught up - thanks to some family help - but it’s astonishing to me that they were able to live in their house that long without making a payment.

The same company that didn’t foreclose on them is the final decision-maker in a short-sale I’m working with - I’m on the buyer’s side.  They don’t want to accept the short-sale offer which would cost them about $10,000.   They have said they’d prefer to foreclose …. which would cost them about $62,000 minimum.

I have no sympathy for these mortgage companies, but feel a certain degree of anger and frustration that as a taxpayer I’m helping them out of the mess they’re in when this is how they make decisions.

Cartoon from Mordant Orange.